Technology and markets are like a river. Some parts are running faster, some slower, and some are eddies sending you backward. Currents are created by the technology, market segment, language, distribution channels, teammates and beliefs in your part of the world.

You need to cultivate the rare skill of assessing the speed and direction of the water surrounding you at all times.

“Find the fast moving water” is a concept that we communicate to our NFX Guild Founders from day 1. This way of thinking has been so adopted within our network that we hear them teaching it to their teams and other founders on a daily basis. So we wanted to write down what it is.

Founders: It’s your job to learn how to read the river, and then have the courage to steer your company into the fast moving water.

Because when great ideas and teams find the fast moving water, watch out. Little can stand in your way.

Fast vs. Not Fast

To build a truly meaningful company, you need to be honest with yourself about where you are. The Founders in the NFX Guild are *not* satisfied with “Not Fast,” “Pretty Good” or “Okay.”

This can be both hard and uncomfortable, because sometimes you don’t even realize that you’re in slow-moving water.

After all, things might be going well.

Maybe you’ve read about the hidden patterns of great startup ideas and already determined that your idea is in the “fertile soil” category and thankfully not in the “will definitely fail” category. Check.

You probably have something that is progressing with customers and revenue and you’re moving up the Ladder of Proof. Check.

You might feel the timing is right. You might even have product-market fit. Check check.

I know you feel you’re working hard. But are you doing all the work? Are you not getting much help from step-changes in technology? Not much push from a market segment growing all around you? Not much excitement around your language? Not much amplification from a new distribution channel? Not attracting the best talent?

Is the current speed and acceleration of your startup, right now, proof enough that it’s worth continuing for the next 10 years of your life?

When you get in the fast moving water, you know it. Everything lights up at once. Everyone wants you. Customers, teammates, investors, press.

If that’s not what you’re feeling, you’re not in it.

Finding the fast moving water is about having the courage to shoot for greatness.

The First Time I Found Fast Moving Water…

…was back in 2003. I was working on a consumer media website dedicated to photo storage. 10,000’s of people were using it, and they were quite content to have a new way to store their photos. We felt like we had found product-market fit and felt the timing was right for “something with photos.” But we weren’t in the fast moving water.

It sounds simple now, but it was non-obvious then, that the real current rippling through the industry was related to photo sharing, not photo storage. We tweaked the language on our site from “Store Photos” to “Share Photos.” The site immediately started growing virally, and within six months, we had registered 47 million users.

That fast moving water propelled the online photography and social networking space for 15 years. It built massive businesses with photo sharing at their core like FB, Instagram, and Snap. But photo sharing is no longer fast moving water for a new startup. If you start a business in it now, you will face water flowing in the wrong direction. There are new currents at work.

When I Finally Found The Words For It

Then, in 2008, Stan Chudnovsky and I were running another company, growing this one by 20,000 new users per day virally. But during a weekend walk on the Dish with our friend Saar Gur of CRV, Saar suggested that even if we kept up that growth rate, we still wouldn’t make a massive, meaningful impact given the sector we were in.

The business, he said, wasn’t in the “fast moving water” at that time in the evolution of tech. We were making it work with a talented team and long hours… but… meh.

He pointed to video games + FB platform as the fast moving water of that time. Stan and I continued growing the original business at a good rate, but we couldn’t get Saar’s words “find the fast moving water” out of our heads.

We realized that okay was not enough. Three months later, we pivoted into video games on FB, grew quickly to $10M’s of revenue that we didn’t have before, and Saar was proven right. That’s when I learned to always be on the lookout for fast moving water, first as a founder and now as an investor.

What Fast Moving Water Is – And Isn’t

The concept of fast moving water at first sounds like product-market fit. It’s not. It’s beyond that.

You can measure product-market fit with experiments, systematic observation, and testing. Over time, you show that your product matters and has extreme traction with a specific set of people.

Fast moving water is the mental model that helps you decide who those people should be in the first place, and what you’re even building in the first place. It’s how you understand which spaces to play in. It is a way of looking at trends happening around you – which technologies, concepts and behaviors are starting to take off. You want to read the river for leading indicators, not lagging ones.

That’s important to you because you will stumble into false positives – you will find sectors that give you short-run success of product-market fit, but long-term irrelevance.

There are thousands of SaaS companies that have met this fate. Successful businesses solving real customer needs, doing $5M, $10M or $20M a year in revenue… but they are still zombie companies in the greater context of blue ocean opportunity. We’ve seen strong Founders trapped in these companies for 10+ years, squandering the greatness they could have created in the world if they had been in the fast moving water.

You can have product-market fit, but find yourself left behind by competitors who have aligned themselves with larger currents and then also found product-market fit.

By contrast, you can lack product-market fit initially, but if you’re in the fast moving water, your chances of hitting the big outcome go way up.

3 Signs Of Fast Moving Water

There are 3 signals I look for to spot fast moving water:

1. Look for technology shifts that enable something new to happen.

Mobile phones, blockchain, GPT-3, Plaid, machine vision, etc, create dislocations in what can be done, how much things cost, and how fast things can happen. These contribute to what might be the fast moving water in any given year.

Each of these technologies creates a current, and then spawns other currents. For instance, the TechBio current driven by computational biology will spawn sub-currents like “Longevity” that will move faster in some years.

The availability of AI platforms is creating a current around “Generative Tech” that will push software to generate novelty on the edge, rather than just the database calls we’ve seen for the last 25 years.

Much within Web3/crypto has been very fast moving water for 2 years now, and while the valuations have decreased for the moment, the flow of energy for talent and capital in this direction is still very strong compared to other tech segments.

2. Look for a low-quality example that’s doing suspiciously well

If you see a company that’s growing absurdly quickly, despite having a mediocre product or a middling management team, that suggests there’s a larger current helping them along.

Many iconic companies were born from a second-mover advantage in fast moving water.

InfoSeek was surpassed by Google.
Stanford’s InCircle was surpassed by Harvard’s Facebook.
Hipstamatic was surpassed by Instagram.
Vine was surpassed by TikTok.
Uber surpassed Lyft despite copying them.

Part of that comes down to better teams, building network effects first, better products, slightly better timing, a lucky article that drove initial traffic from the right network nodes, etc. But, critically, the fast moving water was there. That current bolstered the mediocre projects, but it sprinted the great teams to long-term dominance.

3. If you show your idea to a customer and they have a physical reaction

When this happens, you’ll notice your target user physically leaning forward and their pupils will open up. Oxytocin and dopamine surges and can help the physical reaction.

It happened to me when I was in the back of a yellow taxi in San Francisco in 2010. The driver asked if he could drop me off early in order to pick up another passenger. I leaned forward to look at what he was looking at in the front seat next to him and saw his smartphone. On the screen I saw a map, a picture of a car, and a dot representing a potential passenger. It was Cabulous, the precursor to Lyft and Uber.

Chemicals went off in my brain. I can still remember the exact feeling and place we were on Mission Street in San Francisco. 5 minutes later, I ran up to our office to tell the team what I had just seen. This was a sign of fast moving water. It was just a matter of time before someone got the specifics and the execution right.

Another example was when I first saw DoorDash, or “Palo Alto Delivery” as it was called. My wife and I have four kids, so ordering in dinner changed our lives. My wife and I just grinned at each other as we and the kids ate quietly, and life was never the same again.

There were four other delivery companies raising seed money in that 6 month period in 2013. The water was moving fast, right there, right then. The Doordash team ended up being the best team, which is why you know about them and not the other startups. The river was going to bring us a winner, one way or another.

A Mental Model For Every Stage

The mental model of fast moving water helps you be a world class Founder at every step.

There are two modalities for this.

1. When you’re thinking about what to start. Most Founders have incomplete methods for thinking about businesses. They look at market size, problems to solve, product ideas and competitors. When you think about what company to start, add an analysis of the fast moving water to your way of thinking.

2. And every moment thereafter. Many of the biggest companies were created by Founders who first built their teams, and then moved to the right position in the river.

Zimride raised capital and built a team of 28, and after 2 years, moved 26 people to a new product called Lyft, a better version of Cabulous.

TinyCo raised capital as a gaming company, built their team of 15+ and then became Slack.

Facebook realized a few years ago that the fast moving water was no longer photo sharing. Now it’s texting / messaging. That’s why they spent about 10% of their valuable company to buy WhatsApp. That’s why they put a huge team on Facebook Messenger (including Stan Chudnovsky) who then drove it to 1.4 Billion users.

Things have cycles. Things have moments. Always be thinking: how do I get into the faster-moving water? You have to stay in the fast moving water no matter what stage you’re in.

The Red Ocean Paradox

You’d be right to ask: If fast moving water is a prerequisite for massive impact and success, won’t it inevitably become crowded? Won’t too many Founders jump in to shoot the rapids? Will you find yourself pulled along with the current, only to be deposited in a competitive red ocean?

Possibly. But this is where 1) the best teams shine, and 2) if you build a network effect, you can win even without the best team or product. These red oceans aren’t the signs of death and destruction many make them out to be.

Red oceans are signs that a lot of people actually want what you’re working on. By definition, a red ocean reduces the threat of market risk: you already know the market exists. Red oceans may seem overly competitive, but if there’s fast moving water in that ocean (a key technology, a persisting unfulfilled need, a bunch of low-quality competitors) you can still surpass incumbents, while other startups steer clear.

But Beware Network Gravity

Until you are in the fast moving water, you want to keep your team as small as possible. Otherwise you will build up a lot of network gravity within your company, and the leadership and effort it will take to change course will be enormous.

Network gravity is very real. It shows up in the form of resistance from well-meaning people who don’t want to shift from where you started, even if you’re paddling hard in the slow waters. They think it’s loyalty, or mission, or the right thing to do to stick it out. But they’re wrong. There are a lot of human emotions about commitment, belief, and excitement that get upended when you try to navigate your team from doing something fine, to shooting for something great.

Have courage. Don’t settle for “OK.” Don’t spend $5K or $10K of burn every day on mediocrity. And don’t let your employee and partner and investor networks keep you stuck. You have to get in the current, or someone else is going to – and then no matter how great your execution is, they will leave you foundering in their wake.

See the fast moving water and move there. One of the best things you can do for your teammates and investors is to push them – or let them push you – into the fast moving water. Do it now. Don’t wait.