What I Got Wrong About Seedscout's Business Model
+ My First Ever Four-Quadrant Graph
I started Seedscout because I didn’t think Silicon Valley knew how to properly evaluate talent without relying on third-party credentials like school, work background, and network. I don’t think it’s wrong to rely on these things, but I do think it’s wrong to actively tout that you’re open to cold emails and that SV is a meritocracy, when it’s just not.
On October 14th, 2020, I decided I had enough of the bait and switch and wanted to build a straight-up ecosystem that didn’t play games. One where the rules were explicit and the path to winning was clear as day. The model I eventually landed on was a pay-per-intro-request model, where founder could request intros to investors who could potentially fund them in the future. There’s a good reason I didn’t go with a pay-per-intro or a pay-per-investment model. That’s for another post.
Seedscout charged three tiers: $100/mo, $500/mo, and $1,000/mo. $100/mo got you 10 intro requests per month, $500/mo got you 50, and $1,000/mo got you 100 per month. The investor network was approximately 750 deep, and note, all these investors added themselves to the list. None were scraped. The reason the lowest price was $100 was because I made a decision not to filter by application. Anyone could join Seedscout and request intros. They just had to get over the bar of paying $100. My hunch was that the price was high enough where mostly good founders would pay it, and mostly bad or early founders wouldn’t or couldn’t
What I got wrong about this model is that I believe the $100 wasn’t the actual filter. I could have charged $250 as a starter price and I still think it would have worked. Hell, I could have charged $1,000 for a starter price and it would have worked. This is because there are two types of founders in two mindsets:
Founders who want to win at all costs, and founders who don’t. Then there are founders who know how to separate signal from noise, and those who can’t. When I met a founder who can find signal and wants to win at all costs, they will do what is necessary to position themselves to win. And if that means paying a fee, they pay the fee. If it means putting $1,500 on credit to get a plane ticket and hotel to SF for XYZ event, they will. The act of paying money to increase their odds doesn’t phase them.
With that said, there is a third quadrant here. There is signal-seeking. There is win-at-all-costs. Then there is high-context. Seedscout didn’t filter for the third bucket by design, so a lot of people joined who probably should not have, and they probably burned a few hundred bucks that didn’t need to be burned. This was necessary for the platform to work though, because the feature was that there wasn’t an application/approval layer. You could bet on yourself without any gatekeeping that is typical in the Valley.
Is $100/mo the Magic Number?
As I’ve been thinking about my time running Seedscout and running some very small-scale experiments on the side of Product Hunt, I had a pretty massive realization. The amount actually didn’t matter. Like I said, I could have charged more and Seedscout would have still worked. It just would have been painful for the founders who were not ready yet for this world. More costly for them. So I’ve recently been wondering: what would happen if I tried Seedscout again but lowered the barrier to entry? Lowered the price significantly, but not to zero. Would this work?
I am under the assumption it would. Because I think the signal finders and the win-at-all-costs people will pay $1,000 to win, but if the cost of increasing odds is $50 or $20 or $1, they’ll pay that too. The point is, they will do what is needed to increase their odds. And the people who have a harder time finding signal or are not in a win-at-all-costs mode, I still don’t think they would be able to get over the mental hump to pay for a service like Seedscout. Even if it was $1.
If the goal of Seedscout was to have a permission-less place where founders could bet on themselves, a system that attracts natural winners and pushes away others, then lowering the price actually still allows the same experiment to run. It just comes with lower downside for those who are not high-context yet, and higher upside for the overall network, because we’d probably get more founders in aggregate who would join and succeed. That feels like a massive step in the right direction.
For those who read this far and are open to a Seedscout-esque type product that is under $30/mo, feel free to reply to this email. I’d love to share more.