Value Hypothesis First, Growth Hypothesis Second
Rachleff: When you're starting a company, you need to first develop a value hypothesis, which needs to be confirmed, and then a growth hypothesis, which needs to be confirmed. The value hypothesis consists of the what, the who, and the how. What are you going to build? For whom is it relevant? And what's the business model?
Rachleff: Most people don't realize that you don't iterate on the what. Great technology companies are created by virtue of an entrepreneur recognizing an inflection point in technology that allows them to build a new product. For us, it was brokerage APIs and ETFs. Then you have to figure out who cares -- what's the market, what's the who that matters.
Most people don't realize that you don't iterate on the what.
Don't Start With the Market
Rachleff: You don't start with a market and look for problems to which you can find a solution. That's consensus, and that leads to very mundane outcomes. It certainly doesn't support venture capital.
Rachleff: The great returns in venture capital have all come from people who have tried to do something that's nonconsensus.
The great returns in venture capital have all come from people who tried to do something nonconsensus.
Advertising Clouds Product/Market Fit
Rachleff: The way that you really know you've found product/market fit is if you have exponential organic growth. If you have word of mouth. People only recommend things that they love. That's how you know you found it.
Rachleff: I've seen many entrepreneurs fall in love with the growth that they've gotten from their advertising and not realized that they're not getting word of mouth.
I've seen many entrepreneurs fall in love with the growth from advertising and not realize they're not getting word of mouth.