When tailwinds vanish

blog.johnluttig.com/p/when-tailwinds-va..., by John Luttig, April 22, 2020

When Tailwinds Vanish has been a baseline article that I’ve shared with a lot of people.

I’ve picked out a bunch of quotes below that fit my thesis of deep tech startups, because that’s my interest and preference and the path we’re following with Fission.

The focus of this article is on venture funded startups. I think the corollary is that a recurring revenue B2B SaaS startup is more likely to be in a long tail of software small business. 3-5 people building a profitable company but not having any of the growth metrics that traditional venture returns need.

This also supports the IndieVC hypothesis.

Unlike the organic pull that drove many of the dotcom-era successes, today’s Internet startups need to fight for growth by investing more heavily into sales, marketing, and operations.

A shift from R&D to SG&A will operationalize Silicon Valley, leaving room for new financial infrastructure. VCs will need to take risks on vision, not numbers. And the founders and operators of tomorrow won’t look like those of the past 20 years.

Software companies founded today are competing less with pen and paper than with other Internet-first incumbents. Put another way, as happens in every maturing industry before it, Internet company revenue will become zero-sum.

As the Internet growth tailwinds subside, what’s left? Harder problems.

it will become clear that VC dollars should be reserved for R&D, not S&M or G&A.

For startups taking R&D risk in new technological areas, the founding team may look like something we can’t pattern match to historical successes. Maybe it’s a scientist in his garage who escaped the tendrils of academia. Or your first hire for the founding team is no longer your college roommate, but an expert in your startup’s industry.

Notes mentioning this note