On the Virtues of Thinking Small

In business, or at least the marketing agency side of it where I spend most of my time, there’s a saying that gets tossed around a lot.

It’s from?Andrew Davis, the author of “Brandscaping” and a fairly well-known speaker on marketing and customer experience topics.

"Commit to a niche. Stop trying to be everything to everyone."

It’s simple: Don’t spread yourself too thin by “being everything to everyone.” Only by niching down can you as a business becoming the provider of choice in your market, the expert that everyone knows they need to work with if they want to get the kinds of results their competitors are seeing.

Good advice.?

I was reminded of this line recently when I came across a?somewhat recent post?by?Eze Vidra?on VC Cafe in which he discussed what he sees as the primary trends in venture capital for 2023. (Vidra is a VC in Israel who runs?Remagine Ventures, a pre-seed/seed fund that invests at the intersection of tech, interactive entertainment and gaming.)

You might have heard that VC — in Silicon Valley and beyond to all the markets that we cover here at Screw the Valley — has been in a tight spot for the last six months or so. Per Prequin, Q4 2022 was one of the worst quarters for VC fundraising in the last nine years.

Venture funding was down 65% in the fourth quarter, marking the lowest quarter raised $20.6 billion in new funds in the fourth quarter. That was a 65% drop from the year-earlier quarter and the lowest fourth-quarter amount since 2013.

And only 226 funds saw investment in Q4, down from a whopping 620 in the same period in 2021.

Vidra’s take (all of which I agree with):?

• Fundraising is hard right now for everyone but the 2023 vintage might end up being very strong since deals, talent and market share are all available at lower cost.
• Specialized funds are best positioned to do well in this environment, while generalists are the least attractive.
• Playing up the operational experience and “building strong companies” is proving to be an effective way for VCs to set themselves apart.

He writes: “In today’s market, I believe small is beautiful, and that specialisation matters. Most founders reported (in several different surveys) that knowledge and belief in their industry/sector and personal connection is one of the key reasons they would choose one investor over another. See the?recent reports by Frontline Ventures and Creandum?on what makes founders choose one offer over another.”

It goes back to the line about being everything to everyone.

Generalist funds are out and specialists are in, largely because the specialists are far more likely to be the subject matter experts who can help their portfolios navigate today’s choppy waters.

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