The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch 20VC: Craft Ventures’ David Sacks on How To Assess Founder Psychology, How To Accurately Evaluate CAC, Burn and Churn & What Makes The Very Best Startup Boards
Jun 15, 2020
David Sacks, Co-founder of Craft Ventures and a key player in tech history with influential roles at PayPal and Yammer, shares his insights on founder psychology and capital efficiency. He discusses navigating venture capital during economic downturns, emphasizing the importance of unit economics. Sacks explains mastering customer acquisition costs and highlights the significance of metrics like net negative churn for sustainable growth. He also delves into the delicate balance between visionary leadership and constructive board feedback in fostering a startup's success.
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Building in Downturns
- David Sacks built PayPal and Yammer during economic downturns.
- This experience taught him that innovation doesn't stop during downturns, and some aspects of building a company actually become easier.
Unit Economics
- Losing money at the corporate level is acceptable, but losing money at the unit level is not.
- Startups must avoid selling products for less than their variable cost.
Distribution and CAC
- B2C companies need new distribution platforms due to high CAC and low customer lifetime value.
- B2B companies can afford higher CAC due to higher customer lifetime value and lower churn, making sales-driven approaches viable.