Tag: founder journey

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The CEO’s Evolving Job Description

Not long ago, I was asked: “Why do founders often fail as CEOs?” A rather provocative question. I wouldn’t go as far as to say founders often fail as CEOs as a blanket statement. Equally so, the question isn’t “why”, but “where”. People can “fail” in their positions for any number of reasons. “Why” is simply that they didn’t perform well under the expectations of the role. The better question comes down to “where” might they need to watch out for. Still so, there are many. But one that often catches founders by surprise is: the (in)ability to scale themselves with the company.

Founders often make great CEOs at the beginning. What I’ve seen and heard more of is the inability of founders to scale at the same pace as their company. As the company grows, the job description of the CEO changes as well. The same is true for all executive/leadership positions in a company. Something I personally love is at Shopify, every year the executives have to requalify for the position they hold, and that includes the CEO.

In the early stages, the CEO is a maker. They’re the most obsessed about the problem space. Their main job is to get the product to market. And test if it resonates. They get shit done. As the company scales (post product/market fit), the CEO is a manager. They’re no longer working on the daily/weekly updates of the product at a granular level, but making sure the entire organization functions as a well-oiled machine. How can the CEO enable their team members to be greater than the sum of their parts? To quote Paul Graham of Y Combinator, it’s the difference between the maker’s schedule and the manager’s schedule.

When you’re a small team of 5 or even 20, you’re the product lead. You decide the direction in which the product will go and you’re involved in the day-to-day nuances of the product itself, from the UI/UX to talking to customers to discover pain points, etc. When the company grows to 50 – give or take, you have already hired or are going to hire your first product manager, which means you won’t be involved in the day-to-day anymore, but rather in the larger strategic directions of the company and the product. As a maker, your decisions are tactical. On the other hand, as a manager, your decisions are strategic.

Similarly, Ben Horowitz, the second name in the investment firm, Andreessen Horowitz, wrote about peacetime and wartime CEOs. In the early days of a company, you’re at war. You’re selling; you’re networking. You’re fighting in a competitive market of attention. Not only from your customers, but also potential hires and investors. As your company scales past $100M ARR (among any of the other heuristics when you stop being a “startup”), you’re now a category leader and possibly a market leader as well. As the market leader in “peacetime”, you decide the rules of the game. You’re working to maintain your market position. You focus on the masses, and not the niches as much. And therefore, the job description of a leader born in an era of war is different from a leader born to maintain peace.

Many founding CEOs understand that their role will evolve over time, but unfortunately, many are still unable to keep up with the pace at which the company evolves. Effectively, CEOs have to always be one step ahead of the company’s growth to prepare the infrastructure for the rest of the team to grow into.

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My Top Questions to Ask Portfolio Founders When Doing Investor Diligence

I’ve recommended in a number of essays on this blog the importance of founder-investor fit. That founders should always do their diligence on potential investors, like here and here. And for a more robust understanding, asking founders in their current and previous portfolio, specifically the ones that didn’t work out. Some of my favorite questions for (ex-)portfolio founders:

  • How has [insert name] been helpful for you in your founder journey?
  • What was [insert name]‘s involvement like when shit hit the fan? Do you remember specific examples?
  • If you were to build another company (if applicable), would you work with [insert name] again?
    • If they are building another company in a relevant field, and if they say “yes”: Why haven’t you?
    • What are scenarios in which you would, and ones you wouldn’t?

Then think to yourself, were those pieces of advice actionable? Did the context help or detract from your initial disposition? Your goal isn’t to point fingers, but to paint a more holistic picture of who you might be working with closely for the long haul.

The best investors can inspire founders to think on wavelengths they might not have considered before. Some may hurt when you first hear them, but if your investors truly care, they mean well. The only reason the truth hurts is because it is the truth. And it’s your job as the founder to do your best to fix it.

The red herring

When a founder responds to the above questions with, “X investor just spent less time with us”, it’s not enough to say that an investor isn’t great.

Each VC always has his/her first and foremost duty and responsibility to the partnership. By simple economics, most of their investments won’t work out. Investors generally understand that they have to:

  1. Spend more time with the winners ’cause they’ll return the fund (and then some, hopefully),
  2. And cap their time commitment with the ones who won’t return the fund.

While that isn’t an excuse for VCs to only focus on maximizing returns (i.e. selling your IP, forcing an acquisition, unjustly firing the founder), it is something that founders should keep in mind. When you raise venture funding, just be aware of the fact that investors need to prioritize their time, especially when the going gets tough. And while it is usually implicit in the investment, a great investor/board member will often have that conversation explicitly with you at the beginning.

This notion, on the other hand, contrasts with angel investors, who are often investing out of their own net worth. So the dynamics, as well as commitment level, for angels is different. Angels often have between tens to hundreds of active investments at a time, meaning their time allocation per startup is much more limited than a VC. For context, a VC is usually actively involved in 3-7 investments at a time, meaning they’re going to be more involved per startup.

In closing

At the end of the day, the world of entrepreneurship, and business more broadly, is a relationship-building industry. And it’s extremely hard for an investor to build great relationships and a reputation if they have a track record of burning bridges. With founders. Even other investors – downstream and upstream.

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How Do We Welcome the Founder Narratives Behind the Curtains

Being a founder is one of the toughest jobs in the world. Resilience and grit are two (or one) of the indispensable traits of a 5-star entrepreneur. And most, if not all, investors establish grit as the baseline in founder selection, as opposed to the topline in various other careers. While I don’t mean to discount other career paths, all of which I have incredible admiration for, I can only speak in the world of venture where I spend most of my time in.

Yet that same persistence could very much be the same double-edged sword that makes or breaks you. In October, Ryan Caldbeck wrote about his decision to step down as CEO of CircleUp. It was and is one of the most candid pieces I’ve read about the founder journey to date. In it, one section particularly stood out. “Persistence was my superpower. But now I’ve now come to understand that persistence is a double-edged sword, and my decision not to take a break, to not take more off my plate, hurt me, my family and the company. That was the biggest mistake of my career.”

In the founder journey, there exist many moments a founder’s resilience is stress-tested. To get their first customer. To scale to a team of 10. 30. 100. To get their first investor. To raise their first institutional round. But the last thing a founding team needs is for some of their greatest evangelists – their investors – to create counterproductive friction. While it’s presumptuous of me to say that all friction is counterproductive, some friction and additional perspective is necessary to help founders make better, more informed decisions.

In his same essay, Ryan shares a feedback email he wrote to his former board member, as that member’s participation in the company had become “counterproductive”, “vindictive”, and even “destructive”. Unfortunately, these stories happen more often than I would like. It is why many founders believe investors are the gatekeepers to their startup’s success. But we’re not. We don’t have the right to be. On the same token, that’s exactly why it’s so important for founders to deeply consider founder-investor fit.

Michael Freeman found in 2017 that entrepreneurs are 50% more likely to report a mental health condition. Being a founder is lonely. But it doesn’t have to be.

Anton Ego’s words

A few weekends back, my friend and I re-watched my favorite movie. And as the movie faded into music, Anton Ego’s words echoed in my head. While it’s not the first time this quote has appeared in the venture world, it certainly won’t be the last:

“In many ways, the work of a critic is easy. We risk very little, yet enjoy a position over those who offer up their work and their selves to our judgment. We thrive on negative criticism, which is fun to write and to read. But the bitter truth we critics must face is that, in the grand scheme of things, the average piece of junk is probably more meaningful than our criticism designating it so. But there are times when a critic truly risks something, and that is in the discovery and defense of the new. The world is often unkind to new talent, new creations. The new needs friends.

“Last night, I experienced something new, an extra-ordinary meal from a singularly unexpected source. To say that both the meal and its maker have challenged my preconceptions about fine cooking is a gross understatement. They have rocked me to my core. In the past, I have made no secret of my disdain for Chef Gusteau’s famous motto: ‘Anyone can cook.’ But I realize, only now do I truly understand what he meant. Not everyone can become a great artist, but a great artist can come from anywhere. It is difficult to imagine more humble origins than those of the genius now cooking at Gusteau’s, who is, in this critic’s opinion, nothing less than the finest chef in France. I will be returning to Gusteau’s soon, hungry for more.”

For VCs

One of my favorite investors often says, “stay positive, test negative.” While the greatest strength an entrepreneur can have may be grit, the greatest strength an investor can have is optimism.

Optimism in the world. In markets. In startups. But especially people. That even if one venture doesn’t work out, for the people I’ve had the opportunity to stand behind, I know one of their pursuits eventually will. It’s only a matter of time and luck.

That same optimism is a leading indicator for open-mindedness. As people who build our careers at the top of the funnel, it is our obligation to cast our net outside of what is most familiar to us. There will be a number of ideas and belief systems entrepreneurs have that challenge our own. And in many ways they should, as founders are on the frontlines of innovation, they are aiming to be “right on the non-consensus“, to quote Andy Rachleff. When I first got into VC, that same investor who said “stay positive, test negative”, shared another word of advice, “Some of the best ideas seem crazy at first.“

George Bernard Shaw once said something similar as well, “The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.”

Optimism isn’t only isolated to ideas, but also to the people – the “unreasonable” women and men – behind those ideas and the decisions they make. These innovators aren’t perfect, yet somehow many of us expect them to be. And that dichotomy has created this unfair dynamic that stunts innovation more than we think. I have so much respect for the funds that have set aside capital to invest in founders’ wellbeing, like Felicis Ventures, Freestyle, Crosscut, and more. And I hope many more will follow.

The stories we tell

Over the past few months, I’ve had a number of conversations with founders, friends, and readers about “mental fitness” and “emotional hygiene”. If I could borrow two of my friends’ vernacular. And I’ve learned that we humans are such amazing storytellers.

These powerful narratives has kept the human race alive all these millennia. Before the written word, it was the art of the spoken word, passed down from generation to generation, that held tales of ancestral origins of where to hunt and where to migrate to each season. The same stories have started and ended wars. They have helped us conquer impossible odds. Some narratives today are compelling enough for us to buy a new product or to end a conglomerate.

Yet these exact stories, especially the ones we tell ourselves, can cause stress, anxiety, and depression. The ones that the people we care about and respect tell us can carry even more weight. From role models, parents, managers, friends, mentors, teachers, peers, and more.

In closing

I realized, in conversation, these past few autumn months, more than ever, the power of sharing those stories. To share that we’re not alone and that together, we may learn more than the sum of our individual parts. I understand that it’s no easy task. Even for myself, I debated for the longest time whether to share that I’m not at my best right now. But I’m glad I did. The feedback from the people around me I’ve gotten since brought forth clarity and solace. Similarly, six of my friends, who publicly shared how they get through their toughest times (Pt 1, Pt 2), told me after how grateful they were to have an enormous weight lifted off their shoulders.

Top photo by Nong Vang on Unsplash

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When Investor Goodwill Backfires – What It Means to be Founder-Friendly and Founder-Investor Fit

A few Fridays ago, I had the fortune of reconnecting with a founder, backed by some of the most recognizable names in the Valley and exited his business last year to a juggernaut in the data space. Now working on his second startup. And he brought something extremely curious to my attention. “Investors shouldn’t be too founder-friendly.”

I’ve talked to hundreds of founders and seen thousands of pitch decks in my short 4 years in venture capital. Yet, that Friday was the first time I’d ever heard that. And it was too bizarre for me not to double-click on. The fact that the sentence also came out of a founder’s mouth and not an investor’s bewildered me even more.

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#unfiltered #32 How to Win Even When You Lose

Two and a half weeks ago, I wrote about my mental model for confronting fear – the art of running into walls. Inevitably, I’ve had more conversations about fears and how to overcome them since then. And in those moments, I was reminded of a question Seth Godin posed on his recent appearance on The Tim Ferriss Show. Most people ask the question: “What would you do if you could not fail?” And subsequent answers led to wild dreams, achieving the impossible, and often times, still not a step closer to achieving that dream, myself included. I wanted to be an astronaut, a pilot, an Olympic medalist, and more. Instead, Seth posed the counter: “What would you do if you knew you would fail?“

Knowing that I’d fail

Seth cites that most marathoners competing in the Boston Marathon do not aim to win, yet they still do it. Similarly, I work with founders knowing that most will fall short of their dreams. If we’re talking about expected value – the sum of all the dollar size outcomes of each possibility, multiplied with their respective probability of occurring, then:

E(Vstartup success) << E(Vmost other career paths)

Rationally speaking, the career of a founder is not designed for success. But hell, it’s the irrational founders who do find it. Against impossible odds.

But why?

Why still pursue a career when the odds aren’t ever stacked in your favor?

On the same token, why participate in any contest if you know you’re most likely going to fail? And, I mean contest in the most liberal sense here. Just like a marathon is a contest of endurance and physical prowess, building a startup is a contest of capital, time, and social impact. Confessing to your crush is a contest of love. Sending a cold email is a contest of attention. The more saturated the market – the contest – the more likely you are to fail.

How to Win

In winning, I focus on only one question: What will I gain in this pursuit that’s independent of the result of the contest?

Running a marathon proves that I can push my body beyond its limits.

Confessing to my crush gives me resolution to move on in my life.

Sending a cold email hones my communication and research skills.

I work with startups to build friendships and acquire skills that will transcend the dollar value of the venture. People who are ambitious typically learn fast, and will try again and again until something works. If not this idea, then the next. If not today, then tomorrow. And, if not tomorrow, then the day after. It’ll only be a matter of time before preparation meets opportunity. It’s why we call startups 10-year overnight successes.

So when I take on a new endeavor even outside the exciting world of venture, I look for where there will be a net positive in my life and the world around me, on 3 fronts:

  1. The relationships/friendships I will build along the way,
  2. The skillset I will develop and/or hone,
  3. And the impact the process will have in the lives of other people, particularly my friends and family.

If the above function has a positive first and second derivative, then I know I will win even if I lose.

Photo by Johann Walter Bantz on Unsplash

#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.

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How to Build Fast and Not Break (As Many) Things – A Startup GTM Playbook

The tech world, particularly Silicon Valley, in the past 2 decades, has accelerated its growth ’cause of one mantra: “Move fast and break things.” Some of the most valuable products we know today were built because of that. Facebook, whose founder coined the phrase. Google. Amazon. LinkedIn. Uber. The list goes on. In sum, be “agile”. Simultaneously, I see founders, on the regular, take this mental model too far. They move fast, but they rarely give enough time to test their hypotheses.

Equally so, some companies cannot afford to “break things”. Take Dropbox, for example. Ruchi Sanghvi, founder of the South Park Commons Fund, former VP of Operations at Dropbox, and Facebook’s earliest female engineer, told VentureBeat in 2015, “Quality is really, really important to Dropbox, and as a result we needed to move slower — not slowly, but slower than Facebook.” Ruth Reader, who wrote for VentureBeat at the time, further extrapolated, “What was right for Facebook — fast-paced iteration and fixing bugs in real time — didn’t work for DropBox, an application people entrusted with personal documents like wedding photos or the first draft of a novel. What was valuable to DropBox was the details.”

On the other extreme, there are founders who spend day after day, week after week, and sometimes year after year, pursuing the “perfect” product before launching. If they were right on the money before, by the time they launch 6 months later, they might be 6 months off the money. Take the situation we’re all in today for example – the pandemic. No one could have predicted it. In fact, I had many a few predictions before the pandemic, which all proved to be unfortunately wrong.

  • The Marketplace of Startups, written on February 24, 2020 – I alluded to an opinion I held that consumer social was almost dead. The consumer app market had become so saturated that it was hard for new players to play in.
  • Myths around Startups and Business Ideas, written on October 12, 2020 – Pre-COVID, I was more bullish on Slack than Zoom as a public stock investment. History proved otherwise.

… and more to come. Mistakes are inevitable. And “the rear view mirror is always clearer than the windshield”, as Warren Buffett would describe. Seth Godin said in his recent interview on The Tim Ferriss Show: “Reassurance is futile because you never have enough of it.”

At the end of the day, as a startup founder, your raison d’être is creating value in the world where there wasn’t before. As Bill Gates puts it: “A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it.” Analogized, your startup is that platform.

So, in this post, using the lessons from other subject-matter experts (SMEs), I’ll share how startup teams can balance speed with intentionality in their go-to-market (GTM) strategy.

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Before the Close – How to Increase the Chance of Raising Capital

A number of founders ask me for fundraising advice. While they come in different magnitudes, one of the common themes is: “I’ve had many investor meetings, but I still can’t get a term sheet. What am I doing wrong? What do I need to do or to say to get a yes?”

To preface, I don’t have the one-size-fit-all solution. Neither do I think there is a one-size-fit-all solution. Each investor is looking for something different. And while theses often rhyme, the “A-ha!” moment for each investor is a culmination of their own professional and life experiences. This anecdote is, by no means, prescriptive, but another perspective that may help you when fundraising, if you’re not getting the results you want. This won’t help you cheat the system. If you still have a shoddy product or an unambitious team, you’re still probably not going to get any external capital.

One thing I learned when I was on the operating side of the table is: When you want money, ask for advice. When you want advice, ask for money. It’s, admittedly, a slightly roundabout way to get:

  1. Investor interest,
  2. And reference points for milestones to hit.

But it’s worked for me. Why? Because you’re fighting in a highly-competitive, heavily-saturated market of attention – investor attention. This method merely helps you increase the potential surface area of interaction and visibility, to give you time in front of an investor to prove yourself.

Investors are expected to jump into a long term marriage with founders, while, for the most part, only given a small cross-section in your founding journey to evaluate you. It’s as if you chose to marry someone for life you’ve only met 60-90 days ago. While angels and some people have the courage and the conviction to do that, most investors like to err on the side of caution. Contrary to popular belief, venture capitalists are extremely risk-averse. They look for risk-adjusted bets. And if you can prove to them – either through traction or an earned secret – that you’re not just a rounding error, you’ll make their lives a lot easier.

So, let me elaborate.

When you want money, ask for advice.

As you’re growing your business and you want to show you are, ask investors for advice. Tell them. “So I’ve been growing at X% MoM, and I’ve gotten to Y # of users. I’m thinking about pursuing this Z as my next priority. And this is how I plan to A/B test it. What do you think?”

And if you keep these investors in the loop the entire time and ask and follow-up on their advice, at some point, they’d think and ask, “Damn, this is an epic business. Will you just take my money?”

So, what are good numbers?

The Rule of 40 is a rough rule of thumb many investors use for consumer tech markets. Month-over-month growth rate plus profit should be greater than or equal to 40. So you can be growing 50% MoM, but burning money with -10% profit, aka costs are greater than your revenue. Or you can be growing 30% MoM, but gaining 10% profit every month. And if you’ve got 10s of 1000s of users, you’re on solid ground. Better yet, one of the biggest expenses is increasing server capacity costs.

For more reference points on ideal consumer startup numbers, check out this blog post I wrote last year.

For enterprise/B2B SaaS, somewhere along the lines of 10-15% MoM growth. With at least 1 key customer logo. And 5 publicly referenceable customers.

Of course, the Rule of 40 did not age well for certain industries in 2020.

When you want advice, ask for money.

When you ask for money most of the time, investors, partners, and potential customers will say no, especially if you’re super early on and don’t have a background or track record as an entrepreneur. So when they do say no, I like to ask them one of my favorite questions: “What do I need to bring you for you to unconditionally say yes?” Then, they’ll tell me what they want to see out of our product or our business. These, especially if they’re reinforced independently across multiple different individuals in your ecosystem, should be your North Star metrics. And when you do put their advice to action, be sure to follow up with the results to their implemented advice.

  1. You either do what they recommended. And show them what happened. And what’s next.
  2. Or you don’t do what they recommended. But show that you heavily considered their recommendation. What you did instead. Why you chose to do what you did instead. And what’s next.

To take it one step further, once I ask the above question to have a reference point for growth trajectory, I ask: “Who is the smartest person(s) known to achieve X (or in Y)?” with X being the answer you got via the previous question. And Y being the industry you’re tackling.

For instance, I’d recommend:

Then, go to that person or those people and say, “Hey Jennifer, [investor name] said if there’s one person I had to talk to about X, I have to talk to you.” Feel free to use my cold email “template” as reference, if you’re unsure of what else to say.

If you use this tactic again and again, eventually you’ll build a family of unofficial (maybe even official) mentors and advisors, even if you never explicitly call them that. Not necessarily asking for money all the time. But asking for money might help you ignite the spark for this positive feedback loop.

In closing

When I was on the operating side, a brilliant founder with 2 multi-million dollar exits once told me: “Always be selling. Always be fundraising. And always be hiring.”

I didn’t really get it then. In fact, I didn’t get it the entire time I was on the other side of the table. What do you mean “Always be fundraising”? Should I just be asking for money all the time? What about the business?

It wasn’t until I made my way into VC at SkyDeck that I realized the depth of his words. Keep people you eventually want to fundraise from and hire in the loop about what you’re building. Keep them excited. Build a relationship beyond something transactional. Build a friendship.

Jeff Bezos put it best when he said:

“If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that.

“At Amazon we like things to work in five to seven years. We’re willing to plant seeds, let them grow and we’re very stubborn. We say we’re stubborn on vision and flexible on details.”

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#unfiltered #30 Inspiration and Frustration – The Honest Answers From Some of the Most Resilient People Going through a World of Uncertainty

A few weeks ago, around the time I published Am I At My Best Right Now?, I started noticing more and more that my friends, colleagues, and people that I’ve met since were going through tough times. Two lost a family member. Some were laid off. Two were forced to leave this land I call home. Four broke up. Three burned out. Countless more told me they were stressed and/or depressed, and didn’t know how to escape this limbo. After I published that post, another handful of people also reached out and courageously shared the troubles they are going through now. How it’s been so hard to share with others. And yesterday, while editing this blog post, I found out that one of my high school friends had passed.

Inspiration and Frustration

During this time, I had a thought: Frustration is the absence of inspiration. There were many times in my own life when I was beating myself up because I couldn’t think of a solution. And a small percent of those times, I didn’t even bother to think of a solution since I was so engrossed in my frustration with myself.

In these unprecedented times and inspired by the conversations around me, I decided to show that we’re not alone. So, I asked people who I deeply respect and who could shed light as to what it means to be human. I asked just two questions, but they were only allowed to answer one of them:

  1. What is the one thing that inspires you so much that it makes everything else in life much easier to bear?
  2. What is stressing/frustrating you so much right now that it seems to invalidate everything else you’re doing?

In turn, they responded via email, text, or on a phone call. Of the 49 I asked, so far, 31 responded with their answers. 4 politely turned me down due to their busy schedules. Another one turned me down because she didn’t feel like she could offer value in her answer.

26 responded with what inspires them. 5 with what frustrates them. All of whom I know has been through adversity and back.

Admittedly, the hardest part about this study was how I was going to organize all these responses. Unlike the one about time allocation I did over a month ago, where I knew exactly how to organize the data before I even got all the responses, this one, I really didn’t know how to best illustrate the candor everyone shared. In fact, I would be doing a disservice to them, if reduced their honesty and courage to be vulnerable to mere numbers. So, in the end, below, I let everyone speak for themselves. Sometimes, simplicity is the best.

Thank you to everyone who contributed to making this blog post happen, including Brad Feld, Mars Aguirre, Shayan Mehdi, Thomas Owen, Chris Lyons, Mark Leon, Jamarr Lampart, Christen Nino De Guzman, Louis Q Tran, Sam Marelich, Dr. Kris Marsh, Quincy Huynh, DJ Welch, Jimmy Yue, and many, many more heroes who helped me and the world around us behind the curtains.

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The Biases Entrepreneurs can Carry

backlit beach clouds dark

Last week, I started building a Quora presence. Admittedly, I’ve been a long-time lurker, and only recent answer-er on the platform. Partly to practice sharing thoughts. Partly to answer more specific queries. And partly to have fun. Yes, fun.

It just so happened that I came across a curious question then.

As an entrepreneur, have you found that the cognitive biases (i.e., systematic deviations from rationality that affect human decision-making) described in this article affect the decisions you make for your business?

The question cited this article. And the article itself detailed on 3 of the many cognitive biases entrepreneurs (well, people in general) come across.

  • Confirmation bias – anything we see or hear that supports our own beliefs reinforces our beliefs, whereas the opposite sparks disagreement
  • Sunk cost fallacy – our tendency to continue to hold onto hope for bad investments
  • And, overconfidence – overestimating yourself and underestimating everyone else.

My answer

Simply, yes.

In fact, not just entrepreneurs, but most people are affected by the mentioned cognitive biases – confirmation bias, sunk cost fallacy/loss aversion, and overconfidence. It’s just that many people aren’t aware they have them, which can be detrimental to business, relationships, mental health, and more. I think the article even ranks the 3 from least noticeable to most noticeable from a self-assessment point of view. I’ll give an example of each – all of which I’ve seen before:

Confirmation bias – Stanford engineers are smart. → I will continue hiring Stanford engineers. The flip side is that you’ll be looking less into other populations of engineers who could also be amazing, like folks who are underrepresented and underestimated. Therefore, creating this self-perpetuating loop.

Sunk cost fallacy – I’ve hired this VP Sales that came highly recommended from multiple sources. But over the course of 6 months, I realized that this VP (1) couldn’t meet, much less beat, quota each quarter, and (2) has been unable to hire other great candidates to fulfill quota each quarter. But she will change. She’ll get better. She’ll grow into the role. While it’s okay to hire for passion, make sure candidates have at least a baseline of skills required for the role. And in a VP hire, a good proportion of the job description is hiring. The sunk cost here is the VP hire. While I don’t have to fire her, unless she’s really not doing her job at all, I need to find someone to top her who can perform in the role as fast as possible.

Overconfidence – My product is amazing; all of our competitors’ products suck. I’ve seen this way too often when founders pitch their startup. And while it’s great to be confident in your own product/team/yourself, it should never eclipse your perspective to value the work and commitment and results of others. A question I love asking founders who say “my product is amazing, everyone else is bad” is: What are your competitors doing right? If you were them, what would you say about your own product?

In closing

While these 3 are only a few among the myriad that plague our cognition (i.e. left digit bias, hindsight bias, anchoring bias, fundamental attribution error, etc.), hopefully, this post will shed a little light into the world of our own psychology. Sometimes before we can fix something, we have to first be aware of it.

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On Scale – Lessons on Culture, Hiring, Operating, and Growth

flower, scale

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?

It reminds me of the story of a NASA janitor’s reply when President Kennedy asked: “Hi, I’m Jack Kennedy. What are you doing?”

“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

  1. Build a (controversial) shocking culture.
  2. Hire intentionally.
  3. Retaining talent requires trust.
  4. Build and follow an operating philosophy.
    • Create, hold, and share excitement.
    • Align calendars.
  5. Upgrade adjacent users as your next beachhead.
  6. Capture adoption by changing only 1 variable per user segment.
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