How to get VCs to bet on you, even in a crowded market. | VC & Startup Jobs.
When Product Markets Become Collective Traps & B2C Startup Idea Validation Framework.
đ Hey, Sahil here! Welcome to this bi-weekly venture curator newsletter, where we dive into the world of startups, growth, product building, and venture capital. In todayâs newsletter -
Deep Dive: How to get VCs to bet on you, even in a crowded market.
Quick Dive:
When Product Markets Become Collective Traps.
Jessica Livingston: More customer support tickets are a sign of product-market fit.
B2C Startup Idea Validation Framework.
Major News: Klarna CEOâs family office turned $3.6M into OpenAI shares in ioâs $6.5B acquisition, Apple plans smart glasses launch in 2026, Apple reportedly abandons smartwatch camera plans & Valve CEO's Neuralink rival expects first chip this year.
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đ TODAYâS DEEP DIVE
How to get VCs to bet on you, even in a crowded market.
Hereâs a well-known secret: VCs hate crowded spaces.
If a bunch of companies are chasing the same problem, it means brutal competition for customers, which usually means higher costs and slower growth. Not exactly what investors dream of.
But hereâs the flip side: some companies do win in crowded markets. And when the market is big enough, VCs will still invest. The key? They need to believe theyâre betting on the right startup.
So, if youâre a founder building in a competitive space, the real question is: how do you stand out?
Thatâs exactly what weâre diving into today.
To make this real, letâs talk about a space thatâs super crowded: AI. (Agree??)
Specifically, AI-powered sales development representatives (SDRs) tools help sales teams find and qualify leads faster.
(From my VC friend: We see at least one AI SDR startup every week. There are plenty more out there raising money. So yeah, itâs competitive.)
That said, sales as an industry has a huge total addressable market (TAM), and AI is, well, everywhere right now. VCs want to invest in this space. But only if they believe a startup can return 100 their money. (Can your startup return VC funds?)
Which brings us to the challenge:
How do you prove you wonât stall after some early traction?
How do you avoid insanely high customer acquisition costs?
How do you convince VCs youâre the one to bet on?
The answer: find a market wedge.
The Market Wedge Strategy
A wedge is simply a strategy to win a large market by initially capturing (1) a tiny part of a larger market or (2) a large part of a small adjacent market.
So if you want to break into a crowded market, donât try to be âjust another AI sales tool.â Instead, specialise.
Example: Instead of being a generic AI SDR, you could be the AI SDR for veterinarians.
Why? Because focusing on a niche:
Gives you a clear target audience with a unique need.
Makes customer acquisition way easier.
Helps you stand out from the sea of generic competitors.
But VCs wonât just ask, âWhatâs your wedge?â Theyâll ask, âHow do you grow beyond it?â
Hereâs where your expansion strategy comes in:
Vertical Expansion â Offer more services to your niche.
You start with AI-powered sales for vets.
Then add appointment scheduling, inventory management, etc.
Horizontal Expansion â Expand to similar industries.
What other businesses are similar to vet clinics?
Maybe dental offices? Physical therapy clinics?
The key is to show investors that youâre thinking beyond todayâs niche and into tomorrowâs empire.
Getting Customers (Without Burning Cash)
A wedge is great. But without customers, itâs just a nice idea. VCs want to see that you can acquire customers efficiently.
If you already have industry connections amazing. Maybe you:
Come from a family of veterinarians.
Worked in the industry and have built relationships.
But what if you donât have these connections? Thatâs where partnerships can be a game-changer.
For example, if youâre targeting veterinarians, you could:
Partner with a Medical Association to tap into their network.
Work with private equity firms that acquire vet clinics (and need them to grow).
Get backing from VCs specialising in pet tech, who can open doors.
The goal is simple: show VCs you can acquire customers from day one without breaking the bank.
Hereâs another tip: VCs love learning.
If a founder teaches them something they didnât know, it makes them way more likely to invest.
That means your job is to be the expert. You should know more about your niche than anyone in the room.
How do you prove that?
Challenge common assumptions: âEveryone thinks X about the veterinary industry, but actually, itâs Y.â
Drop surprising insights: âDid you know 73% of pet owners would pay more for AI-enhanced vet services?â (Okay, I made that up, but you get the idea.)
Offer a fresh perspective: Explain why your approach makes more sense than the status quo.
And donât shy away from the competition. Yes, the market is crowded but thatâs because the opportunity is massive. If you can prove you understand the market better than anyone else, you position yourself as the founder VCs want to back.
So, if youâre in a crowded space and want to win investors over, hereâs what you need to do:
Find your market wedge a niche that gives you an entry point.
Show how youâll expand beyond that wedge over time.
Prove you can acquire customers efficiently (without insane costs).
Know your market better than anyone else in the room.
In a crowded market, the loudest voices donât win the smartest, most strategic ones do.
So be different. Challenge assumptions. And make it impossible for investors to ignore you.
Who knows? Maybe your AI-powered vet sales tool is the next unicorn. Just donât forget the little people when you make it big.
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đ QUICK DIVES
1. When Product Markets Become Collective Traps.
Most of us assume that if people are using a product, it must be making their lives better. But what if thatâs not true?
In a powerful new study from the University of Chicagoâs Leonardo Bursztyn, the study shows that platforms like TikTok and Instagram may actually reduce overall well-being, even for the people who actively use them.
Hereâs how they tested this idea:
They ran a large online experiment with 1,000 college students to understand the true value of social media. The twist? They measured not just how much people enjoy using these platforms, but how much it bothers them not to use them when everyone else does.
Key findings:
On average, TikTok users would need to be paid $59 to give it up for a month. But when asked how much theyâd pay to shut down everyoneâs accounts, including their own, theyâd actually be willing to pay $28 for that.
For Instagram, users would need $47 to step away, but would pay $10 to take the whole platform offline for themselves and their peers.
It gets starker: non-users of TikTok said theyâd pay $67 just to make everyone else delete their accounts. For Instagram, it was $39.
Once you factor in the âspillover effectsâ (aka, the Fear of Missing Out), the paper finds that 64% of TikTok users and 48% of Instagram users are actually worse off because these platforms exist at all.
The catch: theyâd feel even worse if they alone opted out while everyone else stayed online. So they stay trapped by network effects.
Why this matters:
The study introduces a concept called a âcollective trapâ: situations where the popularity of a product increases pressure to participate, even when it makes many people unhappy.
It also shows this dynamic isnât limited to social media. The same effects appear in luxury goods and tech:
44% of luxury brand owners (e.g., Gucci, Rolex) said theyâd rather live in a world where none of those brands existed.
A staggering 91% of iPhone users said theyâd prefer Apple release new iPhones only every other year. Among non-iPhone users, it was 94%.
In short, just because a product is widely used doesnât mean itâs making people better off.
Hereâs what founders should take away:
Donât confuse usage with genuine value.
Just because people are logging in doesnât mean they want to be there. Some users stick around because they fear being left out, not because theyâre deriving real utility. Thatâs not sustainable, and it's not product love.Look deeper than metrics like DAUs, Power user curves and retention.
Ask yourself: Would people still use this if their friends didnât? Would they pay to make the whole thing disappear? These questions reveal whether you're creating value or just building a collective trap.Design to serve, not pressure.
Platforms built on FOMO, guilt, or status-chasing may grow fast, but they risk turning into zero-sum ecosystems. Instead, ask: Does my product make people feel better, more empowered, more fulfilled, independently of what others are doing?Build for intrinsic utility.
Products that people use because they want to, not because they have to, are far more likely to build lasting impact and trust.Consider negative externalities.
Think about what your product does to non-users. If your success creates social pressure, envy, or disconnection for others, donât ignore it. Thatâs part of your real-world footprint.
Full paper: When Product Markets Become Collective Traps (BFI)
2. Jessica Livingston: More customer support tickets are a sign of product-market fit.
A counterintuitive tip about startups is that more customer support tickets are a sign of product-market fit.
If users didnât love the solution your product was offering to a painful problem, they wouldnât care enough to write in support tickets. And more tickets = more users.
But when support tickets grow at an exponential rate, they become a problem where you simply canât get to all of them and still work on the product, growing it, managing the team, talking to investors, etc.
So how do you solve that?
Most peopleâs first instinct is to hire a customer support person, but this is almost always the wrong first move:
You take yourself further away from your users, making it more complex to understand their issues.
If your startup keeps growing, youâll just have the same problem again soon.
Instead, take Jessica Livingstonâs (Founding Partner of Y-Combinator) advice (below) and focus on making the product better.
3. B2C Startup Idea Validation Framework.
Most ideas, especially in B2C, get validated in one of four ways:
This framework defines the differences between each path to validation.
Signal Aggregation
Founders should test an idea's viability through small experiments that provide evidence (signals) of potential success before building a full product.
Common signals include landing page sign-ups, social media engagement, ad click-through rates, and customer interview feedback.
Strong Beta
Achieving strong early traction with a beta product is another popular validation approach for founders. Success metrics vary across industries, e.g., high user numbers and retention for consumer social apps, and healthy revenue for B2C marketplaces.
The process typically starts with a hypothesis for solving a problem. The founder builds a basic version to test the hypothesis. Beta products are often rudimentary, lacking polish, due to the emphasis on speed over perfection. This approach aligns with the lean methodology of launching quickly and iterating based on feedback.
True Fans
This approach is similar to the Strong Beta approach, as it involves launching a beta product. However, instead of focusing on significant traction metrics like revenue or user acquisition, the founder seeks to identify a small group of fanatic users who deeply love the product despite its limited features. The key is finding 20-50 users who would be disappointed if the product were to go away. These passionate fans, rather than large user numbers, serve as the validation signal.
Visionary
This approach is the least common among the founders interviewed, as it requires a clear vision and plan for the product from the outset. Typically, the founder has a close personal connection to the problem being solved and a strong understanding of what needs to be done to address it.
THIS WEEKâS NEWS RECAP
đď¸ Major News In Tech, VC, & Startup Funding
New In VC
Klarna CEO Sebastian Siemiatkowski revealed that his family office, Flat Capital, invested $3.6M in Jony Iveâs io just six months before its $6.5B all-stock acquisition by OpenAI, earning significant returns in OpenAI shares. (Read)
VCs like Khosla Ventures, General Catalyst, and Thrive Capital are testing a private-equity-style strategy: acquiring mature businesses (e.g., call centres, HOAs) and optimising them with AI for scale and efficiency. (Read)
Major Tech Updates
Tinder CEO Faye Iosotaluno will step down in July after leading the company since January 2024 and focusing on AI-powered personalisation to improve recommendations. (Read)
Apple is preparing to mass-produce prototypes of its smart glasses later this year and aims for a commercial launch by the end of 2026, according to Bloomberg. (Read)
Amazon is testing AI-powered audio product summaries featuring "AI-powered shopping experts" discussing key product features, customer reviews, and web information. (Read)
Nvidia plans to release a new AI chip for China, priced significantly lower than the H20, with mass production anticipated to begin as early as June. (Read)
Starfish Neuroscience, Gabe Newell's startup, revealed plans to produce its first electrophysiology chip later this year, designed for recording brain activity and brain stimulation. (Read)
Trump warned Apple it must manufacture iPhones in the U.S. or face a 25% tariff, citing dissatisfaction with production shifting to India. (Read)
New Startup Deals
PlaySafe ID, a London, UK-based provider of a gaming cybersecurity platform, raised $1.12M in pre-seed funding. (Read)
Slash, a San Francisco, CA-based banking platform provider, raised $41M in Series B funding, at a $370M valuation. (Read)
Siro, a NYC-based provider of an AI-powered conversation intelligence platform for in-person sales, raised $50M in Series B funding. (Read)
RevenueCat, a San Francisco, CA-based provider of a platform for managing consumer app monetisation, raised $50M in Series C funding. (Read)
StackHawk, a San Francisco, CA-based shift-left API security platform allowing teams to keep up with the pace of AI-driven development, raised $12M in additional funding. (Read)
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