The concept of "Pillars" in the context of startups and venture capital is essentially a 500 Global philosophy for helping companies prioritize their actions and decisions. It provides a framework for founders to understand that, despite the amount of opportunities and ideas, they have limited resources, time, and need to focus on what is essential to get to the next level.

Pillars serve as a risk mitigation tool, “de-risking” a startup by allowing the next round of investors to have greater conviction in a business's potential and what levers affect the outcomes of a company. Pillars are unique to each startup and are created after several hours of deep understanding of business dynamics, generally in a conversation amongst founders and their 500 POC (point of contact). 

They serve as a roadmap for prioritizing efforts and aligning all key stakeholders to move a startup forward. Pillars also change as the startup moves forward in stages, they are like a thumbprint for every company at a specific moment in time.

The concept of Pillars was developed based on Tim Chae’s experiences with portfolio companies. It emerged from the need to help founders understand the mindset of investors at different stages of development. 

Founders often seek specific metrics or milestones to reach their next funding round, but it's not always beneficial for investors to provide fixed numbers. Instead, the focus should be on teaching founders to think like investors and consider the market's size, growth rate, and other aspects that demonstrate the opportunity's potential.

A lot of founders sometimes ask what's the MAU I need, what's the MRR I need, or how much ARR do I need to get to series A? When this question comes up, it's a great opportunity to teach the founder about how to think like an investor. 

Obviously, there's a certain MRR or revenue floor that's associated with what you need to do to get to series A or B. But there's also other aspects where you need to be able to show that if you do this, and then that, you will have “cracked” the puzzle of the startup’s growth.

The easiest way to know you are reaching product-market-fit is actually by looking at growth rate. If the market is massive and the product is great, the company should theoretically be growing fast. That’s how investors usually think about the upside and opportunity.

Pillars are the articulation of what will probably be the two, three, or the single biggest projects that, when investors see that the startup has accomplished them, the startup will automatically have a much greater likelihood of continuing to scale.

In practical terms, we use Pillars as a tool to align founders, mentors and investors in their efforts to work together. They help maintain focus, prioritize tasks, and create a shared understanding of what needs to be accomplished. 

The process of developing Pillars involves deep discussions with founders to understand their business and path to success. The responsibility is on us as investors to understand the business deeply and use our knowledge of the VC industry as a whole, to see how the puzzle pieces align and move forward.

Pillars follow a scientific method approach. Think of them as hypotheses or cooking recipes. If we follow specific steps, we can prove a core aspect of the business model. 

Just as an example, we’d like to share the Pillars we developed with one of our current LatAm portfolio companies. First for context, Conteller is a platform enabling brands to source genuine content directly from their customers and non-famous creators, serving as an alternative to influencer marketing, expensive actor shoots, or stock video content.

Currently, Conteller is in the midst of a pilot program involving 1,400 creators and 12 brands. After extensive engagement with the company, we’ve identified three key Pillars that have steered much of our work during this batch with them:

Pillars change a lot less the moment a startup achieves Product-Market-Fit, when they see the market’s excitement and traction results. Once you get that going, then it changes less frequently.

Once Pillars are established, every interaction that an employee, mentor, or investor has with founders should always be under those two or three sets of big projects, it's basically a road to avoid driving in the wrong direction. If someone wants to explore a new idea or task, does it actually help move the needle in any of those Pillars? If not, it's probably a nice to have, but a distraction for the time being.

It also works as a social contract with the founders to make sure we're staying prioritized on what we need to solve for TODAY.

Final Thoughts: Guiding startups through Pillars

Without knowing much about the business, you can probably imagine there's going to be 10 or 30 other things that you have to figure out in order for this business to be a big business. But if you think about the actual order in which things need to be solved, then you are thinking with Pillars in mind.

While there are no cheat sheets to creating company Pillars, the cue investors with enough experience have is that they generally know what the next stage investor will probably want to see for a company. Start from there. Your ability to articulate why they should think that way is fundamental to make the founders take the advice into actionable steps.

In summary, the concept of Pillars in the world of startups and venture capital serves as a strategic framework to help founders focus on key priorities, align with all their stakeholders, be it other investors, employees, and cofounders, and navigate the challenges of building a successful company. It's a dynamic and evolving tool that adapts to a company's changing needs and market conditions.

Author: Cecilia Ezquerro, Associate & Portfolio Manager, 500 Global

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