The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: The Memo: Sequoia's Alfred Lin on Why Chasing GMV Leads To Bad Behaviours, How To Approach Competition and Capital Efficiency & The Core Importance of Understanding the Difference Between Input and Output Metrics

Jan 27, 2021

Alfred Lin, a partner at Sequoia Capital and former COO of Zappos, shares insights on navigating the venture capital landscape. He discusses the importance of understanding market dynamics and emphasizes the pitfalls of chasing gross merchandise volume (GMV), warning that it can trigger negative behaviors. Alfred explains that successful companies focus on customer needs over competition and stresses the significance of distinguishing between input and output metrics for sustainable growth. His experiences with DoorDash provide a valuable lens on these crucial concepts.

Ask episode

AI Snips

Chapters

Transcript

Episode notes

ANECDOTE

Early Food Delivery Interest

Alfred Lin's interest in food delivery predates DoorDash, leading him to evaluate Grubhub, Caviar, Postmates, and TaskRabbit.
He passed on them due to a lack of perceived founder-market fit and a desire for operationally obsessed founders.

INSIGHT

Seed Stage Focus

Focusing on the seed stage should prioritize identifying strong founders tackling large markets and demonstrating founder-market fit.
Getting bogged down in details provable at later stages can lead to missed opportunities.

INSIGHT

DoorDash's Market Strategy

DoorDash's initial market focus was the takeout market, aiming to make delivery as efficient and potentially larger.
Market dynamics and a clear wedge into a larger market are more critical than sheer market size.

Get the Snipd Podcast app to discover more snips from this episode

Get the app

Alfred Lin is a Partner @ Sequoia Capital, one of the world's most renowned and successful venture firms with a portfolio including the likes of Google, Airbnb, Whatsapp, Stripe, Zoom, Doordash and many more. As for Alfred, he has led deals in the likes of Airbnb, Doordash, Instacart, Reddit and Houzz to name a few. Prior to the world of venture, Alfred was Chairman and COO @ Zappos for 6 years leading to their acquisition by Amazon.

In Today’s Episode You Will Learn:

1.) How Alfred made his way into the world of venture and came to be a Partner @ Sequoia? How Alfred first met DoorDash? Where did the meeting take place? Who was there? What were the first impressions?

2.) Market: How did Alfred breakdown the food delivery market when doing the diligence for the investment? How did Alfred forsee the market changing over time? What were some unexpected elements of the market Alfred did not forsee? What does Alfred look for in markets; size or growth?

3.) Competition: How did Alfred analyse the competitive landscape for food delivery at the time? Why does Alfred believe that great companies are not built by focusing on the competition? What does Alfred mean when he says, "you have to be customer-obsessed and competitor aware"?

4.) Traction: Does Alfred agree with Sarah Tavel in the dangers of chasing topline GMV? What negative behaviours can chasing GMV trigger? What does Alfred mean when he says, "founders have to be able to distinguish between input and output metrics"?

5.) Acquisition: What does Alfred believe DoorDash did so well in terms of acquiring drivers more efficiently? How did they retain them so effectively? What allowed DoorDash to compete so effectively when it came to merchant acquisition? What were some of Alfred's biggest takeaways when it came to DoorDash's customer acquisition journey?

As always you can follow Harry and The Twenty Minute VC on Twitter here!

Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC.