#6 – The value of an idea, how you should pitch VCs and the truth about product management

We discuss whether you can figure out if your idea is worth 1 Bn or not in advance (spoiler alert: NO), analyse several frameworks that are still useful in that analyses, why not being a lemming makes sense in the investment space, and why founders and CEOs shouldn’t waste time arguing with VCs. We go into the more nit gritty elements of product management and product portfolio management, including what one can learn from dead Google projects. Finally, we go into the new Mac Pro, including its $400 (!!!) wheels, why YouTubers like MKBHD (Fanboy alert) and iJustine matter so much, and finally we nerd out on Graphics APIs… because, well, why not.Navigation:How much is your start-up idea worth? (02:23)Pain vs frequency of use framework (03:26)Howard Marks framework (06:35)Lemming mentality in venture capital (10:27)The case for critical thinking in VC (11:11)Introducing feedback loops in VC (15:28)Pitching VCs - do’s and dont’s (18:01)Product management: agile vs waterfall (24:19)A decade of dead Google projects (32:43)Mac Pro (39:48)Marketing through Youtube celebrities (42:44)Apple’s Metal graphics API (45:05)Resources:Ali Zahid, How to know if your startup idea is worth $1 or $1B - http://bit.ly/2U7UhKLTren Griffin, Andy Rachleff, 2×2 matrix If you’re wrong, you don’t generate attractive returns. If you’re right and consensus returns get arbitraged away. The goal is to be in the lower right quadrant - http://bit.ly/3d1Aoh6Eric Paley, Don't Waste a VC Pitch Arguing - http://bit.ly/2xGvllWHBR, The Kind of Creative Thinking That Fueled WeChat’s Success - http://bit.ly/2QgvTVYThe Verge, What we can learn from a decade of dead Google projects - http://bit.ly/2WgpBcEBloomberg, Apple’s New Mac Pro Can Cost $52,000. That’s Without the $400 Wheels - https://bloom.bg/2QjlcSvFortune, Why YouTubers MKBHD and iJustine Got the First Sneak Peek at the New Mac Pro - http://bit.ly/2WffmFCApple Insider, Editorial: Mac Pro puts the pedal to Metal in Apple's race with Nvidia - http://bit.ly/2U9PtEpOur co-hosts:Bertrand Schmitt, Tech Entrepreneur, co-founder and Chairman at App Annie, @bschmittNuno Goncalves Pedro, Investor, co-Founder and Managing Partner of Strive Capital, @ngpedro Our show: Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture news.  Subscribe To Our Podcast Full transcription: may contain unintentionally confusing, inaccurate and/or amusing transcription errors Bertrand: Episode 6 of "Tech Deciphered."  How are you, Nuno, today? Nuno: I'm well, although today I'll be very grumpy throughout most of the episode. There's a couple of articles that we'll be discussing that I have some objections to. But overall I'm doing very well. How about yourself, Bertrand? Bertrand: I'm doing good, it's a good day. I'm not sure if I'm as grumpy as you on some of these articles, but we will see, we will see. Nuno: Maybe we'll get to get grumpy at each other as well? Bertrand: Oh, I hope not. So, we have a few articles today we will be talking about: 3 main topics.  One around, how to help you in term of start-up idea: how to evaluate it, how to get a good sense as an entrepreneur, does it make sense?  Talking as well about, product management - high level: what are different types of product management.  And finally, we will talk as usual, we'll have a section around gadgets, and this time we'll have a focus, of course, on the new Mac Pro. How much is your startup idea worth? (02:23) Nuno: Yes. So let's start with VC and startups and we're going to be discussing two articles to start with: one is actually, how to know if your startup ideas worth a dollar or $1 billion. Bertrand: And I prefer a billion, personally. Nuno: I think most people do, but maybe it's difficult to get to a billion, and then we'll talk about, threads from Twitter from Tren Griffin who summarized the podcast with Andy Rachleff, who obviously is a former GP at Benchmark, who I believe is still the CEO of Wealthfront, and he's sort of synthesizing some of the findings from there. So, let's start with the positive things. There's a lot of two by twos in particular, two "two by twos" that are used by Ali.  The "pain versus frequency of use", two by two, and then the other one, the "Howard Marks consensus versus right or wrong", two by two, which Andy actually also mentioned in the podcast, apparently. I think frameworks are really useful for a couple of things. They're really useful to highly simplify very complex decisions, and certainly for people to put into perspective, what are the analogies in that specific space? = Pain vs Frequency of use Framework (03:26) Nuno: The first framework is a framework that has on the x-axis pain, and on the y frequency of use. And so the different quadrants as he categorizes them are:  The top-right quadrant so high frequency frequency of use / high pain - sort of the holy grail in start-up.  Bertrand: Yes, usually we're all excited when we see something like this. Nuno: That's the one we love.  Then the low pain / high frequency of use is "step forward" "innovation /inventions" "Schlep blindness" as he categorizes. Bertrand: Maybe some example: we would categorize a Zoom or a Slack in that category.  Nuno: Yes, because they're coming into a market where there was no perceived pain for messaging for communications in groups, etcetera, and still they were innovators, and they need to step forward, and they are high frequency use tools and services.  Bertrand: And to be clear it's always a question of perception: myself being a big user of video call, of email, I could feel it was not right, something was not right, I remember myself looking for solution for video call for our needs, at App Annie, and I was not satisfied with anything on the market. So it's really a question of perceived pain.  Nuno: Yes.  And then the high pain / low frequency of use: we have the "Rich Barton Playbook", Rich Barton the founder of Zillow, Expedia, and Glassdoor. And that playbook is the "Power to the People" playbook where users generate information that create data loops, which later help aggregate the consumer demand quickly and match it with suppliers, and I'm here directly quoting Ali on his article. So interesting also that a lot of plays here are highly transactional plays, so they are high-value transactions.   Bertrand: Rare transactions, but high value transaction. Nuno: And then the last quadrant so, low pain / low frequency of use: are brands and luxury goods as defined by him, I'm not sure I totally agree with that categorization, but that's the low pain low frequency side of the quadrant  . So talking about the positiveness of these frameworks. Again, it allows you to distill something that's very complex into something that's very simple. If you're an entrepreneur, or an investor, or venture capitalist that allows you to sort of put things in perspective and create what I call the analogizer mindset, which is, where would this fit in our realm of decisions? For example, as a venture capitalist, the fact that we need to come back to the decisions that we've made over time and also frame future decisions, it's very important that somehow we can put these decisions in perspective. So all of that is very, very valuable.  I think the problem of these "two by twos" is they're obviously overly simplistic. So in time they're snapshots. They're helpful in looking at the past, sometimes. They're rarely very helpful in looking at the future. So at least you can distill a simplified analysis of a market, et cetera. But I don't know, personally any venture capitalist that makes their decisions on "two by twos". And so, my issue with this type of analysis is: there's always going to be exceptions. Also, there's always be going to be companies that maybe there's a misunderstanding of what consensus, for example, in the "Howard Marks" framework, what this consensus actually mean.  Howard Marks framework (06:35) Bertrand: Let's talk about what is the Howard Marks framework?  Nuno: The Howard Marks framework, the 2x2 is on let's call it the y-axis consensus or non-consensus, and then on the x-axis wrong or right.  And obviously everyone likes to be right and non-consensus and that seems to be the venture returns quadrant, where's there's at least two to three years head start.  The right and consensus is is the quadrant that normally has a lot of competition, he calls it relentless competition.  The wrong and consensus is not fun, and then the wrong and non-consensus "sucks to be here". So they're both really bad because obviously you're wrong.  Bertrand: Yes, you're wrong, consensus or not...   Nuno: ...you're wrong, so that's not good.  Bertrand: Actually people might make even more fun of you if you are wrong in the non-consensus situation, so I guess there is some political risk in some ways being in this quadrant. Nuno: Of credibility almost.  Bertrand: Yeah. At some point, if it sounded too crazy, maybe it really was too crazy. Nuno: I don't think there's anything fundamentally wrong with this framework. Again, what I don't think it does, is helps you make critical decisions like, for example, will I invest in this company or not over time? I don't think it's particularly helpful to most entrepreneurs either because you might be looking at something that you think is not consensus, but you might be missing a lot of data points to figure out if it is consensus or not. For example, one space where there's a lot of stealth companies emerging in the market is the area on artificial intelligence . So sometimes it's very difficult to know what's consensus and non consensus driven. You can look at papers, you can look at the academic papers in what's been published. You can look at IP,...