20VC How To Balance Between Vision and Stubbornness, Why Speed Is The Most Important Startup Superpower & The Main Role of A Startup Founder Today with James Currier, Managing Director @ NFX



In the latest 20 Minutes VC episode, host Harry Stebbings interviews James Currier, Managing Partner at NFX, about the recent launch of their $150 million fund and his journey from founding Tickle to becoming a leading Silicon Valley investor. James shares his insights on the importance of speed for entrepreneurial success, the balance between vision and adaptability, and the overrated nature of being first to market. He emphasizes the power of language and psychology in shaping company narratives and the critical role of storytelling for founders. James also discusses the shift from viral to paid growth strategies, the diminishing opportunities in consumer tech, and the significance of network effects, which have been central to NFX's investment thesis. The conversation concludes with a quick-fire round, covering personal favorites and the recent investment in Outdoorsy.

Summary Notes

Introduction to the 20 Minute VC Show and Guest James Currier

  • Harry Stebbings hosts the 20 Minute VC podcast.
  • James Currier is the guest, a managing partner at NFX.
  • James has a background in founding successful companies and is an expert in growth and network effects.
  • NFX recently announced a new $150,000,000 fund.
  • James's previous ventures include Tickle, Wonder Hill, Iron Pearl, and Gfycat.
  • Acknowledgment to Chris Farmer for supporting the show.

You are listening to the 20 minutes vc with me, Harry Stebings and you can find me on Snapchat at h Stebbings with two B's and on our all new app which you can find by searching for 20 vc. That's 20 vc on the App Store.

This quote is Harry Stebbings introducing himself and promoting his Snapchat and new app for the 20 Minute VC podcast.

I'm thrilled to welcome Jay James Courier, managing partner at NFX and one of Silicon Valley's foremost experts in growth and network effects.

Harry Stebbings introduces James Currier as the guest, emphasizing his expertise and role at NFX.

James Currier's Background and Foray into Early Stage Investing

  • James previously worked at Battery Ventures learning about venture capital.
  • He founded and exited his own company in 2004 and began angel investing.
  • Along with Stan Chudnovsky, they made about 50 investments.
  • NFX was created with the help of Gigi Levy Weiss and Pete Flint.
  • NFX's approach was influenced by Y Combinator, Andreessen Horowitz, and First Round Capital.

Well, I had been working at Battery Ventures as an associate in the, learned all about the venture capital world and saw some things they were doing well and things that I thought they can improve on.

James Currier discusses his experience at Battery Ventures where he learned about venture capital and identified areas for improvement.

And so that's how NFX came to be.

James explains the origin of NFX, which was a collaborative effort with his colleagues.

James Currier's Entrepreneurial Superpower: Speed

  • James believes that luck plays a big role in success, but it requires many attempts.
  • Speed allows for multiple attempts and learning from failures.
  • Success becomes a building block for further growth.
  • The NFX team's entrepreneurial mindset focuses on moving quickly and learning from failures.

Well, it turns out that most of what happens is good luck, but you need to have a lot of at bats to have good luck.

James attributes success to luck but emphasizes the need for numerous opportunities to achieve it.

Failure is temporary. Success is forever.

James shares his philosophy on the transient nature of failure versus the lasting impact of success.

Balancing Vision and Stubbornness in Entrepreneurship

  • Entrepreneurs need to assess their list of experiments and maintain excitement.
  • If the list of exciting experiments runs out, it's time to pivot or start anew.
  • Stubbornness should be balanced with the willingness to change direction based on the available opportunities.

Do you still have a bunch of things you see that you could try that you're excited about?

James discusses the importance of having a list of potential experiments that keep an entrepreneur motivated.

The Importance of Being First to Market

  • Being first to market is not always crucial for success.
  • Speed, quality, and superior hiring practices lead to significant outcomes.
  • Learning from the experiences of first movers can be advantageous for later entrants.

I don't think being first to market is actually that important in most cases.

James challenges the common belief that being the first to market is essential for success.

The Role of Language and Psychology for Founders

  • Language can significantly impact a company's trajectory.
  • Naming and choice of words can influence consumer behavior and product features.
  • An example is the change from "store your photos" to "share your photos," which led to growth.

I've had several experiences where I've watched language make such an impact on the trajectory of a company just switching a word or two.

James highlights how small changes in language can have a large effect on a company's success.

Impact of Language on Business Outcomes

  • The choice of language on a company's homepage can significantly influence its success.
  • Language is crucial for conveying a company's mission to customers and employees, fostering unity and uniqueness.
  • Awareness of language should be raised without overburdening the process, seizing opportunities for impactful changes.

"47 million people. And so there was literally that change of one word on the homepage that allowed the whole thing to happen."

This quote exemplifies the dramatic effect a single word can have on a company's reach or customer base, highlighting the power of language in business.

Language and Codifying Culture

  • Language alone is not sufficient for business success; all facets must align.
  • The typical build-first, language-second approach is less effective than integrating language from the beginning.
  • Understanding the language that addresses a problem can guide product development and marketing.

"It's never enough. I mean, all these businesses are multifaceted, unique pieces of art, essentially so you have to have all the different pieces fit together."

James Currier emphasizes that while language is important, it is just one of many essential components that make up a successful business.

Psychology in Business

  • Psychological needs of buyers and their customers are crucial in sales, particularly in enterprise settings.
  • Utility alone is not sufficient; understanding customer motivations and perceptions is key.
  • The psychology of various stakeholders, like VCs and journalists, influences business interactions and language use.

"But if it doesn't solve the psychological needs of the buyer or the psychological needs of the buyer's customer within the enterprise, then you're not going to actually get the sell through."

James Currier points out that addressing psychological needs is essential for successful sales, beyond just offering a utilitarian solution.

Storytelling as a Founder's Tool

  • CEOs and founders should focus on storytelling to motivate themselves, employees, investors, and journalists.
  • A compelling narrative creates unity and motivation within a company.
  • Founders often err by focusing on solutions rather than the impact on people or potential financial gains.

"You know, I feel like the CEO and the founders are, that's their main job, is to tell stories."

James Currier describes storytelling as a fundamental role for founders, affecting all aspects of a company's growth and culture.

Common Storytelling Mistakes by Founders

  • Founders may focus too much on technical details and solutions rather than the broader impact.
  • The minutiae of daily operations can overshadow the inspiring aspects of a startup's story.
  • A successful narrative should resonate with the audience's psychology and aspirations.

"They most get it wrong because they talk about the solution as opposed to the impact on the people or the amount of money that can be made."

James Currier highlights that founders often miss the mark by not focusing on the human impact or financial potential when telling their story.

Balancing Data with Storytelling

  • Data is critical for operational success and should be part of a company's culture.
  • While storytelling attracts attention, data provides the proof points that validate the narrative.
  • Using numbers in communication can significantly enhance a pitch to investors.

"Then you have to speak with data. Then you have to then weave in the proof points of data and your obsession with data into the whole story that builds an effective communication."

James Currier advises that after drawing in an audience with a story, it is essential to back up claims with data to build trust and credibility.

Risk of Data Overload

  • Too much data can overwhelm an audience, detracting from the narrative.
  • Founders should find a balance between providing evidence and maintaining an engaging story.

"Absolutely, yeah. There's a point at"

James Currier acknowledges that while data is important, there is a threshold beyond which it can become counterproductive, suggesting the necessity of balance.

Strategic Approach to Investor Meetings

  • Understand the appropriate depth of information to present at different stages of investor meetings.
  • Initially, provide a balanced amount of data to demonstrate understanding of tactics and proof points for the vision.
  • In later meetings, such as the 6th one, present comprehensive data to delve deeply into specifics.
  • After presenting detailed data, take a step back to facilitate the deal closure.

"You want to go a certain level deep, and then on the 6th meeting, when they're really digging into all the data, that's when you really bring all the data to the table."

This quote emphasizes the importance of gradually increasing the depth of information shared with investors across meetings, saving the most detailed data for a pivotal meeting where it can have the most impact.

Importance of Network Effects in Companies

  • Network effects are central to the success of many tech companies.
  • A study of 337 companies worth over a billion dollars showed that over 60% of the market cap in tech comes from companies with network effects.
  • Despite the value created by network effects, less than 20% of business plans consider incorporating them.
  • There are 13 identified types of network effects, not limited to social networks and marketplaces, including data and physical network protocol effects.
  • Network effects are relevant to both B2B and B2C companies and are increasingly important due to connectivity advancements.

"We did a large study of companies that have been formed since 1994, 337 companies worth over a billion. And if you look at the market caps, the combined market caps of all these companies, and identify which of them had network effects at their core, it's well over 60% of the value that's been created in tech since the Internet arrived has come from companies with network effects at their core."

This quote highlights the significant financial impact of network effects on the tech industry, indicating that companies with network effects are more likely to achieve high market capitalization.

Defensibility and Network Effects

  • Network effects contribute to a product's defensibility by making it more valuable with each new user.
  • This value makes it harder for users to leave and for competitors to offer a better product.
  • The goal is to reach a tipping point where the product's value is unmatched due to the user base.

"Network effects means that every new user makes that product more useful for all the other users. What that does is it makes it difficult for your users to leave because they're getting so much value, and it makes it difficult for your competitors to provide a better product, and therefore it's defensibility."

The quote explains that network effects inherently increase a product's value and create barriers for both user attrition and competitor entry, thus serving as a critical component of a company's defensibility strategy.

Growth Mindset for Companies

  • A growth mindset involves the courage to continually challenge and break the status quo for exponential improvements.
  • Companies should not settle for minor improvements but aim for massive growth percentages.
  • Encouraging a culture of bold goal-setting and risk-taking can lead to significant advancements, even in larger organizations.

"You really need to look for 1000% improvement, 10,000% improvement. And if you can teach all of your employees to have that culture, then even in the later stages of a company, when you have 40, 5100, 200 people, they're still going to be willing to break things and move forward in a way that will take your company to a whole different level."

This quote stresses the importance of instilling a culture that does not shy away from aggressive growth targets, which can propel a company to new heights regardless of its size.

Goal Setting and Benchmarking

  • Establishing ambitious yet realistic goals is essential for growth.
  • Benchmarking against other companies can help set higher, more informed goals.
  • Witnessing the achievements of similar companies can motivate teams to aim higher.

"By cross populating information between companies so that it's real, it's not just James telling you you should have a higher benchmark, it's you seeing others have achieved that higher benchmark and they are just like you."

The quote emphasizes the effectiveness of benchmarking in setting goals, as it provides tangible evidence of what is achievable and pushes companies to strive for higher performance.

  • Initially, there is a preference for growth through free viral methods over paid channels.
  • The number of viral channels has decreased over time, leading to a reliance on word-of-mouth driven by exceptional products.
  • Venture capital-backed companies may need to balance unpredictability with the need for measurable growth.

"We don't like paid at all. That's where we start. We felt that way for 15 years, and that has proven to be a good mentality to approach it with."

This quote reflects a strategic preference for organic, viral growth over paid acquisition, which has historically been effective for building user bases without incurring direct marketing costs.

Diminishing Viral Growth and Shift to Paid Channels

  • Over the past 15 years, there has been a reduction in the ability for companies to grow virally.
  • Facebook and similar platforms have converted viral channels into paid channels.
  • Incremental barriers to viral growth have been introduced, necessitating a move towards paid growth strategies.
  • Companies are advised to become more accepting of paid growth and to execute it effectively.

We've seen a diminution of the ability to grow virally over the last 15 years, and we've got this chart which shows that at the same time, Facebook and others have done a really good job of harnessing their formerly viral channels and turning them into paid channels.

This quote highlights the trend of reduced viral growth opportunities and the strategic pivot platforms like Facebook have made towards monetizing growth channels.

Effective Paid Growth Strategies

  • "Doing it right" with paid growth entails conducting small-scale experiments and closely tracking data.
  • The goal is to achieve a high return on marketing spend, aiming for a $5 return on every dollar spent.
  • Companies should avoid unsustainable practices such as spending a dollar to make a dollar.
  • It's crucial to find new, profitable business models rather than settling for break-even marketing strategies.

Doing it right means small experiments, lots of data, tracking lots of data. Love to find language, to find new channels so that your margin on that can be four or five x what you're spending on the marketing.

James Currier emphasizes the importance of data-driven experimentation in marketing to achieve a high return on investment.

The Fallow Period of Consumer Businesses

  • There is a belief that consumer businesses are currently in a fallow period, with incumbents holding significant advantages.
  • It has become increasingly challenging to build consumer businesses due to the maturation of the market and the fulfillment of consumer needs.
  • Current opportunities may lie in niche areas, and while billion-dollar companies can still be built, achieving higher valuations is more difficult.
  • Understanding consumer psychological and emotional needs is key to identifying new opportunities for viral growth.

I agree with that. I think that it has been easier to do consumer businesses over the last 20 years than perhaps at any other time in history.

James Currier concurs with the view that consumer businesses face a more challenging environment now compared to the past two decades.

The Network Effect of Bitcoin

  • James Currier is a proponent of bitcoin and its growing network effect.
  • The increasing adoption of bitcoin adds value and stability to the cryptocurrency.
  • Currier rejects the notion that bitcoin is a Ponzi scheme, comparing its growth to the solidification of sand into rock.

The number of people who are committed to bitcoin grows every week. And the more people that use it, the more value is there, the more stability is there.

This quote expresses optimism about bitcoin's future, attributing its potential success to the expanding user base and network effect.

Ideal Education System

  • James Currier advocates for a practical learning approach in education.
  • Emphasis should be on teaching students to ask the right questions, predict the future, communicate, and lead.
  • Traditional education systems are considered outdated and not fully beneficial for children or adults.
  • Currier supports continuous education that addresses social, emotional, and communication skills.

We need to be teaching kids to ask the right questions. We need to be teaching kids to predict the future, not study history.

This quote reflects James Currier's belief in a forward-looking, question-focused education system that prepares students for future challenges.

Investment in Outdoorsy

  • NFX recently invested in Outdoorsy, likened to Airbnb for RVs.
  • The market for RV rentals is larger than perceived, with significant network effects.
  • The CEO of Outdoorsy has a strong track record, having led two public companies.
  • The investment is based on the potential for substantial market growth and transformation through software.

We invested in a company called Outdoorsy, which is essentially Airbnb for RVS, and we said yes because it's a bigger market than everybody thinks.

James Currier explains the rationale behind the investment in Outdoorsy, highlighting the underestimated market size and potential for network effects.

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