Growth strategies and the age of camels

by Alex Lazarow, Managing Partner at Fluent Ventures

This piece was originally published on Alex Lazarow's newsletter, [99%tech]

In 2020, in Out-Innovate, I was convinced that the gospel of Silicon Valley—for startups to grow at any cost—was incompatible with the reality of the rest of the world.

At the time, this flew in the face of conventional wisdom. Today, it has become best practice.

Just ask The Economist:

“The slow, measured approach taken by the camels is the opposite of the Silicon Valley playbook of capturing market share first and worrying about profits later…One hurdle for companies choosing steady profits over blitzscaling growth remains: the investors themselves. Venture capitalists typically operate on a ten-year clock, bankrolling startups in the first five and cashing out their stakes in the second. This gives investors an incentive to push portfolio firms to pursue growth at all cost. Sridhar Vembu, Zoho’s boss, likens venture capital to steroids—it can boost short-term performance but damage the business in the long run. His may be an extreme view. Still, if investors want big returns on their Indian bets, they are better off backing sturdy camels over sexy unicorns.”

The age of camels is in—and not just in India.

Camel Reflections

I read this quote, and thought about it for a few days: “Every founder tells themselves a story about why they’re heading to the gold rush, but the executive coach I would eventually hire says there are really only two. Do you want to be rich, generating wealth in service of some further end? Or do you want to be king, with money a mere byproduct of trying to make the world the way you feel it should be?” Lured by the prospect of effortless wealth, this anonymous founder embraced the VC gospel of rapid growth at any cost. But after years of chasing the valuation dragon, he's learned that sustainable business beats hockey-stick graphs. Loved this founder's reflection on the hollowness of pursuing wealth over meaning, and why he now believes slow and steady success is the worthier path.

Camels do better everywhere, especially in emerging markets. Take the case of Grab. The stock is down 75% vs. its comparable in the US, Uber <33%. This article explores why it was harder for a similar blitzscale strategy to work in emerging markets. “Not since the first internet boom of the 1990s had there been such hunger for unprofitable startups. Before it started publicly trading, Grab was valued at $40 billion, almost as much as American Airlines, Delta Air Lines and United Airlines combined…Grab’s stock slump represented a blow to its home base: Singapore.”

Negative CAC map? Is it possible to acquire customers for free (or less)? “Negative CAC (for those of you who didn’t read the original piece) is a go-to-market and product strategy that enables companies to acquire a net new customer at no marginal cost as an extension of the paid functionality that their software delivers to existing customers.” Here is their map. Talk about a great Camel strategy.

source: https://firstmark.medium.com/the-2023-negative-cac-market-map-the-companies-being-paid-to-acquire-customers-c4ab587a7863

Interesting discussions

How should one give back? I have written in the past about Chuck Feeney, perhaps one of the most successful philanthropic donors—and I mean that in the sense that he successfully gave away his money rather than talked about it. Chuck was the founder of The Duty Free Store. Chuck, “who gave away nearly all of his $8 billion fortune to charity, much of it as quietly as he had made it, died… in San Francisco. He was 92.” He also founded General Atlantic (whose namesake is Atlantic Foundation, his philanthropic entity).

This column would not be complete without mentioning A16Z’s new techno optimist manifesto. “We are being lied to. We are told that technology takes our jobs, reduces our wages, increases inequality, threatens our health, ruins the environment, degrades our society, corrupts our children, impairs our humanity, threatens our future, and is ever on the verge of ruining everything…Truth. Our civilization was built on technology. Our civilization is built on technology. Technology is the glory of human ambition and achievement, the spearhead of progress, and the realization of our potential.”

And some of its criticism. “What makes it distinctive is not its views on technology, which are crude for a technologist of Andreessen’s stature. Rather, it’s the pairing of the reactionary’s sodden take on modern society with the futurist’s starry imagining of the bright tomorrow. So call it what it is: reactionary futurism…That, in a way, is my core disagreement with Andreessen. Reactionary futurism is accelerationist in affect but decelerationist in practice. Treating so much of society with such withering contempt will not speed up a better future. It will turn people against the politics and policies of growth, just as it did before. Trust is the most essential technology of all.”

One of the big painpoints in the healthcare industry (in the US) is payments. Good summary on some of the innovation taking place and the budding ecosystem. Nice retrospective on the evolution of models, from health insurance to innovations like HSAs and price transparency rules.