The Ledger
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The Dominant VC Narrative in 2012 Was That Consumer Social Was Dead
“And I think you also have to bear in mind that in 2012, the dominant narrative was that social was dead. Facebook and Instagram had run the table like there were no more new opportunities in social anymore.”
Outlier Social Apps Require >50% DAU/MAU and 30-40% D30 Retention
“In messaging and social networks, you would want to see at least a DAU to MAU ratio of north of 50%, and you would want to see at least a D-thirty of, say, 30 to 40%. For, you know, for something to really be working, to be sort of at that outlier level.”
Lightspeed Passed on a Snapchat Follow-On Investment at a $13M Valuation
“If we'd invested, I think that if we'd done that round, I think the terms were three on 13 or something like that. It would have been a great outcome for the company and for Lightspeed.”
Liew: Former operators turned VCs are most prone to over-steering founders
“People who used to be operators are most prone to, because they're actually used to making the key decisions, and if they had senior roles in their operating companies in the past, they might actually be used to, quote unquote, overruling the team when their j…”
Liew: Largest e-commerce outcomes are multi-brand retailers competing with Amazon
“The biggest outcomes in the space had been in companies that were multi-brand retailers, and in some sense competing with Amazon and doing so successfully.”
Liew: Pessimism around consumer tech investing is unwarranted
“I actually say that the evidence suggests that there's actually a lot of breakthroughs happening on the consumer side. You know, HQ Trivia is having a moment right now. TBH, Saraja, Marco Polo, Musical.ly, as we mentioned, Cheddar, Prisma, Pokemon Go, all on t…”
Jeremy Liew: Young women and Black youth predict future consumer tech trends
“If you follow what young women and young African Americans do today, you'll get a window into what we'll all do in the future. I think they're the really, the early adopters of popular culture, and so we always look for apps and services that over-index to tho…”
Snapchat Raised Seed Capital When Server Costs Exceeded Spiegel's Credit Card
“Frankly, I think the thing that probably changed the most was that they finally had a need for financing. You know, at that first meeting, they ran us through some of the metrics of the business, and it looks tremendous. And we said, well, is there anything we…”
Snapchat Stories Became the Dominant Format Across All Social Networks
“And with that one insight, starting from first principles, thinking about how people interact with each other, he has changed the course of all social networks, because you can't find, you know, whether it's Twitter, or LinkedIn, or, you know, obviously, Whats…”
Social Software User Culture Is Much Harder to Change Than Features
“Social software, there's two key components. There's the features and functionality, but then there's also the user culture, and user culture is very, very, very hard to change.”
Instagram Stories Is Restricted by the Platform's Highlight-Reel Culture
“Stories on Instagram, the culture of Instagram is still, look at how great my life is. You know, it's still highlight real type, you know, use case and culture, and that then propagates into stories.”
Lightspeed Invested in Snapchat's Seed Round at a $4.25M Valuation
“At the seed at four and a quarter pre, and, like, here we are looking at 13, and just thinking, well, you know, that's three times higher.”
Liew: Distinguishing bad startups from good ones is easy for investors
“If you're a reasonably intelligent, reasonably quantitative person who has some domain expertise, and I would probably put, like, most aspiring venture capitalists into this category, it's not hard to tell bad from good. That's actually a pretty easy filter.”
Liew: Investors cannot make a good company great through investor value alone
“Folks who believe that they can take a good company and make it great by sheer value being an investor, I think in general, maybe being a little bit too optimistic.”
Liew: Founders pick VCs for standout strengths, not absence of weaknesses
“Entrepreneurs who choose to work with you will choose to work with you because you're the best at something, not because you're not terrible at something else.”
Liew: Cap table math is irrelevant to founders selecting a VC
“No one cares about cap table mathematics. Like that's not a dimension on which people choose their venture capitalists.”
Liew: VCs have an obligation to respond to every entrepreneur
“I know that that's not a perspective that's shared for by everybody, but I think that we have an obligation to respond to every aspiring entrepreneur, even if, you know, their ideas are not well thought through or their ask is unreasonable. We have an obligati…”
Consumer Social Apps Lack Context Without an Active Friend Network
“If you start using Snapchat without having other friends who use Snapchat, you lose all context. You don't sort of understand what it's for.”
Evan Spiegel Met Liew Because of His Obama Facebook Profile Photo
“At the time, I had as my profile a picture of me at Obama from a fundraiser that I had attended. During his first election campaign, and he said, well, you know, you had a picture of you and Obama there, so I figured you must be a decent person. So I figured I…”
75% of Snapchat's Early Users Were High School and College Women
“When we met Snapchat, one of the things that really caught our attention was that 75% of the user base were young women in high school and college”
Young Women Are the Primary Early Adopters for Social Platforms
“Whether it be Facebook or Instagram or Pinterest or Vine or Tumblr back in the day or TikTok, you know, it's always been young women who've been that first set of early adopters”
Black Americans Are Core Early Adopters Driving Consumer Software Trends
“At least in the US, the African-American population has also been one of the core early adopters that has, again, sort of propagated pop culture across apps and more broadly.”
Snapchat Became the Third Most Popular App in Norway in 2012
“In fact, it had become the number three most, most popular app in Norway at that time, so ahead of Instagram, ahead of Facebook, and so forth.”
Snapchat Had 90,000 DAUs on 180,000 Installs When Lightspeed Invested
“So when we met them in, you know, March, April of 2012, they had about 90,000 daily active users off of a base of 180,000 installs.”
Snapchat Had 50% MoM Growth and 50% 90-Day Retention in 2012
“But I remember seeing 50% month on month growth. 50% DAU to MAU ratios, which suggests very high engagement, and 50% retention after 90 days, which again suggests high engagement, high retention, high growth.”
Social Networking Creates a Response Obligation, Unlike Social Media
“I draw the distinction between social media and social networking as to whether or not a response is required. So messaging and social networks, if you leave someone a message or post something You know, there is a social obligation to respond. To not reply wo…”
Top Social Platforms Were All Founded by People in Their Early Twenties
“If you look at Snap, if you look at Vine, if you look at Facebook, if you look at Instagram, if you look at Tumblr, they were all started by people who were, you know, in their early twenties.”
Relying on Product Best Practices Creates Local Maxima
“You know, one of the funny things about product management is that it gets built up on the quote unquote best practices of product over time. And so, you know, everything ends up being an iteration on top of the thing that came before. And that can lead you to…”
Snapchat's Monthly Burn Rate Exceeded $1M Within a Year of Seed
“Burn, within a year from our investment, Burn was in excess of a million dollars a month”
Social Networks With 100M Monthly Active Users Typically Monetize Successfully
“Historically, what we've found is that if a social network can get to a hundred million monthly active users, it typically finds a way to monetize.”
Liew: VCs must see 1,000 companies to spot a 1-in-1,000 outlier
“The job of venture is to spot that one in a thousand company. Not one in a hundred, not one in 10, but one in a thousand. And the challenge is you don't know what a one in a thousand company looks like until you've seen at least a thousand companies.”
Liew: Requires email traction metrics before taking Series A/B meetings
“At the series A and series B, yeah, I will definitely be asking a lot more questions via email and oftentimes looking for some, threshold level of engagement or retention or growth or usage before I'll take a meeting.”
Liew: VC sourcing depends on work ethic, likability, and network density
“At the end of the day, this comes down to work ethic. It comes down to likability, and it comes down to being part of connected networks that are likely to have a higher propensity to have entrepreneurs coming out of them.”
Liew: Failing to Spot Channel Saturation Is Startups' Top Scaling Mistake
“Specifically around starting to scale, I think perhaps the most common mistake that people can make is not recognizing when the channel on which they're scaling is going to start to reach saturation.”
Liew: Organic Virality Avoids Saturation Until the Entire Market Is Reached
“I think that one of the joys of word of mouth and genuine virality is that that continues to grow as your core user base grows. It doesn't necessarily find saturation until you actually saturate the available market.”
Liew: In venture capital, there is no prize for second place
“There's no prize for second place. If you almost got the entrepreneur to choose you, but they ended up taking a temperature from someone else, it doesn't matter. Like, it didn't matter that you identified this was a great opportunity if you didn't get to inves…”
Liew: VCs should limit diligence to 3-5 thesis points over checklists
“If you have a very clear investment thesis, and, like, there's two or three things that you would need to believe to believe that this company can be extraordinary, and one or two things that you would need to verify to make sure that it's not going to be a di…”
Liew: Founders should build VC relationships early rather than always raising
“You shouldn't always be raising. It's exhausting, but if you're going to consider adding someone to your board, that person is going to be on your board for years, and if you're going to make that decision on the basis of having met somebody two or three times…”
Liew: VCs must prioritize existing portfolio companies over new pitches
“Like if you're not available to the people you've already committed to work with, you know, you're not doing your job properly. You have to prioritize that over taking a company meeting for a new pitch.”
Liew: Junior professionals should advance by following exceptional strategic leaders
“As a junior person, you can really ride in the slipstream of their upward career mobility if you find the right people to sort of follow around, because there are just some people who just, I don't know, they operate on a higher level of thought strategically,…”
Liew: Word-of-mouth distribution will always remain free and open
“And that word of mouth, It's always going to be free. It's always going to be open. And, you know, if you can find the core of that fund, you're going to have a decent time.”
Jeremy Liew: Lightspeed invested $475k in Snapchat at $4.25M valuation
“It was a 475 A thousand dollar investment at a four and a quarter million dollar pre-money valuation when the company was just the two founders.”
Liew: Snapchat grew 50% month-over-month prior to Lightspeed's investment
“It was growing at a 50% per month rate. It was showing incredible retention and incredible engagement.”
Liew: Early-Stage Venture Ownership Matters More Than Valuation
“I think at an early stage, ownership matters more than absolute valuation.”
Liew: Valuation Matters Less for Companies With Network Effects
“There are some companies that have unlimited upside, things that have network effects, and in those cases, valuation doesn't matter as much.”
Jeremy Liew: Founders can only drive three major initiatives at once
“A good founder, a good exec needs to be so focused and have their blinkers on because they can only really drive perhaps three initiatives at the company at a time.”
Path Attempted a Close-Friend Network by Placing Caps on Friend Counts
“There was a social network called Path, which had been started a few years earlier by Dave Morin, who had explicitly set out to try to build a use case for close friends. He did it by trying to cap the number of friends you could have.”
Bobby Murphy Built Early Snapchat Code Off-Hours While at Another Startup
“Evan was partnered with Bobby Murphy, who was a fraternity brother of his from Stanford, who graduated a couple of years earlier. And he'd been the guy who was building all of this and had obviously demonstrated an ability to like build high quality, scalable …”