Wedge, Vision, Execution
All Things Venture #045
Hey Everyone - Dez here from All Things Venture. Woah, woah, woah - am I really hitting your inbox twice in one week? Looks like it. The reason why I’m sharing this bonus article is because I recently hit the 3 month mark of working in Venture Capital, and so far it’s been amazing. Has it been without challenges? No, absolutely not. There’s a steep learning curve, the feedback loops are incredibly long, and there’s almost a paradox of choice when it comes to choosing how to win, in venture. That being said, I wanted to take the time to reflect on my first 3 months in venture and share a framework I’ve been thinking about; a framework that I think can be helpful to founders as they navigate their initial fundraising process. When I joined Firstmark, I was explicit about achieving an overarching goal of contributing to an ecosystem that makes it easier for founders and investors from underrepresented backgrounds to have the necessary connections and knowledge to excel in this industry or in the fundraising process. Think of this post as just one attempt of many to achieve that goal, and whether you identify as underrepresented or not, my hope is that this post is valuable for founders writ large.
After meeting with 90+ founders in 3 months across different sectors like fintech, e-commerce enablement, and Web 3. I wanted to share my own perspective on the patterns I’ve observed from the founder’s that have succeeded the most in the fundraising process (whether that be internal to Firstmark, or broadly in market). The framework I’ve developed, that helps me think through opportunities quickly and is informed by the strongest founders - is simple. In every conversation I have with founders, I am thinking through three things:
What’s the Wedge?
What’s the Vision?
What’s the Execution?
Founders come from all different backgrounds. Some are fantastic storytellers, some are highly technical, some are proven operators. Every founder is going to have some sort of super power, and they should absolutely lean into that power. However, what I have noticed across all the different types of founders that I meet. Regardless of their super power, the conversations that I have walked away from where I am the most excited are the conversations where the founder clearly communicates their wedge, their vision, and their plan for executing both. Let’s talk about each of these things briefly.
The Wedge
I wrote previously in Can You Cut Through Noise about the absurd amount of time we spend on our phones, and the competition that naturally ensues because our phones have become the primary point of distribution for most consumers. Every startup is in, one way or another, a competition for attention, and your wedge is the way your startup can naturally create separation from said competition. I think about it this way:
A wedge is the product or service in your company that attracts a customer with a low to immediate, time to value. It is being able to set up a Shopify store in a few clicks, it is being able to accept payment from your friends through Venmo. It doesn’t need to be the thing that makes money for your business in the long term, but it does need to be what gets your business off the ground in the short term.
In the podcast Starting Greatness hosted by Mike Maples, David Sacks (former COO of PayPal) described PayPal’s wedge like this -
“It’s the atomic unit of the product. It’s the thing that’s going to grab their attention. It’s the single transaction or interaction that the user is going to want to engage in again and again. It’s the search box on Google, it’s dropping a pin on a map in Uber. It’s the very simple user interaction that they’re going to want engage in. It’s a little bit like a musical hook in a song, it’s that thing that grabs you.”
PayPal went on to leverage their wedge at the time, emailing money (or more broadly - enabling peer to peer digital transactions), into building the global $222B payments behemoth they are today. When you are a new product, and you have little to no distribution channels, your wedge is your lifeline. Your wedge is what gets you into the door of creating a long term relationship with your customer. Your wedge is what is going to keep your company alive. The best founders, in my opinion, can clearly draw a line to what their wedge already is today, or what it is going to be in the future. If you are not sure of what your wedge is, ask yourself these two questions:
What is the product feature or service that will enable my target audience to interact with my business for little to no cost?
What is the unique aspect of my business that differentiates my offering from my competitors?
If all you hear are crickets, then you probably don’t have a compelling wedge for your customers, or you haven’t narrowly defined who your target customer is. In any event, a wedge is not a static feature of your company. It is dynamic, and it will slightly change over time. The best thing about startups, is that the future of your company is up to you. A wedge can be created, even if it doesn’t exist today and that wedge can be in service of your ultimate goal, the vision.
The Vision
Great founders, tell great stories, and your vision for your company is just the story that hasn’t happened yet. Every business starts with a kernel of an idea. An idea that grows into the realization of a vision, and every startup relies on that vision, in it’s earliest days, to grow from the side project being worked on in a Silicon Valley garage, to the public company being introduced at the New York Stock Exchange. Great founders, have great visions for their companies, and I think about it like this:
Your vision, is the story you tell that invites, excites, and entices your customers, your investors, and your employees. It is the foundational “why” of the business. It is an abstraction of the culture of your firm, and it is the common thread throughout the company’s existence. It should be bold, it should be audacious, it should be borderline inconceivable, but it is fundamentally the most important story that will be told about the company and it will need to be told thousands of times.
In 2014, Brian Chesky the CEO of Airbnb, published a medium post outlining Airbnb’s vision. In it he wrote,
“Imagine if you could see the world like Van Gogh, find a tiny home to write that great masterpiece, or go on tour, staying in homes along the way. Imagine for a day you could live like a king, or be an explorer, or even a kid. Imagine when you arrived, you were made to feel special. In a home that is smart and designed to be shared. Where home isn’t just a house.”
The vision Brian shared continues on, but the general point he makes is that Airbnb is much more than just another hotel room. It’s a community, it’s an experience, it’s a door to, “a world you never even knew existed.” It elevated a common business (hotels) with an uncommon mission, “ to create a world where anyone can belong anywhere” , and fundamentally changed how we travel today. If your wedge is what gets you in the door with your customer, your vision is what keeps you around. Your vision is a promise, it is an expectation that you have set for your customer and it is an expectation that you must continuously meet. If you are struggling with articulating your vision to investors, try this:
Think about the end state of your business, the business that you want to build and believe you can build, but temper your expectations around because you feel that it may not be “realistic”
Write down what you see that business as and then read it back to yourself, and share it with your closest friends. Tell your mom, tell your dad, tell your babysitter from the 3rd grade. The more people you tell, the more familiar it will be to you when you tell it to an investor for the first time
If people don’t laugh at your vision, or give you a quirky look, or nod along and say, “okay suuuuuure,” my gut feeling (and I mean this in the nicest way) is you may not be thinking big enough. Venture capital is the business of hitting home runs. We want to talk with entrepreneurs who want to hang the moon, who want to put a dent in the universe. It is quite literally our job to seek those types of people out. Your vision, and the confidence you portray in being able to realize that vision can completely change the trajectory of your business in it’s earliest stages.
The Execution
Imagine you plan to go hiking one weekend, and you decide you want to do an unmarked trail. It’ll be your first time hiking an unmarked trail and you’re super excited. It’s you and your closest friends Meg and Dan, but let’s say that Jack, your friend who goes hiking once a month wasn’t able to make it out. Jack’s been to the unmarked trail you plan to do, and warns you it’s a tough spot to get to but he thinks you guys will be alright. Fast forward to the day of the trip - it’s raining, cold as shit, and you’ve been walking in circles for 3 hours. Your phone battery is dead. Meg and Dan are both pissed off, and you have no clue how to get back to the marked trails. You may say to yourself at this point, “Damn, I wish Jack was here.”
That’s what startups are like.
When shit hits the fan, and it inevitably will, it helps to have someone steering the ship who has been there before. There is a premium that gets paid for execution, and it is a critical part of transforming your vision for a category defining company, into the category defining company. While the majority of evaluating an early stage startup is forward looking, a founder’s perceived ability to execute is largely derived from their past performance. There are signals of past performance that we are all well aware of (i.e where you went to school, where you worked, how quickly/consistently you got promoted), and yes there are problems in the model of pattern recognition that consistently places a premium on the same types past performance. I don’t need to go into that discussion here, but what I will share is that the best founder’s communicate their ability to execute by showcasing their depth of knowledge and understanding of their competitive market. In my previous interview with Khalief Brown, the CEO of Renno, when asked about his advice for aspiring entrepreneurs, he shared this perspective
I would encourage people to just build something where they have deep knowledge, but even if you don’t - I think it’s really important to do your due diligence in the space. Who has come before you? Who has tried to do this? Who are the people that failed? Who are the people that succeeded? Study them, understand what they’re doing, what backgrounds they have and find your unfair advantage, because it’s so needed.
Having that knowledge that Khalief alluded to, and having that “unfair advantage” will invariably make it easier for you when people ask the hard questions that are dissecting your ability to execute. The best founders I’ve talked to, have had a clear, concrete, structured perspective on how their product, and by extension their company, grows over time. They understand the competitive dynamics of their industry, they know what their unfair advantage is, and they are laser focused on bringing it to life.
In the end, the process of fundraising is the process of telling a story. The story needs to be exciting (the vision), it needs to be tangible (the wedge), and it needs to be believable (the execution). The more prepared you are to tell that story, and to tell that story effectively, the easier fundraising will go. I hope that this article helps existing or aspiring founders, better understand some of the thinking that is going on, on the other side of the table. And if you’re a founder, and have any questions or just want to chat about what you’re building. Don’t hesitate to reach out at dez@firstmarkcap.com.