On Unique Insight

How can you prove that you have unique insight?

Welcome to all the new subscribers that have joined us over the last week! If you haven’t already, you should check out my last article here:

The Best Way to Build an Authentic Relationship

If you like what you read, please subscribe to Superfluid here:

---

Every VC is on a search for founders with 'unique insight,' a phrase that's repeated ad nauseam whenever someone asks a VC what they're looking for in a founder.

Unique insight refers to knowing something that no one else knows about something. Whether that's a distinct viewpoint about a problem in a specific industry, a different way to approach building a product or even a Go-To-Market motion that no one has tried before.

However, out of that short list, only the first point is easily demonstrable. It's easy to identify founders who might have unique insight based on their experience. The founder who's spent 10+ years working in construction and is now building a construction tech startup very likely has strong insight about the problem.

However, if you don't have much work experience, how are you meant to demonstrate your unique insight or what happens if being an industry veteran just isn't enough?

Insight doesn't need to exist from day 1. It can be developed over time through different iterations and experiments. However, when pitching, how you tell your story is important. The threads that you weave from start to finish matter. You need to show investors the work you've done actually to form the insight. In my opinion, if you’re able to address the following three points, you’re likely to stand out amongst other founders:

1. How you realised the problem was a "hair-on-fire" problem - This means that if someone was experiencing this problem, they would do anything they could to make it go away.

   To be honest, I think this is where a lot of founders fall short. Sometimes, the problem they're addressing just isn't significant enough for the end user. There might be cheaper workarounds or accepted norms that reduce the problem's severity. Alternatively, founders may struggle to convincingly demonstrate why the problem is urgent and needs immediate resolution.

   The founder can control both of these issues. However, the second issue is easier to solve than the first (figuring out a new problem to solve is hard). Founders should look to present case studies of either their own experience facing the problem, or better yet, case studies of their customers/other third parties facing the problem and how past solutions have failed to solve the problem. The simple mistake most founders make here is using their experience as a crutch and trying to 'credential' their way through questions. Investors (especially generalists) need to be taken along the journey and educated to some extent about the problem.

2. How you've acted upon the insight - Insight goes beyond finding a problem that exists and having a solution for it. Even in such a short time, we've seen that AI-first products are starting to look incredibly similar, with matching features and pricing. Products built on weak insight will become commoditised. The future value of that product will trend down towards a steady state asymptote which could be 0.

   How you act on an insight matters. For example, you might have a unique insight into who the best buyer is for your product. Other competitors might be selling in a top-down motion, however, you've figured out that selling bottom-up is far more efficient and valuable. Or maybe your wedge product is the same as everyone else, but you've figured out a different approach towards unlocking a far bigger market compared to everyone else.

   Showing demonstrated proof of how you've acted on your insight and the traction you've gained from doing so is key for 99% of founders.

3. Why this is a valuable insight to have - Showing traction is a step in the right direction, but not the final destination. Once you've got traction, when pitching to a VC, the conversation becomes focused on "how big the business can become, and how quickly can it get there".

   To demonstrate the value of your insight, you need to show how it unlocks a larger market opportunity or allows you to capture more value from your customers. I've touched on this above, but far too many founders stop at the base layer of building a company. You can absolutely get to a good personal outcome, however, if you're looking to raise capital you should be targeting a higher outcome (e.g., for VC-backed businesses the milestone is $100M in annual recurring revenue at least).

   Maybe you can get there with your initial product, but more often than not, it will require further product builds and a shift in ICP. Whilst you'll figure this out along the way and may change course multiple times, at the pre-seed and seed stage you need to be able to communicate that you've thought about this and have some intuition around growing the company to be a unicorn.

As an aside, part of this article was inspired by listening to this segment about the Hunt Brothers Pizza chain on the My First Million Podcast. The brothers had two key insights:

1. The locations of their pizza chains: In the corner of standard gas stations

2. Their business model: The Hunt Brothers operate on an upfront fee + monthly ingredients cost versus a slew of ongoing licensing and profit share costs that typical franchise models use.

By combining both of these insights they’ve been able to scale the chain like crazy. It’s awesome to see that even in a fairly competitive and semi-commoditised industry, with some unique insight, businesses can hold their own.

When thinking about pitching your startup to investors, the crux of the pitch has to be the unique insight that you possess. In a hyper-competitive world, almost nothing else matters. This is the most important foundational element upon which your company is being built. If it is a weak insight, you'll struggle to hit the targets that you want to hit.

So before your next investor pitch, take a step back and pressure test your insight. Is it really that unique? Is it valuable enough to build a large business around?

If you’re struggling with this, I’d love to help you out! Flick me an email at abhi@rampersand.com and we can workshop this together :)

---

Make sure to subscribe now to not miss next week’s article

How did you like today’s article? Your feedback helps me make this amazing.

Thanks for reading and see you next time!

Abhi