Velocity: One Metric that Matters Most
One phrase that you frequently hear in the startup world is “one metric that matters” (OMTM). It refers to the concept of focusing everyone in a company on a single metric, such as users, downloads, leads or revenue. For early-stage startups, rallying around a single metric can provide tremendous focus on a journey that’s filled with decisions and distractions.
But more than revenue. More than users. More than any other metric a company can measure, there’s one attribute that has a bigger impact on the success or failure of a startup than anything else: velocity.
And as an early-stage investor, it’s the #1 thing I’m trying to measure when I meet with founders.
What is Startup Velocity?
Let’s start with a definition of startup velocity:
Startup Velocity is the rate at which a startup achieves its milestones.
It’s that simple. How quickly can a startup achieve the goals and objectives necessary to move the company forward?
Here are a few examples of the many milestones an early startup might need to achieve:
Building an initial prototype
Launching a website
Signing 5 pilot customers
Hiring a developer
Getting the first $1 of revenue
Raising a round of funding
If we’re measuring velocity in days or weeks, it might seem obvious to directly tie a startup’s velocity to the number of hours you work each day. But startup velocity is far more than just hours worked (a nuance that many adherents to startup “hustle” culture get wrong). Velocity is not only about how hard you work, it’s about how you work.
At a fundamental level, startup velocity is a measure of a company’s sense of urgency.
Are You Playing to Win?
When I meet a founder for the first time, this is one of the key questions going through my head.
Are you playing to win?
Not win your city. Not win your country. Not win your initial market.
Are you playing to win the whole damned world?
Many years ago, I was at an event where Tobi Lütke, the founder of Shopify, was asked to describe the difference between Canadian entrepreneurs and American entrepreneurs.
His answer perfectly captured the key cultural advantage that American’s have when it comes to entrepreneurship:
“Canadian entrepreneurs aim to be the best in Canada. American entrepreneurs aim to win the world.”
If your goal is to build a world-changing, globally impactful tech company, you have to behave as though you’re competing against every other founder on planet Earth who is trying to solve the same problem you are.
If you understand that your competition is global from day one, the importance of startup velocity is evident.
(It’s also why one of the questions that’s always in the back of my mind as an investor is “Can you beat my friends?”)
Where is Your Benchmark?
When you’re in a race, everything is relative.
If you can run a 10-minute mile, you’re the fastest person in the race if everyone else takes 12 minutes. But you’re dead last if the rest of the field can do it in 8. As a founder, you need to be cognizant of (and intentional about) who you’re comparing yourself to.
This is one area where founders in cities with smaller startup communities and/or more laid-back lifestyles are at a disadvantage. If everyone around you is kicking back working a 9-to-5 job or running a lifestyle business, you might think you’re the hardest working team in town. But how does that compare to what’s going on in a top-tier ecosystem? How does that compare to your actual competition?
Marvin Liao recently wrote a great post titled, Steel Sharpens Steel: Picking your Tribe and Environment on the impact of being surrounded by ambitious people. In it, he includes a response that famed VC Bill Gurley recently gave to the question of where he would start a company today:
“Place can be very impactful. If I were a 22-year old founder starting something [today], I’d go to Silicon Valley just because it would increase your odds of success. I think many cities — whether it’s Austin or Miami — they have a problem that sounds ironic. They are a lot of fun. And so there is a question whether you attract the very most determined founders.
I think there are a lot of contagious qualities to successful startups. Constantly being around other people all in the same game is super helpful.”
The lesson here is not that every company needs to move to San Francisco. But if you’re a tech founder, you need to benchmark against what companies there are doing. Moreover, if you’re not in Silicon Valley, you need to be intentional about surrounding yourself (either physically or virtually) with other high achieving founders.
How Do You Measure Velocity?
When it comes to measuring startup velocity, I’m not talking about using formulas. The journey of every startup is unique, so it’s difficult to make a true apples-to-apples comparison.
I tend to can look at velocity from a binary perspective: a startup is either high velocity or it isn’t.
In my experience, the velocity of a startup generally follows the tendencies of the founding team. If the founders are high velocity individuals, the company tends to develop a high velocity culture (and vice versa). So when I meet with founders, I’m looking for signs that they are high velocity individuals.
Here are some examples of behaviors that signal a high velocity founding team:
Very responsive in communication (answers emails, texts, etc. very quickly and does so at all hours of the day)
Proactive in communication (reaches out whenever a question or issue comes up, rather than waiting for the next scheduled interaction)
Communication style often includes deadlines (e.g. “I’ll get back to you with this on Wednesday” vs. “Let me get back to you on this”)
Milestones are specific and measurable
Works on multiple milestones in parallel (e.g. reaching out to prospective customers and building pipeline while product is still in development)
Ruthlessly protective of their time
Schedules important meetings/calls within hours or days
Willing to travel on extremely short notice when necessary
Incorporates new ideas/information very quickly
And here are some examples of behaviors that can signal a low velocity founding team:
Takes weeks to schedule important meetings/calls
Unwilling to schedule important meetings/calls outside of their personal business hours (evenings/weekends, different time zones, second-tier/regional holidays, etc.)
Describes milestones in a strictly linear fashion and/or with unnecessary gates between steps (e.g. not willing to start selling the product until a particular feature, approval, etc. is complete, even when that completion date is known)
Over-engineers product / unwilling to release in beta until everything is done
Struggles to get employees to work outside of normal business hours, even in cases of big deadlines
Easily distracted by stories in the media / spends too much time comparing to others (especially when it comes to fundraising)
Spends too much time at conferences, speaking engagements, panels, etc. (when those things aren’t core to GTM)
Overly focused on customers / users / competitors in their local market / resistant to expanding beyond local market
Resists incorporating new ideas/information
Neither of these lists are exhaustive. Very few founders do all of the items in the first list. And almost all first-time founders do some of the things in the second list. But they’re signals.
The more signs I see that support a sense of urgency / high velocity, the more likely I’m going to lean in as a potential investor. On the other hand, the more signs I see that lead me to believe that you might not have that sense of urgency, the louder the voice in the back of my head gets worrying that you’re not going fast enough.
To be clear, as a founder you absolutely, unequivocally do not need to be high velocity if building a globally-impactful company isn’t your goal. There’s nothing wrong with taking another path. But in my experience, a high velocity founding team — and, thus, a high velocity startup culture — is absolutely a necessary (but not sufficient) condition to create a billion-dollar company. That’s why it’s so important to me as a VC.
I’ve met many smart, experienced founding teams with unique insights, great products and who on-paper looked like stellar investments. But as I got to know them, the nagging voice in the back of my head got louder,
“They’re not going fast enough…”
I’ve also met founding teams that didn’t have it all figured out, but were iterating and progressing forward at such a high rate that felt inevitable that they would figure it out.
Guess which teams I invested in?