“Through Language, can we influence Reality? You have 4 hours.”
Man, I always hated philosophy in high school.
While forced studing philosophy in my scientific curriculum, I felt that we reached a level of abstraction close to intellectual masturbation.
Years later, following an M&A entrepreneurship path, I realize now how immature I was as there's nothing more concrete than philosophy.
Economics is a branch of Logic which itself belongs to Philosophy. Charles Gave, a French economist
Last week, a founder, an old pal, reached out on LinkedIn to reconnect. He saw I've been involved in recent deals with investors he wanted to engage with and would like to offer me a drink.
Wine not? (🤪)
For two years, he has worked on a Tinder-like networking app in which each match leads directly to a 15' visio-call.
Thanks to individual seed investors, he bet heavily on R&D to build a differentiated product with proprietary calendar & visio-conference features.
Confident in his product, he wanted to raise a Series A and asked me if I could make friendly introductions.
I friendly told him that I'd seen Series A VCs only investing in early-stage successful start-ups.
He assured me he was one of them regarding his definition.
So I gave him my definition of an early-stage successful start-up.
He totally disagree.
He googled start-up, and the first websites shared the same definition as him.
I didn't try to convince him, as I have learned from Seth Godin that there is no point.
Human beings, as far as their concern, tell themselves stories that are true. Seth Godin, author of This is Marketing
This meeting was a perfect illustration of the conclusion I came to about what business is all about after six years of entrepreneurship.
It is especially true in high-stakes situations such as M&A.
High-stakes situations because we are talking about people (founders) devoting their life to their company, taking risks, getting along with loneliness and anxiety, and making sacrifices, especially on the personal plan.
At some point, some could feel trapped in their own business.
M&A is one of those situations where founders realize whether all the effort and sacrifice were worth it.
It's one of the reasons it's so important to me to increase the probability, the velocity, and the scale of an M&A transaction.
I have learned the hard way what I consider a law in business.
Business is about people and…
People who understand each other.
Most resources about business communication emphasize the need to leverage your communication to make the other person feel valued.
And leveraging your communication basically starts with words, the meaning and the use of words.
I believe words are convention, an agreement between 2 or more people on a fact.
For example, my friends and I are using the made-up word Vivance as an act of creating memories by doing fancy activities.
As far as we are concerned, the usage of words can change over time.
Some words do not age well. Mediocre is definitely one of them.
Directly coming from the Latin medius, which means in the middle, was equivalent to average.
Imagine you're a VC and want to close a deal with a start-up where valuation expectations, say 20x ARR, seem unreasonable regarding the downturn we are experiencing.
Now, go and tell the founders to reconsider their expectations as currently 20x ARR valuation only makes sense for high-end growing start-ups, and their growth rate is mediocre (average).
Slight chance you'll land the deal as you'll naively offend the founders.
Understanding people, therefore, starts with people sharing the same sense of words.
…people do business with people they like
We like people who share the same ideas as us.
For example, I will instantly like someone who think Spider-Man is the greatest superhero of all time!
His determination, his resilience, his struggling to find a balance between his personal life and his personal mission… He is like most mission-driven entrepreneurs I happen to know!
Sorry, I digress.
I think the hype of the last decade about the start-up ecosystem comes from the fact that this ecosystem has been associated with building a better future.
Startups aren’t here to change the world, they’re here to save the world. -Babak Nivi, founder of Angelist
Who doesn't want to build a better future? Who doesn't want to save the world?
I do want to belong to this group of people.
Belongingness is one of the basic emotional needs, and it refers to a human emotional need to affiliate with and be accepted by members of a group.
If you are an outsider to the start-up ecosystem but share the same goals, your interests in joining this group should align with those of the group members.
If business is about people and if people do business with people they like, not using the exact definition of a start-up as people you want to do business with is a real handicap.
To agree on ideas, you have to first agree on words.
The best way to start is with the etymology of start-up.
Start refers to the notion of beginning and Up to the idea of growth, but there's more.
In start-up, there is also a notion of initial impetus, a strong impulse given to the start of the company.
Paul Graham, YC founder, described best this initial impetus when he said:
Starting [a start-up] is at first no more than a declaration of one’s ambitions. You’re committing not just to starting a company, but to starting a fast growing one.
However, do you know what it takes to build a fast-growing company?
I did not.
According to Paul, it's about building a product based on an idea that addresses a large market and reaching and serving every single person in this large market.
Building a product based on an idea that addresses a large market
I like an analogy used by Paul when he associated start-up founders with economic research scientists.
For him, founding a start-up is a commitment to search for rare ideas that generate rapid growth. These ideas are valuable because all the obvious are already taken.
Back in my previous life as a biotech engineer, I work with a well-known scientist Alain Prochiantz. He commits his life to find medical treatments for highly unmet medical needs that are neurodegenerative diseases.
He is definitely not the only one tackling this challenge.
However, he was the first to find that homeoproteins (proteins only active in embryogenesis) have neuroprotective and neuro-regenerative properties.
His idea is to use these proteins in various neurodegenerative diseases such as Alzheimer's, Parkinson's, Huntington's, etc.
I worked months with him and his team, testing the effectiveness of his ideas. If it worked, it would save the world.
That's the kind of idea that start-up founders are looking to test.
In biotech, testing an idea involves a high product risk.
Building a product to test an idea requires years and tens of millions of cash. However, once you have an efficient product, your marketing risk is low as you'll find partnerships easily with pharmaceutical companies.
In tech, testing an idea rather encompasses a high marketing risk.
Thanks to the available infrastructure (Internet, Open source, Cloud computing, Low & no code), you don't have to spend all this time and money to build a functional product to test your idea.
That's why I think that R&D doesn't matter if you are a start-up.
Reaching and serving every single person in this large market
Back to Paul, who differentiates start-ups and other businesses on one parameter: the potential for scale and hyper-growth.
For example, a barbershop may offer what most people want: a haircut. But the nature of this service doesn't allow one barbershop to reach and serve every single person in the world.
However, a software company for barbershops can be, by design, addressed to all the barbershops in the world.
A start-up's potential to achieve hyper-growth and rapid scale largely depends on the growth strategies it implements.
Consistent growth enables a company to move from a start-up to a top market competitor operating on a global scale.
To achieve consistent growth, businesses must find a way to drive scalability.
That's when a marketing growth engine come into play.
A marketing growth engine is an efficient, predictable and scalable system for driving exponential sales growth.
Simply put, a marketing growth engine aims to develop a repeatable strategy where a company can invest $ X's into marketing and confidently expect a return in sales of $ Y's.
A marketing growth engine is one of the hardest assets for a company to build.
It's like building an F1 motor engine (dangerous but high speed) compared to an urban car motor engine (safe but low speed).
Of the hundreds of start-ups I've encountered, only 2 had an effective growth engine.
In the same way, as you measure the quality of an F1 engine by speed, a start-up's quality is characterized by growth.
Growth is the only thing.
When I worked in neuroscience, we used the slowing down of the degeneration of dopaminergic neurons as a compass to make almost every decision.
In start-up, growth is the compass.
It's because of growth that you need a scalable business model. It's because of growth that you need to innovate, and it's because of growth that you need to invest in technology.
If you decide to take the VCs road, you need to know that VCs build a portfolio of start-ups.
And as you, they will use growth as one of the primary decision criteria. And not every type of growth.
Moreover, each type of investor will be looking for different types of growth.
Seed investors: from MVP to initial traction Pre-Series A investors: from initial traction to a working marketing growth engine Series A investors: from a marketing growth engine to a scale up Series B+ investors: from a scale-up to a tech company.
Based on my understanding of people who belong to the start-up ecosystem, I define a successful early-stage start-up as a company enjoying a strong growth potential fueled by a proven marketing growth engine.
Note that there is not a single mention of technology or innovation.
Thanks for reading!