The red flags and magic numbers that investors look for in your startup’s metrics - Andrew Chen
A must-read - 80 slides included
Growing startups and evaluating startups share common skills Earlier this year, I joined Andreessen Horowitz as a General Partner, where I focus on a broad spectrum of consumer startups: marketplaces, entertainment/media, and social platforms. This was a big moment for me, and the result of a long relationship that began a decade ago, when Horowitz Andreessen Angel Fund funded a (now defunct) startup I had co-founded. One of the reasons I’ve been excited about being a professional investor is the ability to apply my skills as an operator. The same skills needed to grow new products can be used both to evaluate new startups to invest in, and once we’ve invested; to help them grow.
The reason for this is that the steps for starting and scaling a new startup share many of the same skills as investing in a new startup: 1) First, we seek to understand the existing state of customer growth – including growth loops, the quality of acquisition, engagement, churn, and monetization. 2) Then, to identify potential upside based learnings from within the company as well as across benchmarks from across industry. 3) And finally, to prioritize and make decisions that impact the future. Of course, as an investor you can’t run A/B tests or analyze results directly, but you can form hypotheses, ideate, and apply the same type of thinking.
As part of my interview process at a16z, I eventually put together an 80 slide deck on how to use growth ideas to evaluate startups. In the spirit that this perspective can help others in the ecosystem, and to share my thinking, I’m excited to publish the deck below:
Disclaimer: This was just one presentation in a 10 year relationship But before I fully share, I have a disclaimer. This is one presentation I made within a series of dozens of meetings and interactions I had with the Andreessen Horowitz team. It was just one ingredient. I’ve been asked by friends and folks on the best path into venture capital. From my experience, it’s a long, windy experience – others have written about their processes as well.
My journey took a while too:
10 years in the Bay Area (and blogging, building my network, etc)Dozens of angel investments and advisory roles in SaaS, marketplaces, etcOnce kicked off, 6 months of interviews (dinners, sitting in pitches, analyzing startups)100+ hours of interviewing and prep
This deck was just one step, but one that I’m proud of, and want to show y’all.
Please click here to read the full blog from Andrew Chen.