Musings of a VC in NYC

Product > Strategy > Business Model

One of the mistakes I see entrepreneurs make is they move to business model before locking down strategy. The way I like to think about this is get the product right first, then lock down the strategy of the business, then figure out the business model.

Getting product right means finding product market fit. It does not mean launching the product. It means getting to the point where the market accepts your product and wants more of it. That means different things in consumer, saas, infrastructure, hardware, etc, but in every case you must get to product market fit before thinking about anything else. And, I believe, moving to business model before finding product market fit can be the worst thing for your business.

Once you find product market fit and start thinking about business model, I suggest you take a step back and work with your team (and investors) to develop a crisp and well formed strategy for your business. Investors, at least good investors, are very helpful with this stage. If you watched the John Doerr interview I posted yesterday, you hear him talk about strategy a lot (Intel, Amazon, Google, etc). The best VCs are very strategic, have seen strategies that work and ones that don't, and can be a great partner to develop a straetgy with. This is one of my favorite things to do with entrepreneurs.

I remember back to the 2009 time period at Twitter. The service had most certainly found product market fit. And the team turned its attention to business model. There were all sorts of discussions of paid accounts, subscriptions, a data business, and many more ideas. At the same time, Ev Williams was articulating a strategy that had Twitter becoming the "an information network that people use to discover what they care about." And so the strategy required getting as many sources of information on to Twitter and as many users accessing it. It was all about network size. That strategy required a business model that kept the service free for everyone and open to all comers. That led to the promoted suite business model. Twitter executed product > strategy > business model very well.

We have also had many portfolio companies build revenue models that did not line up well with the strategic direction. And in some cases, the companies really did not have a well articulated strategic direction at all. That led to a lot of wasted energy building a team and a customer base that ultimately was not of value to the business. We have seen teams walk away from parts of their business because of such mistakes. 

These kinds of mistakes are usually not fatal. Not finding product market fit is fatal. But going down the wrong path in terms of strategy and business model can be fixed. But it is painful, costly, dilutive, and sometimes can lead to a change in management.

So my advice is not to rush into business model without first finding product market fit and then taking the time to lock down on a crisp, clear, and smart strategy for your business. From there business model will flow quite naturally and you will be on your way to success.

Video Of The Week: John Doerr at Pando Monthly

I like what Sarah Lacy is doing with these monthly talks called Pando Monthly. I am going to do one on June 13th. Last week Sarah talked with John Doerr, who has been a role model for me for many years and someone I have looked up to for a long time.

It's a long talk, more than two hours. But if you can put it on this morning and let it run, there's a ton of good stuff in here.

Fun Friday: Favorite Sport

I was at my friend Vanessa's birthday party last night and another friend Cliff was saying to me that baseball is falling fast in popularity amoung the younger people in america. So we asked all the kids who were in attendance and sure enough baseball was considered "boring" and was not interesting to them. Soccer (football) on the other hand was rising fast. Among the kids in attendance last night, basketball was first, football and soccer were in a close second, with hockey and baseball in the rear view mirror.

So for fun friday today, I thought I would poll the AVC readers on our favorite sport:

Please participate in the poll and in the comments. After all, this is fun friday.

Citibike

I walked out of a meeting at 33rd and Park yesterday at 5:05pm. I had to be on a call in my home office at 5:30pm. Getting a cab is a bitch that time of day. The subway required a switch from the Lex to the L at Union Square and that can be tricky if you don't time it right. So I took out my phone, fired up the Citibike app, and saw that there was a Citibike station right across the street. Of course, if I didn't have my nose in my phone I could have figured that out by looking up.

I tweeted this out and hopped on the bike:

Getting on a @citibikenyc to get to my next meeting. twitter.com/fredwilson/sta…

— Fred Wilson (@fredwilson) May 29, 2013

I headed south on Park and then west on the bike lane on 29th Street all the way to 9th Avenue, and then down the bike lane on 9th Avenue. At some point on 9th Avenue, a biker pulled up next to me and started asking me about Citibike. We had that conversation down 9th until he peeled off around 14th Street and I continued down to the bike station at Bank and Washington.

Sixteen minutes later, I was home, and I tweeeted this:

33rd and Park to Bank and Washington in 19mins on @citibikenycthat beats the subway and is cheaper than a cab

— Fred Wilson (@fredwilson) May 29, 2013

This New Yorker cover says it all for me. Why do we get on the bike at the gym and then take a cab to work?

Sure there are some safety concerns. Helmets are a problem. I need an inflatable helmet in my pocket solution. I'll be looking for that. And cars and cabs and trucks can be dangerous company on the roads in NYC. But the bike lanes are huge in that regard. To me the bike lanes are the thing that makes Citibike work in NYC.

A few weeks ago, we bought our whole family annual Citibike passes. Eight dollars a month for unlimited rides per month. That's better transportation value than anything else in NYC and better for you too. Now I am off for my morning bike ride up the west side highway.

I love my city, my bike, and Citibike.

DuoLingo For Android

Our portfolio company DuoLingo has had one of the top free education apps in the iPhone app store for the past year. If you want to learn a language for free on the iPhone, you can get it here. DuoLingo currently offers courses in the following languages:

The big news is that DuoLingo for Android launches today. Android is much larger outside of the US and this will significantly increase the number of users who can take advantage of free language learning on your phone. If you use Android and want to give DuoLingo a try, go here.

Running The Table

I hate it when companies try to run the table on a market.

Like Microsoft tried with desktop computing.

Like Apple tried with mobile computing.

Like Facebook tried with social networking.

And like Google is trying with the entire fucking Internet.

The good news that the market stops them. Apple and the Internet stopped Microsoft. Google stopped Apple. Twitter stopped Facebook.

Who will stop Google?

Remembering

While it is true that Memorial Day serves as the unofficial start of summer, we should note that it is actually a day to remember our fallen service men and women.

As we wrap up wars half way around the world and bring our soldiers home, we should take a second and remember all of our soldiers who did not return from Iraq and Afghanistan. We should also remember those who did not come home from Vietnam, Korea, WWII, WWI, and countless other wars our country has fought in its short histroy.

Regardless of what you think of war, we can honor these men and women. If you can get to a military cemetery, put a flower or a flag on a soldier's grave. If you cannot, please take some time out of your day to think about them and remember them.

I woke up this morning thinking about the military cemetery in Normandy where 10,000 of our fallen soldiers are buried. I took this picture when our family visited Normandy almost three years ago. You can't see something like that without feeling the loss. Please take some time to feel that today.

Finishing

Today, our eldest child graduates from college.

Last night, as we were leaving a house party with all of her friends and their parents and family members, Jess said "thanks for sending me to college dad". I replied "thanks for graduating Jess". Everyone got a chuckle. But I was dead serious.

Dropping out of college is all the rage today in startup land (even dropping out of high school). And when it comes to our business, we really do not care if someone went to or graduated from college. We have funded many college dropouts and will continue to.

But there is also something to finishing something you started.

Yesterday afternoon, all thirtyish art students who had completed a year long senior thesis project did a group show at the Zlikha Gallery at Wesleyan. These young adults had each worked all year long on their projects and the works are impressive. The Gotham Gal negotiated a sale with one of the young artists. The first the young woman had ever made. But the most impressive thing to me was the sense of accomplishment these young artists felt. They all started with a big idea, then had to struggle with the work, the doubts, the mistakes, and in the end they all delivered big time. More than the diploma and the cap and gown they will wear today, that year long struggle and delivery is what they will take into the world as they leave college today. They finished something hard.

Finishing is about discipline, committment, getting up and getting at it. I am a big fan of finishing. And I am so proud that Jessica has finished college today. Congrats Jess.

Video Of The Week: My Talk With John Battelle at CM Summit

If you want to watch here, hit play and go to 47 minutes in. Or click on this link which will take you to you YouTube and get you to 47 minutes in.

Feature Friday: Save To Foursquare

I am a big fan of bookmarking. I mean that in the largest sense. When I find something I want to read, watch, do, etc, I like to save it somewhere that I can find it when I need it.

When it comes to restaurants I want to go to, I like to use Foursquare's Save button. Here's how it works:

Let's say you are reading that Montmartre’s French Fries Are New York’s Best and you think "I have to try them".

You click the save to Foursquare button in your browser and this happens:

The default is that you will save that place to your "to do list"

But if you happen to have a list called "best french fries in NYC" like I do, then you can change the drop down and save it there

If you like reading about places to go out but don't have a good way to save them (to your phone and web), give the Save To Foursquare button a try.

Full disclosure: USV has an investment in Foursquare, The Gotham Gal and I have an investment in Montmartre, and I love french fries.