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The DL - Questions VCs Ask Startups, Best Prime Day Ever (Question Mark?), Guide to Marketplaces, and How to Build a Bridge

October 19 · Issue #70 · View online
The DL
Welcome to The DL, a weekly newsletter about tech, startups, and investing in the Pacific Northwest.
This week’s issue covers what questions VCs ask startups in pitch meetings, my Prime Day report, Version One’s Guide to Marketplaces, and an awesome GIF of how 14th century bridges were built.
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How to Ask Questions Like a VC
A few weeks ago, one of the local accelerators asked me if I had a list of questions to help startups prep for investor meetings. I didn’t have one ready, but I thought it would be a great idea to write one, so here’s my list of questions that VCs ask startups, along with some color on what they are *really* asking when they pose certain questions.
This is all written from the perspective of an early stage startup investor (me 👋) meeting a new startup, but hopefully it’s a useful resource to anyone investing time or money in a startup — whether you are vetting a new idea, evaluating startup jobs, or discussing a partnership with a startup.
Generally, I try to get through most of these topics in a 45 minute “first meeting,” so that’s why it’s helpful for startups to have a well-structured narrative (often using a deck) that can guide the conversation and tell the story behind a company. 
I’d love to make this a “live” list so if you have feedback, please send it my way! Here’s another link to the full article. Let me know what you think!
Best Prime Day Ever (...for small businesses, at least)
Typical day at The DL HQ
Typical day at The DL HQ
One of the most fun parts of working with startups is celebrating the “best day ever,” “best month ever,” and “best quarter ever” every time there is a big milestone. Of course, for fast-growing companies, every quarter is typically the best quarter ever, so eventually it calms down, and you just review a boring finance presentation on actuals vs. forecast.
Well this year, Amazon stopped announcing it was the “biggest Prime Day ever” (like they did from 2016 to 2019). Citi suggested this means they didn’t sell as much stuff this year, but the WSJ reported that sales were up 36%. Who knows? Maybe Amazon is bored, or maybe they are worried about antitrust issues and want to shine the spotlight on small businesses.
Either way, my Prime Day was the same as every other year. Does this sound familiar to anyone?
  1. 🤩 Oh cool, it’s Prime Day.
  2. 🤑 I really want to buy something!
  3. 😞 There’s nothing exciting to buy.
  4. 😓 Ugh, why is discovery and navigation so terrible?
  5. 😲 Holy crap, Echos are SO cheap! I can get an Echo Show for $25?!
  6. 🙄 Sarah’s reaction when a new Echo gets delivered at 6pm
V1 Guide to Marketplaces
Version One, a Vancouver-based VC, published the third edition of their Guide to Marketplaces, last week, and it’s a fantastic resource for anyone interested in building and investing in marketplace businesses.
Here are some of the highlights from their full guide:
  • eBay (1995) started the first wave of product marketplaces, and Uber (2010) started the second wave of services marketplaces
  • Now VCs are investing in the third wave of marketplaces which include managed marketplaces, community-driven marketplaces, B2B marketplaces, and decentralized marketplaces
  • According to a16z, the top four private marketplaces account for 76% of total marketplace transaction value
  • Key strategies for scaling a marketplace include (1) focus on trust and safety, (2) support “power sellers” who make a living on your marketplace, and (3) develop a partner ecosystem
  • Here are all of the KPIs and metrics Version One uses to evaluate and track marketplace businesses
  • Marketplace valuations converge at 1x GMV or 6-8x revenue (about the same thing if you assume a ~15% take rate)
  • Here’s a “funding napkin” explaining what investors want to see at the Seed, Series A, and Series B for marketplace startups
Other stuff Dan's talking about
💼 “If you got fired today…” - Some food for thought to start your week!
🌉 Bridge construction - Fascinating GIF showing how an iconic bridge in Prague was built using 14th century technology. Very cool how the bridge is still standing today
🤖 State of AI 2020 - 177 page slide deck on what’s happening in AI research, where talent is moving, what companies are investing in, and some predictions on where the AI market goes next year
🥇 Nest x Nobel - The Nobel Prize committee couldn’t reach Paul Milgrom to tell him he won the Nobel Prize, so his Nest doorbell caught the moment when his neighbor rang his doorbell and told him
Please hit reply! (Or subscribe or forward!)
About me: I work as an investor at Madrona Venture Group, a Seattle-based venture capital firm that has been early partners with companies like Amazon, Smartsheet, Apptio, and Redfin.
If you have thoughts, questions, or comments, hit reply! If you’re new, check out some of the DL’s top articles from the last few months:
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