I’ve been working in consumer tech for over 20 years, first as an early employee and operator, then starting in 2008 as an angel investor and now a VC. I’ve been fortunate to work with 5 unicorns ($1B+ startups) and have earned a 10x return on the cash I invested from 4 great exits. Since then, my team and I at Maven have raised and deployed two funds — the first of which is among the top funds of 2013 and the second of which is on track for similar returns. I am proud (and lucky) to have these results and have looked at literally thousands of companies to select these investments. Over the years, certain patterns have emerged that I’ve distilled in the following top 10 reasons consumer startups succeed:
#1 Vision Worth Fighting For: What are you planning to bring into the world that is worth all the time, effort, and money required for success? We back passionate founders solving novel problems that don’t already have an existing solution in the market that’s “good enough.”
#2 Founding Team: You’re more likely to succeed with a passionate team of 2-3 founders, one of whom has great technical expertise. It’s an added benefit if the team has worked together for a while.
#3 Culture: Even with a small team, a company culture already exists. Take the time to document it early, live it, then hire for culture fit first and skills next.
#4 Product/Market Fit: The biggest recurring obstacles to product/market fit are that the product doesn’t solve a real need, that it’s not hitting the right audience, or that it’s just not ready for ‘prime time’. Set the right metrics and track them closely to identify and solve these issues if they arise.
#5 Language/Market Fit: All of the language you choose — company name, product features, company description — needs to describe what your company does while connecting with your customers on an emotional level.
#6 Growth: Study known growth techniques, and creatively adapt them to your specific business. Make the product great for your core base of users.
#7 Focus: Whether it’s deciding to target enterprise or consumer, or prioritizing product features, you need to focus, or risk spreading your resources too thin.
#8 The Right Mentors: To prevent mentor whiplash — conflicting advice between mentors — choose individuals who have relevant experience to your business, rather than general success at a tech company. Hold regular advisory board meetings to talk through conflicting ideas as a group.
#9 Fundraising: There are a number of factors to consider in a Seed round; take the right-sized amount of capital, protect your cap table, and be wary of raising too many convertible notes & party-rounds.
#10 Luck: Each of these nine requirements is necessary, but on their own or collectively are still not sufficient. To achieve massive success, you will also need some good luck and great timing to succeed. But here’s the good news: you can influence your luck by laying the groundwork, making good decisions, and acting fast when luck strikes and great opportunities arise. Louise Pastier appropriately said, ‘luck favors the prepared mind.’
If you follow the first nine steps, sprinkled with the right amount of luck, you can build a massive consumer company that improves the world for its customers. Which of the top 10 reasons do you think is most important? Are we missing any?