Yesterday, at Startup Grind, an event series that’s aimed at new founders and people contemplating becoming entrepreneurs, we sat down with Joe Kraus, a partner for the last eight years with Google’s early-stage investing arm, GV. Kraus, who’d earlier cofounded two companies — Excite and Jotspot — shared a range of founder-friendly advice, including what GV and Kraus in particular look for in founding teams (prior success helps), along with some of the missteps that Kraus sees founders make. The biggest, he said, founder “wanting to do everything at once.”
Kraus also said there are three very specific steps that founders should do and in sequential order if they expect to raise seed, then Series A and Series B funding, beginning with “find a product that serves a need in a market that matters.” By “matters,” Krause really means “big.”
It may sound like a no-brainer, but Kraus suggested the GV sees plenty of founders who think they can win by dominating smaller markets. The problem, in his view: a mistake in a smaller market often means certain death, “whereas with a big market, you can make a mistake and the market carries you along.”
As a second step, Kraus advised focusing a lot less on “top-line growth” and instead on positive unit economics. (Despite the “obsession” with many founders to sell more to more people, often by throwing more product features into the mix, he proposed that VCs right now are far more interested in startups that make more money off the sale of their products.)
Third and last, Kraus stressed the importance of squeezing returns out of customer acquisition spend, be it through smart search engine optimization or content marketing or some other channel. Luckier startups that don’t figure out a winning strategy can “get caught in the tailwind of a market that’s growing and they grow with the market.” But you can guess what happens to the rest, he suggested.
More contrarian, perhaps, was Kraus’s advice to those who’ve heard the old adage that founders learn from their mistakes. While Silicon Valley is known for embracing failure as a means to an end, Krause pretty much called bullshit on the idea. The “story we tell ourselves,” that “you’ve learned more from your failures than your successes” is “dumb,” said Krause, explaining that while failure might build “character,” founds can’t learn much from failure other than what specific path not to take again.
For people looking to start a company, Kraus had this advice instead: Get a job at a successful company.
It might sound boring and corporate and like the opposite tack that a founder might want to take, but Kraus told the audience that you can learn a lot by making 10 minor decisions a day — and observing the decisions of coworkers — if “combinatorially” they are part of a path that “yields success.”
Working for a company that knows what it’s doing “gives you a pattern that you can follow in the future,” he said. “It’s far better path to learning [how to be successful] than shooting off your own, trying something out, and it not working.”