Lions & Lambs in the “Post Unicorn” Era

S’all about that dollar and we nuh deal with cowards
Weak lambs get devoured by the lion
In the concrete jungle, the strong stand and rumble
The weak fold and crumble, it’s the land of trouble
— Lil’ Kim, Lighters Up

Exceptional post from exceptional investor and deceivingly brilliant strategist Bill Gurley this week (he speaks simply, but drops knowledge bombs consistently — my kinda VC).

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Bill outlines the dynamics of the unicorn era and the funding dynamics for the founders, employees, VC, angels, mutual funds and LPs invested in these high flyers — and in some cases — “die-ers.” Go read it and take some notes in case you are lucky enough to invest in, work for or create one of these high flyers.

In this post, I want to talk about the new rules for aspiring unicorns which I will call “lambs” in this piece because, sadly, many founders out there have been softened by market conditions and are going to be slaughtered and eaten. Apologies if you cry at trees being cut down, and don’t like the graphic nature of the metaphor, but startups before their A round — which is where I operate — are a high mortality business. Eight of 10 startups angels invest in, in my experience, are a donut (zero dollars returned).

The mortality rate shouldn’t actually be that high, but an environment as frothy and freewheeling as the one we have experienced these past three years has lead first-time founders to a level of entitlement that makes an episode of HBO’s GIRLS, filled with the worst decision making since an installment of Friday the 13th, seem decisively well thought out.

In selecting startups for the LAUNCH Incubator we look for lions, not lambs. We want predatory founders that want to eat what they kill, sharpen their claws and be feared by the rest of the jungle.

Here are some practical “do’s and don’ts” in Goofus and Gallant style, with lambs and lions:

  1. Lambs focus on adding features that might lead to revenue, while lions focus on refining and exploiting features that generate revenue and growth, knowing that one feature that prints money — like Google search or Uber’s commissions — is a better use of their focus than supporting the Apple Watch, experimenting with bots and “getting ready for the VR/AR revolution.”
  2. Lions raise money from the investors with the best track records at terms those intelligent investors put on the business. Lambs attempt to raise money from new funds, first-year angels and AngelList syndicates lead by failed founders, setting their price based on “one million more than their friend got in 2015 with a lot less social proof!”*
  3. Lambs spend their precious early capital to present their startup at scams like WebSummit, DEMO and TechCrunch Disrupt, while lions take those same three weeks, plus the $5,000 to $25,000 in expenses, and spend it intelligently on growth and distribution experiments that move the core metric of their business.
  4. Lambs focus on “social proof,” like putting their TEDx (aka ‘TED for losers’) speaking slot on their LinkedIn and AngelList profiles, while lions figure out the key metric that they need to focus on now to move the needle.
  5. Lambs are continually meeting with investors, chronically chronicling their flowery musings (“we’re really impressed with your progress!” and “let’s keep the dialogue open!”) in their investor updates. Lions put off meeting with investors until they have their key metrics, business model and growth channels dialed in to the point at which investors say the only thing that matters: “we just sent you a term sheet to review.”
  6. Lions explain their business to you in one sentence followed by a series of charts explaining their learnings. Lambs say “before I tell you about our company, let me give you some context” before showing you a series of Mary Meeker’s charts that you’ve seen 50 times combined with obvious-in-hindsight quotes from people more successful than they will ever be.
  7. Lambs focus on their office space and snacks, lions focus on low burn rate.
  8. Lambs talk about downloads, lions talk about CAC, churn, LTV and DAUs.
  9. Lambs think increasing headcount is success. Lions understand eliminating work with automation is the goal.
  10. Lambs pay $10,000 a month to a PR firm that promises to get them in TechCrunch. Lions build a product that people fall in love with and post to ProductHunt, Hacker News and Twitter.
  11. Lambs pop bottles after closing their funding rounds, obsessing over their announcement and Mattermark Score, while lions look at funding rounds as administrative tasks to be completed as efficiently — and quietly — as possible so the team can get back to work delighting their customers.
  12. Lambs constantly pivot, lions frequently persevere.  

What have you seen — or, gasp!, done — that you would say is lamb-like that you regret? What lion behaviors do you see in the winners?

Comments are open and read by everyone on our team.

Best @jason

Special thanks to: @roberthaydock @geoffclapp @andrewfarah @awwstn for their feedback on this piece.

*If you can’t raise from A-list investors, do what you have to do — but understand that it’s a red flag for you.

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