Being a founder is often associated with being contrarian — different, but right.
Ironically, most founders try to capitalize on trends.
Remember how everyone was starting crypto companies a few years ago? And now AI.
This is, for the most part, organic — people get exposed to genuinely new tech, and there are natural opportunities.
But is it a good strategy?
Does it lead to the largest outcomes?
Let’s find out…
On the Pod: Adam Renklint
What would you do if you raised $137 million for your startup, only to realize the business was better off as a cashflowing entity, rather than trying to reach venture-scale?
How would you keep your team excited and motivated?
What would you say to your investors?
These are the questions Adam had to answer when he and his co-founders decided to change course with Pitch.com.
When we chatted he was candid about Pitch’s journey (and also gave his best advice for designing your own pitch deck).
Check it out below on YouTube, Spotify, or Apple Podcasts.
Thanks for being a member! Since this is one of our ✨ members-only ✨ posts, you can read it below.
Should Founders Follow Trends?
I imagine some people reading this will think “of course founders shouldn’t just blindly follow trends.”
But, in truth, there’s more nuance to the decision.
Sam Altman says founders should spend much more time than they often do choosing what to work on.
And, if you’re him and have no limit to your exposure to good, forward-thinking ideas, he’s right.
But not everyone is Sam Altman. So, is there some value to riding the hype train?
I broke it down into a few areas:
The likelihood of a good outcome
Founder life
Hiring
Fundraising
Go-to-market
Good Outcomes
Wealth is the reward of a good startup.
And building a startup in a hot space makes you much more likely to have parties interested in acquiring you. More net positive acquisitions happen in hot spaces, where big players are looking to make a splash.
That can mean life changing wealth in a short period of time. Databricks paid $2 billion for a startup with $1 million ARR.
But, more often than not, these aren’t billion dollar acquisitions and the largest companies actually don’t get started during hype cycles. Check this out.
This is a chart from Rex Woodbury, who writes Digital Native and founder of Daybreak Ventures:
You can argue the jury’s still out on some of the more recent years, and you can argue AI was already getting hot in 2022 (but mostly towards the end of the year).
This is anecdotal evidence of an intuitively true phenomenon:
The ideas with the largest potential have time to mature in uncompetitive spaces that look too niche to outsiders.
By the time the tourists get there, there are more clear opportunities but the best ones are already being worked on. The space only became hot because those other pioneers have proven the case for similar startups.
Founder Life
Building a startup is lonely. If you’re reading this newsletter, you’ve probably felt that at one point or another. It’s what we sign up for.
But when you’re riding a trend, this is less true.
There’s lots of other people solving similar challenges as you, thinking about the same problems, and often setting up ways to connect.
Events, dinners, communities, recognition from friends and online… all of this happens in these settings. Camaraderie is high. Wagmi.
These can be a distraction if you overindulge.
And if the trend evaporates and those things go away, will you still have the motivation to build in the space? Remember how many crypto founders became AI founders?
I would argue that the best founders don’t need these things in the first place. They might enjoy them, but they’re nice-to-haves. They have intrinsic motivation.
When you’re building something unrelated to trends your friends, colleagues, and maybe even your family may not understand why you’re doing it.
It’s like Elon said — building a startup is like eating glass while staring into the abyss.
Hiring
This one seems more clear at first — it’s way easier to get people onboard when you’re riding a trend.
Early employees often get one of the worst deals in tech — they take a big risk, and the upside is way lower than it is for founders. Most understand this to some degree, so they view joining a startup as risky (even if they want the experience).
If you’re building in a hot space that they’ve seen talked about on X, or among their friends, they’ll be considerably more likely to say it’s worth that risk.
The problem is… are those the types of people you want at a startup?
Often they’ll come with good pedigrees, but if their decision is swayed by the hype around your startup’s sector then you should look at their as mercenaries, rather than missionaries.
They’ll likely be the first ones gone when the winds change or success seems harder.
The opposite is true if you’re not in a hot space. I’d argue it’s actually easier to identify the right people in this setting. More signal, less noise.
Fundraising
Fundraising is similar.
When the space is hot, capital comes flooding in. Suddenly every VC is an AI VC or, at least, has an AI-related thesis or two.
When a sector isn’t hot, convincing most VCs that your opportunity has a better risk profile than ones in a hot space, which they feel confident will be able to secure markups just because of how hot the space is, is very hard.
But, again, for the right/best investors the opposite is true. They’re warier of froth in the hot space than a sound idea doing something entirely different.
For you, as a founder, I’m not sure it matters too much. Yes, having better VCs backing you can mean you get a better sparing partner for your ideas, who has more connections and can be a better signal for future fundraising rounds… but getting fast capital in the door and getting back to building is fine (maybe even better) for most startups.
At the end of the day, the success of the startup is on you — not the investors.
Go-to-Market
Getting users to try your product is way easier when the space is hot.
People are looking for solutions. They’re naturally curious about it. They set aside budget. They’re more patient with bugs. Life is good.
It’s true that these folks may be less retentive, and also it may be harder for you to nail down exactly who your customer is if a wide variety of folks are trying it out and giving you competing feedback.
And yes, people will lie to you about how good your product is more in a hot space. It’s harder, again to find the signal in the noise.
But growth is an area where building in a hot space definitely wins out — having too many users use your product is a luxury problem. Move fast and iterate to keep them around.
What Wins Out?
How you feel about “good” outcomes is more of a personal decision based on your goals, but the common theme with the rest is that founders have different problems building in a space when it’s hot vs not.
When a space is hot, founders need to be good at separating the signal from the noise.
When it isn’t, founders need to be good at willing something into existence.
These are vastly different skillsets.
Evaluate yourself honestly and choose a space accordingly.