20VC: Why Great Companies are Defined by How Many Things They Say No To, Why Being First Does Not Matter & Why Market Over Traction or Team is the Most Important Thing with Guillermo Rauch, Founder & CEO @ Vercel
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The PitchFri Oct 06 2023
From Argentina to SF: The Boy Making Money Online:
- Guillermo started creating websites for his passions and interests when he was a kid, using tools like FrontPage.
- He had a passion for the web and continued to develop his skills in web development.
Timing, Markets, and Narrative Violations:
- Guillermo believes that being first doesn't matter as much as being right.
- What makes a company good is how many things they say no to and ruling out seemingly attractive ideas.
- Market selection is crucial for a company's success.
- Narrative violations are important for founders to challenge conventional wisdom and create new narratives.
The Future of AI:
- Different models of AI (open or closed) have different implications on the future.
- Value can accrue to both startups and incumbents depending on the specific context.
- The SaaS business model will change in a world of AI.
Silicon Valley's Most Successful Angel You Did Not Know:
- Lessons from angel investing include not overestimating brand names and focusing on what you believe in personally.
- Hits and misses provide valuable learning experiences.
Immigrant Founders:
- Immigrant founders have a unique appreciation for opportunities in their adopted country.
- They may feel the weight of responsibility to provide for their families at a young age.
UI/UX in an AI-first World:
- Simplicity may not always be better in product design, especially during creative stages where more options can be beneficial.
- UIs need to tame the craziness of AI systems and provide feedback to users.
The Shift in Business Models:
- AI accelerates the shift away from per-seat pricing models towards hybrid models combining consumption-based pricing with platform capabilities.
Open vs. Closed Systems in AI Development:
- Open systems allow for community-driven innovation, while closed systems offer validated products with distribution advantages.
The Importance of Rejecting Ideas:
- Companies are defined by how many things they say no to and how many seemingly attractive ideas they rule out.
The Role of Founders in AI Development:
- Founders need to be uniquely positioned, willing to go through the grind, and have the ability to solve important problems.
AI as an Assistant in the Creative Process:
- AI assists in the creative process by suggesting completions or proposals for users' consideration.
- Feedback loops between users and AI are essential for refining suggestions.
The Potential Disruption from New UIs Enabled by AI:
- New UIs enabled by AI can disrupt incumbents who rely on traditional UI designs.
- Incumbents may need to delete existing products or drastically change their approach when faced with disruptive alternatives.
The Future of Investing in AI Companies:
- Positive ROI is expected for a significant portion of investments made in AI companies.
Outsourcing to Startups:
- Questioning the logic of outsourcing important aspects like home security and company infrastructure to startups with limited resources
- Mentioned Slack as an example, where competitors offered IRC as a service with UI, but Slack took a different approach
- Slack initially had an IRC proxy to help users transition from old world to new world, but later discontinued it
Market Selection and Narrative Violations:
- Highlighted the importance of market selection over being the first mover in a particular space
- Shared Matt from WordPress's decision to install Slack and deprecate IRC, despite initial hesitation about trusting the company with communication
- Noted that when a problem is painful and can be offloaded to someone else, there may be a significant opportunity present
- Emphasized the significance of narrative violations for founders and companies
Future Vision for Vercel:
- Described the dream and vision for Vercel: raising the bar for every software experience and product by empowering creators and developers
- Aimed at eliminating bad products and experiences, ensuring processes don't bog down individuals
- Believed AI would play a major role in achieving this vision by bringing technology to more people and putting the creative process in charge
Closing Remarks:
- Appreciated the breadth of conversation covering topics ranging from infrastructure in Argentina to future business models of artificial intelligence
- Expressed gratitude for the discussion and praised Guillermo Rauch's contribution