Stop selling yourself short: Your market size is bigger than you think!

Market size image

As an early stage investor, I look at two elements: credible founders & a massive potential market. 

You most likely have a slide in your deck that demonstrates this. Most startup founders diligently do their research and present a slide that shows that they are trying to capture a massive dollar market with their solution. Most of these slides are wrong.

I will repeat. You, smart founder, are selling yourself short. 

First off, we want you to be going after a HUGE market in order to build a massive company. The majority of the market sizing slides that I see are a top down analysis of the market. Usually this means the founders are looking at large market surveys to understand how much people are spending on sales enablement tools, or HR technology, or for gluten free snacks in the country or region as their beachhead market. As an investor, this tells me that you looked at existing market data that is out on the web This is based on existing spend, from an analysis that is likely a few years old. . 

Market sizing data is a fallacy for early stage founders.

Available information on markets today tells me about what you could do in today’s environment. As an early stage investor, I’m looking for the biggest companies of the future. This means that market sizing data that you got from a reputable source in the current year doesn’t apply to you. You are building something that is carving a new niche in the current market or creating an entire new category. Simply put, your company doesn’t fit into the current market sizing data.

You need to do a bottoms-up analysis of your market.

A bottoms-up analysis takes a different approach because it looks at how each incremental sale could create a huge market opportunity. A bottoms-up analysis looks at how your solution, at a specific price, serves a specific market. You start with the individual bits that make up a sale, like number of HR partners per SaaS license, total number of HR partners in a specific region, and are building up to the market size. As an investor, this shows me that you are thinking about customer acquisition more tactically. It also shows that you understand where your beachhead market is because you know how many sales it will take you to get to that massive market size. It also helps that you likely are using your current traction as a basis for future growth, which is always fantastic.

While this is definitely a more time intensive process, it is far superior to taking a number from a data analyst survey because it shows a deep understanding of who you are as a business, who your customers are, and how many of them you need to get to that $100M in revenue.

Don’t stop at one method of analysis.

You really need both in order to communicate where you sit in your market today and where you will be tomorrow. 

If you’re looking for a good resource on market analysis, I like to send this link to entrepreneurs as a guide on how to do a bottoms-up analysis. 

Let us know what you think in the comments – do you use one method or both in your pitch deck?

Minimum Viable Community Part 2: Preparing to Launch

This is the second post in a series of posts on community. Check out the first post here.

Community building takes time and careful planning. Launch is your time to shine or fail, so you have to do it carefully and methodically. You’ve done the strategic work to define the purpose, where the community will live, key archetypes, rules, and started to engage plants. Before you breathe life into the community, there is a bit more preparation you have to do.

First, you must build critical mass.

You identified and signed on your plants to join your community. You may remember from part one that these are people who are highly engaged and represent the key archetypes. You now need to get a critical mass of people like them. The first way to do this is simple, ask your plants. Who do they know in their lives who would gain benefit from being a part of your community? The second way to find a critical mass is to go to them. Where do they live on the internet today? Are they having conversations on social media? Are they hiding out in their jobs, wistfully wishing for someone like them to talk to? Are they at industry conferences or specific events? Find these archetypes in the wild and pitch your community to them. Gather a list and update them along the way as you start to build critical mass.

But how much is a critical mass?

This is a consulting answer -- it depends. I’ve launched communities with 15 member companies and I’ve launched communities with hundreds of people. You need to think about the value you provide to members and how you are going to deliver it. For example, if you wanted to build a community for entrepreneurs (key archetype) to share (value) best practices through a (delivery) question and answer forum, you would need hundreds of participants. The delivery method is such that people won’t be checking it all the time, so you need more people to be able to participate in the discussion. If you had a community dedicated to data analytics for the oil and gas industry that held monthly live discussions to share learnings from specific initiatives, you could launch with a group of ten experts. The content focus is narrow, the delivery is more infrequent, and you will still find a range of experiences amongst experts from different organizations. If you can confidently say that enough of your waitlist will participate when you launch, you have a critical mass.

Second, prepare topics for initial discussions.

But wait, Elisa, that means that it’s not an organic conversation. Yes, I know preparing topics for initial discussions means that it isn’t *truly* community driven, but you have to start somewhere. A church may only have a few members, but they have a guide of what they cover and what they don't. You’ve created the rules, boundaries, and limitations for your community. Use those along with community discovery interviews, think of these as customer discovery interviews for your community, to create a list of key topics that people in the community want to discuss. This could be something that a plant is an expert in that they can share with the community. It could be a topic that a lot of folks in the community struggle with that another archetype in the community can share best practices. Make a list of those topics, stack rank, and start assigning dates and people to be involved in these discussions. Schedule these discussions with your plants and others who may be interested in your community so that you can ensure participation. By preparing topics and ensuring a lively discussion, you will show quick value to members. 

Finally, you have to build the hype. 

FOMO is real and you want people who are inside and outside of your community to feel that if they don’t participate at launch, that they are missing out. As you are building the waitlist, you are conducting community discovery interviews with members. Use the information they provide on where they see community value to build your messaging and communications plan. Get quotes from members and sprinkle them throughout your communications as social proof of what you are building. Your plants are central to building hype. Work with them to promote some of the key discussions you may be having and what value they are excited to get from other members. Finally, over communicate before launch to both people on your initial launch list and the broader community you want to reach. 

With all this in mind, you’ll be as prepared as you can be for the launch of your community. In my next installment of this community building series, I’ll talk about the launch and how to obtain and maintain engagement from your community along with key metrics.

If there is anything that I missed, feel free to jump into the comments or find me on twitter at @MissElisaS. 

Building a Minimum Viable Community

Community has supercharged many of the biggest movements and companies in the startup ecosystem in the past few years. Tools like discord servers are growing exponentially, serving online gamers, NFT enthusiasts, and even big brands. More and more companies are using community as a way to better connect with their audience and gain feedback on their products or services. This movement isn’t going away, in fact, many see it as the future to a company’s competitive advantage.

All of the information and tools available can be paralyzing. As in most cases with startups, it’s best to think lean and start now. 

This post is the first in an ongoing series of posts about building, growing, and serving a community for your startup.

Like content, building community is a long-tail play that will require consistent effort.

I like to use the following framework when building a minimum viable community:

1. Decide whether community is your go-to-market strategy or your product. The strategies for these two are quite different. One you will monetize and one you will not. For the purpose of today’s exercise, we focus on the go-to-market strategy. 

2. Define who the key archetypes are that will be a part of your community. You must have exclusivity to get value out of the community because you want to keep the conversation focused and members to realize benefits from the focused conversation.  Inviting everyone without having clear screening criteria is an invitation to chaos. Focused, specific conversations drive more meaningful value to participants than general platitudes. A key takeaway is that it may not be JUST the customer who is part of the community, it may be service providers, influencers, and other stakeholders in your customer’s ecosystem.

3. Define where and how people will interact with one another. This could be through a newsletter and events using a tool like Luma. It could be a slack group that poses consistent questions to engage members in discussion. This could even be a weekly call of experts in a specific area that get to discuss some of the biggest challenges in their lives. Define how you want people to interact and in what format that you can consistently maintain over a period of time. Remember, keep this lean and simple to start.

4. Define rules, boundaries, and limitations of interaction. Determine what content is in scope and out of scope for the community so you can keep the conversation focused. I’ll say it again, focused, specific conversations drive more meaningful value to participants than general platitudes. Create a list of content that is in and out of scope so you can ruthlessly prioritize these discussions and delete the others. Make sure that you have this list and methods for redirecting the conversation to something more valuable for whatever format you will be delivering to the community. 

5. Identify and engage individuals who will be top contributors and super fans. I like to call these people plants. Just like you plant questions in a crowd for lectures or laughs at a comedy show, you want to plant both brand super fans and individuals with specific areas of expertise in your community. Think of this like a brand ambassador program where they will become de facto community leaders by modeling the behavior you want in the community. Recruit these plants to be your initial top users that will actively spark discussion and answer questions. By modeling the behavior you want in the community, the plants will spur participation from other members, even if it is a heavy lift at first. This may mean that you have to reach out to people in the community to participate behind the scenes, that is normal.

Now that you have all the framework together for a community, it’s time to start building. In my next post, I’ll talk about how to execute on this framework and what key metrics you should be tracking in order to drive growth for your company.

What am I missing? Feel free to jump into the comments to let me know any other things that you would include in a framework to build a minimum viable community.

Use Superfounders to Accelerate Fundraising

One of my favorite founders in the world is Jeff Kahn from Rise Science. He and his partner Leon have been steadily working on their company for years and recently executed a phenomenal raise. When I asked him about his process, I was surprised to hear his unorthodox approach.

The most important part of your fundraise is the kickoff.

The ideal kickoff involves warm introductions to multiple funds, to the most senior partners possible. To add a rough number to this, you're looking for 25-30 partner meetings. This creates a competitive dynamic, ultimately leading to an oversubscribed round with the best possible terms.

Here’s the problem: no fund is going to get interested right away, especially without incredible metrics in place. And once a round takes longer than a few months, it goes “stale”. It’s incredibly difficult to revive the excitement in the fundraising process from that point forward. 

Let’s work backwards from the top of your funnel - what activities will lead to real interest from multiple funds?

Cold outreach to a ton of funds (spray and pray) is too slow.

If you are a first time founder without a track record in leadership roles in other high-profile startups, you are wasting time cold-emailing VCs. I’ve done it hundreds of times myself, and I’m here to tell you that it just doesn’t work.

In the early stages, there’s plenty of risk in investing, regardless of the performance of the company. You might have great metrics, but not have a solid leadership team in place. You may address an amazing market, but the legacy customer acquisition costs might be too high. You may have awesome revenue growth, but miserable margins. The list goes on. For every reason there is to invest, VCs see ten reasons to pass.

We believe founders need to take advantage of one of the most underutilized signals: the warm introduction from other founders who have made the fund money in the past.

Six months prior to his raise, Jeff spent almost no time talking to VCs. His initial strategy was to research his ideal investors and understand which companies that the specific partner led rounds in. He diligently outlined which of those companies were the most successful and identified the leadership teams. Ali Tamaseb calls these people “Superfounders”. Even better than another investor who is investing directly, the best introduction to a fund is through a Superfounder that they trust. Most founders think that the lead investor from their previous rounds is the best path, but while that gives you meetings—it doesn't put you in a position of strength.

Superfounders understand that they are sitting on the shoulders of giants and are willing to pay it forward.

However, you have to work for that golden introduction! If you are reaching out to a Superfounder right before fundraising, you are too late.  You need to establish real trust, and real trust takes time. I encourage founders to put together their target list of Superfounders at least six months before their fundraising kickoff date. The earlier the better—these folks are typically amazing mentors who can help you navigate the early stages of your startup.

In your initial outreach, ask for advice. Share why you deeply care about your company and your team and give them a reason to help you. There is something special about the spark in the eyes of a founder who is excited to win and create real impact for their community of customers. As operators ourselves at MATH, we spend a ton of time mentoring founders before they are ready to raise their round.

If you want to turn a Superfounder into a mentor, you need to be an amazing mentee.

Follow up immediately after your meeting and show that you are incorporating their feedback to your startup. Don’t ask for investment or introductions—your goal is to genuinely listen and learn. There is so much nuance in building a startup. The ones that go the distance are the ones who approach their craft with discipline and rigor. Show that you are someone who is open to coaching and growth, this goes a long way.

Meet with them monthly and show progress. Investors invest in lines, not dots. Imagine the introduction that a Superfounder will make for you six months from now—you want them to say that you have grown in front of their eyes. Meeting when there are problems that the Superfounder is uniquely setup to be useful gets them excited and gets you, the founder, great advice.

What’s even better is if you can get an angel investment check out of the Superfounder. Most successful operators are active as investors or scouts for other funds. They might even be LPs in a handful of venture funds themselves. Typically, venture funds keep their investor list close to their chests. Imagine the weight of the introduction of someone who has invested in the venture fund themselves. I can guarantee that you are going to get the attention of the most senior partners in the fund right away.

Don’t ask for the introduction unless you have it all together: a clear narrative and materials to back that story.

The more prepared you are, the faster the rest of the process will be for your fundraise. Momentum matters. Ideally, you will have multiple Superfounders who can vouch for you in your initial outreach, each providing 5-10 introductions. Ask for the connections to be made in the same two week window; you want to create a real sense of urgency from multiple funds to establish a competitive process. Ultimately, you are optimizing for the best partner who will help you along your journey, with the best terms for your final outcome during the exit.

This method only solves for the gateway problem—you still need to deliver an amazing pitch with stellar fundamentals. I recommend reading Brad Feld and Jason Mendelsohn’s excellent book "Venture Deals" or Scott Kupor’s “Secrets of Sand Hill Road" to get a primer on the process—both have been fundamental in my own journey in navigating venture capital. In addition, the YC Series A Guide is a must read for every founder.

It is so much easier to build trust with other founders—you are one of us, and we all remember what it was like when we were just starting out. Ultimately, if you can’t impress other founders, you won’t impress VCs. Use this as a gateway to earn the trust of people who will invest in your journey.

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