Ten
In order for us to underwrite immature company risk, the young enterprise should target an order of magnitude improvement.
That math can be done infinite ways. A sure thing that's a 10x improvement is clear, but nothing is without risk. 100x better, but only 10% likely could work. A 40% probability that combines three separate 3x value wedges does too. It's not about being merely 10x better, but maintaining an order of magnitude advantage on a risk adjusted basis. That math may require 1,000x in certain high risk bets - still, it works for some.
Our portfolio has to work that way too. We either find low risk deals in the wild, reduce risk through our own contributions, or merely convene rather than venture much capital at all. In all cases, we are price sensitive. Time value of money within an urgent problem gives us no choice.
The goal is 100x within two years, implying escape velocity (10x) within one. We may be willing to start 12 months earlier at low capital intensity. Here's what a 1-3 year plan could look like (ignoring risk), if the y-axis measures outcome as a multiple of unity baseline and x-axis is time in years.
Think of the math above on a log scale. It all starts at zero because log(1) is zero. Build a plan that's both 10x (log(10) = 1 year) and 100x (log(100) = 2 years). Occasionally, be willing to start at 10% with out much burn (log(0.1) = -1 year). Be honest about the extra time it will take, but have faith that compounding effort makes 100x only twice as hard as 10x. Might as well go big!
Why does any of this matter? Because the most successful young companies in history - against which you will be compared when seeking capital - found a way to do this alchemy. They turned linear time into exponential results, with some diminishing marginal returns. Android reached 1 billion users in 5 years; it took iOS and facebook nearly 8 years to do the same. Uber impresses because it's reached 10 billion cumulative rides (not really the same metric, but directionally interesting) in 8 years. Lyft started later and is 1.5-2.5 years behind Uber's scale. The only reason folks are chasing the unsustainable gimmick embodied by Bird and Lime is their speed of adoption is faster than anything we've ever seen before in technology. Say what you want, there is latent demand to monetize walking, whether we like it or not. Read more from Horace if impressed by these data below:
To be ten times better, plan to miss the hundred- or thousand-x multiple you aimed for by using linear inputs (e.g., time, capital, employees) to drive exponential results.
That's fundable, impactful and likely worth the risk.
That math can be done infinite ways. A sure thing that's a 10x improvement is clear, but nothing is without risk. 100x better, but only 10% likely could work. A 40% probability that combines three separate 3x value wedges does too. It's not about being merely 10x better, but maintaining an order of magnitude advantage on a risk adjusted basis. That math may require 1,000x in certain high risk bets - still, it works for some.
Our portfolio has to work that way too. We either find low risk deals in the wild, reduce risk through our own contributions, or merely convene rather than venture much capital at all. In all cases, we are price sensitive. Time value of money within an urgent problem gives us no choice.
The goal is 100x within two years, implying escape velocity (10x) within one. We may be willing to start 12 months earlier at low capital intensity. Here's what a 1-3 year plan could look like (ignoring risk), if the y-axis measures outcome as a multiple of unity baseline and x-axis is time in years.
Think of the math above on a log scale. It all starts at zero because log(1) is zero. Build a plan that's both 10x (log(10) = 1 year) and 100x (log(100) = 2 years). Occasionally, be willing to start at 10% with out much burn (log(0.1) = -1 year). Be honest about the extra time it will take, but have faith that compounding effort makes 100x only twice as hard as 10x. Might as well go big!
Why does any of this matter? Because the most successful young companies in history - against which you will be compared when seeking capital - found a way to do this alchemy. They turned linear time into exponential results, with some diminishing marginal returns. Android reached 1 billion users in 5 years; it took iOS and facebook nearly 8 years to do the same. Uber impresses because it's reached 10 billion cumulative rides (not really the same metric, but directionally interesting) in 8 years. Lyft started later and is 1.5-2.5 years behind Uber's scale. The only reason folks are chasing the unsustainable gimmick embodied by Bird and Lime is their speed of adoption is faster than anything we've ever seen before in technology. Say what you want, there is latent demand to monetize walking, whether we like it or not. Read more from Horace if impressed by these data below:
To be ten times better, plan to miss the hundred- or thousand-x multiple you aimed for by using linear inputs (e.g., time, capital, employees) to drive exponential results.
That's fundable, impactful and likely worth the risk.
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