Naval: As an investor you want to apply judgment to pick good founders who are attacking large markets with credible products. We’ve talked about applying judgment to evaluate founders. Now let’s talk about applying judgment to evaluate products and markets.
Especially in an early stage investment, the product is really just a resume of the team. The product tells you what the team is capable of and how quickly—and ferociously—the team iterates.
This is especially true at the seed stage because the team may have been working on the product for only months or even weeks. You don’t know what the end product will look like. But you can get a sense of their shipping cadence—how often they ship updates and new code—and that’s perhaps the best predictor of a company’s success.
It’s the number of iterations, not the number of hours, that drives learning and development. A team that iterates quickly on a high-quality product is much more likely to find product-market fit than one that moves slowly and deliberately.
Fast iterations also work in enterprise and hardware
Obviously, this depends on the nature of the product. With consumer products, you ship early and often, and you don’t mind breaking things. With hardware and enterprise software, it’s tempting to think you have to be a lot more deliberate. But I don’t think that’s true anymore.
The best enterprise products are now consumerized first. Slack and Notion were built for consumers and then adopted by the enterprise. The same is true for Apple products. Products have to appeal to consumers first, which means they need fast iteration.
Even with hardware, a lot of teams are using 3D printing, just-in-time manufacturing and betas to speed up iterations.
At this point, fast iteration is important in almost every startup.