One of my favorite thought exercises to do when I meet with founders who have reached the A- and B-stages (or beyond) is:
“What will his/her company look like if he/she is no longer there?”
The Preface
While the question looks like one that’s designed to replace the founder(s), my intention is everything but that. Rather, I ask myself that because I want to put perspective as to how the founder(s) have empowered their team to do more than they could independently. Where the collective whole is greater than the sum of its parts. Have the founders built something that is greater than themselves? And is each team member self-motivated to pursue the mission and vision?
“Well, Mr. President,” the janitor responded, “I’m helping put a man on the moon.”
From the astronaut who was to go into space to the janitor cleaning the halls of NASAs space center, each and every one had the same fulfilling purpose that they were doing something greater than themselves.
And if the CEO is able to do that, their potential to inspire even more and build a greater company is in sight. Can he/she scale him/herself? And in doing so, scale the company past product-market fit (PMF)?
For the purpose of this post, I’ll take scale from a culture, hiring, operating, and product perspective, though there are much more than just the above when it comes to scale. Answering the questions, as a founder:
How do you expand your audience?
How do you build a team to do so?
And, how do you scale yourself?
And to do so, I’ll borrow the insights of 10 people who have more miles on their odometer than I do.
While many of these lessons are applicable even in the later stages of growth, I want to preface that these insights are largely for founders just starting to scale. When you’ve just gone from zero to one, and are now beginning to look towards infinity.
The TL;DR
Build a (controversial) shocking culture.
Hire intentionally.
Retaining talent requires trust.
Build and follow an operating philosophy.
Create, hold, and share excitement.
Align calendars.
Upgrade adjacent users as your next beachhead.
Capture adoption by changing only 1 variable per user segment.
The other day, I saw a post on r/venturecapital (and now you know what my Reddit handle is) asking how prospect theory relates to venture capital. Admittedly, quite thought-provoking! Ever since college, I’ve been a huge behavioral economics buff – how human psychology dictates market motions. And, prospect theory happens to fall in that category.
First developed by Daniel Kahneman and Amos Tversky, prospect theory is a behavioral model that says humans are naturally loss-averse. Oh, you might know the former Nobel Prize bugger from authoring Thinking, Fast and Slow, a book I highly recommend if you’re curious about the intricacies of how our brain understands the data around us. Simply put, we react stronger to losing something than when we gain something.
*As you can see, this graph is safe for family-friendly programming
For example, I’m more likely to feel the loss after losing my $1500 cellphone than the ephemeral gain of winning a grand and a half in the lottery. On one end, you’re probably thinking that makes sense. On the other end, you’re probably calling me a loser for spending so much on a cellphone. Well, joke’s on you. I got my phone for $250 on Black Friday. But I digress. In another instance, if you look at kids, they’re more likely to throw a tantrum if you take away a marshmallow on their plate than give you a hug for giving them an extra marshmallow.
Similarly…
As you might expect, prospect theory informs many of my investing/sourcing decisions, including:
So, you’re probably now thinking: “Gimme the deets.”
While prospect theory suggests people typically weigh the impact of their losses more than they so their wins, VCs are humans at the end of the day. Just like your amateur naive stock trader will hold on to losses, and sell their wins, many VCs tend to do the same, as a reactionary measure.
It’s counterintuitive. But the name of the game in early-stage investing is not about how many losses you’ve sustained (especially when 7 out of every 10 go out of business, 2-3 break even, and hopefully 1 makes it), but about the magnitude of the wins an investor makes.
For instance, if you’ve invested in 100 companies, and 99 go out of business, and 1 makes 200x, you just doubled your fund. Of course, a successful fund typically makes 3-5x cash on cash multiple. Just our fancy way of saying your fund returns $3-5 for every dollar invested by a limited partner (LP). Although there are some nuances, many VC investors use cash on cash and multiple on invested capital (MOIC) quite interchangeably.
Guess for you to be counted as a successful investor, that one investment’s gotta go to 300x, at the minimum. In reality, you’re probably not going to have just one investment perform. Especially if you’re in the top quartile of VCs out there. You’re looking at a ~2.5% unicorn rate. So 2-3 investments of your 100 investments should be valued at over a billion dollars. Unless you’re Chris Sacca, who I hear returned 250x cash on cash for his first $8.4M seed fund, which included the likes of Uber, Twitter, and Instagram.
Of course, larger funds are harder to return. It’s easier to return a $10M fund than a $1B, much less a $100B. While I’m not supporting the only $100B vehicle known to date, the losses that fund sustained made the front page news a while back. And though by monetary value, they lost more than most other funds out there. Percentage-wise, they’re not alone. But in the public and media’s eyes, their losses are weighted more heavily than smaller funds.
In closing/Disclaimer
But hey, I’m no registered investment advisor. If you’re looking for which specific startups to invest in, please do consult with a professional. While I may share what startups have attracted my attention here and there, my thoughts are just my own thoughts. And, this post is merely me sharing the correlation between venture capital and prospect theory, plus a few digressions.
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With the 2020 series of events, many of us have started to look for other ways to pass our time. Some have looked towards Netflix and Disney+. A number, baking (even ice cream making; thank you to everyone who got an ice cream machine before me). And others, gaming. The number of friends, who had no track record of gaming and suddenly started talking about how to farm iron nuggets in Animal Crossing: New Horizons, skyrocketed. Anecdotally, more than 3-4 fold more.
Games = social networks
Games have become the new social networks. I’m not even talking about the gaming subreddits on Reddit or the Discord channels out there. And much like how social networks are communal hubs of interaction, games, like:
…*deep breath* just to name a few, offer just as much, if not more. People spend hours indulging on the platform and interacting with friends. Not only that, because content is native to gaming platforms themselves, it makes it easier for friends to connect and share content on progress and goals. Much like groups and communities on social networks, many games have clan systems that increase retention and engagement on the platform. Games are just sticky.
By the numbers
They aren’t discrete “one-off” purchases, like my old Nintendo 64 cartridge games, but evolving engines of narrative and relief, or as Andreessen Horowitz calls them – living franchises. What started as “one-off” buys became downloadable contents post-launch (DLCs). And looking at games like World of Warcraft, Fortnite, with constant monthly updates, patches and hotfixes, the games you buy “in the box” are no longer the same beast as before. And now we have a term for it all – Games-as-a-Service (GaaS).
Though many in 2019 weren’t bullish on the 2020’s growth numbers, in hindsight, we’re seeing a whole different wave of optimism. Hell, March 2020 was a real winner for gamers, spending $1.6 billion on games, their hardware, software, accessories and game cards, thanks for COVID. Needless to say, Animal Crossing topped the charts. I can’t imagine the number at the end of 2020.
Social athletes
You also have Twitch streamers, YouTubers, mods, and creators who become the local/global authority on the market and often ubiquitous with the games/genres they play. Who can actively and passively sway how a community thinks and acts, just like big-time influencers on social media. They have effectively become, what I call, social athletes, turning their hobby into a full-time pursuit. And earning paychecks by representing the brand/team they love most, as well as through sponsorships and partnerships. Shroud, a former competitive e-sports athlete, now one of the biggest streamers in the industry and formerly exclusively streaming on Microsoft’s Mixer, took a 1.5 month break after the Microsoft shut down its Twitch competitor, Mixer. And on his first day back recently, he had half a million viewers tuning in to watch his revival on Twitch.
The next frontier
Just like how social networks evolved into ad-based revenue models, games are evolving into a similar beast, as well. Mobile games have been no stranger to advertisements for a long time. But we’re now seeing the change now on PC and console games. And in a slightly different nature. Where the ads are embedded into the game experience itself, rather than the pop-out kinds.
Epic Games’ Fortnite definitely took it all to the next level – from their live, in-game events to their virtual cosmetic options that acted as film promotions. The latter, much like, how LEGO releases a whole series of movie-related sets to help with promoting it. And their live events are no joke, whether it was:
Their live Marshmello concert (with 11 million attending live),
Or, when 3.1 million players got a sneak peek into a never-before-seen scene in Star Wars: The Rise of Skywalker before it came to theaters.
As expected, many other games are following suit. Recently popular PC game, Fall Guys, is now hosting a “battle of the brands” on their Twitter – a bidding war to have your brand featured as a cosmetic in the game towards a good cause of donating to Special Effect, a charity dedicated to helping gamers with physical disabilities.
Last I checked, the bid is at $420,069.69. And yes, I’m sure the numbers were intentional.
So, what’s next?
Well, it’s an exciting time. Not too long ago, influencer marketing blew up. And now brands/games are becoming influencers in and of themselves. Whether that fall under influencer marketing or a new bucket, I don’t know. What I do know is that though we are all far apart right now, the world of media is bringing the larger world closer together. As more games:
Go cross-platform,
Are discovered organically and socially,
And are fueled and accelerated alongside co-creaters, influencers and user-generated content…
… while technologies, like 5G, virtual and augmented/mixed reality (VR/AR/XR), cloud gaming, and blockchain, bring more interactions into each game, building larger and immersive worlds, I’m quite bullish on the growth of the gaming industry. And as the gaming industry evolves, their learnings will bleed into other industries, via gamified models – from Pioneer gamifying the process of building a business to Superhuman gamifying productivity, first through emails.
Why? They’re sticky – high engagement and retention cohorts. And I dare say, sexy, as well. Frankly, game companies don’t just launch with minimum viable products (MVP), but minimum viable happiness (MVH). Or as Jiaona Zhang, VP Product at Webflow and lecturer at Stanford’s School of Management Science & Engineering, calls it: minimum lovable products (MLP).
If you’re interested in a deep dive on how to offer MVH or build an MLP, check out my previous post on the topic:
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Last week, my mentor/friend asked me if I knew anyone who’s stellar at storytelling and would be willing to hold a 1-hour workshop about it with his mentorship group. I connected with my buddy who earned his chops podcasting and being a brilliant customer-oriented founder, specifically on the user journey.
And it got me thinking. Hmmmm, I wonder how long people take to prep for a workshop or talk designed to inform and educate. Which eventually led me to the question… How much time allocation might many event hosts underestimate when asking a speaker to speak at their event?
Well, outside of travel, set up, rehearsal time, and of course, the length of the talk/workshop itself.
So, over the last few days, I reached out to 68 friends, mentors, and colleagues who have been on the stage before, including:
VCs – who invest out of vehicles that range from $5M to $1B (sample-specific)
Angels – investing individuals, who have over $1M in net worth
Founders – both venture-backed and bootstrapped
Executives – Fortune 500 and startup
Journalists
Influencers – YouTubers and podcasters
Consultants/Advisors
Professors
And, those who’ve been on public stages with 1000+ in live viewership.
… and asked them 2 questions:
How long, in hours, do you take to prepare for a 1-hour talk?
For the purpose of slightly limiting the scope to this question, let’s say it’s on a topic you’re extremely passionate and well-versed in, and the audience is as, if not more, passionate than you are.
And if I said this was for a high-stakes event, that may change your career trajectory, would your answer change? If so, how long would you spend prepping?
50 responded, with numerical answers, by the time I’m writing this post, with a few results I found to be quite surprising. *pushing my nerd glasses*
I was quite surprised at the unexpectedly positive response I received for my blogpost, My Cold Email “Template”, I wrote a month back. From DMs by you, my curious readers, and my friends. A great question some of you brought up was:
“What if I have to write a longer email to get my point across?”
It happens. As some of you may already know from this post and my Contact page, I don’t believe that all cold emails have to be short. I, myself, am guilty of writing longer messages sometimes just because I can’t figure out a shorter way to express my interest in that person in a cold email. Regardless, if I think they have the time to read it or not.
What appears fluid is twenty-four frames per second. Twenty-four precious moments per second, lived second after second after second. And each of those still moments is imbued with feelings and memories. The rapid fluidity of each of those moments defines the patterns and beliefs that, in turn, define our lives.
Our lives are twenty-four frames per second, with each frame a set piece of feeling, belief, obsession about the past, and anxiety about the future. Neither good nor bad, these frames form us. They become the stories we tell ourselves again and again to make sense of who we’re becoming, who we’ve been, and who we want to be.
Ghosts of our pasts – our grandparents and their grandparents as well as the ghosts of their lives – inhabit the frames. They and their beliefs, interpretations of scenes, words, and feelings haunt the frames of lives as surely as the roses, figs, and lemon drops of our present daily lives do.
Slowing down the movie of our lives, seeing the frames and how they are constructed, reveals a different way to live, a way to break old patterns, to see experiences anew through radical self-inquiry.
I recently had the fortune of having an email exchange with one of the greatest household names in the space of startups and venture capital, especially known for his empathy and candor. A name synonymous with mental health, accelerators and being radically honesty about his journey – professional and personal. In our chat on mental health, he highly recommended Jerry Colonna‘s book, where the above passage comes from. So I just had to get it.
I first heard of Jerry on Harry Stebbing’s Twenty-Minute VC (his most recent episode with the CEO Whisperer) and The Tim Ferriss Show. And over the years, possibly as a result of confirmation bias, I’ve heard his name pop up over and over again from various founders and VCs. Over the decades, many people know Jerry as:
And, probably best known now for being the CEO whisperer.
So far, his book has reflected all the above and more.
A short trip down memory lane
Although we’re used to 60 frames per second (fps) for daily use or 120 fps for movies these days, the illusion of motion was first found at the optimal 16 fps. Early silent films, like Charlie Chaplin films, were then sped up to 24 fps, as far back as 1927. Admittedly, part of the reason as to why they seemed so comical. As technology caught up, still, the de facto frame rate was 24 fps.
In 2012, The Hobbit series was shot in 48 fps. In 2016, Bill Lynn’s Long Halftime Walk was shot and projected in 120 fps. Gemini Man, which came to theaters 3 years later, followed suit. James Cameron also plans to shoot Avatar 2 at 60fps, with the goal of maximizing the feel of a 3D-world. But as both filmmakers and animators approach higher and higher frame rates, there have been and will continue to be the effect of the uncanny valley. Uncanny valley, or in other words, the more something artificial looks to be real, the more our minds try to reject its appearance. Subsequently, making certain objects, robots, or animations seem creepy and chilling. Part of the reason, it’s a ‘hell no’ to horror films for me.
After decades of 24 fps films, it’ll take a while before our minds catch up to what we see. But I digress.
Moving Forward
Just like how silent films shot at 12-16 fps were shown at 24 fps, giving its comical effect, many of us, myself included (until 3 years back), live by weaving narratives between cross sections of time – both in our personal lives and in our careers. And we script our biographies in a format where seemingly everything happened for a reason. Maybe some things did.
But on the other hand, maybe you’re like me. Where I don’t know what the hell is going to happen tomorrow. Yes, I tell myself I have these plans and goals in life I’m working on accomplishing. But if you ask me, what pitfalls are up ahead? I haven’t even thought about half of them. Another quarter, and I’m being generous to myself here, I think I have a good grasp on, but knowing myself, I’ve got about 20% of it down, 80% I’m missing some piece of the puzzle.
After all, as Warren Buffett once said,
“The rear view mirror is always clearer than the windshield.”
The last quarter – I’m scared – really scared for. But, what’s life without a bit of risk and adventure?
Moving in the Present
While it’s easy to build that narrative for the trail behind us, it’s hard to forecast the narrative forward. So, I take life play by play – frame by frame. Slowing down to that 16 fps, examining, like Jerry suggests, my life in real time. Savoring and reflecting on every moment – the good and the bad. Reexamine my biases – the overt and the covert, in the words of a brilliant sociology professor I chatted with last week. ‘Cause they will make who I am tomorrow.
So, I’ll end on 2 big questions, inspired by that professor. 2 questions I plan to answer and reexamine every month:
What do your social circles look like?
Professional? Personal?
How did you meet them? How often do you stay in touch with them?
What beliefs – overt and covert- are they reinforcing? Are these beliefs worth reinforcing?
Now that you know, what are you willing to give up to make it happen?
Are you willing to take radical measures to do so?
What do you say that you don’t mean? Or find it hard to follow through on?
#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost).Who knows? The possibilities are endless.
Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!
And I’m in complete accordance. I want to specifically underscore 2 of Michael’s sentences.
… and…
The only ‘exception’ to this ‘rule’ would be if investors themselves were the target market for the product. At the same time, I can see how the venture industry has led her and many others to believe otherwise. So I thought I’d elaborate more through this post.
A few days ago, I watched Yes Theory‘s recent heartwarming and inspiring video, Creating a Subscriber’s Viral Job Application. And if you have a spare 20, I highly recommend checking it out. Yesterday, I chatted with a friend about the influx of spam calls these days. So, I thought; now that’s a start of a #unfiltered blogpost.
As a warning, this post is slightly more eccentric than, admittedly, my average #unfiltered blog post.
Prefacing with spam
I used to write this newsletter, Friday Morning Coffee Break, back in college for one of the clubs I helped lead. (Now that I think about it, coffee seems to be the theme for my content drops.) So if any of you subscribers then are reading this post now, this anecdote will be a momentary skip down memory lane.
So, you see, I’m a huge fan of comedy. And 3 years back, when I first learned about James Veitch, I just had to try it out myself. Replying to spam emails. From Nigerian princes. Cold emails from ‘celebrities’. Confirmation emails that require replying to unsubscribe.
If you’re curious as to how he pulls it off, you can check out his Hilarious (yes with a capital ‘H’) TED talks: here, here, and here.
What I did
When I received:
Subject: Save a 80% Off meds delivered discretely to your door
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