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One important aspect in building a successful business is selecting the right customers. It is crucial to design feedback loops and build strong relationships with customers who push the market forward and truly need your product. Avoid customers who may appear big and shiny but won't provide meaningful growth or innovation. Additionally, recognizing bad customers and letting go of them is equally important for long-term success.
Rigorous tracking of product metrics is essential, especially in the early stages of a B2B software company. While sales metrics often dominate, it's crucial to focus on product adoption and ensure that customers are fully realizing its potential. Measuring the actual usage patterns and understanding how customers integrate the product into their workflow can provide valuable insights and lead to better product development and customer success.
Innovation and adaptation are key elements in building successful software companies. Recognizing emerging market segments, new monetization models, and evolving work dynamics is vital. Keeping an open mind to new technologies like AI and exploring opportunities in collaboration tools, vertical market software, and distributed work environments can lead to unlocking new potential and creating breakthrough products.
Building on beachhead markets is crucial for success. By starting with a small group of customers and gradually expanding, companies like Viva and HubSpot were able to grow their revenue and market presence. This strategy involves being close to customers, identifying other jobs to be done, and leveraging a unified view of the customer even when using different tools.
Product quality and timing are important considerations. While product quality is essential in certain industries with critical functionalities, launching a product that may not be perfect but meets customers' needs can generate success. Companies like Lattice prioritized timing by shifting resources to launch an engagement product, which initially had flaws but ultimately differentiated them in the market. The key is understanding the level of risk and customer tolerance for imperfections in relation to the overall product value.
My guest today is Miles Grimshaw. Miles is in his early thirties and is a General Partner at Benchmark. His experience and success belie his age. He was an early investor in Segment, Benchling, and Airtable, all before they had 30 employees. I have learned a ton from Miles about software investing and that’s why I was excited to have him on the show. We discuss his biological approach to investing, whether pure API companies can be good businesses, and what most has his attention right now. Please enjoy this conversation with Miles Grimshaw.
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For the full show notes, transcript, and links to mentioned content, check out the episode page here.
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This episode is brought to you by Tegus. Tegus streamlines the investment research process so you can get up to speed and find answers to critical questions on companies faster and more efficiently. The Tegus platform surfaces the hard-to-get qualitative insights, gives instant access to critical public financial data through BamSEC, and helps you set up customized expert calls. It’s all done on a single, modern Saas platform that offers 360-degree insight into any public or private company. I’ve been so impressed by the platform that my firm, Positive Sum, recently made an investment in Tegus. We did so because we feel that Tegus will be the gold standard platform for investing research for decades to come. As a listener, you can take Tegus for a free test drive by visiting tegus.co/patrick.
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Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes.
Past guests include Tobi Lutke, Kevin Systrom, Mike Krieger, John Collison, Kat Cole, Marc Andreessen, Matthew Ball, Bill Gurley, Anu Hariharan, Ben Thompson, and many more.
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Follow us on Twitter: @patrick_oshag | @JoinColossus
Show Notes
[00:02:57] - [First question] - His notion of the investor as a biologist or a physicist
[00:05:24] - Why he seeks out new companies with unique business models
[00:07:53] - How his investments are based on present and future needs in the market
[00:11:55] - Evaluating the genetics of a nascent or small company
[00:13:38] - The half-life of information as it flows through a company or platform
[00:17:26] - Unpacking how software companies can survive re-evaluation periods
[00:21:03] - The power of environment creation and facilitation
[00:25:10] - The importance of user conferences
[00:25:45] - A company’s potential for a differentiated second act as a sign of good genes
[00:30:21] - Product quality, timing, and reinvention in tech startups
[00:33:10] - Why it’s crucial for companies to avoid copying their heroes
[00:37:41] - Breaking down market perspective on pure API companies
[00:41:29] - His views on software targeted to vertical versus horizontal markets
[00:44:29] - Carefully leveraging relationships with core customers
[00:48:06] - Operational lessons from his experience with the companies he’s invested in
[00:50:26] - His maxim that software development is as much an art as a science
[00:51:12] - His idea of a product magician in the software industry
[00:52:19] - Effects of new products and categories at the forefront of the space
[00:58:21] - How software founders should prepare for 2023
[01:01:41] - How both market structure and product shape the genetics of a business
[01:04:32] - The challenge of pricing and packaging for SaaS companies
[01:06:42] - Cardinal sins in software investing
[01:07:42] - The kindest thing anyone has ever done for him
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