Grand Slam Strategy
3 takeaways from my conversation with Brook Stroud, Senior Principal at Alumni Ventures
From a portfolio standpoint, we are ultimately looking for grand slams. We are not looking for doubles or home runs. We are looking for big outcomes, knowing that a lot of our companies will not make it. That's the reality of venture capital.
Today, I’m breaking down 3 takeaways from my discussion with Brook Stroud, Senior Principal at Alumni Ventures.
Check out our full conversation + how to connect with Brook here.
The Observer Express
Don’t have time to read the entire post right now? No worries, here are today’s 3 takeaways:
Look for Evidence of Sustained Love for a Space. This sets a founder apart from the crowd and often sustains them through pivots and challenges.
CPG Deal? Double-click on Distribution Strategy. Distributors run the show.
SaaS is Not Dead. It’s just more difficult thanks to our friends at OpenAI.
1. Look for Evidence of Sustained Love for a Space
At least three times in our conversation, Brook hinted that having a sustained “passion” or “love” for a space is important. Twice in his own story, and once when talking about the founders of Method Financial. My takeaway?
Investors do well to sniff out whether an entrepreneur has an enduring affection for their niche.
Example #1: Brewing? Nope.
I actually did work part-time at a brewery and learned about the process of making beer. I got really excited about the building of the brand and the marketing piece of it. But I didn't have the same passion for brewing that these small pockets of enthusiasts had.
Example #2: Health food? Not Brook’s thing.
I remember going to these food and beverage conferences, looking around and thinking, wow, these people are so much more passionate about the health food space than I am. I found myself thinking “Am I going to be the best operator of a beverage company for 10 years? I think the answer was no.”
Example #3: Embedding APIs for debt repayment? For the founders of Method Financial, this was the thing.
They were very interested in this category that I think other people would find boring. Embedding APIs for debt repayment is not going to get you a lot of points at a dinner conversation with a lot of people but you can just tell they're super focused on it and excited, with eyes wide open about the opportunity and the challenges.
2. CPG Deal? Double-click on Distribution Strategy.
After running two consumer startups, I take Brook’s word for it: really press the next CPG founder you meet with about their distribution strategy.
Distributors ultimately run the show. You don't just see empty shelves or empty slots and fridges - you're generally kicking someone else out. And so it's: “Can you move more products than what was taking that three-inch slot in the fridge before?”
3. SaaS is Not Dead
This is a very current argument in the VC community - will AI kill the “traditional” SaaS model?
The hot take that “SaaS is dead” is this idea that because of artificial intelligence, the ability to build tools internally is going to effectively take away the business model of third-party software providers.
And the quick answer is yeah, there will still be successful SaaS companies. Will it be harder? I think so, just because there's going to be more noise. As these LLMs and artificial intelligence get better and better, it's going to be easier to spin up a company. Easier to code, easier to do a lot of the elements that were required to build a software company, which lowers barriers to entry, which creates more noise, more complication, etc.
We'll see more company formation and it'll just be harder to identify which ones will be successful. The bigger point about why I don't think it's dead is that you're always gonna have to figure out where are you going to spend most of your time and you'd want to be very focused on what is the highest value for your time and effort, and where can you outsource key points of expertise to people who spend all day thinking about that.
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3 Lessons Learned
Organization is kindness.🗂️
The longer I’m in the business world the more convinced I become that this is the case. Remembering important details about people around you, showing up prepared and on time, being responsive, and communicating clearly - these things show honor to the counterparty (at least here in the US). This sounds simple, but consistently doing these things really does set someone apart since so many miss the mark.Sometimes a 6.25/10 meeting is a 10/10 value.🤔
Over the weekend my business partner Keaton and I broke from the usual structure of our quarterly 8-hour pulse meeting. Why? We needed to hash out some key decisions around strategic focus. We spent WAY more time on it than planned, and it totally exploded our agenda. But while the meeting (which we rated a 6.25/10) was kind of gross to experience as a result, we now have strategic alignment and a clear path forward. I call that a 10/10 value for the organization.Being the right person at the right time is crazy fun.🎉
One of the smartest people I’ve ever met bought me lunch this week. And it was so much fun. She’s literally 1 of 3 people in the world who specializes in her research area, and yet she was coming to me for advice. Wild. Even crazier, she received it all with humility, took great notes, asked dozens of follow-up questions, and very obviously found my thoughts valuable. I didn’t have to do any special research, I just shared what I’ve been soaking in for the last few years. Lesson learned: never shy away from asking “the right person” for a few minutes of their time, they might just enjoy it more than you do.
3 Interesting Links
AI integrated into your product? 2/5 people say “meh” (link)😐
Stage-based taxonomy of product-market-fit from Euclid Ventures (link)🔍
A helpful breakdown of CAC, LTV, and payback period concepts (link)💰
Tune in next week for a breakdown of my conversation with the executive director of the largest angel network in South Texas.
Until then, thanks for reading - have a great week.
-Andrew
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About Me
I cultivate flourishing.
I'm also the CEO of PitchFact, where our mission is to cultivate flourishing specifically through efficient and collaborative early-stage diligence. I'm a proud husband, grateful father, and honest friend. My love languages include brisket, bourbon, and espresso.