The Next Social Networks

If I were starting another company today I’d probably build something around social networks.

I think we’re at an inflection point with the legacy platforms, but still lots of open space for upstarts to figure out what’s next.

Rationale for why and thoughts on how:

Social connection is a core human need. It’s universal and not going anywhere. Essential needs are the best use cases to be building into. This is the #1 reason why this space is so full of opportunity.

Second, incumbents are unpopular and proving themselves incapable of change. While their usage metrics keep going up, there’s an underlying emptiness and unhappiness with the experience. This means the shift won’t happen, then it will happen all at once. Outside of the network effects, users have very little loyalty to the incumbents. When network effects flip negative, they unravel faster than people imagine.

Third, compared to other markets, there is relatively little innovative competition. FB has used its distribution advantage to replicate a lot of social network products (e.g. Snap). Has disheartened a lot of would-be challengers. But that's more open space to innovate.

Last but not least, fixing social media feels like an important enough mission that you’d be able to recruit some extremely talented people to work together on it. Having that is always an accelerant.

That said, I don’t think it would look anything like an existing social network (IG, tiktok, FB, Snap, etc.)

First off, it would be tailored to a specific vertical community. Think urban millennials, retired boomers, fitness fanatics or new moms. Each one of these is will be their own network. A user's future network is more like a series of Reddits than a consolidated newsfeed.

Legacy behemoths often fall prey to a pack of vertical players that provide a more tailored (and obviously better) experience for a subset of users. ebay and Craigslist have been fertile ground for a while. IMO the broad social platforms are next.

The experience will feel more like a “product” than today’s “social networks”. Games like fortnite or roblox are one example of this. People think of them as games, but it’s the social element that makes them really work.

Many of these social networks will have significant IRL elements because that’s what certain vertical communities want. The Wing is one example where their community wants genuine IRL interaction. Give the people what they want!

I also think it's unlikely the business model would be ad based. Why build on a premise that is driving so many of the problems in the incumbents? Also a differentiated business model makes it harder for incumbents to copy you.

Would have to pick a business model that is consistent with the product and community, but memberships, tipping, and in-app purchases are all models I'd explore.

Interesting side effect of this is that it makes these models more likely to stay as pure social networks, rather than grow into social media like the last generation.

I'm excited for the founders building these new social networks.

They say timing is always the hardest thing to get right, but their timing feels Massive opportunity that IMO will feel obvious in hindsight.

Bright days ahead.

(Originally published as a tweetstorm on July 22nd, 2019)

Prioritizing Investor Meetings

As founder I prioritized meeting investors who would jam with me on product. I thought they "got us." I wanted to work with them for 10+ years.

I was totally wrong.

Should have prioritized ones that asked the frustrating, hard, uncomfortable questions.

Here's why:

When I'd meet someone who grokked Frank (our startup) I'd walk out super energized. I thought we'd found our sympatico partners! I imagined every board meeting, investor update and phone call being like that.

When they'd ask about our next product feature I'd instinctively start my response with "that's a great question." Turns out those weren't great questions. Or for us at least they weren't.

As a 1st time founder, I was completely naive.

All the investors who just talked product eventually passed. They were intrigued by our idea but didn't take us seriously as an investment. I spent a lot of time that I didn't have trying to get them beyond product ideas.

The fact that they didn't push us on the hard parts of the business (looking at you go to market plan) was the tell I didn't see. They'd probably already decided to pass, I just didn't know it yet. Maybe it was subconscious and they didn't know it yet either.

On the flip side, the ones who only focused on our GTM strategy were trying to convince themselves to invest. They only had an hour, why waste time jamming on product when they already understood it?

They were in a check writing mindset not a brainstorming one.

Those meetings were a lot less exciting. We didn't have all the answers. The ones we did have were kind of flimsy. Everyone pointed that out. But we were a start-up that needed capital to go figure these answers out. Everyone has to start somewhere.

Didn't they get that?

We'd usually walk out a little bit smarter but a lot more discouraged. It reminded us that we had a lot left to figure out. And it wasn't obvious that anyone was willing to take that risk with us.

In retrospect I should have prioritized *every one* of those meetings.

These were the investors that eventually supported us. They knew we hadn't de-risked everything, but they were willing to take a calculated risk. As one told me, that's why it's called 'venture' capital.

So when you're deciding which investors to prioritize, give a little thought for the ones that don't "get you." The ones asking the demoralizing, frustrating, unanswerable questions.

These might be just the people you need!

(Originally published as a tweetstorm on April 23rd, 2019)

Does Brand Matter for Startups?

For top CPG categories 1923-1983: 20/25 brands held #1 position in their category the *entire* time 1983-Present: Only 4/25 kept the #1 position

Implication? Brand has never been more valuable for upstarts. Never been less valuable for incumbents.

Contrary to popular opinion, I think focusing on brand early in the life of your company is valuable.

Defining what your brand stands for and, these days, *who it stands with* is an easy way to cut through the noise and attract users who will spread the word.

It's a critical part of a product launch.

When people find a young brand they identify with, they shout it from the rooftops. Think of everything from SoulCycle to Bitcoin. Their champions are relentless. fwiw, this also helps a lot with recruiting. I’ve talked about this trend before as t-shirt theory

(Sidebar: This isn't about superficial marketing campaigns. If your product, people and values don't reflect your brand, then you're brand isn't what you think it is. Now back to the thread.)

On flip side, big companies using brand as a long-term differentiator feels less valuable than ever. Brand turnover keeps accelerating. It's easier for upstarts to poach niches in a market. Cool fades faster. Culture moves quicker. Easy to find yourself out of position.

From ketchup to razors to underwear, the big "enduring" brands seem to be able to rely less and less on their brand equity.

So what does increasing velocity of brands mean for founders? Unique branding is great for pushing your way into a market, but it's a short term tactic not a long-term strategy. You need something else - network effects, scale, better distribution - to win the marathon.

(Originally published as tweetstorm on January 22nd, 2019)

For when someone says “I’ve seen this before, it didn’t work”

If you’re a founder you’ve probably heard someone say “oh, I’ve seen this idea before - it didn’t work” or “isn’t this just like that other thing that person/company X tried?”

As a founder, I heard this dozens of times. It’s likely to come from investors, but you hear it from other founders, potential employees, advisors, customers, even family members. Like it or not, pattern matching is strong.

I get contacted from a new company every 3 months working on a idea that's similar to Frank (our old startup). And our idea was similar the original Lending Club and Prosper idea - but with a unique twist, of course :)

Each generation of founders comes back to a few ideas that were tried by a previous cohort. Micropayments to users to sell their data is a one I’ve seen in various eras. Computer based designers is another. In the end, Chewy sounds a lot like Pets.com.

So here’s the thing if you’re a founder hearing “someone tried this before”: this isn’t a reason to be discouraged.

Successful companies often look like previously unsuccessful ones, but with a few differences that are only obvious in retrospect.

Choose whichever cliche you like best - past is prologue? back to the future? - but it’s undeniable that the future often starts off looking pretty similar to the past. In fact, because consumers favour things they know, this can be a feature, not a bug.

While hearing ‘someone tried this before’ doesn’t mean your startup is doomed, it does mean you need to do your homework. And that is much easier said than done.

In this discovery phase, you to need to answer three questions:

(1) has this been tried unsuccessfully before?

(2) why did that company fail?

(3) am I really different?

These sound trivial, but if you're answering them honestly they’re actually very hard. In fact, each one is harder than the last.

‘Has this been done before’ is hard because most startups fail quietly. It’s not like there is some central repository of failed startup ideas.

The ones we tend to hear about in the press are either the huge successes (Airbnb) or the notorious failures (Theranos). 99% of startups end up in the middle.

And once a few years have passed, people have shifted in and out of the ecosystem so community memory erodes. “Who was doing that? Shoot I forget what exactly they did. Ahh nevermind”

Best thing you can do is find nodes - investors, advisors, recruiters - that see a lot of things and might remember. Extra points for finding people who have been around a long time or from different cohorts.

It’s really a grind game though. Ask everyone you meet: “have you seen anything like this before?” The trick is to ask it *honestly*. It’s discovery not promotion. It’s “Have you seen this?” Not “have you seen THIS!”

“Why did they fail” is even harder to get answers to. Ask 3 co-founders why their start-up failed and you’ll probably get 3 different answers.

It’s like a Rorschach test for the founder mind. One might say they went after the wrong market. Another might say the product had a fundamental flaw. Another might focus on execution mistakes.

They’re all probably right in some form or another. You need to continue to push and prod to get to the second and third layer

To borrow a legal term: ask them to connect the dots between the proximate and the cause in fact of their company not working. Keep asking why. Keep going down the ladder of inference. The more specific the answer, the more likely you’re at something real.

Keep in mind you’re talking to someone about something they may have spent years on and is -- for better or worse -- a part of their identity. Be empathetic as you dig. It’s part investigative journalist, part therapist and part pastor.

“Is my startup really that different?” is the hardest question to answer because it’s the most personal to you. Whether you believe it or not you’re probably already emotionally invested in the answer. You’ll really really want it to be “of course we're is different”.

In a lot of cases the answer is yes. A small product change can open up a set of users that never existed before. A unique go-to-market can make all the difference. Even a new competitor can help users and investors understand your category.

But you can also get tricked. You can be different in a way that doesn’t actually change the outcome.

At Frank we made the experience of social lending way better, but we never solved the customer acquisition problem that took down our predecessors. Better product didn’t change that, so our potential was limited.

You need to be super self-aware at this point. You’ll want to weave a narrative that makes all the pieces fall into place. It’s the natural thing to do, and if you’ve started fundraising you might already have a nicely packaged story.

Superhuman self-awareness can be one way to manage this ... or you can try to set up a process that forces you to find real facts that could only be true if the answer to "am I really different" is YES!

Find the evidence that means your unique twist will help you succeed where others have failed. Give yourself a time limit to find that evidence. If you can't find them, then make them your initial OKRs. Work to prove that in the initial phase of your company.

So when someone asks “didn’t someone try this before” you know exactly what to say.

(Originally published as a tweetstorm on July, 13, 2018)