In tandem with technology, demographic change is one of the driving forces behind today’s market expansion. Demographic changes are broad shifts in population over time that materially impact user behavior and long-term demand. In venture, these changes signal emerging market opportunities, shifts in product-market fit, and the expansion of addressable markets.

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But looking through a demographic lens has sometimes caused founders to do unnatural things to narrow their market. As a founder, you could end up honing your base prematurely, defining your users too rigidly, or creating a product that feels more “for these people” than “for the way these people behave.”

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That is artificial gating.

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I’ve invested in artificially gated startups, and other smart investors have too. Artificially gated startups are not inherently bad or wrong, but, like any startup, they can be more or less likely to result in companies that scale to the size needed in venture.‍

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Natural gating, on the other hand, occurs when users behave in ways that create a product targeted to their behavior — not because of who they are, but because of how they behave.

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The divide between these two concepts is this: built for a group vs. built for a behavior that happens to correlate with a large group.

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Read the rest on the Cake Mix Substack

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