Entrepreneur Office Hours - Issue #164
VCs say the darndest things
When I first started my entrepreneurial career, I was intimidated by venture capitalists. I’m ashamed to admit they seemed somewhat god-like. After all, they had millions of dollars they could throw around at will, and they could make or break your company simply based on whether they liked you.
Fast forward a couple decades, and I’ve learned a lot about venture capital that’s changed the way I think about the industry and its people. But the biggest change is how I view the VCs themselves. To put it bluntly, they seem significantly less god-like and significantly more mortal and flawed. In fact, as I’ve gotten more comfortable around VCs, I’ve even become friends with some of them, and it’s allowed them to open up and share more about their work than they used to when we were on opposite sides of the proverbial table.
As an example of what I mean, in this week’s issue of EOH, I share a story that definitely shows a different side of VCs than what most entrepreneurs expect. Even if you’re still intimidated by VCs, once you’ve finished the article I’m pretty sure you’ll never look at one the same again.
Being a successful venture capitalist requires lots of thoughtful research. But that research isn’t always what you might expect.
The secret to startup success isn’t any one specific skill. Instead, the best entrepreneurs are good at something completely different.
Office Hours Q&A
Hi Dr. Dinin!
I’ve been reading your newsletter for a while now and was excited to finally have a question to ask that I hope will make sense for it.
My company is currently selling its product successfully into one vertical and we’ve gotten good traction in it. We’d like to expand into other verticals, but we’re struggling to agree on which vertical should be next.
What, in your opinion, is the best way to choose your next vertical after you’ve gotten traction in one?
I feel like I should begin by congratulating you and your team for achieving significant traction in one vertical. That’s not an easy thing to do, and it sounds like you should all be patting yourselves on the back at least a little.
As for how to choose what vertical(s) to move into next, let’s start with what not to do: guess.
Specifically, you’re goinng to be tempted to spend hours debating your next vertical with your co-founders/partners, and all those debates are going to be based on useless things like “intuition” and “gut feelings. Don’t do that.
Instead, you want to do the opposite. Try to get as much data as possible and let the data answer the question for you. You do that through research.
I always like to think of entrepreneurs as being a lot like investigative reporters. By that I mean most people interact with reporters through the stories they produce. As a result, we tend to assume they spend the majority of their time creating stories, but that’s not true. Quality investigative journalists spend months – sometimes even years – researching stories before publishing. As consumers of their work, we don’t see the huge amounts of behind-the-scenes effort, but that doesn’t mean it didn’t happen.
The same is true for entrepreneurs. As consumers, most of us interact with entrepreneurs and business creators through the products they sell. As a result, we tend to assume the vast majority of their time is spent developing and executing products. However, that’s not the case.
Entrepreneurs (the good ones, anyway) spend most of their time doing research and trying to understand their customers.
That’s what you need to be doing now, too. Research. Research. Research. Your next vertical isn’t going to magically fall out of the sky and hit you in the head. You’re also not going to be able to debate it for hours in a conference room with your co-founders until you figure out the right one. Or rather, that’s not how you should choose your next vertical. Instead, do research to understand what market wants your product, and base your decision on facts rather than feelings.
Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!