Extra Crunch Roundup: GTM, China Edtech & Growth Definition

The Reality of Go-to-Market Strategy for Startups

Many early-stage startups often assert that their go-to-market (GTM) strategy is fully functional. However, GTM is fundamentally a quantitative endeavor. Even a well-defined plan can be undermined by prevalent issues such as internal conflicts and ineffective communication.

Achieving GTM fit represents a significant achievement for any startup. This encompasses everything from scaling the engineering department to initiating the first advertising campaign. But determining the precise moment of attainment can be challenging.

Key Metrics for GTM Fit

“Three metrics are crucial: gross churn rate, the magic number, and gross margin,” explains Tae Hea Nahm, co-founder and managing director of Storm Ventures.

A high churn rate indicates customer dissatisfaction. Conversely, low gross margins signal unfavorable unit economics. The “magic number” is also a vital consideration.

Nahm clarifies its calculation: “It’s determined by dividing new ARR by your marketing and sales expenditure.” However, it’s important to recognize that the magic number is a trailing indicator, and a positive outcome may require several quarters to materialize.

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Fostering Sustainable Growth

Consistent growth is achievable through a systematic approach to expanding your customer base.

Marketers who reactively adjust to trends, or uncritically adopt others’ strategies, are less likely to succeed.

“The core principle of excellent retention is surprisingly straightforward,” stated growth specialist Susan Su at TechCrunch Early Stage: Marketing and Fundraising. “It centers on creating a product that effectively addresses a genuine and ongoing need for users.”

Insights from Susan Su

During a discussion with Managing Editor Eric Eldon, Su explored various topics. These included guidance on how founders should communicate growth plans to investors, and her techniques for constructing a preliminary qualitative growth model.

“I strongly advocate that every founder should actively participate in growth initiatives,” Su asserted.

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Walter Thompson
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@yourprotagonist

The 6-Year Journey to Building an AI Unicorn

It is uncommon for startups to successfully launch with their initial product concept unchanged.

Currently, Tractable is recognized for its technology that enables drivers to submit images of damaged vehicles for AI-powered damage evaluation. Interestingly, their initial revenue came from a client utilizing Tractable for the inspection of plastic pipe welds.

Coincidentally, this initial client terminated their contract with Tractable around the time the founders were securing their first funding round.

Co-founder Alex Dalyac notes that they “discovered a lucrative opportunity within the car insurance sector,” as it represented “a substantial and inefficient market ripe for innovation.”

In a recent Extra Crunch article, he outlines key lessons learned over the past six years while scaling a unicorn, offering valuable insights for founders across various industries. The first crucial step?

Dalyac emphasizes the importance of “identifying and collaborating with co-founders who will evolve into close personal friends.”

European Venture Capital Remains Buoyant, Defying Seasonal Trends

A recent analysis by Alex Wilhelm and Anna Heim indicates that the European venture capital (VC) market is experiencing exceptionally high activity levels.

Their investigation focused on the current state of investment within Europe, building upon their broader examination of the global VC landscape.

Data Sources and Expert Insights

The assessment leveraged data compiled by Dealroom, a leading provider of venture capital data and insights.

Furthermore, Wilhelm and Heim consulted with four prominent venture capitalists to gain firsthand perspectives on the prevailing investment climate.

• Diana Koziarska, representing SMOK Ventures.
• Vinoth Jayakumar, from Draper Esprit.
• Simon Schmincke, of Creandum.
• Javier Santiso, associated with Mundi Ventures.

These interviews provided valuable qualitative data to complement the quantitative analysis.

Continued Momentum Expected

The findings suggest a strong likelihood of continued investment momentum throughout the remainder of 2021.

According to Alex and Anna, “There is minimal evidence to suggest a deceleration of the robust European VC activity observed in the first half of 2021 during the third or fourth quarters.”

Despite Europe’s cultural association with extended summer breaks, investors anticipate negligible impact on deal flow during the summer months.

A slowdown in investment activity is not expected, even during the typically slower summer period.

The Rise of Micromobility Subscriptions Attracts Startups and Investors

A growing trend is emerging within the micromobility sector, as both startups and investors are increasingly focusing on subscription-based models.

This shift is largely driven by the challenges presented by the COVID-19 pandemic and the difficulties in achieving profitability with traditional shared electric micromobility services.

A New Approach to Profitability

According to Rebecca Bellan’s recent analysis, a greater number of companies are now adopting subscriptions as a core business strategy.

This model is viewed by many founders and investors as a pathway to a more sustainable profit center.

Addressing Customer Concerns and Operational Efficiency

Micromobility subscriptions cater to customers who are hesitant about sharing vehicles, while simultaneously avoiding the substantial upfront costs associated with outright ownership of scooters or e-bikes.

Furthermore, this approach helps to reduce operational expenses and mitigate the depreciation of valuable assets.

By minimizing overhead, companies can focus on delivering a more reliable and cost-effective service.

The subscription model offers a compelling alternative in a rapidly evolving market.

The Implications of Robinhood’s Crypto Trading Forecast for Coinbase

Following Robinhood’s prediction of reduced revenue in the third quarter, attributed to decreasing activity in cryptocurrency trading, Alex Wilhelm analyzed the potential consequences for Coinbase.

Coinbase, as a publicly traded company, has experienced both periods of growth and contraction within the cryptocurrency market. A temporary decrease in consumer engagement over the coming months isn’t necessarily critical.

This assumes a sustained, long-term outlook and the realization of the crypto-centric future envisioned by its proponents.

Analyzing the Core Question

However, the central question remains: will this future actually materialize?

Wilhelm delves into Coinbase’s financial performance, noting its reliance on transaction revenue. A downturn in trading volume directly impacts this revenue stream.

He highlights that Coinbase’s Q2 earnings report already indicated a significant drop in monthly transacting users (MTUs) compared to the previous quarter.

Key Considerations for Coinbase

Several factors are crucial for Coinbase’s future success. These include its ability to diversify revenue streams beyond simple trading.

Subscription services and institutional offerings represent potential avenues for growth. Successfully expanding these areas is vital.

Furthermore, the competitive landscape is intensifying. New entrants and established financial institutions are vying for market share in the cryptocurrency space.

• Diversification of revenue is paramount.
• Competition within the crypto market is increasing.
• Maintaining user engagement is essential.

Ultimately, Robinhood’s warning serves as a bellwether for the broader crypto market. Coinbase’s ability to adapt and innovate will determine its long-term viability.

Considering Canada for International Talent Retention?

Dear Sophie,

I currently provide people operations consulting services to a number of tech startups. A common challenge these companies face involves employees currently authorized to work under OPT or STEM OPT who were not chosen in the recent H-1B lottery.

These organizations are keen on retaining these valuable team members, but viable pathways are becoming limited. Re-entering the H-1B lottery next year is an option for some, despite the statistically low chances of success, especially with potential changes to a wage-based selection system.

Exploring the O-1A visa is another avenue, however, many employees lack the necessary experience to fulfill the stringent requirements. Given these circumstances, is Canada a potential solution?

— A consultant based in Silicon Valley

Exploring Alternatives to U.S. Visas

The situation highlights the difficulties tech companies encounter when attempting to retain skilled international workers. The H-1B visa, a popular route, is subject to a lottery system, creating uncertainty for both employers and employees.

The O-1A visa, reserved for individuals with extraordinary ability or achievement, presents a higher bar for qualification. This often leaves companies searching for alternative strategies to maintain their workforce.

Canada as a Potential Destination

Canada offers several immigration pathways that may be attractive to individuals facing challenges with U.S. visas. These include:

• Express Entry: A points-based system favoring skilled workers.
• Provincial Nominee Programs (PNPs): Allowing provinces to nominate candidates who meet specific labor market needs.
• Start-up Visa Program: For entrepreneurs with innovative business ideas.

These programs can provide a more predictable and accessible route to permanent residency compared to the U.S. H-1B lottery.

Considerations for Companies

When advising clients, it’s crucial to assess each employee’s individual profile and career goals. Factors to consider include:

• Skills and Experience: Aligning with Canadian labor market demands.
• Education and Credentials: Ensuring recognition in Canada.
• Language Proficiency: English or French language skills are often required.

Facilitating a smooth transition may involve providing resources for immigration applications and relocation assistance.

Caryn Marooney, Silicon Valley Communications Leader, Details Narrative Success

At TechCrunch Early Stage: Marketing and Fundraising, Caryn Marooney, a seasoned communications expert and now venture capitalist based in Silicon Valley, presented a comprehensive discussion on the art of effective storytelling.

Her extensive experience includes assisting prominent companies such as Salesforce, Amazon, and Facebook with product launches and refining their core messaging strategies.

In 2019, Marooney transitioned from her role as VP of Technology Communication at Facebook to become a General Partner at Coatue Management.

Marooney outlined her foundational approach to startup messaging using the RIBS framework, which stands for Relevance, Inevitability, Believability, and Simplicity.

Understanding the RIBS Framework

The RIBS framework, according to Marooney, is crucial for crafting a compelling narrative.

Relevance ensures the message resonates with the target audience and addresses their specific needs.

Inevitability conveys a sense that the solution is the natural progression and logical outcome for the market.

Believability establishes trust and credibility in the claims being made.

Finally, Simplicity guarantees the message is easily understood and retained.

Applying RIBS to Startup Communication

Marooney emphasized that startups often struggle with articulating their value proposition clearly.

She suggested that founders should constantly evaluate their messaging through the lens of RIBS.

Is the message demonstrably relevant to the customer’s pain points?

Does it present the solution as inevitable, almost unavoidable given the market dynamics?

Is the claim believable, supported by data or demonstrable proof points?

And, crucially, is the message presented in a simple and concise manner?

The Importance of a Strong Narrative

A well-defined narrative, Marooney explained, is essential not only for marketing and fundraising but also for internal alignment.

It provides a shared understanding of the company’s mission and value proposition.

This clarity, in turn, fosters greater efficiency and collaboration across all teams.

Canadian Startup Ecosystem Flourishes Amidst Robust Global VC Funding

A recent analysis by Alex Wilhelm and Anna Heim for The Exchange focused on the venture capital landscape within Canada during the first six months of 2021.

Their findings indicate a period of exceptional growth for the Canadian market, mirroring the global trend of increased VC investment.

The Canadian venture capital scene demonstrated remarkable performance, now comparable to the entirety of Latin America.

Specifically, exit values and the number of mega-deals completed were roughly equivalent between Canada and Latin America in the second quarter.

Furthermore, the total number of venture capital rounds executed during this period was also similar in both regions.

This parallel growth trajectory has been noted as a significant development.

Key Observations from the First Half of 2021

The observed growth in Canada’s startup market is directly linked to the surge in global venture capital investment.

This substantial influx of funding has fueled innovation and expansion within the Canadian tech sector.

The data suggests that Canada is rapidly becoming a major player in the global startup ecosystem.

• Increased Funding: A significant rise in venture capital investments.
• Comparable Growth: Performance now aligns with that of Latin America.
• Mega-Deal Activity: A similar volume of large investment deals.

These factors collectively contribute to a vibrant and dynamic startup environment in Canada.

Greylock’s Mike Duboe on Defining Growth and Team Building

The current startup landscape is experiencing an unprecedented influx of venture funding. Consequently, the demand for skilled growth professionals has never been higher.

Mike Duboe, from Greylock Partners, recently shared valuable insights at TechCrunch Early Stage: Marketing and Fundraising. He detailed lessons learned while spearheading growth initiatives at several rapidly expanding companies, notably StitchFix.

His guidance encompassed team composition, organizational structure, and analytical approaches. Duboe offered specific recommendations regarding the optimal allocation of attention and resources for growth-focused teams.

Defining Growth Effectively

A crucial first step, according to Duboe, is establishing a clear and precise definition of growth. This definition should be tailored to the specific context of the company and its objectives.

He emphasized that growth isn’t simply about increasing user numbers. It’s about driving sustainable, profitable revenue expansion. A well-defined growth metric is essential for aligning the team’s efforts.

Building a High-Performing Growth Team

Duboe highlighted the importance of assembling a team with a diverse skillset. Successful growth teams require individuals proficient in areas like data analysis, engineering, and marketing.

He suggested that early-stage startups often benefit from a “full-stack” growth team. This means having individuals capable of handling multiple aspects of the growth process, from experimentation to implementation.

• Data Scientists: Essential for extracting actionable insights from data.
• Marketing Specialists: Focused on acquiring and engaging users.
• Engineers: Responsible for building and scaling growth infrastructure.

The structure of the growth team should also be considered. Duboe advocated for a relatively flat organizational structure to facilitate rapid iteration and decision-making.

Prioritizing Analytical Rigor

Rigorous analysis is paramount to effective growth. Duboe stressed the need for data-driven decision-making and continuous experimentation.

He recommended employing A/B testing extensively to validate hypotheses and optimize growth strategies. Furthermore, he advised tracking key metrics closely to identify areas for improvement.

Understanding the customer journey is also vital. Analyzing user behavior at each stage can reveal opportunities to enhance conversion rates and improve the overall user experience.

The Potential for Growth in Latin American Last-Mile Delivery

Consumers in numerous global regions now benefit from rapid delivery services, facilitated by extensive fulfillment centers and advanced logistics. It’s now commonplace to order goods in the morning and receive them the same evening.

Challenges in the Latin American Market

However, the landscape in Latin America presents unique obstacles. A deficiency in established technological infrastructure complicates delivery processes.

Frequently, supply chains within the region are still reliant on manual methods, such as spreadsheets and traditional paperwork.

Limited Technological Adoption

The implementation of sophisticated algorithms for route optimization or automated driver dispatch is remarkably uncommon in Latin American retail logistics, according to Bob Ma, an investor at WIND Ventures.

A Region on the Cusp of Change

Despite these challenges, a significant shift is underway. Increasing consumer demand and rising investment in last-mile delivery startups are driving transformation.

Ma believes the region is reaching a critical juncture, poised for substantial growth in this sector.

E-commerce Expansion and Emerging Opportunities

The Latin American middle class has experienced a 50% expansion over the past decade. Currently, e-commerce only accounts for 6% of total retail sales.

This indicates considerable potential for growth, and has already led to the emergence of several unicorn companies, with numerous others anticipated to follow.

• Last-mile delivery refers to the final stage of the delivery process.
• Unicorn is a term used to describe a privately held startup company valued at over $1 billion.

Potential Regulatory Changes in China Could Impact the Edtech Industry

The educational technology (edtech) sector in China is currently valued at approximately $100 billion. However, government officials are reportedly contemplating a policy shift.

This potential change would necessitate that edtech companies function as non-profit organizations.

According to Alex Wilhelm in today’s edition of The Exchange, the Chinese government demonstrates a willingness to accept financial losses in market capitalization to maintain control.

Wilhelm characterizes this approach as unfavorable for market stability.

The proposed regulations could significantly alter the landscape for edtech startups operating within China.

Implications of the Proposed Changes

A transition to a non-profit model would fundamentally reshape the business operations of these companies.

Profit-driven incentives would be removed, potentially impacting innovation and investment.

The move reflects a broader trend of increased regulatory scrutiny within China’s technology sector.

• The government aims to address concerns regarding the financial burden of education on families.
• Increased oversight is intended to ensure alignment with national educational goals.
• This policy shift could lead to consolidation within the edtech industry.

The potential impact on venture capital funding and future growth remains a key concern for industry observers.

The Exchange’s Perspective

Wilhelm’s analysis highlights the unique dynamics of the Chinese regulatory environment.

The government’s prioritization of control over economic gains sets it apart from many other global markets.

This situation presents both challenges and opportunities for companies navigating the Chinese edtech space.