Know Thyself

A fascinating thing about building for venture scale is how vastly different the outcomes are regardless of the efforts put in. Generally, I am very optimistic about venture building. In fact, I have been at venture building for the past 10 years. I have not had a massive win yet. There are decent outcomes, for example, with ProctorEdu. There is the failed one which consumed the most of my time actually, PushPullMe. And there is the one yet with lots of hope, Geeklama, still at the very early stage.

One of the questions that has bothered me is how easy it is to really miss the scale of what you are building and hence have massively different expectation of outcome. What am I getting at? I think the biggest problem of businesses (venture-type or not) is finding the niche where they basically become near-monopolies. You will be shocked at how common it is actually that a lot of companies are monopolies even though they pretend not to be. Google is a monopoly at search (even though it positions itself as a tech company, hence supposedly competing with everyone else, reality is that in search it isn't competing with anyone really).

Something I have learnt working in ridehail for the last 4-5 years is whoever achieves market density first wins it all. There is a reason why the stories of second ridehail players beating the dominant player is almost never heard of. Think of Uber vs Didi in China, once Didi achieved density — there was little to nothing Uber could do. They spent a lot but still couldn't beat Didi. Why? Once you're at monopoly level — you have a lot of room to defend yourself. And I am not even talking about money. There is stickiness of users, business know-how that is just very tricky to replicate in very specific conditions. I have seen this countless times in the ridehail market. And now, I actually believe this is true for most markets.

If we define market density very simply as market share, then where you want to be as a venture business is in a market with weak/no competition with the potential to quickly scale to considerable market share. Let's look at a few examples. Tiktok essentially has redefined social media and it actually did this by attacking a market with very weak competition. Instagram video/algorithms are definitely weak, Snapchat's content discovery was not great and it was not investing at growing a global audience. Tiktok essentially took those weak points and turned them into super power, blitzscaling to considerable market density where it's easy for it to fend off competition and monetize. To implement this, you cannot be a little better than the competition, you have to be miles ahead of the competition, and in this Tiktok succeeded. Telegram is miles ahead of Viber (so it won); Google was miles ahead of existing alternatives for search when it launched, so it won.

Now, if you don't know the game you are playing, or who you're playing or where you are playing, building venture scale is almost an insurmountable task. Going back to my stories of ProctorEdu, PushPullMe and Geeklama. PushPullMe was a massive failure essentially because it failed to build an exceptional product for a niche where it could become a monopoly. We provided on-demand counseling for a small market (students) with little purchasing power whose alternative was talking to parents or peers. PushPullMe wasn't doing anything exceptional, regardless of how painful it is to admit. PushPullMe would have been better off as a social impact project supporting 500-1000 students sustainably annually.

ProctorEdu, on the other hand, achieved market density in less than a year. Within a year, ProctorEdu became the largest automated proctoring solution in Russia by number of conducted tests. ProctorEdu is definitely in the top-3 globally in terms of proctoring algorithms, definitely the #1 automated proctoring solution in Russia. This was why ProctorEdu won, even in the face of a government-backed alternative in Russia. ProctorEdu has inherent venture scale baked into the niche it attacked, hence it can be a huge venture success. But even at that, the company raised a total $300k at a time we didn't really need it and hasn't raised follow-on rounds ever since. ProctorEdu has been profitable since month 6. I think ProctorEdu can be a $100m venture. Today, it's already at least a $20m venture. The guys have more flexibility as to what kind of company and outcome they want. It is my favorite kind of spot to be as a company.

The jury is still out on Geeklama — we have some thoughts about the scale we want and where we can be a monopoly. Geeklama is currently growing 40% month on month implementing this strategy of finding the right niche, pushing out a product that is magnitude of scales better than present alternatives and optimizing for an outcome we believe matches the niche we are. Good luck to us.

So my thought to you today is do you know thyself? What kind of company are you building?