I recently read The Power Law by Sebastian Mallaby. There is a section about how Thomas Perkins, the founder of Kleiner Perkins, approached venture capital. His strategy was to "identify the white-hot risks, then find the cheapest way of going after them." Essentially, determine where the startup might fail (e.g. is there a foundational technical breakthrough that's required? Some complex operational execution? A question of market demand? etc.), and maniacally focus on solving for that singular element in the most economically efficient way possible. I very much like this approach to investing and company building. Constraints (i.e. the limited amount of money one has in the bank) force focus and ruthless prioritization.

In the past decade tech entrepreneurs have experienced remarkable market conditions. Money from venture capitalists was seemingly infinite. This created a series of bad behaviors that entrepreneurs will have to unlearn. Mainly, it enabled founders to do too much shit at once without truly understanding and focusing on what was most important to make their business actually work (i.e. what is the white-hot risk?). My strong preference for company building, particularly at the early stages, is to singularly focus on the thing that is mission critical and to tackle that in the scrappiest way possible. I, like every other entrepreneur, have made the mistake of trying to do way too much on more than one occasion. The times things worked best were always when we had a crystal clear focus on the absolute most important thing to accomplish and focused all of our resources and attention towards it.

The recent market turn is going to create new constraints for entrepreneurs. Capital will be much harder to come by, and this will be a forcing function for leaders to do less. Ultimately, I think this is a very good thing. Many founders will struggle to adapt - these are new market conditions for a lot of people and new is always difficult. But those that do embrace these newfound constraints and zealously hone in on the white-hot risks are going to emerge having built industry-defining iconic companies. They will likely build better companies faster in this capital-scarce market than they would have in the capital-abundant one. Call me old-fashioned, but I'm excited about this return to normalcy. In the long run I think it will produce better outcomes for everyone in the ecosystem.