NFX tells startup founders to find the fast-moving water. Why and how to conquer the current – and not drown

NFX has a library of content, filled with the early-stage venture capital firm's own terms. "Network effects" is the most well-known. But there's another term startup founders like you should be on the lookout for: "fast-moving water."

Fast-moving water means that being small and nimble always triumphs over being large and sluggish. It also means that you should always have the capacity of making a mind shift to creativity, and move your startup's focus with it. That's the only way to keep meeting market needs and taking the leadership of your segment.

How exactly should you go about doing that, and not drowning in the process? James Currier, co-founder and general partner at NFX, shared some guidance on that (and on a lot of other growth strategies) during his chat for our Latitud Podcast.

What is fast-moving water, and why is it important?

Imagine that technologies and their respective markets are part of a river. There are going to be pieces of the river where the water is moving faster (maybe on the sides of rocks). Likewise, there are going to be pieces of water that are moving slowly or even backward (think of the eddies that are just behind rocks).

You need to make sure that you've appropriately thought about where the currents are moving to so that they will help you, not hinder you, as you go forward. And, if you find yourself or your startup in an eddy, you need to violently move to a current that's more fast-moving. That means: being creative, shifting your mindset, reshaping your business strategy, and being focused until you're making a splash and offering what your market really needs.

Taking a startup to success is already a hard journey – we know it, NFX knows it, and you know it even better. If you're fighting the current while at it, selling something that people don't really feel the need for, it’s a nearly impossible task.

NFX uses this metaphor of fast-moving and slow-moving water with founders to help them execute three strategies. That way, the firm propels them and their startups.

First, the concept of "fast-moving water" helps founders identify where the "energies of the world" are moving, as James likes to say. 

Second, it emphasizes the urgency and makes founders focus only on following the fast-moving currents they've identified for their businesses. 

Third, it gives the necessary courage for founders to convince themselves and their employees that they’re doing the right thing for the startup. Let's dive into this third step. 

How to change my startup's focus?

James mentions another growth strategy concept of NFX that relates to fast-moving water: "broad, narrow, broad."

When you start a company, often you need to go broad: do a lot of different things to find out what's really working. Once you've identified that one thing, then you need to go narrow. Meaning, you need to stop doing everything else and just focus on the thing that's working. That's hooking a ride on a quick current. 

Only after you get momentum going you can go broad again – and look for even faster-moving water. That's because that quick current from before might have slowed down already. You’ll always need to be on the move to the fastest moving water that you can get to from where you are today.

Easier said than done, right? At that point in time, you might have tens of employees. You'll need to have the courage to tell them, "I know you came on to do this B2C business, but we need to move to B2B." 

James already knows how they will respond, and how you should go about that:

– But it seems to be working. Are you saying that I wasn't doing a good job in the last six months? I mean, I moved the numbers like you said I should.

– Yeah, you moved the numbers, but it's only good numbers. We need great numbers, right? We're a startup. We're shooting for the moon. We want to go into the fastest moving water, not in this okay-moving water.

As you might have noticed, cultural alignment is a must. You employees need to understand that, in a startup, the only constant is change. 

Drill the message home that no person ever steps in the same river twice. Otherwise, your employees might feel unappreciated and that their work was useless. 

It wasn't useless because it got your startup to that point where there's a team that's able to move forward. Instead of, "You keep changing his mind," you want your co-founders and employees to say, "You are leading us over to that fast-moving water and that's really good for us. That's exciting."

If you need some inspiration, James recommends your friendly neighborhood, Mark Zuckerberg. Mark had a really modest business back in 2014: a US$ 200B value company called Facebook. Even with this market cap and dominating the social network market, with Facebook and Instagram, he saw faster-moving water in texting. 

And so, Mark spent US$ 16B on a 50-person company called WhatsApp. "He was courageous and strong enough to give away about 10% of his company so he could at least try to keep Facebook in the fastest-moving water", says James.

Where is fast-moving water flowing today?

Here's the billion-dollar question. James gives two examples of fast-moving water – one technology and one region.

Generative systems are James' example of fast-moving water in terms of technology. 

Being generative means using unsupervised algorithms to create something new. Instead of recalling databases to make changes, these are now transformations that are unprompted, user-generated in near real-time. 

Generative software can develop a brand new piece of music, image, text, web design, or even a new email marketing message for your sales team. One example is DALL-E, a machine learning model to generate digital images from natural language descriptions.

Now that artificial intelligence became cheap and fast enough to be implemented at the edges of the network, there's potential for generative systems to become fast-moving water, says James. NFX's general partner adds that generative technology is probably going to double or triple the size of the internet over the next 5 years. 

"We think that having generative software at the edges is going to change not only consumers' but also B2B's experiences."

That sounds complicated, right? But, in terms of region, James emphasizes how Latin America is a fast-moving current. So you might be swimming with a propeller without even realizing it!

"There are businesses that, if you tried to start them in the US, it would be a slog. But in LatAm, they can accelerate really, really quickly", says James. 

That's because the region has developed a foundation – we call them smartphones. But almost nothing has been built yet for them. LatAm is ready to be engaged with solutions created by startups.

"The energies of the countries, of how everybody's thinking, of the words they're understanding, of their relationship to their phones… All is now prepared to create really fast-moving water for many of the B2B and B2C marketplaces that we're seeing around LatAm."