20VC CB Insights' Anand Sanwal on The Most Dangerous Myth Some Investors Have Promoted, Why Most B2B Content Is Crap and How To Make It Successful & Why Predigree Is Overrated and The Right Way To Scale Teams



In this episode of Founders Friday, Harry Stebbings interviews Anand Sanwal, the founder and CEO of CB Insights, a tech market intelligence platform that predicts trends by analyzing massive data sets. Sanwal, who previously worked at American Express and was part of the early team at Cosmo.com, shares insights on the importance of revenue funding over VC funding, emphasizing its non-dilutive nature and the focus it brings to achieving product-market fit. He criticizes the current startup ecosystem's obsession with fundraising as a measure of success and advocates for building "real businesses" that are sustainable and not reliant on constant capital injections. Sanwal also discusses the value of preparing for opportunities, the significance of crafting engaging B2B content, and the benefits of hiring a diverse team that doesn't necessarily have a traditional pedigree but brings hunger and ambition to the table.

Summary Notes

Introduction to Founders Friday Episode

  • Harry Stebbings introduces the Founders Friday episode on his Instagram @HStebbings1996.
  • Harry promotes the use of Instagram for audience engagement, including submitting questions and suggesting guests.
  • The guest for the episode is Anand Sanwal, founder and CEO of CB Insights.
  • CB Insights is highlighted as a top workplace and a fast-growing SaaS company.
  • Anand's background includes roles at American Express and Cosmo.com.
  • Harry discusses the benefits of services like Carter, Brex, and StartEngine for startups and investors.

"We are back for another very special episode of Founders Friday with me, Harry Stebbings at H Stebbings 90 96 on Instagram with two B's where you can both submit questions and guests for future episodes."

This quote serves as an introduction to the episode and Harry's Instagram as a platform for audience interaction.

Anand Sanwal's Background and CB Insights

  • Anand Sanwal's journey in startups began with Cosmo.com, a well-funded startup in NYC.
  • Cosmo.com's business model was flawed, selling items at a loss, which ultimately led to its downfall.
  • Anand reflects on the lessons learned from the experience at Cosmo.com.
  • He discusses the impact of witnessing the boom and bust cycles on his approach to running CB Insights.

"My first foray into startups was joining what is now a pretty infamous company in New York City startup history, which was Cosmo.com."

Anand describes his initial venture into the startup world, highlighting the significance of Cosmo.com in startup history.

The Boom and Bust Impact on Anand's Operating Mentality

  • Anand experienced a rapid shift from potential wealth to financial instability during the Cosmo.com era.
  • He emphasizes the importance of learning from the rapid changes in fortune early in his career.
  • Anand connects these experiences to his cautious and informed approach at CB Insights.

"I was a millionaire on paper... and then just sort of, I wouldn't say overnight, but pretty darn close to overnight, it all went away and then had to look for kind of a real job."

This quote illustrates the volatility of startup valuations and the personal impact on Anand's perspective on business.

Revenue Funding as the Best Source of Funding

  • Anand maintains that revenue funding is superior due to being non-dilutive, providing focus, and accelerating product-market fit.
  • He believes revenue funding validates the business, minimizes distractions, and aligns the team's focus on clients.
  • Anand argues that revenue funding allows for organic growth and better serves the team by not diluting equity.
  • He credits customer interactions as crucial in identifying the broader market opportunity for CB Insights.

"Revenue from clients is not dilutive... it sort of has this double benefit of actually validating what you're building."

This quote emphasizes the dual advantage of revenue funding in providing capital without dilution and serving as market validation.

Clarity in Serving Customers

  • Anand highlights the importance of customer focus in providing direction and minimizing distractions.
  • He contrasts the experience at CB Insights with VC-backed companies, noting the absence of investor-driven distractions.
  • Anand discusses how focusing on clients benefits the team by creating opportunities and reinforcing the value of their equity.

"Everybody at CB Insights knows every day when we come into work who we serve, it's our clients first and foremost, and then each other."

The quote underscores the company's commitment to its clients and internal team as the primary stakeholders.

Achieving Product-Market Fit

  • Anand credits talking to clients for helping CB Insights pivot from targeting dealmakers to serving large enterprises seeking growth.
  • He suggests that being revenue-funded allowed them to recognize and seize a larger market opportunity.

"If we were not revenue funded, we'd have not seen that opportunity."

This quote implies that the flexibility afforded by revenue funding was instrumental in CB Insights' ability to pivot and capture a more significant market segment.

Serving VCs vs. Serving Clients and Team

  • Entrepreneurs often prioritize investors over clients and team due to reliance on raising capital.
  • Balancing the interests of clients, team, and investors is challenging; clients and team are more symbiotic.
  • Prioritizing investors may not be conducive to long-term wealth and business sustainability.

"You can have three masters, right? You can have your clients, you can have your team and you can have investors, and in our view, you can balance two of them."

This quote emphasizes the difficulty of serving multiple stakeholders and suggests that focusing on clients and team is more harmonious than trying to please investors as well.

Definition of a Real Business

  • A real business is self-sustainable and not reliant on exits or selling out.
  • Real businesses create fundamental value without depending on external capital for survival.

"A real business to us, is one that's not reliant on a flip. It's not reliant on selling out to somebody who values it in some esoteric way. It's a business that's fundamentally valuable."

Anand Sanwal defines a real business as one that has intrinsic value and sustainability, rather than one that is built to be sold or dependent on continuous funding.

Revenue-Funded vs. VC-Funded Businesses

  • Some businesses are capital intensive and require VC funding from the start.
  • Others, like enterprise SaaS, can be derisked and grown without outside capital.
  • Capital is like oxygen for businesses; it extends life but doesn't guarantee success.
  • CB Insights raised minimal capital and achieved more revenue than companies that raised significantly more.

"Funding is ultimately just oxygen, right. It helps you live a bit longer. It doesn't make your business successful."

This quote suggests that while funding can help a business survive, it is not the sole determinant of success, and businesses can thrive with minimal external funding.

Growth vs. Margins

  • There can be a conflict between pursuing growth and maintaining margins.
  • CB Insights focuses on capital efficient growth without sacrificing sustainability.
  • Growth activities are data-driven and evidence-based to ensure they are economically sound.

"We're never going to do something that we don't think ultimately has a payoff."

Anand Sanwal explains that CB Insights' growth strategy is calculated and based on activities that have a clear, positive economic impact, avoiding negative margin pursuits.

Importance of Unit Economics

  • Startups can scale into understanding unit economics, but must be cautious with early data.
  • Initial customer metrics may not be representative of long-term trends.
  • Realistic projections and historical comparisons are crucial for sustainable unit economics.

"I think being realistic about, okay, well, I'm in this sector and the most penetrated or the biggest player in that sector has x percent of the market. If we got to that, or even half of that, would that make the unit economics work?"

This quote advises startups to use realistic benchmarks from the industry to project unit economics rather than relying on overly optimistic early data.

VC Ecosystem and Capital Deployment

  • The narrative that more funding equals higher success is a myth not supported by data.
  • Overfunding can be detrimental to startups, leading to an unhealthy dependence on capital.
  • The current trend of rapid capital deployment is concerning and may not foster long-term company success.

"The data doesn't suggest that overfeeding startups with capital is a route to success."

Anand Sanwal criticizes the prevalent belief that an abundance of capital is the key to startup success, pointing out that there is no data to support this notion and that it can actually harm businesses.

B2B Content Quality

  • B2B content is often not written for human beings, but rather seems targeted at robots with a focus on buzzwords and product announcements.
  • Good content should be engaging and written as if the author wants it to be read.
  • Writers should critically evaluate their work by asking if they would find it interesting themselves.
  • The bar for B2B content quality is low, leading to a prevalence of uninteresting content.

"Sort of fundamentally comes down to, for whatever reason, b, two b content providers don't write for human beings, right. They sort of have a perception that their clients are these robots, I think, that just want to read buzzwords and just want to read about product announcements, and so they make it sort of hopelessly uninteresting."

This quote explains that B2B content often lacks human appeal, focusing on buzzwords rather than engaging material, which makes it uninteresting.

Crafting Human-Centric and Bold Content

  • CB Insights aims to create content that elicits strong opinions, preferring to be either loved or hated but not ignored.
  • The content is designed to be entertaining, educational, and often vocalizes unspoken industry sentiments.
  • CB Insights embraces a personality that aligns with their brand, understanding that not all readers will become clients.
  • The growth of the newsletter's subscribers indicates the success of their content strategy.

"We want you to either love us or hate us, but we want you to have an opinion."

This quote highlights the company's goal to create content that is polarizing and memorable, rather than bland and forgettable.

Principles for Successful Content

  • Content should be highly visual, catering to the trend of image-centric social media platforms and the desire for quick comprehension.
  • An irreverent tone is important to highlight both the notable achievements and the foolishness within the industry.
  • Truth-telling and avoiding self-serving content is key to maintaining audience interest and trust.
  • CB Insights often shares insights and advice based on truth, even if it means advising against what would benefit them commercially.

"I think that irreverence and truth telling are sort of really important. So not everything that we write looks self-serving."

This quote emphasizes the importance of honesty and a candid tone in content creation, which helps to build trust with the audience.

The Overrated Nature of Pedigree in Hiring

  • CB Insights values ambition and a "chip on the shoulder" over traditional pedigree.
  • A diverse and eclectic team of "misfits" can drive success in a challenger brand environment.
  • Being open to hiring from different backgrounds has been beneficial for CB Insights.
  • The company's leadership believes in resourcefulness and scrappiness over traditional indicators of success.

"Pedigree has sometimes led us astray because of how we've grown and how we've sort of been brought up."

This quote suggests that relying too much on traditional indicators of success, like pedigree, can be misleading and that other qualities may be more indicative of potential success.

Scaling Teams and Leadership Challenges

  • Recognizing when different types of leadership or talent are needed is crucial as a company scales.
  • Increasing interaction among senior leadership outside of work can improve team dynamics.
  • Communication about the company's direction and progress needs to be scaled appropriately with company growth.

"The sort of adage of different wars need different generals. Right. Sometimes I think that is true."

This quote implies that as a company grows and faces new challenges, it may need to adjust its leadership to suit the changing environment.

Company Evolution and Communication

  • As companies grow, their communication strategies must evolve.
  • Larger teams and multiple offices necessitate changes in how information is shared and how the company operates internally.

"Given we're in multiple offices and a much larger team now."

The quote highlights the necessity for communication evolution due to the company's expansion.

Interview Process and Candidate Evaluation

  • Anand Sanwal values preparation and analytical capabilities in candidates.
  • The key interview question asked is about how candidates prepared for the interview, revealing their dedication and work ethic.

"A lot of doing well, and again at CB Insights is about being prepared, doing the work, glamorous or not glamorous, to make sure that you put yourself in the best position to be successful."

This quote emphasizes the importance of preparation and hard work for success at CB Insights.

Insights on a Good Interview Answer

  • A good interview answer demonstrates knowledge of the company and its business fundamentals.
  • Candidates who prepare for specific roles and provide insights or suggestions during the interview stand out.

"The people who really take it to the next level are the ones who do functional or role specific preparation."

The quote suggests that role-specific preparation is highly valued and can turn an interview into a productive conversation.

Book Influence and Professional Growth

  • Anand Sanwal's favorite book remains "Influence: The Psychology of Persuasion."
  • The book has significantly impacted his professional development, particularly in marketing and persuasion.

"It's a book that's helped me think about how to persuade people, do marketing better, newsletter, etc."

The quote indicates the book's role in shaping Anand's approach to marketing and persuasion tactics.

Silicon Valley Culture and Raising Capital

  • Anand Sanwal critiques the Silicon Valley culture that equates raising money with success.
  • He suggests that focusing on raising funds can distract from building a sustainable business.

"The fascination with raising money and the idea that raising money is what makes you successful."

The quote criticizes the overemphasis on fundraising in the tech industry as a measure of success.

Hypothetical Venture Capital Path and Customer Engagement

  • Anand believes that if CB Insights had pursued venture capital funding, it might have been detrimental to the company.
  • Direct conversations with clients have provided clarity and direction for the business.

"It just created clarity that I don't think we would have had to get if we raised money."

The quote expresses the value of customer engagement over venture capital in gaining business clarity.

Work Ethic and Luck

  • Anand Sanwal frequently reflects on the adage that hard work increases the chances of experiencing luck.
  • This mindset has been a guiding principle in his professional journey.

"The harder I work, the luckier I get."

The quote encapsulates Anand's belief in the correlation between effort and fortunate outcomes.

Company Growth and Adaptation

  • Recognizing when a company becomes fundamentally different during growth stages is crucial.
  • Adapting to these changes is necessary for continued success.

"There's sort of these moments in the company where it almost becomes a different company."

This quote speaks to the transformative stages of a company's growth and the need to evolve accordingly.

Dealing with Business Challenges

  • Anand describes how the company's approach to crises has evolved from scrambling for revenue to having a more resilient system in place.
  • Prioritizing and hard work have been key strategies in overcoming difficult situations.

"We have built a pretty resilient system."

The quote reflects the company's development of robust strategies to handle challenges.

Future Vision for CB Insights

  • Anand envisions CB Insights developing an operating system to help large enterprises grow.
  • The goal is to create a machine learning-driven consultant that can provide data-driven solutions and presentations for clients.

"It's really building kind of a machine learning driven management consultant."

The quote outlines the ambitious goal of creating a technology-driven consulting service.

Mutual Admiration and Support

  • Both Harry Stebbings and Anand Sanwal express mutual admiration for each other's work and success.
  • They acknowledge the role of hard work in achieving their accomplishments.

"I marvel at how much you've grown this franchise."

The quote from Anand praises Harry's success in growing his business, reflecting a shared respect for each other's achievements.

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