How to Spot Winning Startups Before the Rest of the World | Chris Dixon - Entrepreneur & Investor

Yeah. Yeah. Well, I think you hit on one thing which is when you're doing things kind of at the quote frontier, people call some call frontier tech, there's a different approach generally because you're doing something that hasn't, you know, that isn't as predictable. So just generally when I do any of these kind of cutting edge frontier like when I did VR stuff or blockchain stuff or AI before back before ChatGPT, you would have these you're sort of dependent on these external factors like when will the technology. So generally these technologies kind of go through two phases: they have an incubation phase where you have lots of early adopters. In the case of blockchains, they're probably like 30 million kind of hardcore users right now which sounds maybe a lot but it's actually tiny on the scale of the internet. And then you have a moment where kind of like ChatGPT or the iPhone where you have a breakout product and suddenly the space transitions from this early adopter phase to going more mainstream. And so when you're in that early adopter stage you just have to sort of behave differently. And so for example, you have to, when you're building a typical accounting SaaS company, you might raise venture capital and land for a two-year budget and assume that if you hit certain metrics, you can raise more money. There's a very predictable financing market. If you do certain things, you can raise more money, and it's much more established what the metrics need to be and the patterns. When you're in these emerging areas, you'll have these massive waves of excitement and then bull and bear markets and if you hit a bear market and you don't have the cash, you won't make it, right? And so you just have to operate. So like Coinbase, for example, they were very good about this. They would just raise a lot of money and save it and then kind of endure through tough times.

Um, you have to have a thicker skin and you have to be willing to power through. I've seen so many cases in my career in technology where people that stuck with something ended up doing very well. Like so many of the entrepreneurs that you see today that are successful, the outside view is like there's some kind of overnight success when in fact they were just trudging through many different ups and downs. And so the entrepreneur needs to be ready for that. The investor needs to be ready for that. The company needs to be structured, you need to have capital for that, you need to have the team for that. So it's just a different way of thinking about the world: pre-growth incubation phase and then mainstream breakout phase. That's the hard part, the good news, the bad news. The good news is when you do that and you're willing to do that, you tend to be one of the very few who are willing to do that and that's how you have outsized outcomes. That's how as an investor you have outsized outcomes. That's how as an entrepreneur you do. If you just follow the consensus, if you're the 10,000th company building a wrapper on ChatGPT, I don't know if that's going to be the consensus strategy, right? And so you got to be right. You can't just be non-consensus and contrarian and wrong. But that's to me the interesting part of technology. That's where I've always gravitated towards, that's why I want to be at the frontier and doing that stuff.

I assume that once blockchains go mainstream I'll probably move on to something else. And so it's just different. It's a different approach. There's a lot of value in doing the other thing too. I mean we need people to do later stage technology as well and I think they all have value. So I'm not making a value judgment. I'm just saying that this is where I like to operate and it's just a very different way of operating and it's a skill I've developed.