Marc Andreessen’s second post on startups is as good as the first, a must-read for entrepreneurs, although perhaps too optimistic on the “keep trying” side of things when in many cases maybe means no and get a clue.
Marc goes through how to fix your plan if investors keep declining. He goes point by point through ways to reduce risk, listed by types of risk. This is somebody who has done it several times, who has real credibility. If your plan isn’t working, fix your plan.
One point I particularly like is how investors don’t say no. They say maybe:
“It’s an old — and true — cliche that VCs rarely actually say ‘no’ — more often they say ‘maybe’, or ‘not right now’, or ‘my partners aren’t sure’, or ‘that’s interesting, let me think about it.’
“They do that because they don’t want to invest in your company given the current facts, but they want to keep the door open in case the facts change.”
I’m delighted to see how well he makes two important points about competition:
“Never, ever say that you have no competitors. That signals naivete. Great markets draw competitors, and so if you really have no competition, you must not be in a great market. Even if you really believe you have no competitors, create a competitive landscape slide with adjacent companies in related market segments and be ready to talk crisply about how you are like and unlike those adjacent companies.
“And never, ever say your market projections indicate you’re going to be hugely successful if you get only 2% of your (extremely large) market. That also signals naivete. If you’re going after 2% of a large market, that means the presumably larger companies that are going to take the other 98% are going to kill you. You have to have a theory for how you’re going to get a significantly higher market share than 2%. (I pick 2% because that’s the cliche, but if you’re a VC, you’ve probably heard someone use it.)
The one element I think he’s missing is the investment filter. If investors turn you down, get a clue, maybe they are doing you a favor. He suggests revising the plan, but sometimes the best thing to do is keep your day job. There’s a lot of heartache in relentlessly pursuing something that isn’t going to work even if you never give up.
I’m looking forward to the third part in what he said would be a 3-part series. I suggest, again, that you read part one and then read part two of Marc Andreessen on startups.