Capital Chronicles #1

Hello there! Welcome to Capital Chronicles, saving you hours every week with ~2-3 minute summarised insights from the best venture builders, investors and capital allocators out there. This week: strategic tech economics, scaling to $100M ARR with BVP, and a16z’s resources for leadership in crisis.

As subscriber #TBD, each web link below takes you to:

• A link to the original article (read time: varies)

• Summary / insights / implications per article (read time: 2-3 minutes)

Now, read on for the latest…

🛠️ On venture building…

The concept of the Idea Maze, initially developed by Balaji Srinivasan and built on by Chris Dixon. Good startup ideas are well-developed, multi-year plans that take into account many possible paths.

• Why you should read it: when trying to evaluate the successive traits of an entrepreneur, I used to struggle with the dichotomy between an outsider looking in coming at a problem from first principles, versus domain experts who already deeply understand the challenges of an industry. The ‘Idea Maze’ concept is a superior reframing. It ultimately doesn’t matter whether an entrepreneur is an outsider or an insider. What matters is an ability to successfully navigate the idea maze.

🧭 On venture investing…

Breaking down the Cash Conversion Score (CCS), by Bessemer Venture Partners. The CCS measures how effectively a company can turn capital investment into annual recurring revenue.

• Why you should read it: it’s easy to drown in an alphabet soup of metrics when evaluating companies. But when it comes to capital efficiency, I really like the CCS. A high CCS aligns with strong returns and serves as a powerful proxy metric for gauging return on investment. And you can combine the CCS with other critical metrics related to revenue growth and unit economics for a more comprehensive view of a company's health and potential for venture-scale outcomes.

📖 Learning resource…

A running list of frameworks by Sarah Tavel. Sarah’s collection of frameworks is aimed at helping consumer technology companies build enduring, mass-market products.

• Why you should read it: Sarah is one of the VC ‘greats’ having spent time in senior positions at BVP and Greylock before becoming a General Partner at Benchmark. She was also an investor and early employee in Pinterest. Extremely thoughtful in her approach, I find her writing great for developing a ‘product-focused’ mindset. And the collection acts as a foundational set of concepts for building and/or investing in technology companies focused on consumers.

📊 Market insight…

The essential technology stack, from ICONIQ Growth. The growth stage firm produced a study on the essential tools and software platforms based on surveying their portfolio companies and review data from G2 (a software marketplace).

• Why you should read it: there aren’t that many reports out there that focus specifically on software tooling, and this one is pretty comprehensive! The report gives good insight and guidance into the technology stack of software companies across various sizes and stages, accompanied with benchmarking and trends data.

🎲Lucky dip essential reads…

• Cash Burn: Starving your startup to help it thrive

• Unit Economics: When Less Is More in the Long Run

• Bat Out of Hell: Identifying Your Durable Advantage in Fintech

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Have a great week!

Josh