Capital Chronicles #18

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: go-to-market troubleshooting with Dave Kellogg, understanding ‘Founder-Market Fit’ with Data-driven VC, the ultimate Startup Field Guide by Unusual Ventures, and McKinsey analysis on using efficient growth to capture $500 billion.

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…

Go-to-market troubleshooting with Dave Kellogg. Dave discusses how to solve problems associated with new customer acquisition, the area where most enterprise-focused businesses are struggling right now.

• Why you should read it: Are you missing your forecast and is your revenue growth down? You're not alone! Dave outlines a systematic approach to troubleshooting go-to-market performance by distilling focus down to two key questions: 1) Is the company providing sales with sufficient pipeline coverage to hit the target? 2) Is sales converting enough of the pipeline to achieve the goal? A thorough analysis of historical pipeline coverage and conversion rates can identify the root causes of underperformance and inform plans to address them.

🧭 On venture investing…

Founder-Market Fit and How It Impacts Startup Success, from Data-driven VC. A comprehensive review of the literature on 'founder-market fit' to better understand the concept and how to leverage its impact.

• Why you should read it: While much attention has been given to the concept of product-market fit ('PMF'), less has been said about founder-market fit ('FMF'). FMF is a fundamental concept that heavily influences PMF and materially increases the chance of success. For example, multiple studies cited in the review suggest that startups with good FMF are 50% more likely to succeed and 230% (!) more likely to grow and achieve scale. Bonus: the Forbes article referenced in the review provides a series of qualifying questions to help validate FMF.

📖 Learning resource…

The Startup Field Guide by Unusual Ventures. A tactical resource comprising over 100 articles, case studies, interviews, and tools designed to assist early-stage founders in navigating the journey from company formation to achieving product-market fit.

• Why you should read it: This guide is a 10/10 comprehensive resource, from the team at Unusual Ventures. It outlines the pre-product-market fit journey in five distinct stages: starting the company, customer discovery, going to market, fundraising, and hiring. These stages cover all the critical areas a founder needs to understand to successfully launch a product and deliver it to customers. The section on tools is equally powerful, offering valuable frameworks, templates, and question sets that complement the guide quite nicely.

📊 Market insight…

How efficient growth can fuel enduring value in software, by McKinsey. A recent analysis by the consulting firm reveals that software companies overcorrected towards margins in 2022-2023, potentially leaving up to $500 billion in value on the table.

• Why you should read it: A compelling narrative breaking down the last couple of years in public software markets, suggesting that many companies overcorrected by focusing too heavily on margins. The analysis indicates that the ideal growth-to-margin ratio for a Rule of 40 software company is 2.1 times to 1.2 times, dependent on the following factors: baseline growth and margin, cost of capital, growth efficiency, and industry growth headroom.

🎲Lucky dip essential reads…

• 9 Signs a Startup Isn’t Going to Make It

• Sequoia’s AI Ascent: a day of conversations, talks and demos

• Financial data for 120+ public SaaS and 100+ M&A transactions

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• Investment toolkit: tools, templates, and how-to guides to help you evaluate and analyse venture investments. (3 referrals)

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Have a great week!

Josh