How Headline is using AI to make better investment decisions

The VC's Deepdive tool helps measure product-market fit

How Headline is using AI to make better investment decisions

The VC's Deepdive tool helps measure product-market fit

Haje Jan Kamps@Haje / 12:31 AM GMT+7•November 21, 2023

 Comment

Image Credits: Getty Images

Startups are made or broken by product-market fit. Immediately before a funding round, founders know they need to show that they are growing rapidly. Throwing a bunch of money at sales and marketing can make the graph curl up and to the right, but does that represent real product-market fit?

The team at VC fund Headline was getting bored of seeing companies riding the OPM train — that’s the Other People’s Money express, right into the abyss — without having anything to show for it. So it decided to build software to get some deeper insights to determine whether a company has found true product-market fit or something else is going on.

Achieving product-market fit is no easy task. It requires a deep understanding of customer behavior, unit economics and capital efficiency.

Enter Deepdive, Headline’s new analytics tool designed to help founders navigate the complex landscape of startup growth and make data-driven decisions. The tool offers a unique approach to startup analytics. Unlike traditional business intelligence tools that focus on revenue graphs, Deepdive delves into the metrics that truly matter, providing founders with a comprehensive view of their business, enabling them to analyze customer acquisition, retention dynamics, spending behavior and more.

“We go beyond the surface-level revenue metrics and really focus on understanding customer behavior and retention dynamics,” Nicolas Von Blottnitz, a VP at Headline who focuses on Deepdive, told TechCrunch. “By segmenting customers based on their spending patterns and analyzing the unit economics, founders gain a deep understanding of their business’s performance and potential.”

Deepdive’s analytics dashboards offer founders a wealth of information to inform their growth strategies. By combining data from various sources, including transaction sets, customer channels and pricing plans, Deepdive provides a comprehensive view of a business’s performance.

“We believe in responsible investing and scaling. Founders must have a clear understanding of their product-market fit and the potential for sustainable growth,” said Thomas Gieselmann, co-founder and managing partner at Headline. “Deepdive helps founders quantify and visualize product-market fit, enabling them to make informed decisions and avoid scaling prematurely.”

Unlocking the Value of Data

Deepdive is still in its early stages, with a growing user base of founders who appreciate its value. While the tool is currently offered for free, the team at Headline envisions it becoming an integral part of the startup ecosystem. They hope to create a shared understanding of product-market fit and responsible scaling, ultimately benefiting founders, employees and investors alike.

The ultimate goal is to shift the spotlight from pure revenue metrics to the value of each cohort. Deepdive encourages founders to prioritize product-market fit and responsible scaling, ensuring they are not wasting their most productive years on a company without true potential.

A business model tool without a business model

It’s ironic, perhaps, that after all the talk we did about business models, Deepdive itself doesn’t have one: The firm isn’t planning to spin it out as a separate company, or charge for it.

“It really comes down to our investment philosophy,” Gieselmann said. “We believe in companies at scale, when they have product market fit. I do feel horrible for all the memories of board meetings where I pushed the founders to put the pedal to the metal, demanding they grow faster, before realizing that the company didn’t have real product-market fit. I have some amount of regret there.”

The firm is making a point around responsible investing and responsible scaling, wanting to invest in a certain type of company, and then paying fair market pricing for its investments.

“If Deepdive ends up helping us find just one massive success out of this, it’ll pay for it many, many, many times over,” Gieselmann said, reminding us of the power of returns regarding the VC model. Which, I suppose, could be a valid business model for a tool.