We Give the Floor to: Daniel Silva

clique aqui para a versão em português

In mid-2019, I called Marcelo, Verve’s founder, and introduced him to a young founder who was building a fast-growing super early-stage company, and I suggested that he invest in this company.

Wisely, he asked: why do you think it’s so great?

I don’t remember the exact words, but it was something like: “he’s smart, he was part of the engineering team at Snap, and he’s going all in. He is actually moving back to Brazil to scale this company. He’s the best founder-market fit I’ve ever seen”.

Nearly four years later, Mateus has led Rei do Pitaco to become the largest fantasy gaming company in Latin America, raising more than $50 million in the process.

Since Rei do Pitaco, Marcelo and the Verve Capital team have backed several founders in their quest for greatness — together we have ten co-investments from around the world — as we watch these founders fight the good fight, and we see some of them collect more wins than losses, I’m left with one question: What makes early-stage founders great and ready for the next level?

After working with so many founders and seeing some go faster and further than others, I have come to understand that laser focus on what matters the most and the discipline to prioritize day in and day out is what sets them apart — topped off with a masterful execution.

Let me structure my thinking here: Founders are visionaries, but they are also firefighters. They often see the future of society and how their product can positively impact millions of people, but when they walk into their “garage” they find a company about to crash, to fall apart. The product is crashing because it doesn’t have the right infrastructure, the cousin he hired for customer success can’t operate independently, his co-founder is dealing with investors and complex term sheets, his early adopters aren’t coming back to the platform because they can solve their problem elsewhere… I mean, his tiny garage feels like a 40-story building and there’s a fire on every single floor and it’s spreading fast and furious.

A whole day goes by, and when he is ready to rest, his mind is everywhere. The visionary is exhausted from putting out so many fires and there is no time to rest because tomorrow he will enter the same building and chaos is everywhere.

“Vision without execution is hallucination.” — Steve Case.

Does this sound familiar? I mean, I can make a long list of challenges that early-stage founders face every day. It gets harder when you are bootstrapped or VC-backed and your runway is shorter than Usain Bolt’s 100m track.

Winston Churchill famously said: “if you’re going through hell, keep going”.

I think Sir Winston is a great leader, but when it comes to running a business, you have to be careful not to burn yourself out. Burnout is a real danger and founders are very exposed to it. But for the sake of this article, let’s focus and prioritize what matters most: how can founders see the future and execute on a daily basis so they have a chance to build the company they envision?

“The most important thing for startups to do is to focus, because there are so many things you could be doing. One of them is the most important. You should be doing that. And not any of the others.” — Paul Graham, YCombinator.

PG is the co-founder of YCombinator, the world’s most successful unicorn breeder. YC has backed over 4,000 companies and according to Failory has 68 unicorns in its portfolio. Companies like Dropbox, AirBnb, Stripe, Brex, they all came from YC.

Well, if PG is the king of startups, how about Mr. Warren Buffet’s quote: “the difference between successful people and really successful people is that really successful people say no to almost everything”.

Ok, now that my idea seems to be supported by two of the greatest business minds in the world, I went on to investigate how founders can focus and execute to take their companies to the next level.

A quote from Forbes Magazine points me into the right direction: “in order to make a difference as a startup founder you need to make sure the minimal resources you have are being used in the most impactful manner. And the best way to do it is to concentrate your efforts on a single point of pressure”.

I can relate to that. Every young company has to deal with very limited resources and scarcity. Scarcity is everywhere — number of people on your team, cash in the bank, paying customers, and of course, hours in the day.

Last week I finished a great book that I highly recommend to all founders, High Growth Handbook: scaling Startups from 10 to 10,000. And I extracted one question followed by a very validating answer.

Do you think most venture-scaled business are winner-take-all? Or do you think you have more complex oligopoly or other market structures? In other words, how important is winner-take-all?

Hemant (the general partner at General Catalyst): “first of all, I think it depends on the market. But for a lot of these large markets that have been regulated and are just opening up, I think it’s hard to think about being a winner take all. Gusto is an example of that. There are millions of small businesses that they can serve with a modern people platform. Should Gusto focus its product and sales on companies that are 1 to 10 employees, or 10 to 100, or 100 to 1,000?”.

You have to carve out your niche and become really great at it, and not worry about what other companies are doing. Figure out how to build a business that is foundationally designed to grow at what you think the optimal growth rate is, and don’t worry about how you take the disproportionate share.

The strategy of validating with a niche market and scaling more broadly has been a strong thesis within the startup ecosystem. The idea is that you can learn faster with a small sample of customers — preferably the ones who need your solution the most — than by launching with a much larger audience. The goal is to optimize your limited resources and learn as fast as possible to get to PMF.

According to Gustaf, a partner at YC, the biggest mistake founders make is not talking to users, which leads to a failure to find product-market fit.

All early-stage founders have one thing in common: their pursuit of product-market fit. So what is product-market fit? I like Andreessen’s definition best: “the customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can”.

If you want to watch a video on the topic, I recommend Siebel’s 13 minutes video. Another great piece of work is this blog post by Marc Andreessen’s from 2007.

Naval Ravinkat, the founder of Angel List, has an amazing quote from his superb book; The Almanack of Naval:

“The lesson of history is that product-market fit is very precise — one wrong tweak or slightly bad timing and you can miss the whole thing. So the only way you’re likely to find product-market fit is if you are almost irrationally obsessed with the market and if you have been working on it for a long time.”

Sorry for the long course here, but I feel that without telling you what founders should really focus on, I would not be able to tell the right story.

Recap: A visionary founder sees a better future and walk into a burning building every day while chasing PMF with his team. There are fires everywhere, but he has to decide which one to put out first and move on to the next.

After working with hundreds of founders and working side-by-side with some of the best leaders in business, I believe that defining what is most important to the company and consistently working on it is the best way forward. Of course, founders can’t build an epic company on their own, so in addition to deciding what the most important mission is, they need to work on getting their entire team aligned and working together.

A foggy definition of what’s important and poor internal communication can be fatal to any company, more so with early stage and fragile startups.

I want to double tap into this: some founders struggle to keep their company aligned, and I believe it is because the task of keeping the company rowing in the same direction isn’t simply an “all hands meeting” every Monday, but a constant communication, 1:1’s, and, in some cases, overcommunication.

I recognize that wearing both hats — the visionary founder and the commander in chief — is challenging and stressful, but it’s a very important element of success.

A caveat here: I often see amazing founders who just walk away from the problem too quickly. The best entrepreneurs are in business to solve a problem in a way that people can embrace and fall in love with — think about your Spotify account, your last Uber ride, and the last meal you ordered on iFood. In the venture capital market, investors want to back founders who are solving gigantic problems with a scalable solution. Scale comes after the problem is solved.

Great entrepreneurs focus on the problem and solving it is the only thing they care about. As my good friend Donato Ramos likes to proclaim, “I want founders who are obsessed with the problem” — and I agree. Founders need to stay focused on the problem they are trying to solve and constantly learn more about it. What’s the problem? When do people/companies suffer from this problem? Who is more sensitive to the problem? Talking to users is the best way to learn.

So let me give you my two cents here: stay obsessed with the problem you want to solve. Talk to your early users, interview them, call each and every one of them and ask them why and how they use your product. Back to PG: “it’s okay to do things that don’t scale”.

Let’s say we’re all on the same page right now, and if that’s the case, I think the next question is how do founders manage to focus and prioritize? Every time I interact with a highly skilled founder, I like to ask how they test their ideas and insights. You know, there you are, trying to solve a problem, and ideas just keep popping up from everywhere, but as a leader with very limited resources — from time to people to money — how do you select, run the experiments and evaluate the success of your ideas?

I decided to ask my LinkedIn network and I will share some of the feedback I got from them (BTW I got great response from people I care very much about and love their business, but I would write a bible if I had everyone in it — thank you all for your cooperation and love).

The question: As an early-stage founder, how do you prioritize what’s most important to tackle at this point in your startup’s lifecycle?

Lestat, co-founder at Healf — a next generation of e-commerce in the UK
Doing what leads to our growth as much as possible, improving and finding new ways to do that and building a support structure around it to handle the growth. Revisit priorities on at least a weekly basis and check upcoming tasks are aligned with them.

Gleb, Ultima.school — a learning platform in Brazil
We normally have 2 OKRs on a company level — one about money, one about product quality. So when we choose what to test or prioritize in the commercial part or in the product we ask ourselves what would have the most impact on those 2 OKRs.

Marcelo Marchetti, ChiefsGroup — an educational platform in Brazil
Today the most important thing to test is the customer’s payment, to solve the pain we identified. Not only the intention to buy, but I try to remove all barriers to reach potential customers and see if they actually take the wallet out of their pocket, take the card and put it on the site (in the case of SaaS) or if they accept a proposal (in the case of b2b). Doing this aggressively, cutting through our internal barriers, creates conflict and takes a bit of risk. Without accepting only google forms, without accepting “I like it, I would buy it” answers.
Example: I have already reached the point of making all the screens until the checkout, take the credit card and have nothing behind, only answer “an error occurred try later”, with this data from the deepest intention that exists, I validated the idea, some numbers from the initial funnel and got resources to develop the product from “back to front”.

Cleiton Sanders, Eleme — a construtech startup in Brazil
I have 2 semi-annual macro OKRs that focus on execution of the vision. From this, I break down into 3 derivatives of the macro OKRs:
1. Acquisition machine (mkt team, pre sales and sales): how they will contribute towards the direction of the macro goals;
2. External customer squad (3 devs, 1 pm, 1 engineering and 1 cs): how they will contribute towards the macro goals of delivering to the external customer (improvements and opportunities for new features that increase value delivery);
3. Internal customer squad (2 devs, 1 pm, 2 engineering and 2 cs): same direction as above, but focused on the improvement and development of the proprietary systems that give flow to the internal processes.
In each of the 3 parts, after surveying the action needs, we go to an effort x impact, action, test, measurement and implementation.
Early stage, short blanket and trade offs all the time, so we try to accelerate as much as possible these cycles within each area.
In my day to day, vision, culture and capture (don’t let lack of fuel for this execution).

Daniel Paredes, co-founder of JáVendeu — a second hand marketplace in Brazil
We make quarter meetings where we define main objectives for the company using OKRs. After that, we define, team by team, how are we going to tackle those objectives, defining possible tasks and actions we could take to move the needle. Then we use methodologies for prioritization that; in summary we give notes to each task, mostly subjective to: impact, reach, effort and trust. With the overall average notes, we choose the first 5 initiatives and define ownership and possible way to execute — including help from others teams and resources.

The next question is with regards to their experimentation process: following up on the last question, how do you test/experiment with what is important? How do you keep track of all your testing? How will you capture all your learning? How will you define success or failure?

Arthur Araujo, IZZI.gg — an e-sport platform in Brazil
Before each test, we choose the metrics and success criteria. In sales, it is always related to conversion numbers, like CAC, conversion rates of pages, ads, emails etc. In product, it is always related to retention and NPS. At the end of each week during the test, we have a call to capture the learnings and decide on iterations.

Braulio Medina, founder of SigmaGeek — a talent marketplace platform from Brazil to the world
We document all the major opportunities on Airtable and track the key metrics accordingly. It’s too early to A/B test everything here, but we use our instincts to come up with changes and we track the impact of those changes on some key metrics.
In the future, when we have more people, traffic and maturity, we should run consistent A/B tests, using an A/B testing calculator to validate hypotheses and come up with a minimum viable test, according to best practices.
But in our early stage, which is a lot of hustle and bustle, one call, one meeting, one big client can change everything. So I prefer to let the chaos lead me to that single game-changing event, rather than tracking and measuring too many things and getting lost in analysis paralysis.

Gustavo Bakai, replayers.com.br — a sporting goods ecommerce in Brazil
We have always run a very short cash flow, in the end this drives the tests we do. We have a Miro model where we include success and failure hypothesis and define key KPIs for the test. We usually define a budget and a RRs — roles and responsibilities model. At the end we evaluate the results and have an open box for lessons learned.

Milson, founder of Bounties4 — a Next-gem software development platform
From an operations and product point of view, we are very clear about the next steps. Our difficulty today is more on the commercial and marketing side, so I would say that we don’t have a very sophisticated method to evaluate if something has worked or not. What we do is test and measure the conversion and then we talk together to see if it makes sense to continue in that direction.

I think it’s okay for founders to have different operational approaches to what’s most important, and I also think it’s an ongoing process to figure out what format works best for you and your team. There are two things I strongly recommend founders do: become a learning machine and consume as much content on leadership, productivity and success stories as you can; and second, reach out to other founders and leaders and learn from them. Don’t miss the opportunity to learn from other people who have been in your shoes before!

Before we wrap up…

The hottest topic in the tech space this year has been OpenAI’s chatGPT3 technology and I could not close this article without asking the AI platform a few questions and revealing how the machine thinks.

Question #1:

Why should early-stage founders focus and prioritize during the early days of their company?

As an AI language model, I can say that early-stage founders should prioritize and focus on the most critical aspects of their company in the early days to ensure its success. Here are a few reasons why:

1. Product Development: founders should focus on developing and refining their product or service to ensure that it meets the needs of their target market. They should prioritize building a product that solves a problem and has a unique value proposition.

2. Customer Acquisition: founders need to identify their target audience and focus on acquiring customers as early as possible. They should prioritize building a solid customer base and developing strategies for customer retention.

3. Team Building: founders should focus on building a team with complementary skill sets to help them execute their vision. They should prioritize hiring the right people for key roles and establishing a strong company culture.

4. Fundraising: founders need to raise money to fuel their growth and development. They should prioritize developing a compelling pitch and building relationships with potential investors.

5. Cash Management: founders should prioritize managing their cash flow and expenses to ensure that they can sustain their business in the long run. They should focus on building a solid financial plan and keeping their expenses in check.

In conclusion, early-stage founders should prioritize the critical aspects of their company to ensure its success in the long run. They should focus on product development, customer acquisition, team building, fundraising, and cash management to set themselves up for growth and success.

Question #2:

How can early-stage startup founders prioritize and focus on what is more important?

As an AI language model, I can suggest the following ways for early-stage startup founders to prioritize and focus on what’s more important:

1. Define Goals and Objectives: the founder should define their company’s goals and objectives and prioritize the activities that will help them achieve those goals. This will help them focus on what’s most important and avoid distractions.

1. Create a Roadmap: the founder should create a roadmap that outlines the critical activities and milestones that they need to achieve to build a successful company. This will help them prioritize their efforts and track their progress towards their goals.
2. Conduct Market Research: the founder should conduct market research to understand their target audience and identify their needs and pain points. This will help them prioritize the product features that are most important to their customers.
3. Use Data Analytics: the founder should use data analytics to track key performance indicators (KPIs) and identify trends that can inform their decision-making process. This will help them prioritize activities that have the most significant impact on their business.
4. Seek Advice and Feedback: the founder should seek advice and feedback from mentors, advisors, and their network to help them prioritize their efforts. This will help them gain perspective on what’s most important and avoid common pitfalls.
5. Prioritize Time Management: the founder should prioritize their time management skills and focus on activities that have the most significant impact on their business. This will help them avoid getting sidetracked by less critical tasks.

In conclusion, prioritizing and focusing on what’s most important for an early-stage startup founder requires discipline, planning and execution. By defining goals and objectives, creating a roadmap, conducting market research, using data analytics, seeking advice and feedback, and prioritizing time management, founders can set themselves up for success and build a thriving company.

Founders, dreamers and believers,

Starting and growing a business from scratch alongside some amazing people is one of the best journeys you can have in this life. If you decide to follow your dream, I wish you all the best. The journey is not easy and it’s full of ups and downs, but I promise you it will be worth it.

When people ask me: what makes a great founder? I answer their ability to learn and execute quickly. I shouldn’t give such a glib answer, but I truly believe that when you start a company, you have to be open to destroying and rebuilding your theories over and over again. Maybe I should rephrase it like this: a growth mindset with laser-focused execution to solve a problem and the ability to lead and inspire great people.

I would like to thank Marcelo, Gabriel and Jeremie for the opportunity to share my thoughts here. I wish you all the success in the world because I know you are legit and founders can only benefit from having you on board.

Sincerely and with love,

Daniel Silva

P.S. I want to share a few books I recommend to founders:

1. Atomic Habits by James Clear
2. Shoe Dog: A Memoir by Phil Knight, the creator of Nike
3. Turn This Ship Around — A true story of turning followers into leaders by L. David Marquet
4. The Almanack of Naval Ravinkat by Naval Ravinkat
5. Legacy: What The All Blacks Can Teach Us About The Business Of Life by James Kerr
6. Mindset — The new psychology of success by Dr. Carol Dweck
7. Think Again: The Power of Knowing What You Don’t Know by Adam Grant
8. High Growth Handbook: Scaling Startups from 10 to 10,000 People by Eliad Gil