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The topic of smart

2012-01-25T07:24:00.004-05:00

On the topic of being smart, the only thing I've clearly noticed is that it's a lot easier to sound smart than be smart.

There are people I know who sound incredibly smart -- almost like they've got it all figured out. Then you talk to them in person and they themselves will admit that they often don't have a clue what they are doing. It reminds me of when I saw a classmate last year and I was told "it's a lot easier to make decisions in case studies than when you have to make them on your own."

If you didn't know these folks, you just might think they're brilliant.

Maybe it's that sounding smart means you are not in the situation and aren't clouded by the facts, because you are "above the situation." Maybe being smart is tough because everything is personal, everything is ambiguous, and you care about the result because you have real skin in the game. Whatever it is, "being smart" is more nuanced than I first imagined.

Copycats

2012-01-19T21:13:00.000-05:00

"Copying someone can tell you what to do, but it can't tell you why you're doing it, and you're probably not going to do something well if you don't know why you're doing it." -Paul Graham

How founders "compare notes"

2011-11-19T10:29:00.000-05:00

Founders talk about how they're treated by investors, both VC's and angels. I "compare notes" with startup founders and I know that many more people do the same thing. More importantly, founders act on what they hear. I've noticed several things, but want to focus here on how founders block deal flow and founders sway deals.

On the blocking point, one of the meetings I had with a startup founder led to a discussion about investors who exhibit poor behavior. The person I was talking to brought up the fact that they have blocked at least a few deals for a VC who lied to them about a conflict of interest. I've seen this happen a few times and with particularly interesting companies. What is not captured here is how often this happens and what sort of tangible impact it has on investor deal flow in the future - and I'm not sure there's currently a way to measure that, though AngelList reviews are one attempt that could begin to tie this all together.

In terms of founders swaying deals, I can personally attest to this one, in the positive sense. An incredible investor of ours asked for help talking to a founder to explain why the founder should take our investor's money versus someone else. I was very honest with the entrepreneur and told them everything about this investor, and of course there was way more good here and the founder took that investor's capital. Well, I've seen the opposite happen as well - founders can sway other founders to not take capital.

It's interesting to see the above play out multiple times, rather than as one-off things. I know that a few initiatives over at AngelList could bring transparency to this offline trend and we'll see if they can figure out an elegant, enduring way to quantify both blocking and tipping of deals at scale. But until then, founders will always be talking with one another behind the scenes and I'm hoping high quality founders can help one another out even more. The positive byproducts of this will be increased investor accountability as well as the sharing and blending of "institutional" knowledge between startup founders. Both are very good things.

Addition by subtraction

2011-11-14T17:45:00.000-05:00

We believe it's all about winning as a team - in terms of results and being a great place to work.

Expanding on these team thoughts, the wrong behavior and mentality from a superstar can subtract value from the team, removing all of their traditionally measured contributions. Take for example this article on Barry Bonds. Here's a quote on toxic superstars:

"Normally in any clubhouse you have at least that one selfish bad apple on each team,'' Ross said. "And everyone knows who it is. It's not like that on this team."

On addition by subtraction:

"When Bonds and his toxic presence was finally removed by the hazmat people after the 2007 season, the Giants began to win more games. Not a lot at first, but enough to realize that Bonds' forced departure was like an emergency tracheotomy on the franchise's windpipe. The Giants could finally breathe again."

Superstars get a "longer rope" because they're so good, but at some point they can push the limits of tolerance within a team. No one misses a misbehaved superstar like Barry Bonds -- they simple do not endure. But what is fascinating and underreported is how often the team gets better once that misbehaved superstar is gone.

Reduce The Variance

2011-10-27T20:07:00.001-04:00

When playing darts, you try to "reduce the variance." It's simple: work on being able to aim and hit a certain point and continue reducing the variance around that point.

When I started out playing darts, I didn't always hit numbers. I was always aiming at the middle, so my variance was the dart board.

I'm currently at the point where I'm never leaving the inner circle (trips) when I aim at the middle. Going forward, I'll work on consistently hitting a number and the end goal is more frequently hitting bulls-eye.

I'm improving because I'm reducing the variance around my throws. I now find myself using this thought process in other areas of life.

The Variability of Output

2011-10-14T07:41:00.008-04:00

The beauty of being a full-time developer is that if you put time in writing code, you're going to eventually get software. If your input is high quality, then you're going to get wonderful software. Your time is leveraged: you spend hours writing something and now an infinite number of people can use your work.

Your time is probably close to being just as leveraged if you are a designer or a PM: for example, you may have created and designed a UI guide used by your organization. Output is steady - much like a late-stage PE-backed business that consistently spins off cash, you know exactly what you're going to get.

Then there's the business side. You might have a hundred meetings and none turn into anything concrete. But you have to turn over these rocks to see if there's a bit of gold underneath one of them. And then one random meeting might turn into a life changing event, an offer to get funding from an investor, or a huge partnership deal. And that has a 100x impact on the business, more than making up for all of the previous "wasted" meetings. Output is lumpy - much like a VC's startup portfolio where one great deal can more than make up for a bunch of bad deals.

The obvious point is that across all roles there should be a sustained, high level of input - everyone should be working hard and finding more creative ways to leverage their time within their own job. The less obvious point is that across jobs, and perhaps also industries, there is naturally going to be variability in output. Understanding that and its consequences (e.g. how and when to smooth output) is valuable when running a company.

Connecting Parallel Tracks

2011-09-11T08:04:00.005-04:00

If only there was a magical way to connect parallel tracks.

Many people are living their opportunities, problems, and so on in parallel to one another. When I see a friend who is struggling with a fundraise issue, and I see another friend struggling with the same issue, I like to connect the two folks - they have so much in common that the companionship is worth the price of admission. Anything else is a bonus and so I do what I can to connect parallel tracks.

But unfortunately there's not yet a seamless way to connect these parallel tracks. For example, how much better would it be if a person with the opportunity of an acquisition could be connected to someone else going through the same thing. It'd still be tremendously beneficial if that person could commiserate with someone who is even remotely close to what they're seeing. But right now the knowledge around the need and opportunity to connect two parallel tracks is trapped in one person's head. It needs to be distributed and open, thus solving the information asymmetry problem.

Mentorship, groups, associations, and support networks are all trying to solve this problem but none of them quite solve the issue. If you can figure out how to make this a magical experience, there's a big opportunity here to do something meaningful.

The confidence winning gives you

2011-09-08T12:08:00.001-04:00

"When you're trying to win a Super Bowl, you're not sure if you're good enough," he said. "But once you win it, you have a certain confidence, a trust, and that relaxes you. You believe at some point someone will make the play."

From this ESPN article on dynasties.

How Fortunate We All Are

2011-09-05T21:27:00.000-04:00

The past day started out poorly.

I had to say goodbye to someone I love. My grandmother passed away this morning, on what also happened to be her 83rd birthday.

This is also a reminder of how fortunate we all are. Often our problems are speed bumps, not true obstacles. It's easy to lose perspective.

I ended the day at peace, reflecting on the many good things all around me.

You're The Ones

2011-08-25T17:44:00.002-04:00

I love this post from Marc Hedlund about Steve Jobs. It's a great leadership story:

"In 1999, I think right after the iMac came out in a range of colors, I happened to sit in on an internal meeting at Apple, one in a large theater filled with employees. Steve Jobs came out and the whole theater burst into applause, and the clapping went on for minutes, with people standing and cheering. The success of the iMac was just becoming evident – the first act of Steve's big return, leading from there to what Apple is now.

Steve let the applause go on for a little bit, then, with much effort, settled down the crowd. When things got quiet, the first thing he said was: "That's an awful lot of applause considering that you guys are the ones who do all the work."

Everyone leapt to their feet and applauded again for several minutes more, this time with Steve egging them on, applauding each other as a team.

That moment has since defined what I think about as leadership."

Accidents Happen

2011-08-25T15:57:00.001-04:00

From my Honest Tea bottle:

In 2,700 BC, a Chinese emperor discovered the great taste of tea when a few leaves fell in a pot of water.

The moral: instead of saying "Oops," say "Why Not?"

Tired Body, Tired Mind

2011-08-18T02:09:00.000-04:00

Sometimes in the second half of games athletes start making dumb mistakes. I don't imagine players would lose their ability to see plays developing, but they do lose the ability to execute.

I noticed the same thing while working. I used to get so tired by the afternoons that I'd sometimes zone out and lose chunks of time because I wasn't my most productive. But now that I'm working out almost every day, I'm feeling great and feel mentally sharper at work.

It's a good reminder that a tired body leads to a tired mind. The people who think they can eat poorly, not work out, and stay in front of a computer for 18 hours a day don't realize the disservice they're doing themselves from multiple perspectives.

Out of left field

2011-07-23T02:37:00.005-04:00

"After graduating, Dalio went to Harvard Business School, where he traded commodities—grains, oil, cotton, and so on—for his own account. Not long after leaving Harvard, he landed at Shearson Hayden Stone, the brokerage firm run by Sanford Weill. Dalio worked in the commodity-futures department, advising cattle ranchers, grain producers, and others on how to hedge risks. (The horns of a longhorn steer, the gift of some California ranchers, are mounted behind his desk.)

On New Year’s Eve in 1974, Dalio went out drinking with his departmental boss, got into a disagreement, and slugged him. About the same time, at the annual convention of the California Food & Grain Growers’ Association, he paid an exotic dancer to drop her cloak in front of the crowd.

After being fired, he persuaded some of his clients to hire him as a consultant and founded Bridgewater, operating it out of his two-bedroom apartment. He was twenty-six years old."

Read the New Yorker profile of Ray Dalio here.

The Secret to Success

2011-07-19T22:08:00.001-04:00

J: And to make sure I didn’t miss anything, is there any other question I should have asked you?

R: Yes: “What advice do you have for people who want to get where you’re at?” And the answer is, from the outside everybody thinks that being good at something, or getting places, or being an independent contractor, or whatever your dream may be is really easy or that it’s just natural.

And I would say: hard work. I think that people have lost the art of super hard work, really focusing on something, working really hard and sacrificing while doing it. I think that’s probably my motto for success. Maybe I’m not as good a designer as others, which is pretty obvious. But what I lack in skill, I think I make up for in hard work and really trying to figure things out.

Read the rest of Rogie's excellent interview here (via Chris Lee).

A Spark Lights a Big Fire

2011-07-15T00:42:00.035-04:00

One of the things I love about Silicon Valley is that someone can go from a nobody to a superstar almost instantly. That's *not* possible at this sort of scale and consistency anywhere else in the world. For one of my personal anecdotes, check out the beginning of this email thread with Evan Reas (CEO of LikeALittle) from last fall:

Of course Evan was hustling and sending an email after we were replying to each other on Twitter but the point is that back then he was a complete "nobody" ;)

Now he's gone on to raise millions, LAL is a hot startup in the valley with great traction, and it seems like they have a pretty big opportunity in front of them with a top-notch team. As long as they just don't fuck it up.

Silicon Valley does a good job getting out of the way of "nobodies" because out here it's close to a pure meritocracy. Like a forest that's incredibly dry, all it takes is a small spark to light a tremendous fire. And of course in this analogy, a big fire is a very good thing. What's important is that this could probably only happen out in Silicon Valley.

In Silicon Valley it seems that the top talent, even if they're "nobody", more often than not finds a way to bubble up towards the top.

What Google+ Could Learn From Coca-Cola

2011-07-12T02:02:00.015-04:00

The rapidly growing lemon soda market was initially dominated by 7 Up and it wasn't for a long period of time until Coca-Cola's entrant, Sprite, took a dominant position in this segment [1].

Of course, Coca-Cola had an incredible brand even in the 1960's when they introduced Sprite to the market. It wasn't for a relatively long time until Sprite took over as the market leader in the late 70's.

Now imagine if Coca-Cola had used the power of their brand to name Sprite something else, perhaps utilizing Coca-Cola in the name, in spite of their core product differences [2]. You have to admit that would be kind of tempting, and while I'm not a brilliant marketer, perhaps they would have gone with Coca-Cola Clear Lemon-Lime, Coca-Cola Lemon-Lime, Coca-Cola Clear Lemon, or something else.

That would have been an awful mistake. And I see Google making the same mistake with Google+. Google is a search company; Facebook is a personal social network [3]. When I see Google+, I just think about how Google is using their new social product to augment their search/ads business. Perhaps if I had seen Google+ launch their product as plus.com (Google could just outright buy the company that owns plus.com) then I would have thought that Google was entirely committed to creating a social network. Or if I had seen a creative, stand-alone domain instead of plus.google.com or google.com/plus, I would have thought the same thing.

Getting the name of a new product right has to come before any innovations on UI, product, technology, and so forth.

[1] Source: http://en.wikipedia.org/wiki/Sprite_(soft_drink)

[2] Even though Sprite is transparent, has no caffeine, and has a pretty different flavor from Coca-Cola Classic.

[3] And Coca-Cola is a marketing company. Perhaps that's why they got the Sprite name right in the first place.

Thanks to Guillermo for brainstorming this post and reading drafts.

Big company inertia

2011-06-25T12:35:00.008-04:00

I stumbled across this old letter that I wrote to Anne Mulcahy, the former CEO of Xerox, when I was an intern at Xerox in 2006. Don't worry, I don't think I actually sent this letter to her.

I'm also surprised that something approaching Dropbox is what I thought would be a good "idea" as part of a big corporation. More than being a "cheeky bugger" and being willing to challenge the CEO of a once-great company, the letter shows one way that big companies can't seize the obvious opportunities right in front of them. Here's the relevant part of the letter (typos and all):

"I was attending a FreeFlow training session so that I could familiarize myself with the software. Our group heard about the many benefits of FreeFlow products, but I asked the group leader why we didn’t digitally store the documents for the customer, thus offering a true document solution and simplifying our customers’ business. The advantages are that this brings in more revenue for us because we charge for digital storage, much like Iron Mountain charges for storage, except digitally.

The beauty of Iron Mountain is that everyone needs them and yet they charge a lot of money just to pick up a document, store a document, and then charge again every time a customer wants to view a document. We could be doing something similar, except digitally, and at a lower cost to our customers. However, our group leader’s response to me was “well, we don’t have the money” without even considering how buying servers and offering storage space could significantly add value to our business for a low cost and with very high profit margins.

Most importantly, I noticed that her negative mindset was infectious to the entire group – if everyone thinks we can’t get something done then it won’t, by way of those negative thoughts. We need to get rid of the latent negativity at Xerox and what I’ve noticed is an acceptance of the “inevitability” of lower than expected performance goals."

Big corporations shouldn't be disrupted as much as they are by startups. Even bozo interns like myself could see the opportunity that a big company had at its fingertips. But even then, large companies are held back by very simple principles of momentum.

The pendulum of behavior

2011-06-20T23:00:00.008-04:00

I've noticed some strange behavior recently thanks to this infamous tech bubble. While the pendulum of power has swung back to operators and away from investors, behavior has also swung from good to bad on the operating side.

I'm seeing entrepreneurs who, with little traction or track record, have multiple term sheets to decide between. Take these guys and put them back 18 months ago and chances are they'd be "yes sirring" and "no ma'aming" investors. They'd probably be happy with what they could get, and they'd be respectful. Now, though, it's a crazy environment and many of them don't appear thankful for the cards they've been dealt but haven't really earned. I'm seeing entrepreneurs acting poorly.

I see the same pendulum of behavior shift for a handful of designers and engineers. Some mediocre engineers and designers are running around treating founders like they're God's gift to mankind. I recently saw a friend of mine get jerked around by an engineer who a year ago couldn't get a job - something is wrong with that picture.

The point is that power is on a pendulum and inevitably it will swing back from where it came. For example, you can bet that sometime sooner than later, investors will get back the power they had. And the people who were slighted now will end up remembering that behavior as well as the people who treated them poorly.

That's why when the pendulum of power shifts, the pendulum of behavior should not swing over to the bad side. Otherwise, it's going to eventually come back to haunt you.

Distribution of my Quora Answers

2011-06-12T22:08:00.003-04:00

Here's a look at my Quora answers by month:

Some ideas as to why I haven't found many questions to answer in the past few months:

Sometimes questions have a few answers and I don't know how I'll cut through the noise
Or I might find questions that are unanswered but only have 3 or less followers
Perhaps my Quora habits have shifted from "teaching mode" to "learning mode" and I've gone from a creator to a (permanent) consumer. I still *consume* content almost every single day, but I just can't find any interesting questions to answer.

Even though I haven't answered a question in 3-4 months, I'm getting about a follower a day. Perhaps it's the influx of so many new people that has contributed to all the noise I've seen lately on Quora, causing myself and a few other folks I know to have moved over to the sidelines to observe, as opposed to contributing actively.

What if Apple is actually helping some startups?

2011-06-07T21:19:00.006-04:00

Over and over and over I've been hearing that iCloud and other recent Apple announcements are the end of Dropbox and several other startups.

I see some similarity here to a story I heard about the coffee shop business. An independent coffee shop owner was terrified that Starbucks, while in their prime, was going to open a coffee shop across the street. Initially the coffee shop owner saw a dip in foot traffic, and of course across various business metrics, but then he started seeing a gradual rise that took his business well above where he was at in the pre-Starbucks days.

What happened?

Well, Starbucks did all the marketing for him and Starbucks did it for free. Starbucks brought in a whole segment of customers who Starbucks helped educate about high end quality coffee - they expanded the market. That Starbucks location drew so many new customers to the area that when the lines got too long at Starbucks, a bunch of folks would head on over to the independent coffee shop. Once there, they loved the product and a good amount of those new customers became loyal customers because the independent coffee shop had a much better product.

In fact, this same owner went so far as to place his next coffee shop right next to a different Starbucks in town.

So what if Apple's announcements actually end up helping some of these startups that are "all going to die" because of Apple's latest actions? There's a pretty good chance this will help at least some of these startups because they'll introduce the masses to many of these ideas that startups are already working on, and Apple will be doing this for free.

How You Work Best

2011-05-25T22:25:00.002-04:00

One thing that is interesting is finding out how you work best.

For example, I schedule "random" meetings at one to two times per day, always on a set time. That's because how I work best is when I have uninterrupted times to complete work, as opposed to meetings at different times. You could say this is a lesson learned from reading about the maker versus managers schedule but whatever it is, it works best for me.

Another thing - I've noticed I work best with a "slow burn." I'm responding to emails right now at 10pm and that's just the way I work. I am not typically high impact *at all times* during the day but I have ups and downs. I'm more of an endurance athlete, rather than a sprinter, when it comes to work and I have to grind out my days. Do I wish I could just do 10 hours of amazing, perfect work like some of my employees? Sure! But that's now how I am.

It seems obvious, but you want to align the decisions you make throughout the day to match your style.

How I find books to read

2011-05-14T09:47:00.002-04:00

I love reading and I've written about it here and here. One thing I've never mentioned is that I made a promise to myself a few years ago that I'd never let the cost of reading, even impulse reading, be a deterrent. That's why last weekend I bought 6 books on the same day. But the reason I'm writing this post is that I wanted to explain a bit about how I get my "book flow" [1].

There's a lot of randomness to how I find books to read. Consider the last couple of books I have read since February, starting with the most recent:

Little Bets by Peter Sims: I found this book because of a TechCrunch writeup and bought it on a whim. It has very little substance to it and I dropped the book 25% of the way through. It was not recommended to me, directly or indirectly.
Inspired by Marty Cagan: I decided to start reading a few more product and design related books to better understand how my genius product co-founder Thianh thinks. I know I will only scratch the surface but I'm working hard to become familiar with the context in which he operates. A while back I had read Design of Everyday Things, which was recommended to me by Chris Han. Therefore, when I decided to read more product/design books, I plugged that book into Amazon and Inspired was the next recommended book with a bunch of stars. The product management book Inspired was very good.
Hackers & Painters by Paul Graham: another ongoing obsession is understanding how Guillermo and our engineers think. I bought this book because I enjoy Paul Graham's essays and I figured it would help me understand engineering at a higher level. This was recommended by a developer and it turns out it was a pretty good book, though not fantastic.
In the Plex by Steven Levy: I saw a tweet from one of my investors when this book came out about a month ago. I bought the book and read it in a weekend. I enjoy books like this one because it has stories about a great company like Google that I can draw my own insights from. Overall the book was fantastic.
Where Good Ideas Come From by Steven Johnson: I bought this book because a few of my investors (and other smart people) recommended it. The book was very good because it had disjointed stories with valuable lessons.
Coders at Work by Peter Seibel: I bought this book because I enjoyed Founders at Work, which was recommended to me though I don't remember who specifically made the rec. I enjoyed this book less than Founders at Work, but Coders at Work was still very good for understanding what I consider the modern history of code.

The recurring theme, of course, is that when smart people recommend books to me I usually end up liking the book, even if it is in a topic I do not understand. When multiple smart people recommend a book to me, it ends up being very good. When multiple smart people who do not know each other recommend a book, the book usually ends up being great.

I'm always looking for more "good", "very good", and "great" books. I've learned over time that to find these high quality books I need to have them recommended to me, ideally by multiple people. That's one way for me to more effectively find the signal in all the noise.

[1] A similar, less nefarious version of deal flow

Influence beyond your title

2011-05-07T19:58:00.006-04:00

One of the people I look up to is Bill Campbell, often to referred to as Coach in Silicon Valley (see this Fortune article). He clearly has influence beyond his title.

Take this quote from Randy Komisar in the Fortune article:

"Bill's impact in the end will be very hard to measure, but it is really important. It won't be in the legacy of a GE; it won't be in the more classic sense of putting points on the board. It will be in seeing the people he's touched go off to do great things."

I wish there were more genuine people helping others do great things. I look for more people like this and I try to learn something from how they carry themselves day to day. That's because the people who have influence beyond their title are making a qualitative though credible impact in other people's lives.

How coachable are you?

2011-05-03T21:30:00.006-04:00

Here's a great quote from a Derrick Rose MVP article:

"He's humble, he's coachable. It doesn't matter if the 12th man on the team says something to him, he's going to look you in the eye and listen to you and nod his head and try to do it better," teammate Kyle Korver said. "That's just the kind of guy he is. And that is so rare. That is so rare."

You can be coachable, but to *really* show you're willing to learn you should be willing to listen to the person on your team that's lowest on the totem pole.

If you do that, you'll have an important and underrated ingredient for attaining incredible results.

Personal pronouns

2011-05-02T16:51:00.000-04:00

One thing I've noticed is that more people these days appear too busy to use personal pronouns [1]. For example, instead of saying "I will email soon" folks will instead say "Will email soon"

Have never understood this. Would like to understand why.

If you've noticed this, please do your part to save personal pronouns from extinction. Please help me bring personal pronouns back into our everyday emails, tweets, and status updates.

[1] Read about the different personal pronouns here.

2nd and short

2011-04-21T10:24:00.000-04:00

One of my guilty pleasures in college was playing Madden.

Whenever I ended up on a 2nd down and short (under 2 yards to go for a first down) I knew I had a chance to try for a big play. That's because if I didn't get any yards on the big play attempt, I would have a third and short, which I felt good about converting into a fourth down. Worst case, I'd have 4th and even shorter to convert, and I felt pretty good about that.

So being in a 2nd and short position was my bread and butter. This meant I could go big on a play and try for a touchdown, or a huge gain, which if I converted it would mean a big momentum change for me and a huge setback for my opponent.

I think about "2nd and short" a good bit. When you're in the situation that you've done many things well, you can take a couple of risks. You can "go for it" and try for the big play. That's a luxury, sure, but as a startup it makes you very compelling. It gives you a lot of confidence, which actually ends up being a big part of making you successful.

I love getting a first down but I feel pretty good about a 2nd and short situation. It means you have all the flexibility in the world to accomplish something great.

The beauty of no filter

2011-04-19T00:10:00.007-04:00

I'm writing this post immediately after receiving an email on which I was accidentally copied. The person who sent the email had privately written to the third person on the chain about me, in this case with some brutal words.

There's actually a beauty to removing filters, once you get past the pain of seeing the truth.

The beauty is that I have a direct look at how this person is thinking, and therefore I can see how someone in the world might think about me. That's rare. Also, because of this email we've now just all cut to the chase - there's no more BS, there are no pleasantries, it's just boiled down "the ask" in the email to a yes or no decision.

As much as it sucks to hear bad things about you, there's actually some beauty to it. It's a slap in the face, but it also keeps you honest.

Doggedness (The King's Speech edition)

2011-04-11T02:07:00.002-04:00

Mini history of the current startup environment

2011-03-29T01:04:00.003-04:00

Back in 1999 there was an interesting quote in the NY Times article Fannie Mae Eases Credit to Aid Mortgage Lending:

"In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders....Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people."

This was one beginning of the very bad crisis of 2008 and 2009. We can take steps forward or backwards in time, but there is no doubt that the unforeseen consequences of loose credit caused problems [1].

This meant that people held onto their money in 2008 and 2009.

Now let's examine at a high level how this has had unforeseen consequences today. The flight to safety meant a pause on investment. This meant VCs were not deploying capital at the same pace as previous years [2].

With nowhere to invest, angels were in the same position. They also held onto their money.

Fast forward to mid 2009 and things started to look up, thanks to Ben Bernanke and the effects of several generous bailouts.

That pent up demand, coupled with the ongoing lack of reasonable returns in public markets, real estate, and even bonds, led to VCs and angels beginning to deploy capital at a rapid clip.

With more people deploying capital, but the amount of startup creation until recently remaining at the same natural pace, startup valuations started to creep up. As they kept creeping up, more startups decided to bring their fundraise forward anywhere between 6 to 12 months. This means more work for VCs and other investors, but then something else has happened as well.

Now there are people starting startups that wouldn't have done so naturally. The other day I met with a friend who has no desire to start a company, and yet he said he was seriously considering becoming a founder and getting going with his startup. The catch? He has done no customer development work, nor does he have a genius idea [3].

Another anecdote: I have two friends with profitable companies that have never taken outside investment. They are both considering raising outside financing from VCs. When I asked them *why* they were going to raise money, they said it was because money was so easy to get. Perhaps the more sustainable answer would be because they had real places to deploy that capital.

Of course more people will be starting companies. Of course the seed bubble is good in aggregate.

Still, it's clear that things are "off" from the natural order of things. Once again, there are going to be some very interesting consequences that are difficult to predict while we're in the middle of whatever it is that's going on.

[1] This may be one of the biggest understatements of all time

[2] VC investment in 2010 grew for the first time in three years

[3] "Genius ideas" occur about as frequently as winning the lottery

Early web startups: building or selling

2011-03-21T23:23:00.025-04:00

At early web startups, you are either building or you're selling [1].

I thought I had written about this before, but Kyle set this post off:

There's no space for a CFO, unless you're doing a very finance intensive company.

There's no space for a strategy position, period. If a sub 10 employee company wants to hire you for a strategy role, they're lost [2].

Let's take an edge-case scenario: even a less than 10 employee web startup that has found product/market fit is going to need more people to build out their product. If they don't, and yet they've found product/market fit, then they will need folks to help sell product [3].

The truth of the matter is that most early web startups are just starting to find product/market fit and that's why a specialist in strategy or finance makes no sense at this stage. If you have finance or strategy skills, that should be a bonus to your role as a builder or a seller, but it shouldn't be your core contribution to an early web startup.

Anything that isn't building or selling is a luxury at a less than 10 employee web startup, and very few early startups can afford luxuries. If an early web startup isn't focused solely on building or selling, they're probably on the wrong track anyways.

Ultimately, the highest returns for early web startups are in building or selling. Everything else is just noise [4].

[1] My definition for the purposes of this post is 10 employees or less.

[2] If there is a role for you there, you probably don't want it.

[3] Marketing and business development go hand in hand with selling.

[4] Great response from Caren: "ABC: Always be coding. (or closing)."

How we do non-technical intern hiring

2011-03-20T14:54:00.004-04:00

One of my investors, Naval, put up a pseudo-joke redirect with Nivi that links to a Quora answer about introducing friction. The link actually applies to non-technical intern hiring, so I'll share more about LearnBoost's process.

First, the relevant quote from that Quora answer:

"One thing I've discovered over the years is that asking someone to do the tiniest bit of real work is an unreasonably effective way of separating out the posers from the operators."

I apply that logic to people I'm considering as non-technical interns, as we already implicitly require it when doing technical hiring and non-technical hiring. When fielding a request, I turn around and ask for a small homework assignment to be completed -- depending on the position, it's a 30 to 60 minute exercise.

By asking for that homework assignment, I introduce a little friction in the recruiting process. This is a good thing because it tells me so much more than a traditional interview.

The process works like a sales funnel. Asking for a completed assignment tells me how interested an inbound candidate is, so I'm qualifying the lead. Then the results and turnaround of the assignment tells me how smart and hard working the candidate is, so I'm working the lead. If the work is timely and smart, I interview the candidate, which is me moving the process along to the demo stage. Finally, if the candidate is great and fits everything we look for at LearnBoost [1], I do everything in my power to close the candidate.

Drop-off is intended to occur with my process. By asking a potential intern for a small homework assignment, I see 90% of people drop off. The only shocking thing has been on the non-technical internship recruiting side, where every single HBS student that said they would do their quick homework assignment ended up never getting back to me. That is unintended drop off, of course [2].

It's better to find out how dedicated someone is well before investing time in continuing the process. For both the intern candidate and LearnBoost, this approach probably works for the better.

[1] Talent, work ethic, and culture fit.

[2] Since there are no exceptions, these folks are dropped from consideration.

Investor brands

2011-03-17T23:29:00.021-04:00

"A common example of [information] imperfection is a consumer's inability to judge the quality of a product." - Felix Oberholzer-Gee

An under-appreciated aspect of a startup's fundraise process is the information asymmetry between a typical entrepreneur and an investor. An entrepreneur is often "at the table" for the first time, whereas an investor is at the table for the nth time. In this case, information asymmetry must naturally exist.

Brands help solve the information asymmetry problem. If you don't have the ability to judge the quality of a product, you resort to branding [1]. As an entrepreneur, if you don't have the ability to judge the quality of a VC, you resort to brand.

This is where problems start to creep in, though they need not occur.

One mistake I've seen is when entrepreneurs default to a brand, instead of using a brand to help make a decision [2]. Any entrepreneur going through a fundraise process should do extensive due diligence on investors on the other side of the table. Otherwise, defaulting to a brand is becoming lazy about a fundraise at precisely the time when original research is most required.

Brand should be an input, not the reason, for picking an investor.

[1] Think of tissue, cleaning products, and so on.

[2] This assumes the entrepreneur has a choice of investors.

What you can't teach

2011-03-03T00:16:00.006-05:00

In basketball, you can't teach height.

For example, if you are 5'5" you won't be able to beat a similarly talented 6'10" basketball player. It's just something you can't improve.

What you can't teach is just noting a differentiating factor in success.

Now it's worth noting that in the world of startups there are certain things you can't teach. Work ethic and talent can't be taught.

There's no disagreeing with the statement that talent can't be taught in the startup world. If you've ever worked with a 10x individual, you'll know what I'm talking about.

The controversy might be about my belief that work ethic can't be taught. From what I've seen, you're either a hard worker from the start or you aren't - I haven't seen people change in this capacity in a significant way, not even once.

It's important to find out what can't be taught and then starting with those ingredients when you're building a team of any type.

Why the "bubble" is good in aggregate

2011-02-19T13:35:00.015-05:00

There's a lot of talk about a fundraising bubble.

The big question is whether a bubble of some sort currently extends to every stage of startup financing. Anecdotally, I've seen a multitude of seed stage deals getting done, with few startup founder friends raising a Series A or beyond with the same relative ease.

What this means is that the top of the "deal funnel" has widened significantly, but that phenomenon hasn't impacted Series A deals. In fact, it won't impact Series A deals: it's one thing to raise a $500k seed round from many investors, and it's quite another to raise $4M to $7M from one VC.

There's going to be a very big choke point at Series A. Which means that when all these seed stage deals come up for financing in the next 12 or so months, there's going to be a world of pain.

But remember that pain is not distributed equally.

The choke point in the funnel from seed stage to Series A is going to be most painful for small angels, who will lose everything they invested. The pain decreases a bit as you move towards bigger angels.

It will be somewhat painful for VC's, especially if they invested a couple hundred thousand in 30 startups only to see 3 succeed and yet have 2 of those 3 get Series A funded by other firms. The "no brainers" will always get funded, so investors will still have to put their company picking skills to work and make non-obvious decisions for who to fund for a Series A. Still, let's keep perspective here: spending a few million per firm to fund about 30 companies is a drop in the bucket for most VC's.

The seed stage to Series A choke point will be somewhat painful for founders. Less so from a reputation perspective, but more so from feeling absolutely disappointed. The consolation prize is that the 15-18 months of startup experience is the most concentrated form of skill building and experience a worker can get, anywhere in the world.

The drop off from seed to Series A will hardly impact early employees, though developers will have an advantage over non-technical employees when it comes to quickly finding another job.

In aggregate, this is still a good thing.

It is not difficult to see that the vast majority of these seed stage deals are going to go belly up. That said, more young people are getting funded than ever before, and they're having to learn everything about running a business on the fly.

Even with all these impending failures, a "class" of startup founders and early startup employees are going to be more knowledgeable and battle-scarred than previous generations were at a similar age.

Put another way: would you rather have these smart people go found a company (or join something that is seed stage) and go through that whole experience? Or would you rather have them not maximize their talents at BigCo, go join a rotational program, and so on?

A new class of battle-scarred founders will emerge from this experience and go on to do great things. Some may join bigger startups, others may go join large companies, but the vast majority will go start another company or join as a founding employee.

This class will already know what it's like to be a founder, and there's no accurate way to predict the impact this will have on startup ecosystems going forward. In aggregate, this will be a very good thing with far reaching implications.

High Talent Density

2011-02-07T14:28:00.006-05:00

One reason startups can outplay incumbents with many more resources is that successful startups tend to have a higher talent density.

My interest is where certain types of talent density are found, and whether those pockets of high talent know that they are amidst uniquely talented individuals.

As someone who studies and searches for these examples, I can tell you this doesn't happen often. A fairly recent example that comes to mind is PayPal, which has spawned LinkedIn, Yelp, YouTube, Palantir, and many more. Upon reading a few historical accounts, an interview in Founders at Work, and a few magazines, it's apparent to me that the early PayPal folks knew they were amidst something special well before their IPO or subsequent acquisition.

There are also important implications for investors, competitors, and potential recruits. That's because high talent density is first noticed within the startup and then validated by external authority afterward.

Edit: good timing, as TechCrunch a few days after this posted a similar article.

Thinking on your own

2011-02-02T12:38:00.000-05:00

A scene from Good Will Hunting best explains the phenomenon of passing off memorization as knowledge, as opposed to thinking on your own.

All you have to do is consume and digest

2011-01-23T13:17:00.000-05:00

I was looking through my old emails and one thing that caught my eye is the September 2009 correspondence I had with one of my professors regarding his papers.

I had asked multiple professors to send me their very best papers to read through, but with this professor I had asked him to send me as many as possible. He sent a bunch, but perhaps I surprised him when I read all of those papers and even the working drafts (and notes). Boy, I remember having a bunch of questions!

This exchange is interesting to me because there's an old Matt Welsh quote (ex-Harvard professor) where he shares the following:

"It is, after all, my firmly held conviction that the goal of academia is to broadly disseminate good ideas for others to exploit."

That's what professors do, among other things. There's a wealth of information out there, and professors have done a bunch of legwork to lay out an organized platter of wonderful ideas. All you have to do is consume and digest.

Moving stuff around is not cleaning

2011-01-19T21:45:00.001-05:00

Remember when your parents would ask you to help clean the house?

Starting out, I'd move a few things around for a while but I wouldn't really vacuum, clean the windows, or take a proper job cleaning the house. I didn't feel a sense of ownership but more importantly kids aren't very mature, so I thought I was getting away with not having to do chores :D

Moving stuff around is not cleaning. In a similar sense, face time isn't working. You can delude yourself into thinking you're working, but really you're just moving things around.

Playing the wrong sport

2011-01-16T16:23:00.008-05:00

One of my friends in high school was an amazing athlete. Thinking back on it, he lettered in five varsity sports and set records in almost every sport he played. This may be obvious, but an athlete like that doesn't come along too often.

Most people pick a sport and stick with it. That's how you get better: you practice, you play the game, you pick up patterns, and so on, all of which requires a strong work ethic and dedication.

Now imagine you're a kid who wants to become a soccer player when you grow up. Unless you are an insane athlete like my friend, you're not going to be particularly good at that sport unless you practice soccer, compete in soccer games, watch soccer, etc.

It would be absurd to say that you want to become a soccer player but you choose to play basketball instead during your critical growth years. Certainly there is some overlap: basketball will get you in shape and improve your hand-eye coordination. But if you believe that playing basketball will translate into you becoming a better soccer player, then you are deluding yourself.

Another point: your heart has to be in it. If you're saying you want to be a soccer player, but go play basketball, your actions are speaking louder than your words and your heart clearly isn't into soccer.

That's why it doesn't make sense when I hear students tell me every single year that they'll go into anything other than a startup "for just a couple years" before they go start a company. Plus the people who would "invest in you" and help you become successful are less likely to pick you than someone who is completely dedicated to startups.

Unless you are a very talented individual, you are not going to be particularly good at starting a company if you have been playing the wrong sport.

Thanks to Matt and Caren for reading drafts of this post.

Chiseling Away

2011-01-09T15:49:00.000-05:00

There is a new show called Million Dollar Money Drop in which contestants are asked questions and must place their money on one of three or four possible answers, with the distribution of money taking place however they prefer. For example, if you start with a million dollars then you can place that money evenly across all four possible answers and be guaranteed $250,000 and a shot at the next question.

I saw two episodes while wasting time before my flight home and I noticed something odd: not a single contestant had much conviction about their answers. Each time they would hedge in some way and by the end of the questions they'd be left with $50,000 max. They completely chiseled away at what they started with: $1,000,000.

This made me think of innovation and in particular how product development works in a traditional sense, because oftentimes the original, bold concept gets chiseled down over time.

To quote from Where Good Ideas Come From, the traditional way to build a product is "to follow a linear chain of expertise. The designers come up with a basic look and feature set and then pass it on to the engineers, who figure out how to actually make it work. And then it gets passed along to the manufacturing folks, who figure out how to build it in large numbers -- after which it gets sent to the marketing and sales people, who figure out how to persuade people to buy it.

This model is so ubiquitous because it performs well in situations where efficiency is key, but it tends to have disastrous effects on creativity, because the orginal idea gets chipped away at each step in the chain. The engineering team takes a look at the original design and says, "Well, we can't really do that -- but we can do 80% of what you want." And then the manufacturing team says, "Sure, we can do some of that." In the end, the original design has been watered down beyond recognition."

There is no conviction. Apple's approach is "messier and more chaotic at the beginning, but it avoids this chronic problem of good ideas being hollowed out as they progress through the development chain... the process is noisy and involves far more open-ended and contentious meetings than traditional production cycles -- and far more dialogue between people versed in different disciplines."

The common thought is to hedge your bets. Indeed, that's what most people end up doing at work, in life, and so forth. It's what the odds dictate, I suppose. It's the safe option but it's also the bland option.

Why do so many people, organizations, and so forth not follow their conviction? Perhaps because it's not safe to have a bold point of view that surprises people. Maybe it's not easy for most people to go against the flow.

Making sense of anomalies and trends

2011-01-02T14:52:00.016-05:00

Growing up, Tony Gonzalez was a successful athlete in multiple sports. Tony succeeded in basketball and football, ultimately chose to become a tight end, and then proceeded to revolutionize the position. Some pundits credited his basketball experience for developing his skills as a tight end, but for a while the more common explanation was that Tony was an anomaly because he's an athletic specimen.

Antonio Gates ended up confirming a trend: "undersized" but athletic basketball players can cross over to football and become particularly good tight ends. Antonio went undrafted, but then the San Diego Chargers took a chance on him as a project. A few years later, he turned into a dominant Pro Bowl player.

A quote from Youngme Moon's book Different helps make sense of anomalies and trends:

"When sceneries change and deeply ingrained truths start coming apart at the seams, the first to let go of the myth has the advantage."

Bringing this back to football, now teams look for former basketball players that become tight ends in football. They are continuing the confirmation of a particular trend that didn't turn out to be an anomaly. This past year Jimmy Graham was taken as a 3rd round pick, even though he played only one year of football. The early results are promising and analysts are raving about his late season performance. I'll bet that the next athletic, undersized basketball player turned tight end will end up being a higher round draft pick.

From the team's perspective, being late is "expensive" to miss out on. An interesting wrinkle here is that being "late" is advantageous from the player's perspective because the trend is proven and more of their value is accurately reflected in their compensation.

Thanks to Sara for reading drafts of this post.

Maximizing the potential of communication mediums

2010-12-19T14:04:00.004-05:00

Consider a phone call versus an email. A phone call is a synchronous form of communication and work, which is certainly necessary at times. But when it is not necessary, or when it is replaceable by email, then email should win as a form of communication. That's because email is asynchronous: you can send out a request, or information, and the receiver can respond at the moment that is convenient to them [1].

Now imagine blurrier distinctions between synchronous and asynchronous forms of communication. For example, I enjoy blogging and its asynchronous nature. I wrote about this on a Quora answer:

"One relatively easy way to help large numbers of people is by becoming a resource for a particular topic. A specific example is Venture Hacks -- they have an amazing blog full of advice for startups, raising money, etc. Basically Babak Nivi and Naval Ravikant wrote these posts over the past few years and they reach 50,000 people every month [1]. Imagine if there was a VentureHacks for your area of expertise. If there isn't one, you could write a detailed blog post/article once a week for the next year and really help a lot of people, just like VentureHacks."

Contrast that to a meeting with someone who wants to learn from you. If you spend 30 minutes with that person, particularly if you spend that time answering questions you've already blogged about, then you've spent 30 minutes helping one person directly. Working on a blog post for 30 minutes and helping 100 people is a form of leverage, due to its asynchronous nature.

There are tradeoffs, of course. A face to face meeting can have several back and forths, leading to faster iterations of thought. That can be lost on a blog, especially when people read but do not comment. A face to face meeting is more personal; a blog can be impersonal.

However, these tradeoffs melt away the more busy or important the person. It's much better for society to have a guy like Fred Wilson blogging every day than it is to have him meeting with 1 extra person per day. There is no debating this point. The debate is at what point do these asynchronous forms of communication before more efficient and necessary on an individual level [2].

As a person becomes busier, it makes sense for them to skew towards what reaches the most people and what allows people to consume at their leisure. Otherwise, they risk the monopolization of their time, which is explicitly scarce and valuable. The same logic, though, could be applied to anyone interested in maximizing the efficiency of communication.

[1] What I never understood when I worked at a large company were the group phone calls we'd have to placate various "stakeholders". This takes a synchronous form of communication and tries to make it asynchronous, with disastrous consequences if the group is too large or not everyone is paying attention. Thoughts are repeated, decisions are lost over the course of the conversation, and people tune out. Ultimately, you can't even revisit critical moments from the meeting unless someone took copious notes.

[2] Put another way: when are you busy enough to skew towards asynchronous communication?

Positive byproducts

2010-12-12T12:16:00.007-05:00

One of the ways we've set up LearnBoost is that there are many positive byproducts of our employees' daily work. This is a perk of working at LearnBoost, but for this to be sustainable it is important to remember these are byproducts, and not our primary purpose.

For example, LearnBoost has become an open source leader. But we have taken this technical leadership position due to the positive byproducts our technical team creates while making LearnBoost the best software in education. Our core focus is not to open source for the fun of it or to show off – there is always a greater purpose [1].

The same applies to LearnBoost's non-technical work. For example, we received an invitation to contribute to a reputable publication. Given Meredith's consistent productivity, having the opportunity to write became a positive byproduct of her work. But it will never be her core focus – if this writing becomes a distraction toward our team goals then we will stop contributing to this publication.

Positive byproducts of a company's core focus are incredible motivators. But it is important to remember that they are byproducts and should never distract or become the core focus of an individual. They are one of the things that make our company unique, but ultimately they are perks.

Keeping all of this in mind is one way to continue winning as a team.

Thanks to Matt Walker for reading drafts of this post.

[1] I am amazed by the following this technical team has earned on GitHub; every single developer at LearnBoost has played an important role. It is interesting to note that positive feedback can potentially overwhelm the capability to make good decisions. Avoiding the temptation to focus too much on open sourcing, instead of our product and saving schools from the tyranny of legacy software providers, may be fairly unique to our company. But being aware of all this positive feedback in the open source world means that we won't possibly let it blossom into a greater issue.

Thoughts on keeping a notebook

2010-12-05T15:32:00.002-05:00

I've written before about keeping an idea notebook but I couldn't fully express why it's so important. After reading through Where Good Ideas Come From, I came across a paragraph that explains how Darwin used an idea notebook to his advantage.

This passage explains what I stumbled upon and couldn't articulate:

"[Darwin] adhered to a rigorous practice of maintaining notebooks wehre he quoted other sources, improvised new ideas, interrogated and dismissed false leads, draw diagrams, and generally let his mind roam on the page. We can see Darwin's ideas evolve because on some basic level the notebook platform creates a cultivating space for his hunches; it is not that the notebook is a mere transcription of the ideas, what are happening offstage somewhere in Darwin's mind. Darwin was constantly rereading his notes, discovering new implications. His ideas emerge as a kind of duet between the present-tense thinking brain and all those past observations recorded on paper."

The passage follows a nice summary of slow hunches, which is exactly what an idea notebook enables. Keeping a notebook simply allows the cultivation of ideas to meet other ideas, occasionally forming something special.

How LearnBoost does recruiting and hiring

2010-12-01T14:08:00.001-05:00

Over the past few weeks I wrote two posts on how LearnBoost does recruiting and hiring.

I'm still getting questions about how to do hiring, so perhaps those posts were lost in the shuffle. Here is our post on how we do technical hiring and here is our post on how we do non-technical hiring.

Each post sums up our current thoughts on recruiting and hiring. As always, these ideas are subject to change, but they're working well right now.

Introducing Topic Clusters

2010-11-28T13:15:00.000-05:00

I've noticed that my blog has a "discovery problem" -- older content gets buried, unless it's in the favorites section on the right. That won't change dramatically until I find the time to do a blog redesign.

In the meantime, I want to try something new that is inspired by the idea of tags. Instead of tagging blog posts, I have curated my best blog posts that fall within larger themes. Each topic cluster has 5-10 posts and a short description next to each link within the cluster.

Here are the initial topic clusters:

I suspect I'll add and curate more topic clusters eventually.

Giving Thanks and Reflecting

2010-11-25T13:51:00.005-05:00

It's incredible how quickly things change in just a year.

This time last year, I was still in school and heading home to Atlanta for Thanksgiving. That day, I had just finished listening to Richard Tedlow's lecture on American history.

But this time last year was the first time I shared the ideas behind LearnBoost's all-in-one gradebook with my family. I remember sitting down with them and telling them everything I had discovered. But basically all I had were ideas. Last year I was one guy all on his own.

Fast forward a year and we're up to 8 incredible full time employees. I feel very very fortunate, not just because each employee is so talented but also because of their work ethic and the respect everyone has for each other. And of course on the personal side everything is going well with my family and friends. I couldn't ask for more.

Posts like this are important because the day to day minutiae of life can make things seem worse than they are. But when you step back and think about it, those day to day issues are just high class problems. We're all very fortunate.

Of course, I have to admit that I am excited to see what happens in the upcoming year when I get a chance to write another reflective post like this next Thanksgiving.

But a day like today is a great time to reflect and give thanks for all the good things in life.

Happy Thanksgiving!

List of companies started by MBA's

2010-11-21T19:25:00.024-05:00

There's a blanket statement (now accepted as truth) that MBA's don't start companies, especially the kinds of companies that end up creating massive amounts of value.

So in response, I'm starting a list of successful companies started by people with MBA's. These are just MBA's who were founders of companies, I don't even want to get into MBA's that were early employees at companies or even MBA's that end up becoming CEO's.

I'll get this list started with companies started by entrepreneurs from just Harvard Business School, Stanford GSB, MIT Sloan, Kellogg, Berkeley Haas, and Wharton. Hopefully others will add famous companies from alums of other MBA programs.

Add some more thoughts in the comments, and please cite your sources. I am hoping that this list becomes a pretty comprehensive resource of MBA's that went and started successful companies. Here's the list of successful companies so far, in no particular order:

Nike
Genentech
Charles Schwab
Akamai
3Com
Intuit
Staples
Bloomberg
Capital One
Electronic Arts
Sun Microsystems
Tesla Motors
Gap, Inc.
Victoria's Secret
Sealed Air
Zynga
Kayak.com
Zipcar
Match.com
E-Trade
Lotus
VisiCalc
Endeca
Starent
Trader Joe's
Gilt Groupe
EnerNOC
CVS/Caremark
Blackstone
Nine West
Liz Claiborne
Apax Partners
Warburg Pincus
Huntsman Corp
QVC
H&R Block
KKR
Commerce Bank
Half.com
Texas Pacific Group
Boston Scientific
Vault.com
TNT Group
Weather Channel
Bain Capital
The Carlyle Group
Highland Capital
Bridgewater
Greylock
Boston Properties
JD Power and Associates
Apollo Management
Summit Partners
Booz Allen
Crate & Barrel
Gartner
StubHub
TheLadders
athenahealth
Kiva Systems

So far the list is made up of companies whose market cap is a couple hundred billion dollars. And that's just counting the public stand-alone companies while ignoring the ones that have been taken private, have stayed private, have been acquired, or are financial firms.

I'm not saying you need an MBA to start a successful company. But you have to admit you're pretty shocked by that list of companies started by MBA's, and that's the point: MBA's do start companies and many end up being very valuable. Neglecting that business school has some effect on massive value creation in the form of entrepreneurship is shortsighted at best. Maybe this can be a step towards getting rid of blanket statements about MBA's not creating value.

[1] HBS Alumni

[2] Stanford GSB Alumni

[3] HBS Entrepreneurs

[4] Wharton Alumni

[5] Kellogg Alumni

[6] MIT Sloan Alumni

[7] Berkeley Haas Alumni

[8] Columbia Business School Alumni

Create more value than you capture

2010-11-17T08:49:00.001-05:00

Girl Talk (aka Gregg Gillis) released his new album, All Day, earlier this week. It has been quite the success.

More importantly, the entire album is free. That's right, even though in this interview he is "the first to admit that he labored longer and harder on All Day than all of the previous Girl Talk albums combined."

He is creating more value than he captures. Even then, it's going to come back to help Girl Talk in multiple ways, and for that it is a genius and long term focused strategy.

From an influence perspective, this strategy cuts through all the noise and becomes a topic du jour, basically taking mind share in an increasingly distracted world.

From an economics perspective, Girl Talk can go on tour and make way more from touring than from charging for this album. That's not just because of the economics of touring, but also because significantly more people are exposed to his music via his free album, which means more and higher ticket priced concerts. By extension, this means there will be merchandise purchasers too.

It is a brilliant strategy, and the mentality can be applied to business.

It's About Winning as a Team

2010-11-11T13:04:00.004-05:00

The New England Patriots are all about winning with a team mentality. If you play for that team, the focus is not on salaries, and it's not about stats. The way the Pats make this work is they do everything possible to make sure each individual buys into their team mentality.

With the Pats, they don't put up with any bullshit. A player can be supremely talented (see: Randy Moss) but if that person doesn't buy into the team mentality, they are gone. No one is bigger than the collective team. I love that approach.

And that team approach works: the Pats are consistently one of the best teams in the NFL. In fact, if you look at their roster, on paper they don't have the talent that most teams have in the NFL. But what they also don't have is egotistical "superstars" running around the locker room, causing problems, and playing just for themselves.

It means that individuals have to sacrifice some pride to get their hands dirty, and play a certain role within the team.

There are small, unnoticed moments where an individual has a chance to gripe about the role they're playing, or they can just get things done and swallow their ego. Every time someone complains about their role, it puts a dent in the team mentality and it affects the rest of the team -- one person might notice another person complaining about their role, and then they'll think they have a right to complain too. Or someone might put up a stink about not getting enough touches, or plays called for them, and then other players will think that's okay to do as well.

That's why even an innocuous selfish moment can be the "straw that broke the camel's back" and get someone kicked off the team. The coaches notice these things, and it's not hard to tell who is buying into the team approach and who is "starting to go rogue" -- and if they go rogue, you can bet they'll be gone in a flash.

In a successful organization, it's about team members being the glue and caring about the team more than they care about themselves. You better believe that in a world class organization, even the smallest contributions are noticed. From special teams play to critical blocks, all of that makes a team succeed and the best coaches notice and praise that performance as well. Not everyone can score the touchdowns, but everyone can pitch in and the best coaches make sure to praise someone executing to perfection within their role.

This means trusting that it'll work out better in the end if the team succeeds, because then the glory of winning shines on every member of the team.

Thanks to Thianh Lu for reading over drafts of this post.

Bonus: the New England Patriots eschewed individual introductions at their latest Super Bowl appearance, and decided to come out as a team. This video sums up how they're all about winning as a team.

Are you splitting hairs?

2010-11-07T17:02:00.008-05:00

This clip from Good Will Hunting makes a great point:

The money quote from the famous math professor, speaking to the genius Will Hunting: "I can't do this proof. But you can. And when it comes to that, it's only a handful of people in the world who can tell the difference between you and me, but I'm one of them."

The supposed difference between these two geniuses is nonexistent. It's like splitting hairs. But to anyone who really knows and can recognize talent in the math world, the two of them are miles apart.

This movie clip applies to many situations, especially when assessing talent at startups. For example, there's no way I can tell the difference between one strong developer versus another strong developer. Maybe I can look at where a developer worked, but that doesn't really mean anything. Ultimately, it takes a true technical talent to be able to see differences. That's why I'm lucky as hell to have Guillermo on my side.

There are situations that look like splitting hairs to many people. To the talented specialists, the difference is stark. Off the top of my head, this happens in portfolio management, venture capital firms, athletics, arts, and I'm sure there are many more examples.

You have to work hard to recognize where you aren't a talented specialist. It requires healthy self awareness. If you're assessing a situation outside of your area of competency, find a domain expert.

Otherwise you're at the mercy of randomness.

The Market's Upcoming Reaction to Talent Acquisitions

2010-10-29T18:03:00.002-04:00

We're about to see VC's get more comfortable with letting founders take money off the table and we're about to see the rise of partial founder buyout funds.

The beautiful thing about free markets is that there are always actions and reactions. With the rise of talent acquisitions, startups are being bought up for a nice sum of money but nothing that would get a VC extremely excited. Look at Google's average deal size of $17 million excluding Slide, and take note of Facebook's recent talent acquisitions of Hot Potato and Drop.io.

Look, if a founder has a startup that is not yet a runaway success, but they have an acquisition offer from a well regarded company at a reasonable valuation, then they have to really think seriously about the offer. Why? Because an acquisition looks like a win for the founder, and the cash from these relatively small talent acquisition deals is compelling.

Why is it a win? Well, when any of these entrepreneurs goes to start another company, they can go to a VC and say "I got bought by Google. I'm ready to go big on this company, because I don't really need the money" and the VC gets a proven entrepreneur.

Why is the money important? This cash (or stock) is compelling because usually the first $X million or $Y hundred thousand is game changing compared to an eventually higher take home amount for the founder. The difference between $3 million and $30 million is how much you're going to eventually donate to charity.

So if you can take home $3 million from a talent acquisition, then you have a nice amount of money. Contrast that with raising another round (or two) that might be highly dilutive because you don't have runaway traction, and the chances that you exit with a significantly higher amount of money, and you can see why these talent acquisitions are so compelling from the entrepreneur's perspective.

This is why there will be two market reactions to talent acquisitions.

First, VC's are going to get more comfortable with letting entrepreneurs take money off the table. They're going to realize that it's the first $y hundred thousand that really matters to an entrepreneur, and that by letting an entrepreneur take some money off the table they won't really be tempted to accept a talent acquisition. For this to work, a VC will have to be consistent about how much they allow a founder take off the table.

For example, if it becomes commonplace for a particular VC to let a founder take $500k off the table when they raise a follow-on round, then a founder will not even seek a talent acquisition and they will rebuff overtures from larger companies. Perhaps more importantly, the first VC's to act consistently regarding taking money off the table will probably see more popular deals fall into their lap.

And hey, there's already a bit of a precedent for VC's letting founders take a little bit of money off the table. It just so happens that this only occurs with the hottest deals, but the result is that it lets the founders focus on building a really large company. For example, when Facebook raised their round from Accel, Zuckerberg and Moskovitz quietly took $1 million each from Accel. That sure made it easier to resist acquisition overtures, even for substantial amounts of money, because these guys already had what they needed to live comfortably and focus on building an enduring company. But now VC's will react and allow this phenomenon to "creep down" into more of their deals.

The second reaction will be partial founder buyout funds coming to fruition. If a founder has the opportunity to get acquired by Google for $10 million after a year in existence, but they are not yet at the point of raising another VC round, then you can see funds pop up particularly to help founders take money off the table. There may be a space in the market to preemptively help founders find liquidity, and let them go back to building a large and enduring company.

Are there downsides to these reactions? Of course. Here are just a few downsides: what happens if a VC allows a founder to take money off the table, and in going for the home run the company ends up in the dead pool? What happens if a founder takes money off the table and doesn't stay motivated? What happens if a founder uses a partial founder buyout fund and then still sells out in a talent acquisition? How will LP's react to all of this and how much does that matter?

It's clear that something is going to happen as a result of the rise in talent acquisitions. That's the beauty of capitalism. The first reaction is that VC's are going to get more comfortable with letting entrepreneurs take money off the table, and they're going to signal it consistently. And the second reaction is that there will be a rise in partial founder buyout funds.

The serendipity of meetings

2010-10-23T16:17:00.003-04:00

A couple weeks ago I was in Boston to give a talk, and before the event I had lunch with my friend Sunil Raman. We were chatting about taking meetings, and having to say no to meeting requests for various reasons.

Around that point I had unfortunately been turning down too many meetings because were so busy building our gradebook (and other cool things). And Sunil reminded me that the benefit of being in San Francisco is that I'm exposed to the "serendipity of meetings."

That made me rethink my filter for taking meetings. Lately I've seen some random meetings end up being pretty interesting, and I usually learn at least one new thing at each meeting.

There always has to be a balance between taking meetings and getting work done in the traditional sense, but it's worth not skewing too far towards not taking meetings, since that means losing out on the power of serendipity.

Update: lucky timing, here are Paul Buchheit's thoughts on serendipity.

The Role of Qualifiers

2010-10-17T17:02:00.004-04:00

One qualifier I would use when asked about my first company, CK Tutors, was that my cofounder and I were not running the business full time. In hindsight, we were using that qualifier as a giant excuse for being fully accountable. It's only by going through that experience that I now see the role of qualifiers more clearly.

CK Tutors was a tutoring company that Orion and I started when we were beginning our senior year at Georgia Tech. Before we knew it, we had roughly 20 tutors in Atlanta alone. But I had to go start a job in M&A and Orion had to finish up Georgia Tech.

Looking back on it, we took full advantage of using qualifiers. Folks would see our success and talk about the potential, but we would always cover our bases and say things like "we know we could make it a much bigger company if we were running it full time."

That is ridiculous. We will never know if we could have grown the company into something significant, because we didn't run the business full time. For us, qualifiers played the role of reassurance as well as insurance for things going against our well-intentioned plans.

Now I see the role of qualifiers more clearly. "If I put my mind to it", "If I ran it full time", "If I wasn't so young", "If I had financing" and other qualifiers are just excuses. The role of qualifiers is protection against culpability. And unfortunately, qualifiers also work against you by acting as roadblocks towards greater success.

How to hire your startup team

2010-10-14T14:53:00.002-04:00

There's a great essay that VentureHacks just wrote about that has a lot of good hiring advice. Make sure you read the whole thing.

Perhaps this is no surprise, but here is my favorite quote:

"When a founder convinces A-level engineers to quit and join them full time... it is a major indication of the strength of the founder, the technology and of the idea."

The Entrepreneur's Keynesian Beauty Contest

2010-10-09T11:03:00.002-04:00

First, a primer on Keynesian Beauty Contests, from Wikipedia:

"Keynes described the action of rational agents in a market using an analogy based on a fictional newspaper contest, in which entrants are asked to choose a set of six faces from photographs of women that are the "most beautiful". Those who picked the most popular face are then eligible for a prize.

A naïve strategy would be to choose the six faces that, in the opinion of the entrant, are the most beautiful. A more sophisticated contest entrant, wishing to maximize the chances of winning a prize, would think about what the majority perception of beauty is, and then make a selection based on some inference from their knowledge of public perceptions. This can be carried one step further to take into account the fact that other entrants would each have their own opinion of what public perceptions are. Thus the strategy can be extended to the next order, and the next, and so on, at each level attempting to predict the eventual outcome of the process based on the reasoning of other rational agents."

The implications of the Keynesian Beauty Contest are far reaching. For example, you can apply this to dating. The relevant quote from Dan Ariely's blog post:

"When people are free to choose what type of discussions they want to have, they often gravitate toward an equilibrium that is easy to maintain but one that no one really enjoys or benefits from."

It is more interesting to me how the Keynesian Beauty Contest manifests itself in the startup world. In particular, this shows up when entrepreneurs are deciding what opportunity to pursue and thus what type of company to start. Some entrepreneurs will actually start a company because they think it is fundable, as opposed to something that they are passionate about but might also be non-consensus right.

Ultimately, here is what ends up happening: this "fundable" filter results in groupthink, which leads to innovation centering itself around a hypothetical mean.

Being In The Game

2010-10-02T11:46:00.003-04:00

One key to rapid learning and skill development in sports is by playing, and not by watching.

And it turns out that being an operator is like playing a sport -- you get a lot of reps by training and playing in games. This is very different than being a fan where you're watching the sport, and in that case it's rare that you develop the skills to play the sport.

Now in the rare case, you may become quite good at watching sports, in which case you become the equivalent of Bill Simmons over at ESPN: you notice patterns, you consistently make smart observations, but ultimately you're still not an athlete. You are simply a specialist in analyzation and observation of your particular field, which is sports.

What is also interesting is that being an elite athlete means that you can still transition to being an analyst of sports. Being an analyst, and honing your skills in analysis and observation, precludes you from ever becoming an elite athlete.

Put another way: just because you're seeing the game, it doesn't mean that you're actually in the game. That's worth remembering, regardless of your choice to play or watch.

The importance of long term thinking

2010-09-26T13:47:00.000-04:00

Some people are not long term thinkers. When these people optimize an immediate gain, they often don't think hard enough about the medium and long term implications.

Here's a recent example: when I was raising money for LearnBoost, I was screwed over by two different VC firms. What they did was egregious -- I checked with several startup CEO friends and they agreed. This is bad in the short term but more shocking in the medium and long term.

And here's why: health permitting, I'm going to be around for a long time. I'm in my twenties. So presumably, I'm going to be at the startup table in some way, shape, or form for the next +30 years. In this case, why would you screw someone over if you thought carefully about the medium and long term implications?

Another example: a pretty high visibility startup has screwed over two of my friends by underpaying them severely and not giving them equity over the time they were both there. Of course, my two pals made mistakes in not pushing back harder but the point is that the management team at this startup did not think clearly about the medium and long term implications.

Not surprisingly, both of the screwed over individuals in question left the startup. The reputations of the management team have suffered among those who know. And so this startup has created more hurdles for themselves going forward.

When making any decision of consequence, seriously consider the medium and long term implications of your choice. You'll have a major leg up on most people for that consideration alone.

This post was from my former newsletter...

Measuring the quality of introductions

2010-09-15T13:56:00.000-04:00

When I make introductions, I try to always use the double opt-in approach. It is the most respectful use of everyone's time, even if it means I have to send an extra email or two.

One thing I've noticed is that the people who don't practice the double opt-in approach tend to make poor introductions. There may be two reasons for this:

They value their time more than your time: by making an introduction between two people without checking that both want an introduction, they save time as opposed to using the double opt-in method.
They assume they know what introductions you want: as the saying goes, assuming makes an ass out of u and me.

Let me be clear: I love getting introductions from people. For example, my investors frequently make incredible introductions. But they almost always use the double opt-in approach and that lets me occasionally turn down an introduction offer, which is why my investor's introductions are so strong.

The flip side of this is when people give out my contact information and tell the person being introduced that of course I'd be willing to speak with them. This happened again the other day, which is why I'm writing this post now: the person made an introduction by giving out my email to the other person, and then I felt forced to take the meeting. The intention was right, but the execution was wrong.

After the person rode their bike down to the coffee shop near our office, we realized within the first five minutes that the introduction was a dud based on what he needed and what I was looking for... and this problem could have been avoided with a quick double opt-in email. Instead of two minutes of the introducer's time being spent, it was 30 minutes not spent optimally for two people.

Not checking before making an introduction means you, as the person making the introduction, value your time more than the other party's time and/or you are assuming you know what someone wants. Doing one or the other leads to worse introductions and occasionally a waste of time for everyone involved.

If you make an introduction, please use the double opt-in approach!

How I can and cannot help people

2010-09-12T09:34:00.001-04:00

I welcome emails from entrepreneurs, MBA's, college students, and more. I try to respond to every legitimate request and where I can help, I try to help. And I help people for free, with nothing expected in return.

I have to write this post because of how people have been reaching out recently, how they have reacted to my responses, and how they've been abusing having my openly available email. Hopefully this post will set expectations up front and avoid any disappointments from people reaching out with requests I cannot fulfill.

Here's how I *can* help people who ask nicely:

I can help give you brief fundraising advice, if you already have investors at least interested.
I can help give you an opinion on investors you're deciding among (yes, some are better than others depending on your business).
I can help you at a high level on navigating your business -- I love business models, and I especially love startups trying to disrupt stodgy old businesses.
I can help you with career advice, especially if you're an MBA deciding to start a company or are committed to joining a startup.
I can help give you quick PR advice, especially if we have a prior relationship.

Here's how I *cannot* help people, even if they ask nicely:

I cannot become your advisor or mentor, especially if we don't have a prior relationship.
I cannot/will not make introductions to my investors. Please use http://angel.co as a proxy for whether you'll be able to garner interest from investors.
I cannot help people who've treated a friend poorly (or treated me poorly) in the past.
I cannot meet everyone for coffee. Thus, most of my responses are trying to answer your question or request via email and a smaller percentage are a quick call.

All this aside, if you think I can help you with one of the things in the first list, email me.

Why you need to get rid of face time

2010-09-04T15:37:00.005-04:00

Most places I've worked maximize face time, and not productivity. I'd venture that many companies seem to work this way too, whether explicitly or implicitly.

At LearnBoost, we actively try to maximize productivity, not face time. What I mean by this is that if you aren't being productive, or aren't feeling motivated, then you aren't even implicitly forced to stay at your computer where you pretend to work. In this case, implicitly forcing long hours is "the boss" or "management" not making an active effort to get employees out of the office, taking breaks, and so on.

In fact, I find that our team probably takes the most daily breaks at Dogpatch Labs, the startup co-working space where we are headquartered. This is actually a very good thing if you're an information worker, whereas if you are someone in a service role I recognize that you have to be available certain hours of the day, in spite of productivity concerns.

Now the reason breaks are good for information workers is that they allow us to constantly recharge our batteries throughout the day and have spurts of major productivity. That more than "makes up for" the "time lost" by taking breaks, playing video games, going for a long walk to get coffee at the delicious Philz, and so on.

An extension of this is that we don't have a vacation policy -- if you want to take time off, you can do so... as much as you want. Just give us a heads up. If you're working long hours, and sometimes working weekends for LearnBoost, then why the heck would I track your vacation? That just does not make sense to me. And yes we practice what we preach: talk to any of our developers and they'll tell you they've taken off random days for a variety of reasons, from being tired to having family in town, etc. Ideologically, I don't want to be part of building a company where folks are afraid to ask for time off.

Now to be clear, this actually takes getting used to if it's going to work properly. You might think that someone stopping to play video games for 30 minutes, or heading out to run errands in the middle of the day, is simply losing that amount of time in productivity. But the fact of the matter is that productivity is just not measured by face time. Productivity is truly measured by delivering great results, ideally sooner than expected.

The mistake companies make is they explicitly or implicitly make their work environment focused on the clock. But you can't force productivity to happen by having people at the office all the time. In fact, I've seen that even implicitly forcing long hours detracts from the true productivity that a startup needs.

One way to combat the face time problem is policy (e.g. a clear take as much vacation as you want policy) and another way is via culture (e.g. making breaks a priority, actively proving to employees that you trust them). Both are important, and both take time and patience to institutionalize. But once this is set in the DNA of your company, the rewards to maximizing productivity really start showing up.

Dealing with friction

2010-08-25T13:03:00.001-04:00

The latest book that has caught my fancy is Warfighting, by the Marine Corp. Here's the link to the free PDF, though if you want to buy the book you can also just search on Amazon.

The part on friction really caught my attention:

"Whatever form it takes... friction will always have a psychological as well as a physical impact.

While we should attempt to minimize self-induced friction, the greater requirement is to fight effectively despite the existence of friction. One essential means to overcome friction is the well; we prevail over friction through persistent strength of mind and spirit. While striving ourselves to overcome the effects of friction, we must attempt at the same time to raise our enemy's friction to a level that weakens his ability to fight.

We can readily identify countless examples of friction, but until we have experience it ourselves, we cannot hope to appreciate it fully. Only through experience can we come to appreciate the force of will necessary to overcome friction and to develop a realistic appreciation for what is possible in war and what is not. While training should attempt to approximate the conditions of war, we must realize it can never fully duplicate the level of friction of real combat."

I would re-read that passage to let the wisdom sink in. And then I'd recommend you go read the book, as it's chock full of wisdom that applies to startups.

I can tell you that training (e.g. working at an established startup, getting an MBA) can give you a leg up but it can not fully give you an appreciation of what it's like to actually start and grow a startup. The only way to appreciate the difficult of creating something out of nothing is to try doing it yourself. And if you do decide to create something, the way to maximize your startup's chance of success is to remove friction where possible, and where it's not possible, to create a culture of dealing with friction. Both are important.

You know it when you see it

2010-08-22T13:22:00.006-04:00

The "you know it when you see it" ability is very difficult to develop. More importantly, when recruiting you need to have it for every critical area of your company.

For example, I am not a world class developer. Heck, I'm not even a developer ;) So why would I pretend to know if a developer is special, great, good, mediocre, or bad?

Instead, when assessing the talent of our technical hires I completely rely on my co-founder Guillermo and the rest of our technical team. Because Guillermo is so damn good, he "knows it when he sees it" and so far we've assembled a really strong technical team.

Where I come in is making sure that our developers understand our vision and fit in our culture -- in fact, we are strict about someone needing to fit in with our culture. If they don't, they won't last in our company even if they're talented. On this point, we don't compromise.

Now back to the main point: danger arises when you *think* you know what you're doing, but you really don't. That lack of self awareness about your weaknesses is a recipe for failure. One way to think about this sort of disillusionment is comparing it to purchasing a car when you know nothing about cars. You're bound to make a mistake or two in that scenario.

And you know it when you see others make these mistakes.

What's your pitching wedge?

2010-08-14T23:16:00.002-04:00

A while back, I was caddying for my uncle in a tournament and throughout the day he was actually giving me advice, not the other way around. On one of the last holes, he had a bad lie in the rough but still seemed pretty happy.

Of course I was confused. It's the end of the tournament, things are coming down to the wire, and he's in the rough. He should have been pissed off. But he wasn't. I asked him what was going on and he told me that we were a certain distance away, which meant he had to use a particular club. It was his favorite, go-to club: a pitching wedge.

He explained to me that while he practices a lot, he makes sure that he always spends more time with his pitching wedge than other clubs. To him, if he hits a good drive, he is usually left with a pitching wedge into the green. The way he saw it, that's about 15 shots per round and sometimes more depending on shots around the green too.

The pitching wedge is the all around club for a good golf player. And by being great at it, he knew at he could really nail the shot he had from the rough, no matter what.

There are equivalents for a pitching wedge in life. Think of it as having a go-to move. But there's more to it -- if you think about it, not enough folks see the importance of a pitching wedge in golf. And there are go-to moves you can develop that other folks don't see as important. That's a great way to build a sustainable advantage.

Integrative Thinking

2010-08-02T08:40:00.001-04:00

One of my favorite books is The Opposable Mind by Roger Martin. It's dry reading, and a bit of a slog, but it's chock full of important ideas.

The basic idea behind the book is that innovation happens via integrative thinking. To quote from the Amazon snippet, "the opposable mind... is the human's brain ability to hold two conflicting ideas in constructive tension... [which] is an intellectually advantageous evolutionary leap through which decision-makers can synthesize 'new and superior ideas'"

The true integrative thinkers that I know don't fit neatly within any bucket, which is probably why they're (accidental) integrative thinkers in the first place. It's something I've touched upon in my "on the fringes" blog post, but I didn't introduce the idea of integrative thinking in that post.

These are the people that have longer term advantages and true staying power. Integrative thinkers don't have to generate new ideas, like an inventor. Rather, they can take complementary ideas and form new thoughts that can be incremental or evolutionary in nature -- and they can form these new thoughts with minimal effort, simply by observing their surroundings and continuing to "input ideas" through their mental models.

It's powerful stuff. And if you suspect you aren't already an integrative thinker, I suggest reading the book to observe a few mental models shared throughout the writing.

Yep. That post was from my letter.ly too.

Corporate VC: Kaplan Ventures Makes No Sense

2010-07-31T12:35:00.004-04:00

I don't usually promote LearnBoost blog posts here, but I wrote one that's broadly applicable. I do think you'll like it. The post covers Kaplan Ventures and more importantly includes an analysis of the education landscape from the corporate VC perspective.

It's interesting, I promise. Go read the post by clicking here.

Update: the piece got linked to by PEHub. Also, here is LearnBoost's list of schools to choose from.

Grow a bigger brain

2010-07-28T08:17:00.001-04:00

A passage from the wonderful book "The Rational Optimist":

"The rich meat diet also enabled erectus hominids to grow a larger brain, an organ that burns energy at nine times the rate of the rest of the body. Meat enabled them to cut down on the huge gut that their ancestors had found necessary to digest raw vegetation and raw meat, and thus to grow a bigger brain instead. Fire and cooking in turn then released the brian to grow bigger still by making food digestible with an even smaller gut - once cooked, starch gelatinises and porein denatures, releasing far more calories for less input of energy. As a result, whereas other primates have guts weighing four times their brains, the human brain weighs more than the human intestine. Cooking enabled hominids to trade gut size for brain size."

That entire passage could be entirely rewritten and applied to startups. Here's a quick go:

"[Taking outside financing] also enabled [the startup] to grow [quickly and seize an opportunity], [a decision] that burns [cash] at [X] times the rate of the rest of the [industry]. [Cash] enabled them to cut down on the [slow growth] that their ancestors had found necessary to [survive], and thus [grow quickly and seize an opportunity] instead... [Taking outside financing] enabled the high potential startup to trade [equity] for [seizing an opportunity]."

Differences at the Margin

2010-07-25T13:04:00.004-04:00

There are so many talented people hitting the market every year. It's amazing when you step back and think about it. Just think about the thousands of newly minted MBA's from top schools, every year, hitting the job market... in the United States alone. Of course, keep in mind all the engineers, computer scientists, "creatives", and so on that are hitting the market each year. That means there are at probably close to a hundred thousand very talented young people out there hitting the job market in any given year.

How do you compete with that? At the margin, what are the things that make a difference between you and any other person?

While you can nod towards luck, connections, and other characteristics, it's probably hard work that makes the biggest impact on differentiating yourself in a controllable manner.

You see proof of this every single day, in every discipline. One example where it's readily apparent is in sports. Unless you are a once-in-a-generation talent, you can't get by on just ability. You've got to work your ass off to really make a difference. We're all similarly talented but we're not all similarly hard working. That's worth keeping in mind if you feel like you aren't a once-in-a-generation talent but still want to maximize your chances of making a large impact in whatever you do.

This post comes courtesy of my newsletter. Maybe I'll bring it back.

Early Leads

2010-07-23T19:37:00.001-04:00

Now here's a theory I've been stewing around in my head, and I'm curious what you think. I've noticed that the people (and companies!) who get early leads often have a tremendous advantage. That is, if you're winning by even 1%, you get a disproportionately larger share of the rewards. Let me share an example:

When I was growing up, I did well in school and skipped a bunch of grades. I had an early lead on the academic side. In fact, because of that early lead I got just about everything my way: teachers would give me great grades on mediocre work and people would hear some of my class participation and think normal things I said were pretty smart. Most of this accrues to the early lead I developed in school, and it's been paying off ever since. When people hear I skipped a bunch of grades, they just assume I'm smart as a whip. Well, I've got news for you: it's really just thanks to that early lead.

And so this applies to business as well. We always hear in business school about markets tipping, so this could probably be an extension or adjustment of that theory. But it's worth keeping this one thing in mind: examine the market you're about to enter, or the one you're in, and figure out if an early lead does actually give you that disproportionate reward. If you think your market works that way, go all in and don't look back.

These thoughts come from my newsletter.

I'm returning to blogging

2010-07-22T11:49:00.002-04:00

Well, I'm returning to blogging.

The letter.ly experiment was extremely polarizing. Let me repost what I already wrote about it in one of my letter.ly newsletters regarding the polarization. Here goes:

"...when I started blogging, I got a ton of shit for it. Same for Twitter (some people got really nasty during my first year at HBS and then ironically they signed up for Twitter several months later). Same with foursquare and so on. Needless to say, I push what's new and end up getting a lot of resistance. To be fair, I've only mentioned mostly meaningless web services, but trust me that I do this for just about everything.

So when I decided to switch to a paid newsletter (less than $1 a month!) I got the most polarizing responses in a long time... I received positive responses like "this is a great idea" and "your thoughts are worth more than a dollar" and then on the negative side I had people call me "narcissistic", "borderline jackass" and other mean stuff. And it's mostly just interesting, because when you push the limits people respond in their true character.

Let me explain, because this is a chief motivation for why I generally like pushing people's limits. It's because I love seeing people's true character. You really see that when people are not in a relaxed state, but rather when emotions are high and they're experiencing some level of discomfort. That's what new, paradigm changing services do in terms of eliciting a strong response. It's what I like to do, personally, to see who exactly I'm dealing with.

But then there is the aftermath of pushing limits, and that's not to be taken lightly. After the letter.ly announcement, I was shocked by the people who had extreme responses on both sides. I was able to really see their true character. And we often don't want to see people's true character... at least, if we're not prepared for a "character unveiling" we're taken by surprise and put in our own situation of high discomfort."

So why go back to blogging? After the personal attacks, the insults, and the generally unsolicited awful feedback it almost feels like conceding. Blogging is a labor of love. Heck, the vast majority of my public detractors don't even maintain a blog consistently, which I feel is the biggest irony here.

Oh well, I always share my thoughts. If you look back to my first company, I've been blogging pretty consistently for the last four years. I've greatly enjoyed the time I did letter.ly, especially given the deeply personal responses my subscribers would send back to me, but I think something is missing without a very public forum. Maybe many of my readers take my blogging for granted, and the general discussion will suffer compared to the private discussions within my newsletter, but I think there's still some benefit to publicly blogging. I'll discuss this in depth in a later post.

In the meantime, I'm back. In between running and growing a company and having a fruitful personal life, I'll be trying to write my thoughts somewhat consistently here.

As always, thanks for reading.

From Letter.ly: On integrative thinking, a theory of finding talent, and a startup MBA

2010-07-18T17:06:00.001-04:00

To entice you to sign up for my letter.ly, some excerpts from the latest newsletter are below. Note: the third one (which has this content) goes out tomorrow.

On integrative thinking:

"These are the people that have longer term advantages and true staying power. Integrative thinkers don't have to generate new ideas, like an inventor. Rather, they can take complementary ideas and form new thoughts that can be incremental or evolutionary in nature..."

On a theory of finding talent:

"...when you're a general manager in sports, the best think you can do is consistently find underpriced talent. The next best thing you can do is find transcendental talent and find a way to compensate that person appropriately without hindering your flexibility. And, combining the two traits of a successful GM above, if you can find transcendental talent for below-market prices, you're a genius."

On a startup MBA:

"...the premise of "spend the money from an MBA on starting a company" is absurd advice. Dear sir or madame: you are not a financial planner, first and foremost. Then, you can't just "spend the money from an MBA on starting a company" because, hey, most people who go get an MBA *don't have the money for an MBA*. Think of the loans you receive when going through business school, and there's no similar systematic extension of credit to someone starting a company."

So that's a small sampling from the newsletter going out tomorrow. You'll get a few of these every month and if you're not happy, you can get your money back by emailing me. Otherwise, sign up here -- it's the only way to get access to this content.

From Letter.ly: On pushing limits, differences at the margin, and long term thinking

2010-07-11T14:40:00.002-04:00

To entice you to sign up for my letter.ly, some excerpts from the latest newsletter are below. Note: the second one (which has this content) goes out tomorrow.

On pushing limits:

"...this is a chief motivation for why I generally like pushing people's limits. It's because I love seeing people's true character. You really see that when people are not in a relaxed state, but rather when emotions are high and they're experiencing some level of discomfort. That's what new, paradigm changing services do in terms of eliciting a strong response. It's what I like to do, personally, to see who exactly I'm dealing with..."

On differences at the margin:

"You see proof of this every single day, in every discipline. One example where it's readily apparent is in sports. Unless you are a once-in-a-generation talent, you can't get by on just ability. You've got to work your ass off to really make a difference. We're all similarly talented but we're not all similarly hard working..."

On long term thinking:

"So presumably, I'm going to be at the startup table in some way, shape, or form for the next +30 years. Why would you screw someone over if you thought carefully about the medium and long term implications?"

I'm retiring from blogging

2010-07-05T13:52:00.005-04:00

I'm retiring from blogging. My (digital) friend Amanda wrote some great thoughts here, and she hits the nail on the head, but let me add a personal bit.

Basically what happened is I stumbled upon Jason Baptiste's post about email newsletters and it got me through to Sam Lessin's intro to letter.ly. And I work way too hard on my blog and the "branding" stuff is now less important, thanks to some solid things going on in my work life. So here we are: paid newsletters with more in-depth thinking about whatever I want, whenever I want. Less filtering, more awesoming. Make sure you sign up here.

To entice you to sign up, some excerpts from the latest newsletter.

On adjustments:

"... and perhaps surprisingly, I was massively productive. In fact, investors would wonder how the hell I was getting so much done while also being a full time student. And I think it's because I had these forcing functions everywhere that would cause me to be so productive. So now I'm slowly trying to figure out how to insert forcing functions into my day."

On raising money:

"One thing that won't get much attention but is worth nothing here: I really had no product. And yet what you often hear is "go build a product and then raise". Bullshit. That's not always true... I think this will get no coverage when we release our investor list, but I have to get it out there."

On early leads:

"... But it's worth keeping this one thing in mind: examine the market you're about to enter, or the one you're in, and figure out if an early lead does actually give you that disproportionate reward. If you think your market works that way, go all in and don't look back."

So that's a small sampling from the last newsletter. You'll get a few of these every month and if you're not happy, you can get your money back by emailing me. Otherwise, sign up here -- it's the only way to get access to this content.

Raising Money: Pitching is a performance

2010-06-29T07:33:00.000-04:00

Raising Money is a series of posts with advice for anyone thinking of raising venture capital or angel money. Previous posts: find credible sponsors, do homework, use both coasts,schedule meetings in batches, control your introductions, never pitch over the phone, better reputation is less time wasted, and use VentureHacks.

I wrote a previous post that doing a presentation is like doing a performance. Instead of reinventing the wheel, I'm just tweaking that post here for pitching.

You should treat pitching like doing a performance. You're an actor and you need to memorize your lines. That's how you get great timing and put on a show. Well, guess what: you should memorize your lines for your pitch. It's really the best approach to having a successful pitch.

Actors memorize their lines by practicing them. Over and over and over. Very few of them can get by on just "making it up as they go along". The ones that do look like this:

Unfortunately, you do not look like that. And your pitch isn't as meaningless as a stoner movie. So if you practice until you've got everything memorized, you'll make sure your timing is right and optimize the changes that your presentation is a success.

Remember: it's a performance and it's up to you to put on a show. That's how you'll stick out from the +5 pitches a day that a VC sees.

MBA Startup Hacks

2010-06-27T16:38:00.000-04:00

A long time ago I wrote HBS Startup Hacks part 1 and part 2. But I never put them together... until now!

Here's some advice from having launched a VC and angel backed startup while getting my MBA:

Build your “idea notebook”: you need to move toward starting a company with an open mind. A startup is your attempt at a new approach to something, which means you need to come up with sometimes crazy ideas. Having an “idea notebook” will help you capture everything that pops in your mind without filtering, and later you can go back to spot trends and test each idea.
Be shameless: when you’re doing a call or a meeting, don’t let it end without asking for at least one more introduction. This is how you make progress – by following every connection, you’ll expose yourself to broad ideas and get closer to your market.
Iterate, iterate, iterate: when you get to an idea that excites you, and makes sense in the market, you need to embrace that it will change many times. Be ready to iterate, and quickly! Nothing is static, and your startup will be a fast moving target.
Always follow through: just like sports, you need to always follow through. If you get an introduction, follow through and set up a call or meeting. If a professor recommends someone, you especially need to talk to that person. You have nothing to lose except a little bit of time. There is little downside to this approach and the upside is limitless.
Get out of the bubble: there’s nothing like customer development. You need to make sure there’s a market for what you’re doing. Talk to as many potential customers as possible. Test your theories. Tell them you’re considering starting a company, and ask them if they would be a customer. Their enthusiasm, or lack thereof, is a good proxy for what you’re doing. (If you don't know what I'm talking about, buy this book)
Build a “startup board of advisors”: you need to identify a close team of colleagues and professors who are willing to help you throughout this process. These are the people who will really get to know your concept, which is valuable to getting the most out of every subsequent meeting.
Stay level headed: this whole process can get lonely. Starting a company is like riding a rollercoaster, except you can’t see when you’ll be going up or down. Believe me on this one, because no one ever said starting a company was easy. When everything is going great, take a step back and realize there’s a lot left to be done. When everything is going poorly, take a step back and realize you’re going to be perfectly fine.
Test your commitment: if you’re doing a startup, you’re going to be tempted by job offers. Don’t submit your resume to the resume book. Don’t go to any recruiting events, even if it is the CEO of a reputable company. Don’t look at your debt.
Test your commitment again: ask yourself what job you would take over your current startup concept. If you had an answer for this, you’re not committed yet. Make sure you love doing a startup, and not the idea of doing a startup. It’s going to be tough, and you’ve got a long way to go, so you better be “all in” and completely committed to starting your company. If you are “all in”, good luck!

Raising Money: Use VentureHacks

2010-06-24T07:39:00.010-04:00

Raising Money is a series of posts with advice for anyone thinking of raising venture capital or angel money. Previous posts: find credible sponsors, do homework, use both coasts, schedule meetings in batches, control your introductions, never pitch over the phone, and better reputation is less time wasted.

One way to drive significant interest in your startup is applying to VentureHacks' Angel List and getting through to all of those investors [1]. Over on the VH website they say "your pitch will be reviewed by Nivi and Naval from Venture Hacks" but they do way more than that.

First, you answer a series of questions in 50 words or less. It's common sense stuff like "product", "social proof", "traction", and so on. But by putting a limit on your word count, you're forced to be concise. Being concise is great for getting your message across in a format that speaks to investors.

Then, if you make it through their filter, you have the option of going out to all the angels on the list, or just to a select few [2]. I went with the "all the angels" option and then followed up with custom intros for the people I was really interested in. Aside from forcing you to really break your pitch down into a micro-format, getting all of these intros at once really gets the ball moving on your financing.

I know that in spite of our pitch going out on a Friday afternoon, we still had a bunch of responses from going out to the whole list. I do think it would have been higher if it had gone out any other day of the week, but that's something you can't control when you apply.

The custom intro's get an even higher response rate. And ultimately, by getting through the filter that is Nivi and Naval, we were able to meet with several more angels that we wouldn't have had access to otherwise. It led to a big chunk of our (as yet unannounced) financing and further catalyzed our round with truly minimal effort. Perhaps more importantly, Nivi and Naval were both available to give me valuable advice as I went through our fundraise and they provided first-looks at much of the content you now see on VentureHacks.

So if you're raising a round of financing, use VentureHacks. Looking back on it, going to Angel List was one of the best things I did when raising LearnBoost's first round.

[1] Note: this is the newer version of Angel List

[2] Getting referred onto Angel List by someone Nivi and Naval already know, like we were able to do, is a great way to increase your chances of getting through the VentureHacks gauntlet.

Raising Money: Better reputation, less time wasted

2010-06-23T09:17:00.007-04:00

Raising Money is a series of posts with advice for anyone thinking of raising venture capital or angel money. Previous posts: find credible sponsors, do homework, use both coasts, schedule meetings in batches, control your introductions, and never pitch over the phone.

When I pitched less reputable firms, I noticed that more often than prestigious firms they asked silly tactical questions and were much more skeptical about credible facts. For example, I always had a pretty big market number that wasn't based on assumptions; after pitching plenty of firms, I noticed that the reactions to this number ended up being a good proxy for the quality of the firm/partner. [1]

The reason this happens is that, almost by default, the less reputable firms self-select towards not being as good as the better firms at making investment decisions. Don’t waste time with poor fits/less reputable firms beyond using them as practice. You'll also notice the other extreme: really amazing firms and angels make decisions rather quickly, and in the money raising business one of the most important things you need to do as an entrepreneur is optimize your time.

[1] By and large, the same could be said about less reputable individuals at any quality of firm. And as always, there are going to be exceptions too.

LearnBoost Blog Contest (Free iPhone 4)

2010-06-21T10:39:00.000-04:00

Many of you know I run a startup called LearnBoost.

What you may not know is that we just launched a really neat blog contest. Make sure to read the contest details here.

Basically we have made it very easy to win one of several iPhone 4's that we are giving away. Just answer the question "what do you think is the future of education? and link back to LearnBoost with the words free gradebook or online gradebook (like I just did).

Everyone is eligible to participate. Well, not my employees, but everyone else in the world.

I hope you submit a blog post and give yourself a great chance to win a free iPhone 4 :)

Raising Money: Never pitch over the phone

2010-06-18T09:23:00.006-04:00

Raising Money is a series of posts with advice for anyone thinking of raising venture capital or angel money. Previous posts: find credible sponsors, do homework, use both coasts, schedule meetings in batches, and control your introductions.

More lessons learned the hard way: don't pitch over the phone. I understand *why* a VC or an angel might want to talk on the phone -- it's low maintenance and they want to sneak you in to their schedule. It's more convenient. But convenience does not get you funded.

Why pitch over the phone and lose the magic of meeting in person? There are maybe a handful of firms worth risking a pitch over the phone to get an in-person meeting, but for 95% of the firms/angels on there you should insist on an in-person meeting.

If the person you're talking to insists on a phone pitch, just stick to your guns and say "please let me know when you're free to meet in person. I can come by your office or wherever is mutually convenient for you. But I believe our opportunity is best expressed in person."

Pitching over the phone just gives someone two opportunities to say no. And it tiers your fundraise with the particular VC or angel -- you get "screened" and then if you make it past hoop number 1, you get asked to come for an in-person meeting. Your time is way too valuable and you need to skip that extra step that someone wanting to talk on the phone will try to add.

Raising Money: Control your introductions

2010-06-16T09:42:00.002-04:00

Raising Money is a series of posts with advice for anyone thinking of raising venture capital or angel money. Previous posts: find credible sponsors, do homework, use both coasts, and schedule meetings in batches.

One thing I learned the hard way while raising money is that you can't rely on a person making an introduction to say what they want about your startup, because they can’t communicate your startup as well as you. You have to control the messaging or else your startup's story might get distorted.

To solve this problem, you need a 3-5 sentence “blurb” to send along with your request for an introduction. Make it memorable, interesting, and emphasize how big of a market opportunity you're going after. If it says billions, more power to you!

A related tip for managing introductions: if the introduced person doesn’t respond the first time, respond against that email with a significant update or two. That will likely get them on board for a meeting, because chances are they either forgot about your startup (it's nothing personal, the person is usually just really busy). If they don't respond after 2-3 tries, they're not interested; move on and get back to work being wildly successful.

Raising Money: Schedule Meetings in Batches

2010-06-14T09:32:00.004-04:00

Raising Money is a series of posts with advice for anyone thinking of raising venture capital or angel money. Previous posts: find credible sponsors, do homework, use both coasts.

You want VC’s and Angels moving at the same pace. This lets you create demand in the market so that you can have them compete against each other. To do that, you have to schedule in batches. It’s rough, but having 3-4 days where you pitch 2-3 times per day works.

The first time I started actively pitching investors, I did 3 meetings per day for 3 days in a row. It was exhausting, especially after a cross-country flight. To give you a feel for this, imagine sharing the same story and quips roughly 10 times in a row for an hour apiece, and you'll start to understand how difficult this was. It's tough to convey because you really have to experience it to understand what I'm talking about, but believe me: it's not easy. You're getting grilled by some really smart people who are looking for any excuse to say no.

But the benefits far outweigh the cons with this approach. Because if you batch your investors together, then you have them all moving at the same pace. You can subtly name drop and say "I'm talking to several firms this week, so I suspect things will move quickly" and from there it's up to you to deliver a fantastic pitch.

Like the Raising Money series? Stick around... there are new posts coming every two days.

Raising Money: Use both coasts

2010-06-10T09:31:00.002-04:00

Raising Money is a series of posts with advice for anyone thinking of raising venture capital or angel money. The first post was find credible sponsors and the second post was do homework on VC's and angels.

When raising money, it goes without saying that you must decide where the best place is for your startup. The additional advice I'd give is that you need to then start pitching on the opposite coast. This gives you valuable time to practice and see what the typical questions and feedback are. More importantly, you lower the risk of your deal becoming "stale" -- that's when you've been pitching for too long, have made the rounds, and all of a sudden you're seen as damaged goods because you couldn't get funded in a 2-3 month window.

After pitching on the opposite coast, take the feedback you received, iterate quickly, and schedule for the coast your company will be on. Reassure the VC's and angels that you're going to be based near them by a certain date and use both coasts to your advantage by playing one against the other. It's important to create a market and demand around your startup's fundraise to catalyze your funding event.

Raising Money: Do homework on VC's and Angels

2010-06-08T09:46:00.002-04:00

Raising Money is a series of posts with advice for anyone thinking of raising venture capital or angel money. The first post was find credible sponsors.

When raising money, it makes complete sense to do your homework on VC's and Angels. Think about it this way: these are the people you'll be spending the next ~5 years with, so why wouldn't you do some research and get to know them better?

And anyways, you need to self-select for the right investment fit. For example, if you’re raising $250k, you probably shouldn’t be talking to a huge fund. Do your homework so that you know if you’re a good fit from a fund need perspective.

But you should also do homework to figure out if you’re a good fit from a strategic/focus perspective. For example, if you’re cleantech you probably shouldn’t go talk to Union Square Ventures. And if you're in a capital intensive medical devices startup, don't ping Brad Feld at Foundry Group.

Doing your homework is another great test of your raising money process. If you get to a meeting and it's a bad fit, it reflects poorly on you as the entrepreneur. Your potential investor will think you're not worthy of investment before you really get to sharing the good stuff about your startup and investors talk to each other all the time.

To summarize: do your homework so you don't waste your time and the investor's time. Also, you don't want to look bad, since investors talk to each other. Otherwise, you'll make your fundraise process more difficult. And it's already hard enough as it is.

Raising Money: Find Credible Sponsors

2010-06-06T13:09:00.003-04:00

Raising Money is a series of posts with advice for anyone thinking of raising venture capital or angel money. This is the first of many posts, so keep checking back!

One tip to make your raising money process a bit easier is to find credible sponsors. The benefit is that you can subtly name drop your "sponsors" to pass the credibility onto yourself. Unless you're Jack Dorsey, you could use a little more credibility and positive signaling.

It doesn't matter if you're a Harvard MBA or a hotshot programmer at Google, you can always use more positive signaling. And having credible sponsors is an easy hack to make your life easier.

I had 2 "name brand" advisors and 2 amazing Harvard professors whose names I could use to gain further credibility. I made it clear to these advisors and professors that I wouldn't take up their time (roughly 30 minutes every 6 weeks). Instead, I told them that I needed to use their names to give me some extra credibility.

It certainly didn't hurt in my VC and angel meetings to say I had the guys I had on board and it was low risk for my sponsors, because they trusted me and believed in the vision of what I was doing. Once I got my first couple of investor commitments, I basically stopped mentioning my advisors and started mentioning who was committed to the round since that was better social proof.

Another way to think of this: if you can't get credible sponsors, then you probably won't be able to raise VC or angel money. If that's the case, you have too many open questions/issues to address or aren't working on the type of startup that gets funded. Go back to the drawing board and rethink your approach.

To summarize: If you can get credible sponsors, you obtain a low risk way to transfer other individual's credibility to yourself. Perhaps more importantly, you will have passed the first in a series of tests to successfully raising money.

Raising Money: Take X days off

2010-06-04T09:23:00.000-04:00

Raising Money is a series of posts written to share advice for anyone thinking of raising venture capital or angel money. Note: this particular post is idiosyncratic to Harvard Business School students, which is why I'm leading off with this post.

In a session during the fall of 2009, I took advice from the Rent the Runway co-founders to schedule Y classes off. It seemed like a great idea: have all Thursdays and Fridays off, which means leave for flights to the west coast on Wednesday evenings and come back on the Sunday redeye. But in hindsight, taking Y classes off is a big mistake.

Instead, you should schedule X classes off. That’s because VC partner meetings universally take place on Monday, so if you’re raising money from VC’s then you want to have the option to not miss many classes. Not just that, but you also will have plenty of Fridays off during your second year at HBS. So you can leave on Thursdays, set up meetings for Friday, and then be around for follow up meetings the following Monday. I can't emphasize how much better this would have been with my fundraise process.

To summarize: schedule X classes off if you're raising money, because you'll be better aligned with the VC's you're raising from and you'll be able to use "universal days off" to extend your trips to effectively get some Y classes off as well.

Determination versus fear

2010-06-01T10:07:00.004-04:00

Seth Godin had a smart post the other day about having determination in your eyes versus having fear in your eyes. I was struggling for a personal example before I stumbled back on my sandboarding videos.

I know I've linked to them before but this time I'm going to use the videos to make a different point.

Look at the time that I failed. I'm full of doubt and you can see I'm scared. I'm thinking about how I'm going to fail, instead of how I'm going to stay upright.

Now look at the run where I succeed. There is no visible doubt on my face and if I could see my old thoughts, I'd wager I was thinking "I'm going to do this". If there's no doubt in your mind, you're way more likely to succeed.

The question is *how* do you consistently get to that state of mind? Do you take previous successful experiences and apply them to other areas? Or is confidence/determination a "chicken and egg" problem?

This is a hunch, but I feel that confidence and determination are driven more by taking previous successes and applying them to other areas, even if those areas aren't directly related to previous success.

Does LeBron want to win?

2010-05-29T09:25:00.000-04:00

I think the athletic saga around where LeBron James will go next is fascinating and informative for general talent assessment. With LeBron, you have the most coveted free agent since Kobe Bryant supposedly "up for grabs" and meanwhile LeBron has to choose between winning, loyalty, and immortality.

There's no need to rehash Bill Simmons, who is a consistently fantastic writer by the way, but I would like to add a point to the winning argument. And that is: LeBron doesn't want to win at all costs. He may say he cares all about winning, and this quote from a recent article about Mark Cuban recruiting him supposedly backs that claim:

"What I do know about LeBron in the minimal time I've spent talking to him is he just wants to win. Money's not his issue."

If winning were his primary motivation, then LeBron would do this: sign for a minimum contract on a team with the building blocks in place to contend immediately and for the foreseeable future. If he signed with Chicago for the league minimum, they'd still have space to acquire one more talented free agent though not for a max contract. That would be the "winning" choice.

But unless he surprises everyone by actually doing what I say above, then I suspect LeBron only says he "wants to win". So how do you sort out words from motivations and actions?

More importantly, how do you apply this motivation assessment framework to recruiting talent at a startup? If you're prioritizing between the three motivations (winning, loyalty, immortality) then you probably lean heavily on winning and then loyalty. But how do you assess those motivations? That's what I'm struggling with and I'd love to brainstorm this further with someone.

Bet on yourself, not markets

2010-05-23T09:46:00.002-04:00

I was talking to my friend Elizabeth the other day and it reminded me of an email I sent in late February of this year to her father. The relevant part is republished:

"...the issue is who knows what the next bubble/force will be to drive that recovery.

But so much of this is psychology too that it's very difficult to predict. That's why I'm starting company #2... more control in my hands lets me make a bet on myself, rather than Mr. Market"

That's what drives a lot of entrepreneurs: they want to make a bet on themselves, rather than on other companies. At least, that's a part of what drives me. It also reminds me of something that happened with one of my uncles.

My uncle in Spain is one of several entrepreneurs in my family. A few years back, we were driving back home and he asked about my investments. So I shared that with him excitedly.

He cut me off as I started talking about another exciting investment and he said: "how do you know that it's a good investment?" I told him what I normally do when making an investment: I read several years of annual reports, read macro reports, build a model, and then ask myself "will this company be around in 30 years?" That's about it.

And he said "but you don't know what could happen. Do you think you have access to the most information? No. That's why you should bet on yourself. Your returns will be way higher if you do that"

It's one way of looking at entrepreneurship. If you consider what's happened to so many public companies unexpectedly blowing up over the past two years, the advice becomes even more compelling.

Why you shouldn't worry about investors stealing your idea

2010-05-20T16:18:00.003-04:00

Early on in my startup's life, I was worried about people stealing my ideas and starting a company. But I have never been too concerned with investors stealing my idea.

The few times I have been concerned with investors, and been asked to send a deck, I edited out the stuff that could come back to hurt me and that I felt was less than obvious. The tradeoff there is that if the investor actually reads your deck and uses it to decide, they won't see the best stuff to jog their memory. And the counterpoint to that point is that a few lines of ideas probably won't sway them either way.

All that said, you should lean towards not worrying about presenting to investors. I recently wrote this response on Quora and since it got voted up a few times, I wanted to share it here for non-Quora users.

Here we go:

"Ideas are basically worthless and a startup's success is about execution. If your idea can be copied into another startup, then it's probably not strong enough to stand on its own as a funded company.

If you have the greatest idea in the world, then sure, don't present to an investor that has already invested in a project similar to yours. But odds are it's probably not the greatest idea in the world (by definition!) and so you have something to gain.

Primarily, you get the early test of "can this stand on its own as a company" versus finding out later that your idea was in fact a feature that the already funded startup can turn on and wipe you completely out. So you get this feedback for free and may save time and resources as a result.

On the off chance that your idea can't stand on its own and it gets taken by the investor, you now have a relationship with an investor for when you do have something that can stand on its own. Or you could get hired by the already funded startup to work on your idea.

Lastly, this is a good way to find out how high this investor's integrity is when you start talking about your idea. High integrity investors will stop you and say something like "just to warn you, we have an investment in (fill in the blank) so if you'd like, you can stop now". That's a class act and it may be worth it for you to find out for future interactions with this investor."

Mass syndication is "A Party Round"

2010-05-18T09:37:00.004-04:00

At LearnBoost, we're taking the "mass syndication" approach to our fundraise. So far, it's going well. But like any decision in life, there are pros and there are cons. When this "mass syndication" approach goes well, things are amazing: multiple VC's fighting to lead your next round, great relationships get formed, VC's compete to prove their value to you with one awesome intro after the next, etc. When this approach goes poorly, well, you're screwed. Plain and simple.

For various reasons, this approach to fundraising made sense for LearnBoost. And without discussing in depth why we went the "mass syndication" route or the detailed pro's and con's, there are two main reasons why I call it a party round: it's more fun and mass syndication is actually like hosting a party.

On the fun point, what's cooler to say: "mass syndication" or "party round"? This alone is a "no brainer" reason to call it a party round.

More importantly, mass syndication is like hosting a party. Imagine you're hosting a party and have a bunch of guests over. None of your guests know each other that well. You are the host, so your main task is to make sure everyone is having fun. What are your potential outcomes on that night? Well, two scenarios are likely to happen.

The first scenario is that one of your "marquee" guests (in this case, a VC in the round) starts having a lot of fun. Fun is infectious (just like success is infectious) and this means that the second guest is going to have fun. Pretty soon everyone is having a blast.

Before you know it, as the host you're the life of the party. Everyone wants to talk with you, people want to see how you're doing, and people even invite you to cool stuff later on because they're having so much fun at your party (this is like getting follow-on funding in the form of a big round on your terms). That's the "very good scenario".

The second likely outcome is that one of your "marquee" guests starts having no fun at all. This is similar to when you're not doing well as a startup. Even if it's not your fault, people think a lame party IS your fault since you're the host. You know when you're at a party and there's that guy who sulks and pretty soon everyone is in a bad mood? Well imagine that the guy is sulking, calling people names, and generally being a jerk. That's also infectious. That's why you're screwed if you do a party round and things are not going well... or at least people can't see things getting better.

This is why a party round is a great name for "mass syndication." In a party round, things can quickly get out of control in a very good way or in a very bad way. If you're doing poorly and you have multiple investors (guests), then they'll rapidly head for the exit one right after the other. And guess who is left with the mess?

As the host of the party, you're stuck cleaning up all by yourself.

Presentation Hacks (All of the posts)

2010-05-16T00:11:00.000-04:00

Here's the definitive post on my Presentation Hacks series, with links to all of the individual presentation posts.

Remove Crutches: remove the crutches that most presenters use and you'll instantly upgrade your presentation skills.
Use Some Spice: you should use a little spice in your presentations. Add in a few well-timed quips here and there.
Fewer Words, More Power: make two versions of any deck you're presenting: a read version and a presentation version.
Timing, Timing, Timing: when it comes to transitions or adding a great zinger, it comes down to timing.
It's a Performance: you should memorize your lines. It's the best approach to getting your timing right and putting on a show.
Additional Random Presentation Tips: trust your clicker, design matters, and slow down your speaking.

Many of these posts individually received thousands of hits through Hacker News and other sources. Some of the later posts in the series were influenced by suggestions on Hacker News and other communities.

More importantly, I hope this Presentation Hacks series serves as a solid resource for people putting together any sort of presentation. Because together we can end the tyranny of boring, awful presenters.

Self-regulating communities

2010-05-14T00:41:00.007-04:00

Self-regulating communities are interesting because of how norms emerge and are enforced within a community. In particular, I've been able to see how Hacker News self regulates via my recent experience submitting a TechCrunch article.

I was sitting on my computer with Tweetie open when I saw a TechCrunch headline pop up. It was about Mozilla and the CEO stepping down to leave for Greylock. That piqued my interest and two big things ran through my head:

CEO's rarely step down from organizations that are getting better: to me, absent a few conditions below, this signals "the top" for Mozilla. That's a hypothesis, but think of the signal that stepping down sends. Look, it probably wasn't about the money for John because the Mozilla Foundation pays well. It wasn't about the glory: Mozilla is a very visible organization. And I don't think it was because Mozilla lacks challenges. Maybe John got tired, but absent personal issues, usually a CEO sticks around for longer than 2 years. Something is fishy to me.
The Mozilla-Google deal will present problems: in 2006, Mozilla (the non-profit) got $57 million from Google out of roughly $67 million of revenue for the year. In 2008, this post projects they hit about $80 million. In that same post, they project 2009 revenues in the worst case hitting $70 million, which is what their projected expenses were as well. I heard that Mozilla is worried about releasing their most current figures because they are making a killing above that expense number and are sitting on an even bigger pile of cash equivalents. In 2008 they were sitting on over $70 million in cash equivalents... when they release their latest numbers, look for a shocking cash equivalent number and a big delta between revenue and expenses. Could this fill the void in explaining part of the reason why John is leaving Mozilla? Does it signal the beginning of the end for Mozilla, Firefox, etc?

Now I want to focus on what is interesting about a self regulating community like Hacker News. I posted the link here and you can see the comments at that same link. Since I'm new to Hacker News, I had no clue that what is standard here is posting the same exact title that you link to -- lesson learned!

What is interesting about self-regulating communities is exactly that -- how they teach the new people like me what the norms are and are not. I was certainly taught the norms with the comment from aresant that says "Editorializing is for comments, article title is: 'Mozilla CEO John Lilly Stepping Down To Join Greylock Partners'" That comment is great -- I did not know the rules and I appreciate the straight up correction that is neutral in tone.

What is a poor method of regulating is a comment like this one from micmcg: "Way to sensationalise the article, nothing in it mentions the end of Firefox you clown." A comment like that turns smart people away from a community, even if a member turns out to be wrong which in this case may be me. Note: I now know I was wrong about posting the wrong title, but we don't know if this does or does not signal the beginning of the end of Firefox. Even if I am wrong on both counts, the insult is not necessary for making a point.

I clearly will stick around Hacker News because it has been a great source of, well, news. Plus the discussions are lively and it's a great, smart group of people. So when you see comments like this one ("Wow. You make an incredible amount of bad assumptions") that only insult and don't offer a counter-point, it shows a downside of a self-regulating community. And in this case, it also shows a downside of allowing complete anonymity of a user in a community.

Self-regulating communities aren't perfect. Hacker News is one of the best ones I've seen because of the quality of the people and the willingness of people to enforce the norms. But there is a line between enforcing norms and bullying new, interested members.

There is a base level of decorum that should be maintained in any self-regulating community and one my realizations is that no self-regulating community may not be able to maintain that decorum consistently, even a community as great as Hacker News.

An Interesting Flight

2010-05-12T06:41:00.003-04:00

Well I just took the JetBlue $10 flight from San Jose, California to New York City. And it was interesting.

It started with a lady who decided to bring garlic/fried food onto the plane. I guess she lacked a base level of respect for the other 100 passengers. It was an awful start to the cross country trip.

As the boarding process went on, I noticed there were a lot of old, frail people. Ominous sign, for sure.

From the $10 fare promo, this ended up being a completely full flight... except for two seats, one which was next to me. Of course, an off duty crew member came on the flight and she happened to be extremely big. She was so fat that my other seatmate started laughing at me when the new arrival put on her headphones.

That big lady saw the other spot and decided to move. So I got lucky. But then the flight started and one of the frail people started getting violently sick. So that sick person's seat mate decided to move to the one open spot which was now next to me. My new companion was, you guessed it, also ridiculously fat.

That sick lady was so badly off that the crew asked if there was a doctor on board. There was, the crew and doc did their thing, and I presume the lady got better.

Meanwhile, all this excitement had kept me fighting off my Simply Sleep pills. So I dozed off for max an hour before I heard a huge thump. It turns out a second person got really sick and passed out onto the floor. That was scary but the crew and doctor reacted quickly. I saw the crew make the husband sign some paperwork but I don't know what that was about.

The rest of the flight was awful because the lady next to me had body parts spilling over into my seat. Finally we landed and a medical crew escorted the first lady off the plane. And that was definitely a really interesting flight. I can't wait to go home and get some sleep.

Picking the right startup ecosystem

2010-05-08T13:56:00.000-04:00

The question of "where is the best place for a startup?" always stirs up a pretty serious debate. You have people arguing for San Francisco, some arguing for Boston, and a really loud but small group arguing for NYC. Then there's Seattle, Austin, and so on.

But the way to settle the debate between ecosystem advocates is to just ask "cui bono?" It's that simple. Cui bono just refers to who benefits from something, and that's exactly what you should look for when you see one investor arguing for a city versus another.

Of course Chris Dixon is going to argue for New York City -- he's based there and he works there. Fred Wilson is going to make the same argument for the same reasons above. You'll see presentations from guys like Jeff Bussgang arguing for Boston -- again, cui bono. And then there's always the Silicon Valley crowd talking about the benefits there (biggest ecosystem, most of the money is there, and so on).

What would be interesting is seeing someone who has worked with their own startups in all three locations, and then have that person provide a more objective analysis. Then you would need to find several more people with that same characteristic, so as to net out many of the idiosyncrasies in their analysis.

At that point, we can restart the very personal debate of which ecosystem is right for your startup. Until then, the question is answered by just asking the advocates for a particular startup ecosystem this very simple question: cui bono?

Kill 'em with kindness

2010-05-07T13:29:00.006-04:00

In my business (right now, the raising VC and angel money business) you deal with a lot of people. And the people I deal with deal with lots of people too. I'm guessing a VC sees hundreds of emails a day, and as a result an admin sees a good chunk of those emails too.

One thing I've learned is that you can kill 'em with kindness. Mostly I'm referring to the admins, who are oddly overlooked by most people but are really the gatekeepers to a VC/Angel's schedule. Why wouldn't you be nice to any person in general?

So when I say "kill 'em with kindness" I mean adding one extra line to your email, not going way over the top. I like to say something like "and thank you for your help coordinating this meeting -- I appreciate it" and that works like a charm. Or when you're waiting for a meeting, actually striking a conversation with the admin and asking how they're doing. It's got to be genuine, of course, but it's amazing how few people talk to the admins (maybe because they are nervous about the upcoming VC meeting?)

Just being genuinely nice pays off. Admins have given me great looks at a VC's calendar, and I've had an admin call me and say "tell me when is best for you and I'll make it work." There are stories I'm forgetting, but the good stuff I'm talking about doesn't happen everyday considering all the meetings admins have to schedule.

You should always be nice, don't get me wrong. But for some reason people overlook that being kind to support staff results in disproportionately good things.

Zero Zero

2010-05-02T10:01:00.003-04:00

I've been thinking about something that we always did junior year when I was on my high school soccer team.

When we'd score a goal, we realized that it's when a team is at its most vulnerable. I saw it first hand when many earlier teams I had been on would get scored on right after our goal. It negates the whole point of working so hard for that score.

So that year, after a goal, we would pause and celebrate for just a few seconds. And as we ran back to our side of the field, we always had one guy stop and yell at the top of his lungs, "WHAT'S THE SCORE?" and we'd yell back "ZERO-ZERO!"

That scared our competitors, but more importantly it got us results. That year we outscored the teams we played something like 48 goals for and 6 against. We beat some of the best teams in the southeast and some really big schools.

My varsity team was barely 15 guys from a 200 person school. We had a high concentration of really talented people, but the big part of our success wasn't our talent. Our success was actually the result of our mentality. And that's the broader point: don't let your success turn into complacency. Because right after a small success is when you are the most vulnerable to complacency and bad results.

Presentation Hacks: Additional random tips

2010-04-29T11:46:00.001-04:00

Some more presentation hacks that just don't fill up their own post:

Trust your clicker: make sure whatever technology you're using works beforehand. And when it does, trust that it works during your presentation. You could be doing everything right and then if you use your clicker and have to look back to make sure the slide changed, you've lost your momentum.
Design matters: I debate this with people all the time, and there's no way for me to prove it, but I think design matters. I'm a huge fan of Keynote and if you have an Apple you must buy this for your presentations. Anyways, an aesthetically pleasing presentation is better than one that isn't, right? So if I'm pitching a VC and we're tied on the idea and team, why wouldn't I want to have one more tie breaker, no matter how small.
Slow down your speaking: a lot of people get in front of an audience and turn into the Speedy Gonzalez of words. They don't even realize they're doing it. I know you might get nervous before a presentation, but just take a big breath and when you're talking try to slow it down to the point where you feel uncomfortable about the speed of your speaking. That's probably the right speed, even if it feels slow.

That's about all I've got right now for the Presentation Hacks series. I hope it was helpful! I'll let all of these posts "stand on their own" and then do a summary post in a few weeks.

Check out the previous posts in the Presentation Hacks series: Remove Crutches; Use Some Spice; Fewer Words, More Power; Timing, timing, timing; It's a Performance.

Presentation Hacks: It's a performance

2010-04-27T10:02:00.001-04:00

You should treat "doing a presentation" like doing a performance. You're an actor and you need to memorize your lines. That's how you get great timing and put on a show. Well, guess what: you should memorize your lines for a presentation. It's the best approach to getting your timing right and putting on a show.

Actors memorize their lines by practicing them. Over and over and over. Very few of them can get by on just "making it up as they go along". The ones that do look like this:

Unfortunately, you do not look like that. And your presentation probably isn't as meaningless as a stoner movie. So if you practice until you've got everything memorized, you'll make sure your timing is right and optimize the changes that your presentation is a success.

Remember: it's a performance and it's up to you to put on a show.

Check out the previous presentation hack on timing.

Hacker News user tptacek had a great comment regarding practicing that I'm allowed to share in this post. Here goes:

"For the last several talks I've given, I've printed all my slides and taped them up to the wall. Then I rehearse the talk once with a marker and write notes as I work out the wording. Then I walk through the talk with someone else in the room, more explaining the slides and the narrative than actually rehearsing, taking notes while I do that. Then I collect my notes and practice from that. I find actually rehearsing to be incredibly difficult (it's awkward, in the same way that narrating a screencast is awkward, but magnified), and while this isn't a perfect substitute, it's drastically better than just trying to write out everything I'm going to say, or, worse, just throwing slides together and hoping."

Presentation Hacks: Timing, timing, timing

2010-04-25T14:48:00.003-04:00

In my earlier post about presentation slides, I didn't get to mention a completely separate but important hack: that it's all about timing.

You need to know what slide is coming next and more importantly what you're going to say next. I have done my pitch so many times that I know the exact order of my presentation slides. I could do the pitch with my eyes closed.

And so I've noticed that timing is incredibly important. You have to know when to add a quip or two. You have to know when to transition (and so on and so forth).

For example, I have a cadence to my VC pitch: I speak generally about my sector, talk about our vision, and then pause. Always at this point in the presentation, I pause for an extra second or two. And then I transition to how we're going to make the vision a reality, first by drilling down into my competitors and then how we're approaching the market. Then I pause again and move to the next section.

That's another part of this advice: you have to recognize the power of pausing. A lot of people think you always have to be talking when presenting. Not true. You've got to let your message sink in.

When it comes to transitions or adding a great zinger, it comes down to timing. Which leads me to my next post: to get your timing right, you need to practice your presentation repeatedly. Stay tuned.

Presentation Hacks: Fewer words, more power

2010-04-23T10:18:00.003-04:00

I like to make two versions of any deck I'm presenting: a read version and a presentation version.

The read version is exactly that: for sending out before a meeting to be pre-read or for sending out after a meeting as reference material. Do not use the read version of your deck when you give a presentation. Way too many people do this.

With minimal effort, you can create a presentation version of your deck. What I like to do is multiply my slides by 3-4x and put as few words per slide as possible. For example, if my read deck is 15 slides chock full of information, I'll shoot to have around 45 to 60 presentation slides. And I'll make sure I have either an image for a slide or 3-5 words on a slide.

I cannot emphasize how little effort it takes to deconstruct your read slides and make them into presentation slides. When you do this, you make your presentation much more visually appealing. This is incredibly powerful with minimal additional effort required.

Remember that when you present, fewer words on your slides translates into a more powerful message and a better delivery.

Here's the previous post in this series: use some spice.