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When To Trust Your Data vs. Your Gut Instincts By Felicis Ventures
Helen Chong
Puzzle x Felicis Ventures
Take it from Dasha Maggio, Partner and Head of Founder Success at Felicis, a VC firm investing in companies across stages, sectors, and geographies. They’ve just announced their ninth core fund of $825 million and have a portfolio that includes companies like Shopify, Adyen, and Credit Karma.
For our expert funding series, we sat down with Dasha to dive deep into topics like:
Read on for more...
“Knowing your numbers is fundamental to figuring out how to turn strategy, capital, people, and inputs into something that will ultimately deliver your vision.”
Here’s the deal: Founders need to understand their company’s engine to know exactly what’s in vs. what’s out of their control.
There will always be movement outside your company’s bubble that you cannot control — macro conditions, competitive moves, you name it.
So, focusing on your own business formula and understanding its inputs and levers is the path to success.
The internal engine of a company is composed of two things:
That’s why knowing your numbers from day one is integral to your ability to turn strategy, capital, people, and inputs into the brand vision you’re striving for.
While KPIs vary dramatically by business, there are still metrics that all founders should track.
When Dasha reads a great investor update, it gives an instant snapshot of the company. The update typically includes KPIs like:
Superior updates also indicate variance, AKA what’s changed since the previous check-in. This includes both positive and negative spikes to investors so they know what’s working.
Ultimately, the investor update is a source of truth and visibility into company dynamics. In Dasha’s experience, founders who send consistent updates with transparent numbers have a better handle on their runway and more comfortable investor relationships.
“Understanding the engine of what you're building so that you know your level of control as a founder is, in my opinion, the critical piece. I think it is never too early to get connected with that.”
Often, founders have the right gut instincts about what growth levers to pull.
However, some variables must be quantified. For instance, specific data points often tell you how far you can pull levers impacted by runway.
Also, numbers are the clearest way to convey decision-making rationale to stakeholders by giving you objective input for those crucial conversations.
The founder of Felicis, Aydin Senkut, is a fan of Formula 1, so he brought the idea of telemetry to his team.
In F1 racing, cars have hundreds of sensors on them that send data to the driver, the ground team, and the crew during a race.
This allows the teams to achieve their ultimate internal goal: improving efficiency.
The name of the game isn’t building as many features as possible or spending the most money. It’s figuring out how to translate inputs into outputs efficiently. The team at Felicis emphasizes that this approach is also directly applicable to companies and metrics.
As companies mature, they tap into that telemetry — or complex, real-time metrics that provide a rigorous way of assessing trade-offs and options.
“There's no one correct path that works across every single company. You need toweigh your gut instinct and the data against each other.”
Founders are constantly trying to avoid different types of debt: tech debt, organizational debt, financial debt, trust debt, and more.
How can you avoid debt when it comes in so many forms? The answer is by investing in your accounting and bookkeeping from the beginning.
Prioritizing your accounting is a green flag to investors
Imagine the concept of a trust battery between investors and founders (the ‘trust battery’ concept comes from Tobi at Shopify). You risk exhausting that battery if you blindside investors or make bad decisions due to accounting errors.
Accounting often gets lost in the push to hire the right people and find product-market fit. However, the errors that may occur if you overlook accounting are existential and painful.
The key here is that bookkeeping is within your control, so you should strive to own it.
In addition, when investors see great accounting, it signals that this company understands potential risks and has the tools to handle them. As such, Dasha has seen investors walk away entirely from companies with inconsistent numbers in their pitch decks.
“If you believe in maintaining trust with investors, investing in bookkeeping is an important ingredient in maintaining that trust. It allows for consistency, visibility, predictability, and a sense of control over your growth.”
Dasha emphasizes that no matter the market environment, founders should strive to be as nimble as possible and determine their own paths.
It’s true that there is less margin for error in the current market.
At the same time, Dasha notes this doesn’t mean “doom and gloom” for founders.
The macro-environment may not be within their control, but how dialed in they are to their business inputs and understanding of business mechanics absolutely is.
Founders can make great decisions when they arm themselves with the right financial tools.
