Startups

Founder-Market Fit Matters More Than Ever

Photo by Tekton on Unsplash

These days, practically anyone can start practically anything. If you have a sliver of pedigree1, like experience at a reputed company, it becomes even easier.

But as tech permeates everything, people are starting companies in industries they don’t know. In other words, they’re founding companies as outsiders, without strong founder-market fit.

And that’s fine. A fresh perspective is often a huge help. But many industries are complex. The incentive structures, local laws, and nuances about who wins and loses are not obvious from the outside, or even after several conversations with those in the industry. Today, there are over 1,000 seed funds—capital is flowing freely. You will get funded, but that doesn’t mean you’ll find product-market fit, and then get to scale. At any given time, there may be 5-10 companies tackling a similar problem. This is where a founder’s knowledge or experience in the industry is a real advantage.

As my colleague Jonathan Kroll put it:

“The bar has never been lower to build a product. 10 years ago, you’d need millions in investment to have some sort of rudimentary machine learning or computer vision capability. Now, this is all off-the-shelf.

This is amazing! Right?! Well yes, it is—but as a result, building a cheap product with amazing functionality is at everyone’s fingertips. So while amazing products with amazing features could have been the major source of differentiation in the past, today, that’s just not enough.”

Founder-market fit is an advantage because:

  • These founders get to asking the right questions quickly.
  • If they don’t know the answer, they know who to call in the industry to get the answer.
  • “Founders who know exactly what their market needs,” in terms of leverage to move the needle, “might meet those needs faster and in a more capital-efficient manner, therefore extending runway and giving themselves more time to experiment,” said my colleague Sara Eshelman.
  • They understand the incentive structures, and so know how to position their company in the most appropriate (read: unthreatening and helpful) manner to the relevant constituents.
  • They know local laws and where they can push and where they can’t.

Founder-market fit is not developed only by having worked in the industry. You can also be obsessed with a problem in that industry and immerse yourself in it before you find a solution that works.

One example of this is Filip Victor. Filip is the founder of our portfolio company Mati, which is focused on identity verification. He came to the US as a student and faced the challenges of an immigrant: not being able to get credit and not being able to verify his identity with many of the commercial entities that you need to live a life with agency. This led him to spend time learning about the space to try and solve the identity verification problem for people in the developing world.

Another example is David Zamir at Nana. During a tough moment in his life, he taught himself to repair appliances, going out to customers’ homes to fix their washing machines in order to have an income. This led him to create an appliance repair marketplace that trains technicians and enables them to craft their own livelihoods.

Founder-market fit is real when a founder knows enough of the market to see a real opportunity, while knowing how hard it’s going to be. At the same time, founders need to have a bit of rebellion, a bit of chuztpah, a bit of “fuck it, this may really work,” a bit of willingness to upset former colleagues, boldness, and the ability to envision how things could be. That’s when they can take the leap and build a company that could be amazing.


  1. This is a problem and it is exclusionary, but it is also how the world currently works 

Your Startup is an Improv Class

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From Giphy

These are some guidelines for an improv class.

  • Improv is a trial by fire.
  • Don’t deny the reality in front of you; react to the world as it is.
  • Ditch your inhibitions.
  • If you have a good idea, run with it. If you don’t, it could falter. Commitment matters more than the idea.
  • Take the initiative to develop your character; otherwise, someone else will.
  • Adapt your character as the improv session evolves. Don’t worry about what it looked like 5 minutes ago—that scene is already over. You have to react in the present.
  • Improv is about everyone contributing little actions and lines that make the scene killer. It’s not about who said the smartest line; it’s about the whole.
  • Figure out how to make others look good. Letting others shine gives them an incentive to let you shine.
  • Be in the moment. Don’t focus on who’s watching, on looking dumb, or on being wrong. Instead, focus on what you’re doing.
  • You have to take (a little) time to think—but then, be willing to own the spotlight.
  • If your performance is inspirational, the others will want to step up.
  • Improv teaches you that you control very little, except your performance and how you react. The rest depends on other actors, the audience, and a bit of luck and timing.
  • A situation may look bad or good, but every situation is an opportunity.

This is also startups.

Your startup is an improv class.

Zoommovies, Panpics, and Startupping

Mythic Quest’s Quarantine Episode

Human beings are amazing. A mere two weeks after the lockdown started, most people had adapted to a remote world. Kids were learning soccer on Zoom, personal trainers adapted, cooking and baking classes moved to zoom—but I really did not expect theater and filmmaking to adapt in this world.

But, adapt they did. Zoomtheater and Zoommovies are a thing now, 4 months into the pandemic—for example, Host is a horror movie, made on Zoom.

Are these pieces any good? Well, it depends — film, which is asynchronous (i.e. shot and edited before the viewer sees it), can be just as good. For theater, which is delivered in real time, the remote version is not as good as when the cast and crew are in the same location. But the ability to adapt, the ability to even try this, makes me optimistic.

An image from Mythic Quest’s Quarantine episode

For a polished spin on quarantine filming, look at Mythic Quest, which is on Apple TV. They were filming the second season when the pandemic shut things down. This article outlines what the crew and cast did to shoot a “pandemic” episode that is part of Season 1. They used iPhones with prosumer film software, mics, and shot in all natural light, since lighting is one of the harder parts of filmmaking. They then edited it together to make it look like it was shot on Zoom.

On the other hand, some of Princess Bride’s celebrity cast decided to make a fan fiction, and it’s very clear that it’s shot by non-professionals, embracing the reality of shooting in different locations, with no crew.

In a scene with Diego Luna and Jack Black, they create continuity from two different locations in amazing ways: Diego throws down a green rope tried to a tree in his house and Jack, who is lying on a set of stairs in his house, grabs a hose that is thrown down to him. Diego lifts, Jack clambers, until finally, Jack is back at the top of the mountain (stairs). It’s really well done!

Images from Home Movie: Princess Bride. Image courtesy: Quibi

This would never have been considered acceptable pre-pandemic, but with a new set of rules for the world, there’s a new set of expectations. All film-watching requires the “willing suspension of disbelief,” and for these pandemic-pictures (panpics?), the suspension of disbelief has to be extended. But they are so entertaining!

Theater, unlike film, is synchronous – everything is live. This makes it much harder to adapt to a remote environment. While in film, you can do an extreme close up to show the twitch of an eyebrow, theater acting is “bigger,” so that the person in the last row can have the same read of a scene as someone sitting in the front. So Zoomtheater and the innovations there are harder to adapt to the pandemic. But theater has adapted, too. And if the pandemic stretches out, theater will have to continue to adapt. Imagine if there was a plugin that:

  • allows a lighting tech to set the stage by adding a virtual background and virtual lighting to make people seem like they’re in the same room, with the mood lighting the director wants.
  • controls which person is “shown” to the audience during a live performance. That way, the tech can make sure the right face is shown at the right time.
  • enables a “prop” tech to develop a unique, dynamic set and background for each actor and upload it behind them as the stage changes
  • allows live mixing of the audio so that music can be woven in, like a play.

It’s entirely possible that this could happen. Because despite the insanity in the world around them, humans continue to create, continue to innovate, continue to live lives of hope and splendor. Constraints make them innovate in ways that they wouldn’t have thought to before.

The same is true for startups. Startups have to startup. And the first requirement of startupping is surviving. But the very best startups, like the best creators, use constraints to innovate and thrive, offering customers an unexpected, delightful solution that moves us all forward.

Being Messy

Photo by todd kent on Unsplash

Chanel Miller said her New Year’s resolution for 2020 was to fail as much as possible.

“Making things that are really crappy and undeveloped until maybe they can be good. I’m way too young to confine myself to one lane and lose the ability to openly experiment.”

This is exactly how a the first draft of a film script develops. Characters and ideas float around in your head, and one day, they’re done with the floating and demand to live on the page. The script gets written, and when you’re done… it’s shitty. It’s embarrassing, you don’t want to show it to anyone, and you wonder how on earth your magical characters and ideas amounted to this pile of doodoo on the page.

But, it’s really important to have this first draft. Because as Miller said, yes, it’s crappy and undeveloped, but you need the crappy and undeveloped to have hope for the good and the great.

Struggling, wrangling, failing, crying, working, pushing forward allows your characters and your story to breathe, thrive, and for the bones to slowly emerge from the pile. Experimenting openly, taking the story in unexpected directions, adding or removing key characters, and messing around with no pressure allows the sparks of creativity that makes the script sing.

Every creator needs that messy time.

The same is true for startup creators. Ideas for a product form in your head over time, sometimes over years. Then one day, you’re ready to put it on the “page” — to code something, to craft something. And it may be a sloppy, messy ball of hair, mud, and hope. Don’t clean it up, polish, and shine it in order to raise money too early.

Love your messy stage, because it is so important to relish that stage. You can only do it once for each startup, and it’s when experimentation, ideation, hanging out, and trying weird things is entirely possible. It’s where ugly is awesome.

At some point, a screenwriter will have to share the script with producers. At some point, you have to share your startup with users and, if you want, with investors. If things go well, they love it, and you build an amazing company. Fantastic.

If you’ve grown your company into a wonderfully world-changing one, it’s worth finding ways to go back to being messy. Get into small groups. Make room for experimentation with ugly, creative things that may fail, because that can lead to new lines of growth. If you have the urge to start again, you could start another company and embrace the new ugly ball of mess. Whatever path you follow, the messy part of creation can be the the best part of creation, and the challenge of it makes your ideas and your company better.

Investing in Founders is like Casting Actors

On the set of “Waking Jed”, directing Jessica Chastain. Photo Credit: Anna Kooris

One of my early lessons in screenwriting was to focus on the character—motivations, personality, drives—and not external characteristics. It’s tempting to specify that the leading lady is blonde, petite, or whatever. And it’s okay to envision the character while writing, but we’re taught to avoid specifying detailed external appearance in casting.

The reason is that sometimes, the best casting decision is the one that’s least expected. You might have an image in your head of the character, but the best actor—the person who is most convincing and does an incredible job—might look very different from your mental image. Let’s say your character is written as a seductress, but the best actor for that role could be more of a plain Jane. That adds a lot to the nuance and depth to the story. A more regular-looking person being a seductress is so much more interesting than the hottest person on earth being a seductress. The film Snowpiercer was written for a mild-mannered man in a suit, but Tilda Swinton rocked the role.

During casting sessions, screenwriters and directors need to learn to set aside their mental picture, look at the actors in front of them, and reimagine the story with each person auditioning. That’s the way to cast the best actors.

Similarly, investors sometimes have a mental picture of who will be a good entrepreneur. It’s not based on looks (one hopes), but on the profile — the experiences a person “should” have had to be a great entrepreneur. VCs can sometimes be biased toward someone who’s worked at a hot company that went public, or is an engineer who can build it all, or a name-dropper who seems very connected in the ecosystem.

If investors carry around these biases in our heads, we will miss the best people. Like great actors, great entrepreneurs can come in all shapes and sizes, and from all backgrounds, all levels of work experience, ages, nationalities, and genders.

When casting an actor, the most important things to look for include:

  • Ability to live the character. Do you believe the actor is the character
  • Willingness to take direction. A director should never tell an actor “how” to play the scene, but the director can and should give her guidance on the mood of the scene, how the audience should feel, or the character’s motivation for a certain action. And the actor should be able to take that input and give the director a range of options.

    I remember when I had the chance to direct Jessica Chastain and James Franco. They gave me such a spectacular performance on the first take and then turned around, asked how it was, and whether I wanted to see it another way. My jaw was on the floor — I was blown away by their talent and their humility in asking for input from a student director.
  • Ability to go with the flow. Film production (especially in the indie world) needs to be flexible. Sometimes, a much-desired location might suddenly become available (for free!), and the crew might have to shoot there tomorrow instead of three weeks from now. This means the actor has to be ready for scene 56 instead of scene 18.

Many of those same characteristics apply to ideal founders:

  • Ability to fully inhabit the role of the CEO. This is about vision, tactical capability, ability to hire, and the ability to sell their vision and themselves.
  • Willingness to take input. An investor should never tell a CEO how to do their job, but a big part of the investor’s role is to see around corners, anticipate challenges based on their experience, and give the CEO input and feedback.
  • Ability to go with the flow. Startups need to be flexible. Sometimes, a new competitor might emerge, you might lose a key person on your team, a pandemic might unexpectedly sweep the globe. The best CEOs are those who can adapt and find a way to thrive in the new world.

Just like the success of a film depends on casting the person who is the best actor, the success of an investment depends on casting the best founder. It requires putting aside the mental preconceptions and focusing on the person in the room (or on Zoom). Despite her youth, can she be an amazing CEO? What gives you that confidence? Her knowledge of the space? Ability to be compelling? Authenticity?

The best casting decisions happen when we are open to allowing incredible actors to show us how much better the character can be. In the same way, I try to approach every meeting with a founder with a willingness to be blown away by their vision of the world.

Hardware as a Moat

Photo credit: Peloton

When investors look at companies, one of the things we try to understand is whether the company can build a moat. In tech, a moat is a conscious business design choice that allows a company to develop and maintain a sustained competitive advantage over other players in the space.

Economies of scale and network effects are two of the best-known moats. But there are others—like deep tech, etc. Today, I want to propose a new moat: hardware. I’m talking about products like Peloton, where the hardware is central to having the full experience.

In the wellness space, software solves real problems, and the app ecosystem in these spaces is thriving. These apps help with things like meditation, period tracking, sleep tracking, and exercise of all kinds. But in a crowded market like that, investors ask, “How does a company win?”

Now, when you have “just” apps in these spaces, with no connected hardware, they are fungible. To move from one app to another, you just… click. If you have paid an annual subscription, you might wait until it expires, or you might just eat the cost and try a new app regardless. With these apps, there may be UI differences or instructor differences, but the experience is largely similar. The customer choice is being made based off of relatively small differences.

As my colleagues and I have written, in a software-only space where differences are minimal, a product-led community can be a great moat. Another moat could be sales to enterprises, where a company buys the app/service as a benefit for employees. If you lock up as many companies as possible, very quickly, the employees of those companies become your customers. But this kind of lockup, while valuable, may not be driven by passion or love for the product.

So, a moat that could be longer lasting is hardware. Yes, hardware often scares VCs, because it can be complicated. You need to create processes around mailing things out, dealing with returns, production challenges, and more. There seems to be an endless list of issues.

However, hardware has changed over the past few years, becoming easier to manage than it was 10 years ago. A whole ecosystem of companies has emerged to support hardware companies with many of the logistical issues. And engineers, product people, designers, and marketers who have built and shipped multiple versions of good consumer hardware are available in the market.

In a crowded software market, hardware can be your moat.

The most successful of these companies is Peloton. If you buy a bike (or presumably a Tread), to just get your hardware to turn on, you have to pay Peloton $39 a month for a subscription. And while your parents’ generation ended up using exercise equipment mainly as a clothes horse, these new devices are a joy. They are well-designed, they are connected, they often have community elements, and they have a rich user experience that’s compelling and powerful. So, sure, much like your parents, you could turn your Peloton into a dumping ground for your shorts and t-shirts, but once you’ve bought a device that costs several thousand dollars, the additional monthly pinch of $39 is likely making sure that you are using the device. Their numbers back this up: their S1 claims 95% 12-month retention for those who buy their hardware. Even if it is a bit lower, like some analysts debate, it’s still incredibly strong. Also, just yesterday, agreeing with this point of view, Lululemon bought Mirror, a connected hardware exercise mirror, for $500M.

Photo Credit: Core

It is even better when the hardware gives you unique data. For example, our portfolio company Core provides your Heart Rate, your HRV, your minutes of calm, and your minutes of focus for each session. Because you are holding a device that vibrates to give you a point of focus, and that same device gives you all this data, once you’ve bought a Core, you’re unlikely to want to use anything else to meditate. Same goes for Peloton.

In addition, unlike another apps on your phone, which are all behind the black glass screen, hardware is visible. You can see your Peloton bike in your house, your Core trainer on your desk or bedside table. And by being visible, and by being well-designed, they beckon to you to use them and experience the tactile, live user experience with them. They exist in the real world.

These are still the early days of connected hardware, but between the physical presence, the cost paid to acquire the device (which could be a proxy of customer commitment), the tactile experience, and the data generated, these devices can serve as a moat in crowded software markets. Over the next few years, companies will evolve their model and create fantastic new experiences for consumers. Both as a user and as an investor, I am excited to see where this world goes, and I’m excited to use these beautifully designed products and apps to achieve my goals.

Ignore the Requirements, Check the Proxies

Photo by Free To Use Sounds on Unsplash

This past week, I talked to 10 candidates for our first round of summer intern interviews. It was awesome to see the enthusiasm and energy in the applicants, as well as the range of people who applied. On the job listing, we stated that “experience is preferred, but not required”—so we got a lot of MBA students, young professionals, recent graduates… and, to my surprise, one rising sophomore.

This young man, let’s call him Carl, realized there was no downside to having a conversation about the role. Because if he got picked to have a conversation, he could pitch why, despite how young he is, he’s qualified for the role. And if he impressed (which he did), he could put himself in a position to land future roles or be referred to other opportunities. He would also make a connection in the venture industry that he wouldn’t otherwise have had. Having spoken to him, I can put a face to the name, and I have a positive impression.

Because we had such fantastic candidates, Carl didn’t move on to the next round. But, he stands out in my mind for having the chutzpah and confidence to put himself out there. At Spero, we are giving some serious consideration to having ongoing, in-term interns, and Carl will be on the very short list of people I’d call if that opportunity opens up.

This story connects to the broader issue of how requirements are written and what they actually mean. Most of the time, a requirement is a proxy for a skill that people want to see so you can be successful in the role.

For example, in a job description:

An MBA is a proxy for analytical skills, basic financial skills, modeling basics, and an ability to evaluate businesses.

Experience in a specific role/industry is a proxy for the ability to hit the ground running versus needing people to spend time explaining how the industry works.

Years of experience is a proxy for maturity, the ability to collaborate with people, and the ability to handle the kinds of decisions the role will require.

And when raising venture investment, $1M revenue is often a proxy for product-market fit. There may be other ways to show PMF without being at exactly $1M.

This is not to say that every prerequisite is a proxy, or that you should fudge the facts. If you’re 2 credits short of your MBA, don’t say you have an MBA — but don’t automatically assume you’ll be rejected, either.

In our summer intern posting, we didn’t specify a single hard requirement, not even a college degree. I believe the whole professional world is moving towards tours of duty, which don’t depend on credentials like that. One of the smartest product designers I know doesn’t have an undergraduate degree. He is awesome and has accomplished a lot at some of the very best tech companies in Silicon Valley.

Next time you see one of those proxies, if you feel you‘ve demonstrated what the proxy is asking for, don’t hesitate to apply. I‘m fairly confident that Carl will do something interesting with his life. He recognizes that he is the asset and despite his youth, he understands the concept of proxies. He took the chance to put himself out there, and in nearly every situation, that’s better than not applying.

Ignore The Gatekeepers

Photo by Zachary Lisko on Unsplash

Last week, I saw the awesome news that my NYU Grad Film classmates Sarah-Violet Bliss and Charles Rogers are making their next feature. I love their story because it’s so different from what people may consider the “traditional” path in film.

It was the summer of 2012, and most of the class was on draft 63 of their soon-to-be perfect first feature script. But before that, we each planned to submit draft 79 to all the prestigious film labs. There, we would get input from auteurs we admired. Then, we’d make the perfect film, it would open to acclaim at the perfect festival, and get acquired and released nationwide. That was the plan.

That same summer, Charles and Sarah-Violet (SV) had a very different plan. Instead of perfection, they decided to create immediately. They cranked out a feature script. They each borrowed $40K through student loans. Knowing they were on a tight budget, they wrote about a world they knew (deep Brooklyn), with only a small handful of locations (all in NY), and very few characters. They didn’t submit the script to any labs. They didn’t apply for any grants. They did not wait.

They planned the shoot. They cast fantastic actors, some of whom they’d known for years. One of our classmates was the cinematographer.

They shot their feature. They edited their feature.

They did it all on a total of $110K. Tiny, even by indie standards.

One year later, they submitted it to festivals. The movie, Fort Tilden, premiered at SXSW. It won SXSW. And that set SV and Charles on a different trajectory. They were writers on the Netflix show Wet Hot American Summer and now have their own, very successful show on TBS, Search Party.

I share this story to share the power of ignoring gatekeepers. There are a few big steps in making a feature film: write a script, prep and plan the shoot, shoot, edit, release. Every step depends on funding. You could wait for funding at each stage—basically asking for permission from someone else to make your film. Or, you can do what SV and Charles did — make the best movie within the constraint they faced and the funds they were able to access. No waiting, no permission needed.

Don’t get me wrong: this is definitely not an easy or guaranteed path. I spoke with SV recently about her story, and she said, “(Taking out those loans) was still a huge insane risk I wouldn’t exactly recommend for everyone. But it felt right. So I’m always very careful to say, ‘Look, this is how we did it, and it worked out for us. I have some success but I also still have student debt.’ That said, I do NOT regret it. Not everyone would be comfortable with the position I put myself in, but it was right for me. I had a lot of clarity in the process and risking the money didn’t scare me. Waiting years and years to find funding or someone to approve of my voice was a much scarier fate.”

If you follow the SV & Charles model, you will have a real, live product. A product which people can see and enjoy. A product that people can evaluate and say “hey, they won SXSW on a tiny budget.”

Given the choice between being constrained, but still making something, versus waiting for the “ideal” situation, what would you pick? While most of the class was dreaming of the perfect first feature, SV and Charles made their first feature. That was enough to launch them into a world that is very hard to break into.

Breaking into tech is easier because angels and early funders (the gatekeepers) are willing to fund first-time founders. But it’s not always easy to raise your angel or pre-seed round.

Look at the funds and skills that you have. Decide how much risk you want to take — each person has their own comfort level and you should be the one that decides what is best for you. And then, design and build something using your skills and your budget. If you build something people love, you will have a little success. And that little success can propel you onto your next opportunity. And then onto the next opportunity. And each project or startup could get better. The gatekeepers will then come to you (and I say that as a venture investor).

In my film school class, every single person had ambition, most had a great idea. But SV and Charles just did it. And they went from strength to strength. You can, too.