Building a Team

So you can't do it by yourself. That's what everyone told me getting into this, but the last several months have cemented that. In order to survive as a startup founder, you need to build a team. Figure out what your skills are, and find people whose skills complement yours. At the same time, you need a shared vision and passion. To be honest, the idea isn't as important as a shared love for a given process

What does this mean? You need to find people who have both the right skills and the right goals. In my case, that requires finding people who can do the things that I can't, who are passionate about building a company, and who are willing to stick with it no matter what. When I talk to the founders of successful startups, I'm amazed by what they were willing to do to succeed. Some of the stories are actually pretty incredible (on some level, it even sounds glamorous in the aftermath, although they were just doing what it took to scrape by). Sometimes I wonder whether I have what it takes, but then I remember that every path is different, and that you need to be willing to follow your own path.

So, to get back to the original topic, I think that there are two major types of companies. There is the hub and spoke, where there is a single founder, and everyone else plays a support role. Some people manage to make this work - usually the strong personalities who always need to be in control. The startup founder is kind of like the dictator of a small nation or the founder of a cult. Everything goes through him, and other people are sort of drawn to the energy that he puts out. I don't think this is for me.

Then there is the collaborative model, where you have a couple of core founders, each of whom has an equal (or mostly equal) stake in the company. Decisions diffuse out of this group. Each founder has control over a sphere of influence, and although everything is discussed among this group, the controller of each function is responsible for the execution and the outcome. In order for this to work, you need fairly equal strengths, and everyone needs to be both willing to stand up to the others and to yield when appropriate.

I'm not sure whether this post makes much sense. I'm trying to reason some of this stuff out as I write it.

Do It Again

I was at a conference today doing Guerrilla marketing (we showed up and were randomly approaching people on the expo floor), and I realized one of the important principles of succeeding at a startup and at life. I have been doing this for a while in other areas of my life, but had never formalized it. I can simply sum it up as "do it again." In short, whatever you are doing, do it one "bonus time" before you give up. If you're going to call it a day, follow up with one more customer. Build one more feature. Do one more thing.

In today's case, I was pitching a product. I would approach a customer, do a short pitch, and hand them a sticker. A couple of times during the day, I had to go to the bathroom or to get a snack. On the way to the break, I had to find and pitch one more customer. Often times, that pitch would go surprisingly well, and I could feel good about taking a break. Even if it didn't, I had still accomplished my goal.

The Theory
This tactic works well for a number of reasons. First of all, there is a motivation to do that last pitch (getting to go home/to lunch/to the bathroom), so you are inspired to do it. In addition, we seem to be motivated to quit at a high note. To get optimal efficiency, you always want to push yourself just a little farther than that high note...

I view any practice session as kind of a bell curve. The first few times you do something in a day, you are rusty, or maybe you don't have the skillset down. After you do it for a while, you start to rapidly get into the zone, and your performance improves. Then you peak, and it levels off. This is typically where you first want to quit. You feel good about yourself (validated), and don't need to keep going. If you keep pushing yourself, apathy and fatigue sets in, and you start to fade slowly, and then quickly. Finally, it starts to level off as your performance approaches zero.

So where do you want to quit? Most people quit at one of two places. At the top or the bottom. I would argue that neither is the correct place. if you quit at the top, you feel great about yourself, but you have untapped potential (half of the bell curve). If you quit at the bottom, you maximize your potential for that day, but you probably damage your self-confidence. The next time you try, you will remember the hard part at the end, and this will damage your performance. Obviously it depends on what you are doing - if you are pitching at a once-a-year conference, you might want to go all-out to fatigue. But if you're going to do this again tomorrow or next week, this may be counterproductive

My System
Here's my system for figuring out where to quit. You wait until you hit the first point where your brain tells you it's time to quit. At this point, you come up with a count. Typically not a high number (I usually do one or two, although in some rare cases it will be five or ten). You tell yourself that these are just bonuses, and that if they don't come out as expected, who cares? At this point, you force yourself to do that many more iterations of whatever you are doing. As soon as these are finished, you quit (regardless of the outcome). If you do this correctly, you should still feel good about yourself, and you shouldn't feel burned out. The first iteration should be about as good as the peak, and the second iteration should be slightly worse (but still pretty good).

Startups are a Journey of Self-Discovery

When I got into this, I thought that a startup was a road. You started at one end, and marched along to the end. It could be a long and winding road, but you essentially moved in a straight line. It starts with a concept, and progresses to a business plan, and then to a demo. You build a product, get customers, funding, etc...

What I have realized along the way is that this concept isn't necessarily true. Maybe your business "catches at some point," and then you race on towards the goal. I suppose that, if you are either exceptionally lucky or exceptionally skilled, that you might always be making progress.

However, the startup life is more often a journey. Imagine wandering through the jungle, trying not to get eaten by a lion or tiger. Maybe you have a jeep, or possibly you are on foot. I feel like we are on foot. You wander for a while, and maybe you eventually come to a road. Sometimes you hit a dead end, and have to backtrack a bit to find the route. At other times, you become so entangled in the thicket that you have to hack your way out (is there even a thicket in the jungle?)

So, enough of the metaphors - let's try to be concrete. One of my most interesting/important learnings is that there is no one telling you what to do. You need to figure it out, based on imperfect information. There isn't even a single correct move to make at each point in time. Every day, you need to figure out whether what you are doing is correct, or whether it makes sense to bag it and change directions.

Is your idea stalled, or is it dead in the water? Should you give up on selling to restaurants and move over to Facebook Applications (to take an example from my current situation)? Is it better to focus on one project, or to make smaller bets on a bunch? Is direct sales or internet marketing the best way to sell a product? Should you keep going in the same direction for a few days longer, or should you cut your losses and bail?

The life of the startup founder is one of many hazy possibilities. I think that my next post is going to be about advisors...

Why I'm Doing This

So, there is one question that I constantly ask myself, and that's "Why am I doing this this?"

I think that it's a question that every startup founder should be able to answer for himself. In my case, it comes down to a few different things.

Before I went to b-school school, I was an engineer at Google. It was a comfortable existence, but I felt like my potential impact was fairly low. Big company, lots of bureaucracy, and even though there was lots of total impact, the impact of the average engineer was pretty low. When we launched Google Page Creator, it literally took me six months to get through the launch approval process (lots of checks and reviews by various people). I understand why they were in place (to be honest, we were still under prepared when we launched), but it ate up a LOT of my time. Time that I could have spent making the product better (we were understaffed for pretty much our entire existence).

Google paid me well (I can't complain about that), but overall, it seemed fairly hard to do something big-risk/big-reward. Rewards (as they should be) are generally distributed according to how much risk you take, which often equates to how early you join. Paul Buchheit made a lot of money from Google not because he created Gmail, but because he was one of the earliest employees. I would actually argue that his earlier contributions had higher impact to the company than creating Gmail (which has high mind share but AFAIK hasn't been hugely profitable). There were some big rewards for contributions that had high impact, but these were somewhat arbitrary, and typically went to teams fairly close to the company's core business (usually having to do with the ads system). For the average person working on a non-search product, the upside was essentially a nice salary, a generous bonus, and some fairly good stock options (depending on when you joined).

For most people, this was great. Many of the people I worked with are still at Google (with the exception of some of the most ambitious). I have a bunch of friends who left school and are working at comfortable corporate jobs. I can't criticize these people. They are doing important work for important companies that have impact on our daily lives. In my case, however, I wanted something more. I really wanted a few things (in order of importance):

1) To create new things that were my own. There is nothing more rewarding than creating a product and having people actually use it. I love thinking up ideas and putting them into practice. There are definitely advantages to doing some of this within the framework of a big company, but in this case, you don't really own the resulting product. I wanted to create things and get them out there.

2) To learn about business. As an engineer and as a consultant, I was exposed to a small slice of the business as a whole. The best way to learn is to actually do it. While I have no intention of working a corporate job moving forward, I would argue that entrepreneurship is actually the best career move I can take at this point. I will learn what I'm good at, what I'm not good at, and what I can develop.

3) To take more risks. I don't mind taking risks in exchange for reward. I felt like I was too risk-averse in my career up to that point. While I'm a fairly calculating person, one of my current goals is to take smart risks. I feel like (especially at this point in my life) a startup is a fairly low-risk endeavor that potentially has huge upside. For me, the upside isn't a huge thing (I really can't see how my life would be significantly different if I had a few million in the bank), but there is definitely a thrill in knowing that my actions directly influence my outcome. Every morning, I wake up and think about what I'm going to do and how that will affect the company's outcome.

So that's why I'm doing this. What would be your reasons?

Different Languages

A startup founder needs to speak at least two different languages. And I'm not talking about speaking Chinese and English, or Ruby and Java. Those are nice, but definitely not essential. What I'm talking about are the languages "customer" and "investor."

So why do we need multiple languages? When I started doing this, I assumed that you came up with a single vision of what your company was doing, and that everyone would understand it. One consistent vision internally and externally - boy was I naive. It all started to gel when we decided to switch directions with our product. We were feeling sort of lost, so we had a conversation with our seed investor. He mentioned "demand pricing." We were excited - this was going to be the next big thing.

The problem was that when we started to actually discuss this with our potential customers, they had no idea what we were talking about. The concept was completely foreign to them, and even when they understood it, they didn't really like the idea. So we asked them what they wanted, and we built that. When we showed the product to them, they seemed pretty happy, and wanted to buy it. But then we talked to some potential investors, and they were completely lukewarm about the same things customers had loved.

"Sure you can make some money on that, but your sales model is too hard to scale, and it's not a big enough idea. It isn't going to be the next Google." This confused us. How are we supposed to build something that our customers want AND that investors want to invest in? Then it hit me - we need to say the same thing in multiple ways. You tell the investors one thing, and the customers a different. Essentially you're saying the same thing, but in terms that each can understand and relate to (I'm in no way advocating lying to either). One wants a huge potential market opportunity, while the other wants a product that is useful for them.

If you do it just right, everyone ends up happy. The customer gets what they want, and the investor gets a long-term vision that they can invest in. And you as the startup founder only need to do a bit of juggling.

Sales

So I think that the biggest shock of my short entrepreneurial career has been sales. Sales is hard. It's easy to sit in your ivory tower and build a product, but SOMEONE actually has to sell it. Unless you build a product that no one buys, which is monetized indirectly through ads. Then you build all of the cool features that you want, and hope that people come and click on your ads. But that's a digression, and probably the subject of another post entirely.

Returning to the point, sales takes skill and real work. You build your product, and talk about the millions of users, but then you have to actually go out and get people to pay you money. So you mean they won't just magically come beating down your door and asking to give you money? Well, in some cases it may work this way, but most of the time you will have to seek them out. At least until the "viral effect" kicks in and you experience hockey puck-shaped growth (ha).

So, in our case, we knew next to nothing about sales, at least in our industry. I sold knives the summer between high school and college. My business partner did a bit of telesales in the financial industry. Walking into a restaurant and trying to get them to buy a product was a completely different situation. No worries, though, because we were willing to try. And we've done a lot of trying.

So here's another interesting concept that I didn't quite grasp from business school. Even when the customer interested in the product off the bat, it still seems to take several meetings to get them to buy. I'm starting to understand things like cost-of-sales a bit better. You really can't sell a product for $50 a month if you have to make three pre-sale visits to the customer. They definitely tell you this stuff in business school, but you don't really learn it until you actually experience it. Eventually, you start to understand how much money you need to make to support yourself, and then you can use that to figure out how much each sale should be worth. Sure, you can hire dedicated people to sell, but they add to your fixed costs. As a founder, you can pay yourself next to nothing, but your employees don't expect the same deal.

Which brings me to my next point: switching hats is hard. Paul Graham and Joel Spolsky both talk about the cost of interruptions (skip to point number 8). I have found switching hats between sales and engineering to be very costly. Not only do you have to switch hats, but you also have to switch mindsets. After spending some time selling, I have a lot of trouble switching into engineering mode.

Anyways, more on this later...

Intro

I'm starting this blog to catalog the journey through my third year of business school. BUT, you say, the MBA is only two years. I guess that it is for most people, but for me, the classwork was just the beginning. One of the chief criticisms of the MBA is that it creates "managers" who know it all but don't actually know how to do anything. I took this to heart, and upon graduating, I decided to undertake the optional one-year practicum, also known as entrepreneurship. After spending two years learning about finance and marketing and sales and operations, I actually get to do all of them (often simultaneously) as a startup founder.

We're starting sort of in medias res, so I'll go back to the start and give you a bit of history. I think that it all started in November 2008, when I had an idea for a new product. Actually, I'll give credit where it is due, and say that it was a joint collaboration between myself and my friends Tyler and Mike. Anyways, we were out drinking, and had one of those aha moments where you are like "why couldn't they do X," and you realize that you might as well be "they." The product (a replacement for the restaurant buzzer that sends you text messages on your cell phone) wasn't nearly as important as the cascade of events it set off.

So, anyways, this one aha moment led to me entering MIT's business plan competition, forming a team (more on that later) getting to the semifinals, applying for and receiving a bit of seed funding (at least a post or two on that as well), and moving to Northern California (highly recommended in any case). I guess that the real story starts around the beginning of June, when we filled out the incorporation paperwork and started doing this full-time. It has been about two months since then, but I feel like it has been about a year.

Paul Graham really wasn't kidding when he said that a startup allows you to compress an entire career into a few years. I've seen a few new gray hairs on my head, and I'm definitely more forgetful these days. Anyways, back to the grind. I have a big demo coming up tomorrow, and we need to push a build before that.