VCs seek outliers: companies with the potential to deliver highly defensible cash flows, define industries and establish category leadership. At early stages, they look for the characteristics that will transform the business into an outlier. Investors use different phrases for this rare occurrence — defensibility, secret sauce, unfair edge. What they’re really asking is: what’s your competitive advantage and how does it become even more powerful as you scale?
At Connect, we back potential outliers that are product-led. We invest in companies very early — often pre-product, pre-launch and always pre-PMF. We assess the same aspects as other VCs — team, market size, business model, go to market strategy, etc. But, due to our product focus, we also deeply consider your product potential. Using our thesis, we aim to figure out whether your product will have a competitive advantage and how that advantage will compound at scale.
In the past decade of meeting seed stage companies, we found ourselves evaluating products based on a range of different vectors including engagement, retention, growth, technology advantage and commercial velocity. Over time a clear framework emerged — one that allows us to categorise how a product can accrue value as it scales. We call it Product Vectors of Value (PVV).
What are the Product Vectors of Value?
At a particularly productive partner offsite, we developed both our product-focused thesis and the PVV framework. We did this by analysing our portfolio companies for the factors that made their products valuable as they scaled. We then ran the same analysis on the most legendary product companies on the planet. This led us to identify nine product-driven vectors of value. The table below shows all nine, along with a definition for each and examples from our portfolio we believe are exemplary of that vector. (N.B. There are several non-product vectors such as brand, community, marketplace liquidity or technology IP, but for our purposes, we’re focused on product.)