Finding Distribution #1
Stories about how start-ups build traction and generate revenue.
Distribution is all that matters
Don’t nail me down on the precise number, but a partner at Sequoia once told me that “80% of all venture returns are explained by second time founders.”
How come? Justin Kan, co-founder of Twitch, puts it best:
As a second time founder myself, I can confirm he’s right.
Building a company is not about logos, colors, Delaware C-Corps and fancy offices.
Instead, it’s all about finding your niche in a growing market, with a product that solves a problem for set of customers who are just waiting to rip that product right out of your hands.
The days of easy money are over.
2022 saw a formidable cut in start-up valuations. The bubble has collapsed.
Before, it was possible to raise funding on aspirations and big visions. Now, all that matters is product traction and distribution.
As we go into 2023, we’re looking at higher interest rates and lower stock market valuations. Add that VCs that are stressed out about the state of their portfolios, and cautious about making any more investments - and you’re looking at a not so great funding environment.
Unless of course you have distribution.
So what does distribution look like?
dbt Labs is a great example. They’re the company behind “dbt”, an open source package that helps analytics engineers transform data.
What started out as a side project for their consultancy in 2017 grew into a company with over 9,000 companies using dbt in production in Q1 2022. dbt Labs 6x’ed (!) revenue in 2021.
And no surprise, dbt Labs raised their latest round of funding with $222M of new money at a $4.2b valuation in February 2022.
The raise happened a time when stock markets had already tanked from their peak, Russia’s invasion of Ukraine was imminent, and the first interest rate hike by the Fed was on the horizon.
Goes to show, distribution fixes everything.
The stories behind finding distribution
This newsletter is about uncovering the methods behind the success.
Luckily, most companies these days share their success stories in public. Sometimes it takes a little bit of putting the different pieces together, like I did in this Medium post:
“How Doordash built the most incredible go-to-market playbook ever”
Another example is my post-mortem of my first company, with quite a detailed analysis on how Snowflake conquered the cloud warehouse market. The post is from 2020. Turns out Snowflake’s success has continued until today, and actually accelerated.
But I also want to dig into the basic blocking and tackling - the stuff that happens behind the scenes.
Mundane things like setting up your Salesforce instance, running outbound campaigns, or building a community. The hard work that makes distribution possible.
Publishing this newsletter
Every week on Saturdays (morning ET), so you can read it with your morning coffee.
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Love it, Lars. Also on my second go and finding that building a business based on revenue is so much simpler than hype. And more fun.