5 min read
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Published on
April 24, 2024
Jameson Pitts
Venture Basics

Venture sucks: A plea for help from Lynx’s product manager

This blog is a siren call for help on a noble mission. I’m going to lay out our point of view on the status quo, and our vision for the future. See, I have the greatest job in the world. My mandate in leading product at Lynx is to explore the whitespace between incorporating and selling a technology company, and understand every point of friction along the way that in aggregate lead to this reality: Almost every startup fails. See for us, the stakes are as big as venture itself. This industry that is ostensibly responsible for backing so much innovation in this country is painfully slow to innovate itself.

But spoiler alert, this is a tale as old as time: Analog industries become digital. Gatekeepers are displaced by technology. The tendency of transactions in any industry is for them to become more digital, quicker, with fewer participants and agents required. Timeshares become AirBnBs, travel agents become Expedia. Bankers become mobile apps. And your VC too may very well become technology one day. The tendency of the old guard is to die. My tools on my noble mission are primarily category and design thinking, research and intellectual honesty. First, a look at how we got here:

Lynx Today

Today, Lynx is a Sweat Equity Marketplace. We struck out with this insight: that sweat deals are hard to paper, and that if they were easier to source and execute startups might have more runway and a better chance to survive. Not to mention the benefits of your team sharing the same incentive in the long term success of the venture.

These sweat deals primarily fit between Seed stage startups and middle-market service firms: legal, development, marketing & PR. Working with vendors like this is one little area of friction that we bit off first. But every day, we meet founders asking for different types of talent, different types of legal support, and crucially — help raising whatever round we find them on.

The Category

We believe these separate asks are really the same. We define the problem as “Why are we ok with most startups failing?” Venture rationalizes this with a pick the winning thoroughbred mentality — that this is the way it goes, of course most fail, but the winners trade at 30x. We are confidently and proudly Not Okay with this — and today we declare war on the old way. Imagine if other professions, your surgeon for example, paraded their 1 in 10 survival rate. This problem implies a category, a NEW category.

We’re calling that category a Startup Resource Marketplace, with the core insight that everything matters. The ability of a founder to find a co-founder, a team, to incentivize and motivate that team, to listen to customers and empathize with a problem, to raise capital, find fit, become a performant business and raise again — are all really different flavors of the same thing and completely inextricable.

No product or category addresses this alchemy problem, and as founders haphazardly hire, investors spray out cash on SAFE notes, with incentives pointing every which way, and everyone being ok that It’s Probably Not Going to Work, It’s Just Luck if it does, we waste massive amounts of money, time, talent. Imagine that if it was all just a bit easier, maybe 1.1 or 1.5 out of 10 startups succeed, and what that might mean for the future. The ideal startup resource marketplace would allow venture stakeholders to align incentives, operate & invest efficiently, share in returns, and win big. The core requirement of the category is to get talent and resources to founders and ideas in a way that reliably ends in market fit. We specifically reject that venture capital alone is the best vector to deliver resources to ideas to create fit. We are living in the aftermath of that attempt — it empirically fails 90% of the time. However, capital is an inextricable catalyst in the synthesis of resources and ideas into fit. So we turn our research here.

The Hypothesis

Lynx is a research-oriented organization. We love hardcore, old fashioned, interview research as our primary data source. Today we start researching and designing against a new question — How might we disrupt startup funding, to improve startup outcomes? Sweat deals are one small part of this question. And what do we need to empathize with investors to make this a win-win.

Our specific hypothesis is… The methods, attitudes and tools of venture funding contribute to a market inefficiency. There is a present but high-effort opportunity to disrupt one or more of those critical factors and improve startup outcomes. This thinking leads to several sub-hypotheses:

  • Venture is inflicted with a pervasive attitude that winners can be picked instead of made
  • Pattern-matching prevails in early stages as the primary funding method
  • Financing instruments have huge unintended consequences — pro-founder docs like SAFEs allow for massively inefficient deployment of capital

It’s Too Soon to speculate on the product outcomes but let’s indulge for a moment: Imagine investors buying line items from a use of proceeds, imagine investment instrumented to market fit, imagine a savvy venture investor of the future who uses domain expertise to equip ideas in their niche with talent they know that wins in that niche, from a mobile app. Who knows.

Help Me Change the World

Do you have ideas? Submit them to our public roadmap. Are you an investor who radically agrees or disagrees with the above? Book a meeting, I’d love to chat. We want to make you more money by changing the way you do everything.

Get started with the
Lynx SWEAT equity toolkit.

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