BC INVESTING
Saved by @Jacobtldr

Saturday thoughts on market pull. What is it? How is it different from Total Addressable Market (TAM)? And what ideas tend to have strong market pull?

A thread >>

 1) First: "Market pull" != market size.

IMO (and most VCs will disagree!!), market size (TAM) doesn't *really* matter. But market pull DEFINITELY does. For that reason, I've almost never asked a startup about TAM.

Why?
2) First, what is TAM?

TAM is a sizing of how big your market is. A good way to estimate this is - if you can get to all potential buyers and based on how much $$ they are worth to you, how much money can your company make if you took the whole mkt?
3) An example: Say we run an e-commerce site that sells hippo food. TAM in the world:

-1000 zoos have on average 3 hippos = 3000 hippos.
-Each hippo eats $100 worth of food each day
-365 days * $100 * 3000 hippos = $110m per year globally
4) But, we'll come back to this.

Why I don't like TAM - it doesn't take into acct a few things:

A) how hard it is to get customers
B) how much more you can upsell once you have customers
C) how fast the mkt is moving up or down
5) Of these, the challenge in getting customers is the MOST concerning. For example, travel is a HUGE market. Lots of ppl travel. They each spend a lot of money on travel.

But scalably acquiring travelers in most customer acquisition channels is HARD.
6) It costs a lot of money to capture attn. So just because you have a big TAM doesn't mean you can actually get the customers -- even if you are a better product / service.
7) In addition, if you have strong loyalty w/ your customers, you can often upsell beyond your original plan. So, going back to the hippos, if we can get reliable customers buying hippo food, we have the opportunity to sell hippo grooming products / cleaning supplies / etc.
8) It is much easier to sell to an existing mkt than expand to a new mkt in most cases.

AMZN is a great example. Although they are expanding intl, they spend WAY MORE RESOURCES expanding in their home mkt. They sell the US audience everything >> trying to get new customers.
9) The caveat is if you are in a commodity business.

E.g. traditionally, it's been hard for fintech companies to upsell other fintech products. E.g. money is money wherever you get it, so one may have a Chase cc but bank at BofA.
10) Lastly, mkts are accelerating or decelerating faster than ever - due to technology.

Some large businesses / industries are dying quickly.

Others are accelerating quickly.
11) A good example of this is crypto. If you aren't making a bet in crypto because the current mkt size is too small, that's the wrong way to look at it.

Need to look at where it will be in 10 years.
12) Here are some other "small" mkts that will grow:

Sharing economy (eg Uber / Airbnb). Rent >> Own.

Alternative assets. StockX, @Vinovest1 are good examples.

Emerging mkts - Africa doesn't have many unicorns now, but they will have lots in < 10 yrs.
13) You have to see where the mkt is going. Not what it is today. Trajectory matters more than TAM.
14) Let's go back to A) Challenging customer acq. This is the biggest reason to prevent ideas from becoming big. There is just SO MUCH NOISE these days.

In the 1990s, turning your idea into reality required $5m to house your own servers. Few ppl knew web programming.
15) Today, there are SO MANY WEBSITES. Even if you don't have a direct competitor, there is ALWAYS COMPETITION for mindshare.

Tech is a commodity. Marketing is critical:

https://t.co/eecWQfQSA6
16) This brings us to market pull. What is it? Loosely, I define it as how quickly customers adopt your product. It's a velocity measurement. (And very handwavy!)

With re: to startup success, this matters MORE than anything else IMO.

So what does strong mkt pull look like?
17) To map out how to get to $100m / yr in rev by yr 5, your trajectory basically looks something like this:

Yr 1: $1m
Yr 2: $6m
Yr 3: $15m
Yr 4: $40m
Yr 5: $100m

You more than double each yr & have much higher revenue multiple jumps in the beginning. This is hard to do.
18) So how does this happen? A few ways. One way is you just have really strong product-based mkt pull. This can happen w/ strong product features that have virality.

I.e. referral codes. Group interactions as part of the product.
19) For this, think social networks. Think group productivity tools. Think referral codes for consumer products. Etc.

Yes, this is often referred to as "free" cust acq, but marketers still spend time & $ MEASURING & EXPERIMENTING W virality.

Customer acq is never free.
20) A second way is being in a greenfield sector or geography at the right time. Crypto is a good example (and combined w/ strong product virality is a killer combo).
21) Some of our "emerging mkt" portfolio companies are able to sign up businesses with street sales -- literally going door to door to get signups. And there is literally no competition so this leads to strong mkt pull.
22) Timing is impt for these ideas.

Harder to find these types of opportunities in the US IMO (but still possible - they just tend to be really "out there" ideas!)

Bill Gross talks about timing here: https://t.co/8K7PIWMis2
23) A third way is via paid ads. Most VCs think this is impossible. It's not - I've seen this happen a few times. But it's rare.

Ad prices only go up over time. So, you must have strong LTV for this to work which usually implies STRONG RETENTION.
24) And, if you are finding CAC too high in Google Ads or FB ads (generally saturated), try using untapped channels.

YouTube ads. Tik Tok. Etc.

Ad channels often require doing what everyone else is NOT doing.
25) A 4th way is expanding via SEO. Remember, you need rev to more than 2x every yr. SEO is one of the few channels where CAC from each link goes DOWN over time. The cost for link builders & writers is a 1 time cost, & hopefully you get many customers over time from that work.
26) However, you must be METHODICAL in measuring how much each link or content is worth to you & can't pay a lot for each. The problem is you won't know how much you can afford to pay until mos or yrs later. So, this is a gamble & will need careful attn to this long feedback loop
27) Since it takes some time to understand, often early stage VCs won't touch SEO driven companies.

I also haven't seen anyone get to $100m/yr by yr 5 as a result of needing time to figure out the feedback loop, but I've seen cos get REALLY CLOSE so it's worth mentioning.
28) So if you want to build a venture business (and there is also nothing wrong if you don't!), I would work backwards -- how are you going to hit these rough #s each yr?

And what are the deliberate cust acq activities you need to do to hit this?
29) In short, for your biz idea:

-Is it in a crowded space (affects CAC)?
-Are there potential upsells to increase LTV later?
-Is there greenfield to run that fits a rising trend?
-Is there enough margin between CAC & LTV?

These are the qs I would ask before starting a co.

More from Elizabeth Yin

Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Today's thread is on the affiliate business model. Many years ago, I used to be an affiliate marketer. If there is any way to get schooled in marketing, becoming an affiliate marketer is probably the best way.

What is affiliate marketing and why should you care?

Read on >>

1) Affiliate marketing is selling products or generating leads on behalf of other companies and getting paid a commission for those products.

2) Some notable examples you've seen before:

NerdWallet - you read their articles on best credit cards. You click on a link to one of those cards. You fill out an application. They get paid for delivering that lead to the cc company.

3) In https://t.co/kSfWS69ybp - same thing. Any of their financial products -- you fill out an application, and https://t.co/mCrBT43mOj gets paid for that.

But the affiliate revenue model applies beyond financial services products.

4) Wirecutter -- you see a neat product they review or talk about. You click through and buy.

Wirecutter gets a cut of that transaction.
STARTUP
Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Some gems from @MacConwell of @RarebreedVC in Clubhouse right now:

1) VCs are looking for startups that can get to $100m / yr in rev by yr 7-10.

VCs need this kind of return in order to produce great funds.

2) And so many companies won't get to this level - and that's not a bad thing - but then it means you should be thinking about trying to get going w company revenue since you can't count on VC backing.

3) someone asked about age and fundraising & do accelerators help?

Age doesn't matter. But just make sure no one is taking advantage of you. And as such, accelerators can help sometimes w that guidance.

4) Someone got a rejection because he had a teddy bear in his room (side note: what investor says that?!?)

Mac says he's been there and has heard that saltiness. But you're going to get a lot of nos. And you gain more leverage w more progress and traction. So just keeping going.
INTERNET
Advertisement
Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Last week, I wrote a thread about generating momentum for startups.

Today's thread is on how emerging fund managers can generate momentum for their fund.

Whatever you do, momentum is so impt to get ppl onboard -- for hiring, for sales, for fundraising.

Read on >>

1) First, why does momentum matter?

Think about it from the "buyer's perspective" -- it is almost ALWAYS better to wait and get more information if you can get the same deal. Right?

More info on a potential investment. More info on a new product. Etc.

2) There are few situations where it's impt to be a first mover.

If you're a product buyer, it could be you have a dire situation at your company that alternatives can't handle.

But if you have a decent alternative (alternative product or alt investment), it's better to wait.

3) That means it's YOUR JOB to create momentum. Whether for fundraising, sales, or hiring.

So with that in mind, how do you generate momentum for fund fundraising?

4) In a prior tweet about generating momentum for startup fundraising, essentially I said to limit your supply (the amnt you are raising) in tranches AND to increase demand by packing in mtgs.

Unfort this doesn't quite work well for funds.
STARTUP , FUNDRAISING
Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Today's thread is a continuation on *how* you generate momentum in fundraising.

Here's a rough conversation I had with a founder (called 'C') over the course of days a few months back.

Read on >>

1) C: I'm having trouble raising. VC A and VC B are taking so long to get back to me.

Me: Oh, when did you meet w/ them?

C: 3 weeks ago.

2) Me: Oh, are you mtg w/ anyone else?

C: No, I got busy working. I had all these sales calls to make.

Me: That's the problem - there isn't a reason for them to move quickly. There's no investor at the table.

3) C: But I have all these sales calls to make!

Me: I really don't have a great answer for you here. This is probably the hardest part about fundraising - juggling your actual job w/ your fundraising job, which is full-time too.

4) Me: You need to hand off your sales calls to your co-founder. And then you can do mtgs back to back.

C: Ok...

[some time passes]

C: Ok - I'm ready.

Me: How much do you want to raise and what are you using the money for?
ALL , FUNDRAISING
Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Today I want to talk about the legal aspects of startups. How to set up? How to think about legal costs?

Fun!

Read on >>

1) Lawyers are expensive -- oof! A startup lawyer can cost you $300-$1k per HOUR! An associate paralegal may be slightly cheaper. But still pricey.

What do you need from a lawyer?

-company setup costs
-doc creation and review for financing rounds
-exit negotiation

2) For the purpose of this thread, we're just going to focus on setup costs, because this is where I see the most mistakes.

Once you get going, you may quickly realize you need a better lawyer - hah - and that generally helps w/ solving for financing rounds and exits

3) If you want to potentially raise money from VCs, you'll want to set up as a Delaware C Corp. If you don't ever want to raise from VCs, an LLC is fine.

Lots of ppl start out as an LLC because you can get tax benefits if you are not profitable.

4) But to me, if you know you want to raise VC money, it feels a bit penny wise / pound foolish, because you will need to spend $$ to convert your LLC to a Delaware C corp.
STARTUPS

More from Investing

Ram Bhupatiraju
Ram Bhupatiraju
@RamBhupatiraju
Excellent article on Investor psychology & Market cycles based on Howard Marks' "Mastering the Market Cycle".

cc: @dmuthuk @Gautam__Baid

My fav pts 👇


continued...


Excellent pts 👇

✔️Mania and risk
"The combination of feedback loops and irrational exuberance, where newfound expectations and enthusiasm, encourages investors to bid up and rationalize extraordinary growth in asset prices.

By contrast, during periods of fear and pessimism, many face difficulties with identifying potential future value beyond the immediate-term.

An understanding of where attitudes to risk sits within the current investor psychology cycle can be a useful knowledge advantage.
INVESTING
Sahil Bloom
Sahil Bloom
@SahilBloom
Dollar Cost Averaging 101

Many of the brightest minds in the investing world share one common trait: they recommend dollar cost averaging as an investment strategy.

But what is dollar cost averaging and how does it work?

Here's Dollar Cost Averaging 101!

👇👇👇


1/ Dollar cost averaging, or "DCA" for short, is a simple investment strategy in which an investor splits the total amount to be invested in a given asset across regular periodic purchases.

The regular purchases occur regardless of price, volatility, or economic conditions.

2/ The goal is to remove the complexities of market timing from the process, allowing an investor to build their desired position without concern for external factors.

Its simplicity removes behavioral and psychological biases from the equation.

Let's look at an example.

3/ Imagine you want to build a $10,000 position in bitcoin. You have done your research and believe in the long-term story.

You aren't sure if it will go up or down in the near-term, so you decide to dollar-cost average.

Great decision! How will you do it?


4/ You split the $10,000 up into 20 pieces ($500 each). You could have done any number of pieces, but 20 felt right.

You decide on a weekly DCA, so every Monday, you buy $500 of $BTC, regardless of price. After 20 weeks, you have built your desired $10,000 cost basis position.
INVESTING
Advertisement
Tar \u26a1
Tar ⚡
@itsTarH
All my Threads so far 🧵 👇🏼

The One with the Cash Flow Explained


The One with Free Cash Flow Explained


The One with Mutual Funds


The One on Laurus Labs
ITSTHLEARNINGS , ALL , INVESTING
Ram Bhupatiraju
Ram Bhupatiraju
@RamBhupatiraju
Some Excellent articles on Financial Ratios and Analysis.
h/t @discover_ci 👏

1⃣ Profitability

2⃣Liquidity

3⃣Leverage

4⃣Asset Management

5⃣Financial Analysis: What It Is and Tips for Getting it Right.

✔️Determining a Company’s Key Performance Indicators
✔️Collecting Company Financial Statements & Calculating Financial Ratios
✔️Analyzing Operating Results & Financial
INVESTING
Alok Jain \u26a1
Alok Jain ⚡
@WeekendInvestng
Who are some of the Best and worst TTs out there...who are running their trains well....share your experience for others.
MF, PMS, AIF , advisory etc.
INVESTING

You May Also Like

STEALTH JEFF
STEALTH JEFF
@drawandstrike
Here is Editor-in-Chief of the @EpochTimes, @JasperFakkert's response to the slanted hit piece that @Buzzfeed's @HayesBrown put up 2 days ago:

Brown's article at Buzzfeed starts off pretending it's some kind of really off-the-wall notion that Hillary Clinton paid for the creation of the Steele Dossier that was then used to justify the FBI's spying on the Trump campaign & transition team.


After that awful start, he swerves to making accusations that the Epoch Times is connected to the 'cult' Falon Gong.

You can read the article here:

Brown insinuates with no real evidence whatsoever that the Epoch Times is 'Falon Gong-linked'.

The 'evidence' he supplies in his article to 'prove' @EpochTimes is 'Falon Gong-linked is this:

1) the Epoch Times' extensive *news coverage* of China's attempts to wipe out Falon Gong with intense persecution directed at the group since 1999.

2) a reporter *shouting a question in 2006* at then-President George W. Bush about China's persecution of Falon Gong members.
ALL
Dr. Barry J. Cooke
Dr. Barry J. Cooke
@barryjcooke1
1. Let's talk about the effects of #climatechange on the world's forests, with a focus on the northwest of Canada. This is also about electoral #greenwash, and my duty as public servant and right as private Canadian citizen to speak freely about what I know.

2. Why am I compelled to speak? How am I free to speak? The answer is in the federal Values and Ethics Code of Coduct (VECC).


3. It can be career-limiting to criticize government policy when you work for government. Duty of Loyalty is very, very important. However, as VECC makes clear, it is not absolute. In fact SCoC has ruled twice in favour of citizen free speech as a higher ideal. In 1985 and 2001.

4. I am therefore perfectly comfortable showing you the scary things that are happening in the North under a warming climate. A failure to meet global GHG emissions targets is hurting Canada's forests in a way we used to think wouldn't happen for decades.

5. Warming temperatures and rising [CO2] could, in theory, help green the planet with more vigorous tree growth. But that's not what's happening. Don't believe the #greenwash. The positive effects are over and it is warm enough that we are now starting the into the negative.
ALL
Advertisement
Pulp Librarian
Pulp Librarian
@PulpLibrarian
Many readers have asked me "why do so many pulp covers feature women in ripped red blouses standing in swamps while a man fights off an unusual animal attack?"

The answer is artist Will Hulsey...


Will Hulsey was the undisputed king of the animal attack pulp cover. You name it, he'd paint it attacking you in a pool of stagnant water.


Very little is known about Will Hulsey, but he worked on a number of men's pulp magazines in the 1950s and early 1960s including Man's Life, True Men, Guilty, Trapped and Peril.


Their audience was ex-GIs: during WWII the US Council of Books in Wartime had given away over 122 million books to American servicemen to read; this led to a post-war surge in paperback and magazine sales amongst these newly enthusiastic readers.


As a result the 1950s saw a raft of men's pulp magazines being published to tap into this market - almost 200 different titles!
CULTURE
Zena Hitz
Zena Hitz
@zenahitz
I just finished Eric Adler's The Battle of the Classics, and wanted to say something about Joel Christiansen's review linked below. I am not sure what motivates the review (I speculate a bit below), but it gives a very misleading impression of the book. 1/x


The meat of the criticism is that the history Adler gives is insufficiently critical. Adler describes a few figures who had a great influence on how the modern US university was formed. It's certainly critical: it focuses on the social Darwinism of these figures. 2/x

Other insinuations and suggestions in the review seem wildly off the mark, distorted, or inappropriate-- for example, that the book is clickbaity (it is scholarly) or conservative (hardly) or connected to the events at the Capitol (give me a break). 3/x

The core question: in what sense is classics inherently racist? Classics is old. On Adler's account, it begins in ancient Rome and is revived in the Renaissance. Slavery (Christiansen's primary concern) is also very old. Let's say classics is an education for slaveowners. 4/x

It's worth remembering that literacy itself is elite throughout most of this history. Literacy is, then, also the education of slaveowners. We can honor oral and musical traditions without denying that literacy is, generally, good. 5/x
CULTURE
Nyck de Vries
Nyck de Vries
@nyckdevries
Lately there have been various rumours in the media about myself and Jumbo in relation to Williams. To clarify things, Jumbo is not and will not invest any money in my career. 1/2

Of course we’re collectively looking at career opportunities, however this is certainly not our philosophy and strategy. I hope to announce my future plans soon, be patient 😉 2/2
SPORT