Why I founded CxO in late 2021

According to those who know me well, my unfair advantage 
is delivering consistent value. The way I see it, that is 
a combination of four features:

- my energy and persistence to pursue new ideas
- a clear understanding of how money is separate from happiness
- a steady balance of rationality, intuition, candor, and mindfulness
- 20+ years of experience on startup execution and venture capital

So I'll occasionally share some thoughts on all that, 
and hope they make sense to you. Sign up to read more.        

[TL;DR: skip this post right now if you're not into startups or venture capital for a living]

Why I founded CxO in late 2021

So it's 2022 and you're already familiar with one unavoidable fact: it is a year of adjustment. The post-pandemic valuation shakeout due to recent global issues has affected founders, professionals, funds, and individual investors. The main impacts are the massive layoffs and plummeting stock prices of public companies, shrinking entire markets and dissipating decades of gains. It is now harder to raise big money, down rounds are progressively common, and everyone feels compelled to adjust both funding and execution strategies.

Nevertheless, many companies and funds have been left untouched by that systemic winter. They were following the path of capital efficiency. They kept hiring, growing steadily or scaling even further by deploying capital the right way.

I do hope you're one of those relieved founders or investors. If you're not, you have everything to do with my new project... so let me tell you how and why I started CxO in late 2021.

Some background...

Capital efficiency has been a clear directive for me since my teenage years, when I founded and liquidated my first startup. I have also taught myself my own psychology of money when growing up, massively devouring dozens of authors and references while making and losing my own money a couple of times. During my whole professional journey, I have developed decision frameworks that have been very useful to me as a founder and investor, and also to the founders and VCs I've supported over the years.

This is the main reason why I have founded CxO: to maximize the outcome of the Capital x Operation equation. By packaging my own existing frameworks and making them available to the market, I could amplify and extend the value I have already achieved both for myself and for others. Here's the website I've built in 4 days to explain the new project (hope it works out for you - I won't be touching it again very soon, I'm too busy executing).

Understanding capital efficiency

There is always?great potential on cool products launched by incredible teams in huge markets. The problem lies exactly in those words - cool, incredible, huge -, how often they are used, and how they're mistaken?for real value.

Many founders and even investors tend to justify their assumptions over a startup with subjective claims and theories. Unfortunately, the real question?often remains avoided: no matter what has been done and one's personal opinions,?how more productive?could a particular startup have been if business decisions were different, say, for the past six months??

• Was there space for better performance?
• How should the funding capital have been assigned and distributed over time?
• How much additional value could have been captured if small changes were made on execution?
• What could have been the additional gain on valuation?
• If anything could have been improved, have the founders quickly learned what to change, how, and when?
• The final question: would the 2022 downturn be so devastating had those answers have been found and widely practiced by founders?

To rectify that, the smart ones perform execution experiments and analyze resulting metrics such as revenue, churn, and MAU, having?growth rates counterposed to estimates on competitors' performance and the size of their addressable markets. Even so, for early stage startups,? those?estimates?are very tricky: you can't infer realistic future numbers from near-zero historical data. This argument holds true throughout the initial phases of a startup, such as validation and traction, because revenue sources are still unstable in every chart until the growth phase starts showing trends towards scale.

Without reliable data, that whole problem remains unsolved. Since precision is often insufficient during the journey from product to scale, estimates can be easily questioned. That context makes it extremely difficult to define how efficient a startup is?at any point, how capital is internally deployed, and how their results impact its valuation. Nevertheless, that definition is a key decision for both investors and founders before signing a termsheet.

When numbers can not be trusted, decisions based on unstable data are shifty and uncertain. Most startup founders aren't able to collect meaningful data in a systematic and non-subjective fashion. Since reliable data is key to reduce risk?in venture capital and startup execution, many founders and investors end up performing the so-called art of investing (or the art of execution) instead of using science and reasoning based on reliable numbers.

CxO: when heuristics meet big data

After?two decades working on that topic and?profiling?thousands of startups for investment or improvement, I have gradually built and tested a?fast, simple, and less unreliable solution?for the execution efficiency riddle (thus, an heuristic at its finest). That particular solution has been derived from the analysis of thousands of empirical data points (the BSc and MSc in Computer Science and Machine Learning did help). The engine predictions show?strong correlation with the real performance of test sets in different startup stages.

So far, the CxO expert system and reports have shown improved results?when compared to subjective approaches assessing startup execution efficiency, plus dramatically increasing the productivity of VC analysts.

[At this point you're probably calling my bluff and saying "that nonsense will never perform better than traditional dealflow screening practices". In fact, most investors on my validation phase said that. However, founders and funds who hired CxO in just six months are NPS 96-level happy, so I'll argue with you in a future post.]

Wrapping up...

While looking for an assertive and data-driven solution, my research was based on two initial hypotheses:

A) Founders should?never execute more efficiently than required by the market they service and operation they run, considering the typical scarcity of data for unproven or pre-scaling startups

B) Due to many reasons, such as inexperience or lack of reference metrics, founders will often execute way less efficiently than required by the same circumstances

The sweet spot would be somewhere between A and B. The description of that sweet spot would be the execution playbook used by founders to maximize productivity and growth?with minimum capital. Thus, execution efficiency towards a scalable business would be just enough effort to cope with market and client demands, but not more... otherwise, there would be waste as a consequence of overperformance or overspending.

The search for that sweet spot in execution efficiency lies in finding that particular playbook, which varies according to each startup's stage, team, product, market, and many other variables.

Bold or not, now you know: that is the new journey I'm taking with CxO.