How to understand your business economics: David Weiden of Khosla Ventures

When calculating Customer Acquisition Cost (CAC), don't rely on blended metrics

David Weiden is a founding partner and managing director at Khosla Ventures (he invested in Okta, RingCentral and Upstart). He recently gave a talk at Khosla venture’s conf and while it is a must watch, I am sharing notes from the talk (for the busy you).

"Without data, you're just another person with an opinion."

David Weiden’s talk focuses on understanding that the difference between success and failure often lies in the ability to make data-driven decisions (and not just intuition).

He shares how founders can leverage quantitative frameworks to target the right markets, understand their true business economics, and effectively raise funds.

Unlike most startup talks, this is all about numbers and how to revisit your business economics - a must read/watch imo.

Topics discussed:

• Targeting the Right Markets

• Understanding Your True Business Economics

• How to really calculate CAC

• Effective Fundraising Through Financial Transparency

• 3 Actionable TODOs for you

PS: From now, expect more activity on this newsletter around curation and notes (I read/watch a lot - so will be sharing more notes going forward).

Targeting the Right Markets

Intuition alone isn't enough. Successful founders overlay quantitative analysis on their intuition to make better decisions.

A quantitative framework simplifies your business down to atomic units, helping you make explicit decisions about which markets to target. This not only improves decision-making but also aligns the entire company behind the strategy.

For instance, when targeting the financial services market, one company used a framework with five criteria, including buying cycle and network compatibility. This allowed them to focus on the most promising segments, resulting in a significant increase in Annual Recurring Revenue (ARR) and profitability.

The real power lies not in the specific criteria, but in using a framework that forces you to think critically about your target market.

You may have an intuition about where to focus, but quantifying it can reveal surprising insights. For example, the largest companies in a sector may not always represent the biggest revenue opportunity for your specific product.