197. The DNA of Startup Success (John Vrionis)

197. The DNA of Startup Success (John Vrionis)
Nick Moran Angel List

John Vrionis of Unusual Ventures joins Nick to discuss The DNA of Startup Success. In this episode, we cover:

  • Backstory/path to venture.
  • Talk about your experience at Lightspeed and your decision to leave.
  • Where/when did you first meet Jyoti Bansal, the founder, AppDynamics?
  • What’s unusual about what you do?
  • ‘Unusual Academy’ and ‘Get Ahead Platform’ — what are they and what’s the difference?
  • You’ve spoken about your team at Unusual being focused on redesign the early-stage VC market and giving founders a distinct advantage. What about your approach gives founders a distinct advantage?
  • You’ve spoken about founder focus on “How it works” vs. “Why it matters” — what’s the disconnect you’ve observed with early-stage founders?
  • You’ve covered your own experience of learning through suffering — is that also a quality/characteristic you look for in founders?
  • Arrogance vs. Humility — have you invested in founders displaying these traits? What’s been your experience?
  • 3 must-haves that you look for in a new investment?
  • If there’s one common theme in failed investments — what is it?
  • Is there anything unusual about your approach to sourcing? If so, what is it?
  • What are some best practices for founders when picking a VC?
  • Over the past year or so the percentage of total VC dollars invested in early-stage deals fell to the lowest levels the industry has seen in five years. Why do you think this is the case?
  • You’ve talked a lot about the seed funding gap and challenges to get to Series A. I’d love to get your thoughts on what’s required to raise an A?
  • Do you focus on product-market-fit prior to the A round — if so, how do you define it?
  • What’s the problem with Sovereign Wealth in Silicon Valley?
  • Do you have specific examples of unintended consequences or challenges with certain types of LPs behind a VC fund?
  • Re. founders — You’ve said that “the biggest mistake you can make is taking an investment from a mega-fund” Why?
  • How has the early-stage venture landscape shifted from previous years? What do you expect to see in the future?

Guest Links:

Key Takeaways:

  1. John made the decision to leave Lightspeed because he felt the industry had changed tremendously over the last decade and founders weren’t getting the help they needed at the hardest stage, which is in the first two years.
  2. He and Jyoti Bansal shared this belief and felt there was a big opportunity in the space and ecosystem, therefore they teamed up to start Unusual Ventures.
  3. John and Jyoti make a complimentary team because you get the experienced investor/mentor/advisor turned VC from John and the very successful entrepreneur with an understanding of how to build a startup from scratch with Jyoti. 
  4. The key to being exceptional in this business is focusing on one specific niche and giving it your all. At Unusual, their focus is on providing founders with stage-specific help during the most difficult and crucial early years. 
  5. It’s all about financing the company to the next fate. It’s not a linear function in terms of value creation for startups, it’s very much a step function, where in order to reach the next step up, you must hit certain milestones. “Getting 80% of the way to the moon doesn’t get you anything.”
  6. Before writing a check, John first defines the goals of the money to make sure the company has meaningfully de-risked itself and therefore can raise money at a higher valuation before the next round. 
  7. There’s a fine balance between taking enough capital to reach critical milestones and raising too much money because often that can lead to bad habits. “Innovation comes from constraints…” therefore you don’t want founders to overly dilute themselves.
  8. The primary metrics that John uses to indicate product-market fit are first, having evangelical users, that are very much in need of what you’re selling and second, users that are so delighted with the product that they’re spreading the word and organically creating new customers. 
  9. John’s three “must-haves” before writing a check: 1. The team is a group of hardworking people with integrity and a passion for their idea that they believe can truly make the world better. 2. Timing. Is the timing right? What has changed on a macro level to make now the perfect time? And 3. The ability to raise venture capital. As a VC, we have to believe that the market has the potential to be huge and that there’s a real growth rate at the company that can take advantage of it. 
  10. A common theme John has observed in failed investments is incorrectly judging the motives of those very first customers.
  11. Founders want to believe that what they’re building is the antidote for everybody’s pain. Sometimes they believe it so much, they fail to ask the right questions or really listen to feedback in a way that would help them make decisions, which often leads to building something that people weren’t truly desperate for. 
  12. Unusual Academy was created to provide a time-efficient way for founders to learn from “master practitioners” or people who are exceptional in their craft. They go through a series of workshops to learn how to overcome the 7 most common challenges a seed-stage founder typically faces and then how to apply it in their company. 
  13. When a company becomes a part of the Unusual portfolio, they also gain access to the Get Ahead Platform. Through the platform, they hire the best salesperson, marketing person, and recruiter to join the founder’s team. 
  14. Mega funds are great for series A-C stages however, the biggest mistake founders can make at the seed stage is taking an investment from a mega fund.