Saw an opportunity, decided to build a company around it, but don’t have much experience in the space? It’s the story of many startups, including some of the most successful ones.
Have a lot of experience? Chances are you will still have to learn what is emerging and have to unlearn what is outdated. In fact unlearning is the unspoken dark side of having experience — you become bound by what you think would or wouldn’t work while the world has actually moved on.
This post will try to distill common sense into five actionable buckets, in no particular order, on how to grok an industry.
1) Advisors — Giving equity to Advisors is a time-tested way of aligning incentives. The standard is constantly evolving, in Silicon Valley at least a few basis points of stock, say the equivalent of 0.1% of the company, vesting over a couple years is the closest thing to a norm. The basis points are typically a combination of the time, knowledge and reputation of the Advisor. The 2-year vesting is a good compromise since putting Advisors on a 4-year traditional vesting like a full-time employee is often too long of a time given how much value they typically bring. Startups can obviously amend or renew the Advisory Agreement, which has the benefit that you don’t end up giving up too much equity upfront to an Advisor who ends up not being as committed as you expected.
2) Investors — If you don’t know the industry well enough even more reason for getting investors who have significant experience. Ask them what are the investments the fund has made in the space. Ideally you should understand how many, at what stage, how much capital deployed, how long ago, and what were the outcomes. Beyond the fund, understand what is the partner’s specific experience since he / she is the one who will be working closest with you. Similar to Advisors a combination of time, knowledge and reputation, with an additional weight on how effectively you can work together, are the key pieces to make a decision.
3) Conferences — Conferences are generally terrible places to actually learn, they are best for networking. That said, there is more value to events if they are industry-specific, invite-only, or require paid tickets. If you are an entrepreneur, choose to speak at a conference, there is much learning that happens in the process of preparing your remarks, engaging with other speakers, and taking questions from the audience.
4) Reading — In a world of overabundance of information, who said something matters as much as what has been said. Do your own PageRank, factoring in the author’s experience in the industry or if the article / report came to you from other people that you respect. Set a goal of reading at least a certain time during a time just to read and reflect, could be as short as a few minutes or as long as a few hours, depending on what your goal is. Having a well-thought goal is actually key. Books? Absolutely, but just be mindful of the trade-off between depth and relevance (i.e. they may be more detailed but also become more stale). Once again, a personal goal is key, one book a month about your industry is an investment rather than a cost on your time.
5) Writing — Perhaps the area that entrepreneurs least consider when grokking an industry. Part of it is because writing requires a significant mental space, part of it may be hesitation to disclose what you are working on, part of it is simply feeling that you don’t have as much to offer yet. All three reasons are valid but it should be a matter of when not if. Publishing your thoughts is a concrete way of reinforcing learning, pinpointing gaps and fallacies, plus the responses you get will help point to knowledge and logic you may not have considered. It’s also fantastic for exposure of a startup in terms of branding and hiring.
This article is inspired by a conversation with Karthick Gopal. Originally published on “Data Driven Investor,” am happy to syndicate on other platforms. I am the Managing Partner and Cofounder of Tau Ventures with 20 years in Silicon Valley across corporates, own startup, and VC funds. These are purposely short articles focused on practical insights (I call it gl;dr — good length; did read). Many of my writings are at https://www.linkedin.com/in/amgarg/detail/recent-activity/posts and I would be stoked if they get people interested enough in a topic to explore in further depth. If this article had useful insights for you comment away and/or give a like on the article and on the Tau Ventures’ LinkedIn page, with due thanks for supporting our work. All opinions expressed here are my own.