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This episode is different on many levels.
For instance, we usually interview founders/marketers/growth functions within startups. This time, we have Daniel (Danny) Cohen, a general partner at Viola Ventures. Yup, we’re going to the investors’ side.
It’s also not an ordinary episode because Danny Cohen is all but the usual investor type that comes to mind when you think “investors.”
Being one of the outstanding B2C investors in Israel, his investment interests include Consumer Internet, e-Commerce, and Digital Media. He serves on the board of Lucky Fish, Playbuzz, Puls, Splacer, Maapilim, Deep, Lightricks, and Origami Logic. He was also on the board of Tapingo (acquired by Grubhub for $150M).
Recently, Lightirkcs, one of the companies he’s been working with since their round A 5 years ago, has reached a $1B valuation, and it’s only climbing.
In this episode, Danny, the Pearl Jam fan and investor talks all about what type of things he is looking for when investing in companies, the big difference between B2B and B2C investments and why a company with a marketer with a product background might score more points than a classically trained marketer.
If you’re a b2c company looking to get investments – listen carefully.
Our Main Takeaways
Why invest in B2C companies?
Of course, there are some big B2B exits and success stories, but VC’s are in the business of significant outcomes, and if you nailed it with a B2C company, you win the jackpot.
There are more risks, but there’s also a chance for a more significant turnover, we are looking for extreme outliers.
The Difference between b2b and b2c investment
When it comes to investing in a B2B or a B2C company, most people’s brains work differently.
When it comes to “judge” a B2B product, investors are more likely to think:
“I don’t understand this because I’m not a consumer” and then ask 5 customers.
If they love it, the investors might go for the deal – You are not biased.
When it comes to B2C, investors assume they if they don’t connect to it, nobody will and the other way around. They believe their “gut instinct” more than they can be objective about it.
But how do you fight the bias?
Danny’s suggestions are to look at every consumer deal from the data angle to understand the deal instead of just relying on your gut feeling.
Should you raise money before launch or after?
Danny’s advice is to raise money once you can.
That being said, there’s a difference in raising money before or after launch.
If you’re looking to raise money after launch – you’d better show good numbers and that you are on your way to “cracking” the market and that the opportunity is there. New customer or strong retention reports will be the right direction.
If you are trying to raise money before launch, you have to have proven experience or have what Danny calls “have a point of excellence” Investors are looking for a “risk reduction” (proven team or technical propriety for example)
Have a strong marketing lead. But not “that” marketing.
The traditional marketing role has changed, and the “classic” marketer has been replaced by the technical – product and data-oriented marketer.
Working with data, being more unit economics aware, and being product-oriented is vital in today’s path to success. It doesn’t matter if you are selling a physical or digital product. Having a tech background/data background gives you more advantages as they will usually be more aligned with company goals and products.
In other words, – Creative is essential, but technology-oriented marketing departments are excellent.
Understand your Unit economics
The key to successfully growing your product is to have an accurate analysis of your value and unit economics – how much does it cost to acquire a new user and understanding its LTV.
Know the nature of your product – is it a product with high retention or Low?
Understanding that is critical for every product we meet.
The easy example will be: If you sell a product that is 10 dollars a year and you want to get 1 billion revenue, that’s 10 million users, which can become a big challenge.
Subscribers based products vs. one-time payment
There’s no right or wrong, but it very much relies on your type of product and understanding of your user economics.
B2b vs. b2c behave very differently when it comes to subscriptions, and it’s at the core of your business model.
If you are a B2B subscription-based product churning 50% of its users a year – it’s a disaster.
For a B2c to retains 50% of its users is fantastic.
The important thing is to be aware of the type of product you are creating.
Even if you have a product with an LTV of 6 months, you can make it work.
As long you understand the unit economics and make sure that once you get the user for that short amount of time – you get the most value out of them.
In other words, if my product has 6 months of LTV, how do I get the most revenue out of it in that time period. You should optimize your revenue efforts for those 6 months.
There are many frameworks and case studies on how to do marketing and grow your product, but eventually, it’s up to you to come with the creative strategies that will help you grow in your unique scenario.
We hope you enjoyed this episode!
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A big thank you to Elad Levy for joining me this week. Until next time!