Capital Chronicles #12

Hello there! Welcome to Capital Chronicles, saving you hours every week with ~2-3 minute summarised insights from the best venture builders, investors and capital allocators out there. This week: 20 lessons on 20 different paths to PMF with First Round Review, Revisiting the Mendoza line with Scale Venture Partners, the Craft Ventures Series on Operating in a Downturn, and The State of AI for H1 2024 report based on a survey of 750 tech professionals.

As subscriber #TBD, each web link below takes you to:

• A link to the original article (read time: varies)

• Summary / insights / implications per article (read time: 2-3 minutes)

Now, read on for the latest…

🛠️ On venture building…

20 lessons from 20 different paths to PMF, by First Round Review. A compiled set of insights from interviews FRR ran as part of a wide-ranging public study into how all sorts of different founders tackle the journey to product-market fit.

• Why you should read it: the 20 lessons are incredibly actionable, having been directly derived from real-world examples of founders and their respective journeys to achieving product-market fit. They also act as the perfect compliment to FRR’s ‘4 Levels of PMF’ framework and accompanying program (both covered in CC#6 back in June), and NFX’s approach to the topic (covered in CC#11 last week). Bonus: the full list of case studies is available here for those who want specific examples.

🧭 On venture investing…

Revisiting the Mendoza line in 2024, with Scale Venture Partners. The article updates the original "Mendoza line for SaaS" for 2024 market conditions.

• Why you should read it: for those not familiar with the concept, the Mendoza line outlines the growth rates and ARR levels needed for companies to stay on track for an IPO. While year-on-year growth persistence remains at about 85%. The target for IPO-ready companies has shifted from $100M ARR growing at 30% to $250M ARR growing at 25% with a clear path to profitability. The article demonstrates how the line has changed since 2018, provides a calculation tool and offers advice for companies that fall below the line.

📖 Learning resource…

The Craft Ventures Series on Operating in a Downturn. The Craft Ventures team gave their portfolio company founders a series of talks on navigating poor macroeconomic conditions.

• Why you should read it: excellent series for entrepreneurs and investors alike on how to operate when the macro environment is tough. A wide range of topics are covered including fundraising, managing runway, and communicating with employees. But if you were only going to watch one video, make it the last one. Craft Partner Mike Robinson talks about 8 principles of operating efficiency and the advice on how to implement them is absolute gold.

📊 Market insight…

The State of AI for H1 2024 report, by the Retool Team. A comprehensive overview of AI adoption, use cases, and technology stacks based on a survey of 750 tech professionals.

• Why you should read it: an extensive review of the current state of AI adoption across startups and enterprises, suggesting uptake is more moderate than most people would have you believe. For example, companies are still primarily relying on OpenAI’s models to develop internal use cases (chatbots, code writing, knowledge base Q&A). But there is growing interest in Anthropic’s latest family of models and usage of vector databases has skyrocketed, rising to 63.6% of respondents from 20% in 2023.

🎲Lucky dip essential reads…

• Six product strategies to catalyze your Second Act

• The Relentless Application of Force

• Cybersecurity trends in 2024

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Have a great week!

Josh