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VC Frameworks & Mental Models
8Key frameworks from top investors for evaluating companies and markets
- Level 1: Growing engaged users through core action completion
- Level 2: Retaining users by accruing benefits that increase switching costs
- Level 3: Self-perpetuating, where users invite more users, creating a virtuous cycle
- Clarity of purpose: can the mission be stated in one sentence?
- Large market with tailwinds, not just big but growing and shifting
- Product-market fit evidence: customers pull, not push
- Business model genius: elegant alignment of value creation and capture
- Team DNA: founders who attract exceptional talent
- Scale Economies: cost advantages from size
- Network Economies: value increases with users
- Counter-Positioning: incumbents can't copy without self-harm
- Switching Costs: customer lock-in through integration
- Branding: consumer willingness to pay a premium
- Cornered Resource: exclusive access to a valuable asset
- Process Power: organizational capabilities that are hard to replicate
- Year 1–2: Triple ($1M → $3M → $9M)
- Year 3–5: Double ($9M → $18M → $36M → $72M)
- Achieving T2D3 typically requires 5–7 years
- Companies hitting this cadence are typically top-quartile venture outcomes
- Every great company is built on a secret, something most people don't agree with you on
- Secrets come from domain expertise, not genius
- The best founders have earned their insight through years of proximity to a problem
- Convention is the enemy of breakthrough outcomes
- Most founders avoid 'schleps' (boring, hard, regulatory-heavy problems)
- This avoidance creates opportunity for founders willing to do the work
- Stripe succeeded because payments were a massive schlep nobody wanted to tackle
- The schlep filter is a competitive advantage in itself
- Customers don't buy products; they hire solutions for specific jobs
- The 'job' includes functional, emotional, and social dimensions
- Competitive alternatives are defined by the job, not the product category
- Understanding the job leads to better product design and positioning
- Liquidity is the fundamental metric: can buyers reliably find what they need?
- Focus on the 'hard side' first. Which side of the marketplace is harder to build?
- Measure match rate, fill rate, and time-to-transaction
- Network effects only kick in after minimum viable liquidity is achieved