Early-stage investing is a matter of focus!

VC Rookie: I see our portfolio of early-stage investments are in a myriad of industry and market sectors, as well as in both physical and digital solutions.

Surely we should be taking a leaf out of the Silicon Valley VC icons’ playbooks, and FOCUS on a particular solution, sector or customer type?

For example, let’s FOCUS only on say, B2C solutions or consumer subscription businesses or retail apps exclusively?

VC Sensei: Why?

VC Rookie: Surely FOCUS brings cumulative benefits from experience, networks, reputation and mastery.

VC Sensei: Have these apparent ‘FOCUS’ advantages upped their odds of success, to the degree that early-stage VCs consistently outperform the negative effects of the power law governing early-stage venturing and investments (namely, ‘invest in 20 because only 1 on average will become a home-run’).

VC Rookie: Apparently not, but it should! So what’s the alternative to this seemingly ineffective type of FOCUS then?

VC Sensei: Maybe it’s a matter of the right FOCUS, for a step change improvement in investment selection, and fund performance.

VC Rookie: Put me out of my misery. What should the FOCUS be on then, for consistently better early-stage VC success?

VC Sensei: The primary FOCUS should be on the market!

More specifically, on reaching Product- (New Market) Category Fit (PCF)!

In other words, knowing IF and WHEN this key inflection point is possible, beforeinvesting.

VC Rookie: So FOCUSING on the market in a reliable way, allows us to operate in all sectors, Sensei?

VC Sensei: YES, and it’s more profound. There are 2 guiding principles that govern our Product-Category fit (PCF) investment approach:

1. We bet on the market

, and

2. We never rely on analogy – even in the same sector

(‘it worked there, so it will work here’, or its ‘Uber-for-this-or-that’)

VC Rookie: Surely VCs have figured this out?

VC Sensei: Indeed, Sequoia Capital stands out. They bet on the market, and play a role in creating new market category kings, and have become a trillion dollar fund.

VC Rookie: With Sequoia being the king, what is new market category we are carving out for ourselves, for which we can emerge as a king too?

VC Sensei: Two new market categories, actually. Linked together within what we call the Market Category Generator (MCG), one for startups and one for investors:

Let me explain. Aspiring emerging market kings (startups) undergo the Product-Category fit (PCF) process inside the MCG, to determine IF and WHEN they can reach PCF, and investors inside the MCG, take options on the home-runs coming through.