Recently, I’ve been chatting with a number of GPs and LPs looking to make their first hires. Many of whom hadn’t built a team prior. Now I’m no expert, nor would I ever claim to be one. But I’ve been very lucky to hire and work with some stellar talent.
They asked me how I think about interviewing, selecting, as well as onboarding. I’ll save the last of which for a future blogpost, but for the purpose of this one, if you frequent this blog, you’ll know I love good questions. And well, I get really really nerdy about them. So, as I shared my four favorite, nonobvious interview questions as of late with them (some I’ve used more than others), I will also share them with you.
I won’t cover the table stakes. Why are you excited to be here? What skills are you a B+/A- at? And what are you A+++ in? Why you? Etc.
If you had to hire everyone based only on you knowing how good they are at a certain video game, what video game would you pick?
I recently heard Patrick O’Shaughnessy ask that question to a guest on his podcast, and I found it inextricably profound. While the question was directed at Palmer Luckey, who has a past in video games, the words “video game” can easily be replaced by any other activity or topic of choice and be equally as revealing. Be it sports. Or an art form. Or how they grasp a certain topic. Even, putting them in front of a Nobel Prize winner and see how quickly they realize they’re in front of one.
The last example may be stretching it a bit, but has its origin in one of my favorite fun facts about the CRT — the cognitive reflection test. Effectively, a test designed to ask the minimum number of questions in order to determine someone’s intelligence. But in a parodical interpretation of the test, two of the smartest minds in the world, Daniel Kahneman and Amos Tversky, decided to make an even shorter version of the test to measure one’s intelligence. The test would be to see that if one were to put you in front of Amos Tversky, one of the most humble human beings out there despite his intelligence, how long it would take you to realize that the person sitting across from you was smarter than you. The shorter it took you, the smarter you were. But I digress (although there’s your fun fact for the day).
The reality is that any activity that requires a great amount of detail, nuance, resilience, frustration and failure probably qualify to be mad-libbed into that question. Nevertheless, it’s quite interesting to see what someone would suggest, and a great way of:
Assessing how deep a candidate can go deep on a particular subject,
How well they can relay that depth of knowledge to a layperson, and
How they build a framework around that.
I hate surprises. Can you tell me something that might go wrong now so that I’m not surprised when it happens?
Simon Sinek has always been one for great soundbites. And the above question is no exception. It’s a great way of asking what is one of your weaknesses. Without asking what is your weakness? Most, if not all hiring managers are probably accustomed to getting a rose-tinted “weakness” that turns out is a strength when asking the weakness question to candidates. It is, after all, in the candidate’s best interest to appear the most suitable for the job description as possible. And the JD doesn’t include anything about having weaknesses. Only strengths… and responsibilities.
At the same time, while the weakness question makes sense, when there is an honest answer, I’ve seen as many hiring managers use the associated answer to discount a candidate’s ability to succeed in the role, before given the chance. While this is still throwing caution to the wind, for one to be open-minded when asking this question, at the very least, you’re more likely to get an honest one. At least until this question becomes extremely popular.
Another version, thought a lot more subtle, is: What three adjectives would you use to describe your sibling?
I won’t get into the nuances here, but if you’re curious for a deeper dive, would recommend reading this blogpost. The TL;DR is that when we describe others (especially those we know well), we often use adjectives that juxtapose how we see ourselves in relation to them.
What did you do in your last role that no one else in that role has ever done?
This is one of my favorite professors, Janet Brady’s, favorite questions, and ever since I learned of it, it’s been mine as well. Your mileage may vary. Of particular note, I look for talent with entrepreneurial natures to them. Most of what I work on are usually pre-product-market fit in nature. In other times, and not mutually exclusive to the former, requires us to re-examine the status quo. What got us here — as a team, as a company, as an industry, or as a citizen of the world — may not get us there.
And there is bias here in that I enjoy working with people who push the boundaries rather than let the boundaries push them. And I love people who have asked the question “What if?” in the past and has successfully executed against that, even if it meant they had to try, try again.
What haven’t you achieved that you want to achieve?
Steven Rosenblatt has always been world-class at hiring. By far, one of the best minds when it comes to scaling teams. For a deeper dive, and some of his other go-to questions, I highly recommend checking out this blogpost.
When you’re building a world-class team, you need people to self-select themselves in and out of the culture in which you want to build. Whether it’s Pulley’s culture of move fast and ruthlessly prioritize to build a high-performance “sports team or orchestra” or On Deck’s non-values, it’s about making it clear that you’re in not because you’re peeking through rose-tinted glasses, but that you know full well, that you will be confronted by reality, yet you still remain optimistic. To do that, you need:
A tight knit team who hold the same values
And folks with a chip on their shoulder
The latter is the essence of what Steven gets at with the above question. And does one’s selfish motivation align with where the company wants to go and what the role will entail.
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!
The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.
Voila, the fourth installation of 99 soundbites I’ve been fortunate enough to collect over the past year. The first four of what I imagine of many more to come. Each of which fall under one of the ten categories below, along with how many pieces of advice for each category:
You can also find the first three installments of 99 pieces of advice for both founders and investors here. Totaling us to a total of 396 pieces of advice.
But without further ado…
Fundraising
1/ If you’re an early stage startup, expect fundraising to take at least 3-4 months to raise <$1M. If you’re on the fast side, it may take only 2 weeks. – Elizabeth Yin*timestamped April 2022
2/ If you’re going to raise a round over 6-12 months, it often doesn’t seem fair that your first commits have the same terms as those who commit 6 months later, since you’ve grown and most likely have more traction at the time. As such, reward your early investors with preferred terms. Say you’re raising a $1M round. Break the round up to $300K and $700K. Offer a lower cap on SAFEs for the $300K. “Tell everyone that that offer will only be available until X date OR until you hit $300k in signed SAFEs. And that the cap will most likely go up after that.” Why? It lets you test demand and the pricing on the cap – to see if you’re cap is too high or too low on the first tranche. – Elizabeth Yin
3/ As a startup in recessionary times, you have to grow your revenue faster than valuations are falling to make sure you raise your next round on a mark up. Inspired by David Sacks and Garry Tan. *timestamped April/May 2022
4/ There’s only going to be 1/3 the amount of capital in the markets than in 2020 and 2021. So plan accordingly. If you’re not a top 0.1% startup, plan for longer runways. Fund deployments have been 1-1.3 years over the past 1.5 years, and it’s highly likely we’re going to see funds return back to the 3-year deployment period as markets tighten. *timestamped May 2022
5/ B2B startups that have the below disqualifiers will find it hard to raise funding in a correcting venture market:
No to little growth. Good growth is at least doubling year-over-year.
Negative or low gross margins. Good margins start at 50%.
CAC payback periods are longer than one year.
Burn multiples greater than 2 (i.e. You’re burning $2 for every dollar you bring in). A good burn multiple is 1 or less. – David Sacks
6/ Beware of “dirty term sheets.” Even though you’re able to get the valuation multiple you want, read the fine print for PIK dividends, simple “blocks” on IPO/M&A, and 2-3x liquidation preferences. Inspired by Bill Gurley.
7/ “This came at a very expensive valuation with certain rights that should not have come with it — like participating preferred, which is they first get their money out and then they participate in the rest, which was OK for the earlier rounds, but not for the later ones.” – Sabeer Bhatia in Founders at Work
8/ In a bear market, public market multiples are the reference points, not outlier private market multiples. Why? Public market multiples are their exit prices – how they return the fund. It matters less so in bull markets. – David Sacks
9/ Don’t trust the “why”, trust the “no.” Investors don’t always give the most honest responses when they turn down a company.
10/ If you inflate your projections, the only investors you’ll attract are dumb investors. They’ll be with you when things are going well and make your life a living nightmare when things aren’t, will offer little to no sound advice, and may distract you from building what the market needs. By inflating your projections, you will only be optimizing for the battle, and may lose the war if you can’t meet or beat your projections.
11/ VCs will always want you to do more than you are pitching. So if you’re overpromising, they’re raising their expectations even more down the road.
12/ Five questions you should answer in a pitch deck:
If you had billboard, what 10 words describe what you do?
What insight development have you had that others have not?
How you acquire customers in a way others can’t?
Why you?
What you need to prove/disprove to raise next round? – Harry Stebbings
13/ The longer you’re on the market, the greater the differential between expectations and reality, and the harder it is over time to close your round. Debug early on in the fundraising process (or even before the fundraising process) by setting and defining expectations through:
Leveraging market comparables. You don’t have to be good at everything, but you have be really really amazing at one thing your competitors aren’t. It’s okay if they’re better than you in other parts.
14/ You should reserve 10% of your round to allocate to your most helpful existing investors. Reward investors for their help. – Zach Coelius
15/ If your next round’s investor is willing to screw over your earlier investors out of pro rata or otherwise. After they leave, the only one left to screw over is you. – Jason Calacanis
16/ “Nobody’s funding anything that needs another round after them.” – Ben Narasin quoting Scott Sandell
17/ “When a VC turns you down for market size, what they are really saying is: I don’t believe you as the founder has what it takes to move into adjacent and ancillary markets well.” – Harry Stebbings
18/ When raising from corporates, be mindful of corporate incentives, which may limit your business and exit opportunities. “I’ve often seen the structure just simply be a SAFE with no information rights. No Board seats. Check sizes that are worth < 5% ownership. No access to trade secrets.” – Elizabeth Yin
19/ LOIs mean little to many investors, unless there’s a deposit attached to it. A customer must want the product so much they’re willing to take the risk of putting money down before they get it. 1-5% deposit would be interesting, but if they pay the product in full, you would turn investor heads. – Jason Calacanis
20/ “The most popular software for writing fiction isn’t Word. It’s Excel.” – Brian Alvey
21/ “Ask [prospective investors] about a recent investment loss, where the company picked someone else. See how they describe those founders, the process, and what they learned. This tells you what that investor is like when things don’t go their way.” – Nikhil Basu Trivedi
22/ “Founders, please hang onto at least 60% of the company’s equity through your seed raise. Series A or B is the first time founder equity should dip below 50%. I’ve seen cap tables recently where investors took too much equity early on, creating financing risk down the road.” – Gale Wilkinson
23/ “One of the worst things you can say to a VC is ‘we’re not growing because we’re fundraising.’ There are no excuses in fundraising.” – Jason Lemkin. Fundraising is a full-time job, but when you’re competing in a saturated market of attention, it’s you who’s fundraising, but not growing, versus another founder who’s also fundraising and is growing.
25/ The goalposts of fundraising (timestamped Oct 20, 2022 by Andrea Funsten):
Pre-seed: $750K-1.5M round
Valuation: $5-10M post (*She would not go over $7M)
Traction:
A working MVP
Indications of customer demand = have interviewed hundreds of potential customers or users
2-5 “Design Partners” (non-paying customers or users)
Seed: $2-5M round
Valuation: $12-25M post (*She would not go over $15M)
Traction:
$10-15K MRR, growing 10% MoM
6-12 customers who have been paying for ~6 months or more, a few that would serve as case studies and references
Hired first technical AE
Series A: $8-15M round
Valuation: “anyone’s guess”
Traction:
$1.5M in ARR is good, more like $2M
3x YoY growth minimum, but more like 3.5x • 12-20 customers, indications of ACV growth
Sales team in place to implement the repeatable sales playbook
26/ Don’t take on venture debt unless you have revenue AND an experienced CFO. – Jason Calacanis
27/ When you are choosing lead investor term sheets:
For small VC teams (team <10ppl): Make sure your sponsoring partner is your champion. Why does investing in you align with their personal thesis? Their life thesis? Which other teams do they spend time with? How much time do they spend with them? When things don’t go according to plan, how do they react? How do they best relay expectations and feedback to their portfolio founders?
For larger platform teams (team >10ppl): Ask to talk to the 3-5 best people at the firm. And when the investor asks you to define “best”, ask to talk to their team members who best represent the firm’s culture and thesis. Why? a/ This helps you best understand the firm’s culture and if there’s investor-founder fit. b/ You get to know the best people on the team. And will be easier to hit them up in the future.
28/ “If you are a category-defining company, you will always have a TAM question, if the category is defined by somebody else, you will not have a TAM question.” – Abhiraj Bhal
29/ “[Venture] debt typically has a 48-54 month term, as follows: 12 months of a draw period (ballooned to 18 months over the last few years), to which you can decide to use it or not 36 months to amortize it after that 12 months. The lender at this stage is primarily underwriting to venture risk, meaning they are relying on the venture investor syndicate to continue to fund through a subsequent round of financing.” This debt is likely to be paired with language that allow the fund to default if investors say they won’t fund anymore and/or just not to fund when asked. “They typically are getting 10bps-50bps of equity ownership through warrants. Loss rates must be <3-4% for the model to work.” If there’s less than 6 months of runway or cash dips below outstanding debt, then as a founder, expect a lot of distracting calls. – Samir Kaji
30/ The best way to ask for intros to investors is not by asking for intros, but by hosting an event and having friends invite investors to the event. There’s less friction in an event invite ask than an investor intro ask. The reality is that the biggest investors are inundated with intro requests all the time, if not just by cold email too.
Cash flow levers
31/ The bigger your customers’ checks are (i.e. enterprise vs. SMB vs consumer), the longer the sales pipeline. The longer the sales pipeline, the longer you, the founder, has to stay the Head of Sales. For enterprise, the best founders stay VP of Sales until $10M ARR. For SMB, that’s about $1-2M ARR, before you hire a VP of Sales. Inspired by Jason Lemkin.
32/ “‘I have nothing to sell you today — let’s take that off the table and just talk,’ he would say. ‘My goal is to earn the right to have a relationship with you, and I know it’s my responsibility to earn that right.'” The sales playbook of David Beirne of Benchmark Capital fame, cited in eBoys.
33/ “All things being equal, a heavy reliance on marketing spend will hurt your valuation multiple.” – Bill Gurley
34/ If you were to double or triple the price of your product, what percent of customers would churn? If the answer is anything south of 50%, why aren’t you doing it?
35/ Getting big customers and raising capital is often a chicken-and-egg game. Sometimes, you need brand name customers, before you can raise. And other times, you need capital before you can build at the scale for brand name customers. So, when I read about Vinod Khosla’s advice for Joe Kraus: “We had $1 million in the bank and we didn’t know what we were going to bid. We sat down in my office, all on the floor. Vinod said we should bid $3 million. I was like, ‘How do we bid $3 million? We only have $1 million in the bank.’ And he said, ‘Well, if we win, I’m pretty sure we can raise it, but if we don’t win, I don’t know how we’re going to raise.'”
36/ “Your ability to raise money is your strategy. If you’re great at it, build any business with network effects. If you’re bad at fundraising, it’s strategically better to build a subscription business with no network effects.” – Elizabeth Yin
37/ Be willing to fire certain customers (when things get tough or in an economic downturn). If they aren’t critical strategic partners or are loss making, figure out how to make them profitable. If you can, renegotiate contracts, like cheaper contracts for longer durations. If not, let them go. Make it easy to offboard.
38/ An average SaaS business, that doesn’t have product-led growth, is spending about 50% of revenue on sales and marketing. Those that are in hyper growth are spending 60%. – Jason Lemkin
39/ “The only thing worse than selling nothing is selling a few. If you sell nothing, you stick a bullet in it and move on. When you sell a few, you get hope. People keep funding even though it’s really not viable.” – Frank Slootman
40/ If your customer wants to cancel their auto-renew subscription to your product, you should refund them a 100% of their cost. – Jason Lemkin
41/ “Your price isn’t too high. Your perceived value is too low.” – Codie Sanchez
42/ “15-20% of IT spend is in the cloud.” And it’s likely to go up. – Alex Kayyal
43/ If your customers are willing to pay you way ahead of when your service is executed, you have an unfair and unparalleled cashflow advantage. – Harry Stebbings
44/ If you’re in the CPG business, it’s better to negotiate down the contract. “You buy 75, and you sell 60, they’re going to go, ‘Ah, I got 15,000 in inventory, it’s not a success.’ If you give them 40, and then they have to buy another 20, and they sell 60, they go, ‘Wow, we ordered 50 [(I think he meant 20)] more than our original order.’ You’re still at 60, but one, they’re disappointed, and one, they’re not. You’re still playing some weird mind games a little bit so that they feel good about whatever number was there.” – Todd McFarlane
45/ “If you are under 100 customer/users, get 20 of them in a Whatsapp Group. You will:
Get much higher quality feedback, faster, on the current product.
They will be WAY more proactive in suggesting future product ideas and helping you shape the product roadmap.
It will create a closer relationship between you and them and they will become champions of the product and company. People like to feel they had a hand in the creation process.” – Harry Stebbings
46/ Create multiple bank accounts with different banks to keep your cash, to hedge against the risk of a bank run. The risk is very unlikely to occur, but non-zero, especially in a recessionary market. Inspired by SVB on March 10, 2023. More context here, and what happened after here. Breakdowns here, here and here.
47/ “Keep two core operating accounts, each with 3-6 months of cash. Maintain a third account for “excess cash” to be invested in safe, liquid options to generate slightly more income.” – A bunch of firms
48/ “Maintain an emergency line of credit. Obtain a line of credit from one of your core banks that can fund the company for 6 months. Do not touch it unless necessary.” – A bunch of firms
49/ In case of a bank run: “1/ Freeze outgoing payments, let vendors know you need 60 days, 2/ Figure out payroll & let your investors know exactly when cash out, 3/ Attempt emergency bridge with existing investors; hopefully reasonable terms or senior debt (but given valuation reset this is a HARD discussion for many), 4/ Figure out who can take deferred salary on management team, which will extend runway, 5/ Make sure you communicate reality to team honestly so they can make similar plan for their household, 6/ Make sure you talk to HR about legal issues around payroll shortfall — which hopefully this doesn’t come to, 7/ In future, keep cash in 3 different banks.” – Jason Calacanis
50/ “Whenever a CEO blames their bad performance on the economy, I knew I had a really crappy CEO. ‘Cause it wasn’t the economy, it was a bad product-market fit. The dogs didn’t wanna eat the dogfood. Sometimes the economy can make that a little worse, but if people are desperate for your product, it doesn’t matter if the times are good or bad, they’re going to buy your product.” – Andy Rachleff
51/ General reference points for ACV and time to close are: $1K in 1 week. $10K in 1 month. $100K in 3 months. $300K in 6 months. And $1M in 12 months. – Brian Murray
52/ A B2B salesperson’s script from Seth Godin. “Look, you’ve told me you have this big problem you need to solve. You have a five million assembly line that’s letting you down, blah blah. If we can solve this problem together, are you ready to install our system? Because if it’s not real, let’s not play. Don’t waste my time, I won’t waste yours. You’re not going to buy from me because I’m going to take you to the golf course. You’re not going to buy from me because our RFP is going to come in cheaper than somebody else’s. You want my valuable time? I’m going to engage with you, and tell you the truth and you’ll tell me the truth. You’re going to draw your org chart for me. You’re going to tell me other complicated products you’ve bought and why your company bought them. And I’m going to get you promoted by teaching you how to buy the thing that’s going to save your assembly line. Let’s get real or let’s not play.” – Seth Godin
53/ “The job of a pre-seed founder is to turn investor dollars into insights that get the company closer to finding product-market fit.” – Charles Hudson
Culture
54/ Deliver (bad) news promptly. Keep to a schedule. The longer you delay, the more you lose your team’s confidence in you. For example, if your updates come out every other Friday, and you miss a few days, your team members notice. Your team is capable of taking the tough news. This is what they signed up for. Explain a stumble before it materially impacts your bottom line – revenue. Inspired by Jason Lemkin.
56/ “It’s easier, even fun, to do something hard when you believe you’re doing something that no one else can. It’s really hard to go to work every day to build the same thing, or an even worse version, of what others are already building. As a result, there was a huge talent drain from the company.” – Packy McCormick
57/ Lead your team with authenticity and transparency. “Employees have a ridiculously high bullshit detector, more so than anyone externally, because they know you better. They know the internal brand better.” So you have to be honest with them. “Here’s what we’re going to tell you. Here’s what we won’t, and here’s why.” Set clear expectations and leave nothing to doubt. – Nairi Hourdajian
58/ When someone ask Jeff Bezos, when does an internal experiment get killed? He says, “When the last person with good judgment gives up.” – Bill Gurley citing Jeff Bezos
59/ “Getting too high on a ‘yes’ can prepare you for an even bigger fall at the next ‘no.’ Maintaining your composure in the high moments can be just as important as not getting too down in the low moments.” – Amber Illig
60/ “Most have an unlimited policy paired with a results-driven culture. This means it’s up to the employee to manage their time appropriately. For example, no one bats an eye when the top performing sales person takes a 3 week vacation. But if someone is not pulling their weight and vacationing all the time, the perception is that they’re not cut out for a startup.” – Amber Illig
61/ “Whenever we’re dealing with a problem and we call a meeting to talk about the problem, I always start with this structure. We are here to solve a problem. So the one option that we know we’re not going to leave the room doing is the status quo. That is off the table. So whenever we finish this meeting, I want to talk about what option we’re taking, but it’s not going to be what we’re currently doing.” – Tobi Lutke
62/ “[Peter Reinhardt] would put plants in different parts of the office in order for the equilibrium of oxygen and CO2 to be the same. He would put noise machines in the perfectly placed areas and then reallocate the types of teams that needed to be by certain types of noise so that the decibel levels were consistent. What I don’t think people realize about founders is that they are maniacal about the details. They are unbelievable about the things that they see.” – Joubin Mirzadegan
63/ “Leadership is disappointing people at a rate they can absorb.” – Claire Hughes Johnson
64/ Page 19 Thinking: If you were to crowdsource the writing of a book, someone has to start inking the 19th page. And it’s gotta be good, but you can’t make it great on the first try. So you have to ask someone else to make it better, and they have to ask another to make their edits even better. And so on. Until page 19 looks like a real page 19. “Once you understand that you live in a page 19 world, the pressure is on for you to put out work that can generously be criticized. Don’t ship junk, not allowed, but create the conditions for the thing you’re noodling on to become real. That doesn’t happen by you hoarding it until it’s perfect. It happens by you creating a process for it to get better.” – Seth Godin
Hiring
65/ Hiring when your valuation is insanely high is really hard. Their options could very much be valueless, since they would depend on the next valuation being even higher, which either means you grow faster than valuations fall (market falls in a bear market) or you extend your runway before you need to fundraise again.
66/ It’s easier to retain great talent in a recession, but much harder to retain them during an expansionary market. Talent in a boom market have too many options. There’s more demand than there is supply of talent in a boom market.
67/ If you’re a company with low employee churn, you can afford to wait a while longer to find someone who is 20% better in the role. – Luis von Ahn
68/ “[Fractional CMOs and CROs often] want to be strategists. Tell you where to focus, and what to do better. But the thing is, what you almost always just need is a great full-time leader to implement all the ideas.” – Jason Lemkin. The only time it works is when the fractional exec owns the KPI and the function, where they work at least 60% of the time OR they work part-time and help you hire a full-time VP.
69/ Hire your first full-time comms person after you hit product-market fit, when you are no longer finding your first customers, but looking to grow your customer base. – Nairi Hourdajian
70/ “Ask [a high-performing hire] if there’s someone senior in her career that’s been a great manager, and if so, bring them on as an equity-compensated advisor to your company. If there’s someone in industry she really admires but doesn’t yet know, reach out to them on her behalf.” Give her an advisor equity budget, so they can bring on a mentor or someone they really respect in the industry. As a founder, create a safe space for both of them. Monthly 1:1s and as-needed tactical advice, introductions, and so on. And don’t ask that mentor to give performance feedback “because if so it’s less likely they’ll have honest, open conversations.” – Hunter Walk
71/ Hire talent over experience for marketing and product. “In marketing and product I prefer people with less experience and a lot of talent so we can teach them how we do things. They don’t have to unlearn anything about how they already work. We teach them how we work. For developers it might be different because it takes a lot of time to be a really good developer, and it’s relatively easy moving from one environment to another.” – Avishai Abrahami
72/ If you’re going to use an executive search firm to hire an exec, ask the firm three questions: “1/ Walk me through your hardest search? 2/ Walk me through a failed search? 3/ Why did it fail? 4/ How do you assess whether an exec is a good fit?” You should be interviewing the firm as much as the candidate. Watch out for “a firm with a history of candidates leaving in a short timeframe. Avoid firms that recycle the same execs.” – Yin Wu
73/ Before signing with any recruiting agency, ask “What happens if the person hired is a bad fit? (Many firms will restart the search to align incentives.) Is there a time limit for the search? (Some firms cap the search at 6 months. We’ve worked with firms without caps.)” – Yin Wu
Governance
74/ “The higher the frequency and quality of a young startup’s investor update, the more likely they are to succeed in the long run.” – Niko Bonatsos
75/ Five metrics you should include in your monthly investor updates:
Monthly revenue and burn, in a chart, for the whole year
Cash in the bank, at a specific date, and runway based on that
Quarterly performance for the past 8 quarters, in a chart
Target for the quarter AND year and how you are trending toward it
76/ Another reason to send great, consistent investor updates is that when prospective investors backchannel, you want to set your earlier investors up for success on how they pitch you.
77/ If you don’t have a board yet, still have an “investor meeting.” “Create investor meetings where you invite all your investors to do an in-person + Google Hangout’ed review every 60 days. They don’t have to come. But they can.” – Jason Lemkin
78/ “[The] most important measures of success for a CEO [are] internal satisfaction, investor relations and consumer support.” – Bob Iger
79/ “Entrepreneurs have control when things work; VCs have control when they don’t.” – Fred Wilson
80/ If an investor really wants their money back (usually when VCs have buyer’s remorse), there are times when they force you to sell or shut down your companies. Instead, ask them, “What would it take to get you off my cap table?” – Chris Neumann
Product
81/ “The ones that focus, statistically, win at a much higher rate than the ones that try to do two or three things at once.” – Bruce Dunlevie, cited in eBoys
82/ Once you launch, you’re going to be measured against how quickly you can ramp up to $1M ARR. One year is good. Nine months is great.
83/ The more layers of friction in the onboarding process (i.e. SSN, email address, phone number, survey questions), the better you know your user, but the higher the dropoff rate. For PayPal, for every step a user had to take to sign up, there was a dropoff rate of 30%. – Max Levchin in Founders at Work
84/ “Product-market fit can be thought of as progressively eliminating all Herbies until there are no more Herbies. Then, you’re in a mode where you can invest in growth because it’s frictionless.” – Mike Maples Jr. (In the book, The Goal, the trek is often delayed by a large kid called Herbie. As you can imagine, the group only moves as quickly as their weakest link.)
85/ “There’s a ruthlessness in the way Dylan finds sources, uses them and moves on.” – No Direction Home. Be ruthless about how knowledgeable you can be about your customers, about your problem space, and about your product. The knowledge compounds.
Competition
86/ “If you patent [software], you make it public. Even if you don’t know someone’s infringing, they will still be getting the benefit. Instead, we just chose to keep it a trade secret and not show it to anyone.” – Max Levchin in Founders at Work
87/ If you know you’re building in a hot space, and your competitors are being bought by private equity firms, share that with your (prospective) investors. The competitors’ innovation slows, and optimizing for profit and the balance sheet becomes a priority when PE firms come in. – David Sacks
88/ “As a startup, you always want to compete against someone who has ‘managed dissatisfaction at the heart of their business model.” – Marc Randolph
89/ “You cannot overtake 15 cars in sunny weather… but you can when it’s raining.” – Ayrton Senna. It’s easier to overtake your competitors in tough markets than great markets.
90/ “Having a real, large competitor is better than having none at all!” – Anna Khan
Brand/Marketing/GTM
91/ If you’re a consumer product, your goal should be to become next year’s hottest Halloween costume. Your goal shouldn’t be fit into a social trend, but to define one.
92/ Don’t be married to the name of your company. 40% of NFX‘s early stage investments change their names after they invest in the seed.
93/ The viral factor doesn’t take into account the time factor of virality. In other words, how long it takes for users to bring on non-users. Might be better instead to use an exponential formula. “Think of a basic exponential equation: X to the Y power. X is the branching factor, in each cycle how many new people do you spread to. Y is the number of cycles you can execute in a given time period. The path to success is typically the combination of a high branching factor combined with a fast cycle time.” – Adam Nash
94/ In a down market, you may not need as big of a marketing budget as you thought. Your competitors are likely not spending as much, if at all, to win the same keywords as before.
Legal
95/ “Nothing is more expensive than a cheap lawyer.” – Nolan Church
The hard questions
96/ “I’d love to kill it and I’d hate to kill it. You know that emotion is exactly the emotion you feel when it’s time to shut it down.” – Andy Rachleff, cited in eBoys
97/ “Inexperienced founders are usually too slow to fire bad people. Here’s a trick that may help. Have all the cofounders separately think of someone who should probably be fired, then compare notes. If they all thought of the same person…” – Paul Graham
98/ When you’re in crisis, find your OAR. Overcorrect, action, retreat. Overcorrect, do more than you think you need to. For instance, lay off more than you think you need to. Actions can’t only be with words. Words are cheap after all. And retreat, know when it’s time to take a step back. “Sometimes you just have to do your time in the barrel. When you’re in the barrel, you stay in the barrel. And then you slowly come out of it.” – Nairi Hourdajian
99/ “A half measure is usually something a management team lands on because it’s easy. If a decision is easy, it’s probably a half measure. If it’s hard, if it’s really damn hard… if it’s controversial, you’re probably doing enough of it. The other thing is a half measure often doesn’t have an end result or goal in mind. If you have a really specific goal, and implementing that goal is difficult, that’s probably doing your job. That’s probably what’s necessary.” – Tom Loverro
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Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.
Earlier this week, I grabbed coffee with a founder. Let’s call him “Elijah.” He recently lost a key exec he’d been working with for two years to their incumbent competitor. The competitor’s offer happened to be too good to turn down. Triple the exec’s salary. As that exec had a family to feed and children’s education that didn’t come cheap, he made the hard decision to leave. Needless to say, Elijah was devastated. And he asked,
“David, what should I have done?”
I initially thought it was rhetorical. It seemed that way. But he paused, looked at me, and waited.
So I responded.
My response
I’ll preface by saying that the advice I shared with him was a collection of insights I learned from mentors over the years — some a lot more recently than others. I don’t hold all the keys to the castle. And every situation is, well, situational. So the last thing I wanted was for the founder to take my advice as the word of god (nor anyone reading this blogpost now). Merely a tool in the toolkit. At times, useful. Other times, just something that acts as décor in the shed.
“Elijah, it’s probably too late for that exec… for now. He’s made his decision and walked. That said, I think there are two things to be aware of here:
The fact you didn’t know about this until it happened, and
The decision itself.”
Pre-empting the ultimatum
For the former, here’s how I think about pre-empting your team’s career inflections.
In their first week, have everyone put together their personal manifesto. What is their 6 month goal? 1 year? 5 years? 10 years? Lifetime goal? What motivates them? How do they like to give and receive feedback? Of course, it’s helpful to share your own first, so they have a reference point. Don’t expect anything you’re not willing to share first. So, naturally, this requires a level of transparency, and more importantly, vulnerability.
Then within the first two weeks, you and their direct manager should review their manifesto with them for at least 30 minutes live. Really get to know them. Taking a page out of Steven Rosenblatt’s book, what drives them? What haven’t they achieved that they want to achieve? How do they do their best work? When do they feel the most motivated? Why did they want to work here? Why are they excited to do so? How does working at your company fit in their broader goal?
Then every quarter, allow every team member one day of mindfulness away from their work to revisit their manifesto. I usually recommend a Friday. What’s changed? What’s stayed the same? Does their current role still fit in their broader goal? If not, why not?
The week after, take time to sync again and be incredibly candid.
Of course, the above is easier to do if you have a company of less than 50. At some point, when your company scales past that, it’s at least helpful to do it with your direct reports and their direct reports.
Helping with the decision
For the latter, you can’t stop a river. Even if you build a dam, the flow will always find a way around. You can’t change what motivates someone else. But you can help them channel it. The best thing you can do is equip that person with the tools to make a decision they will not regret, and wish them the best.
I like to sit people down and first help them figure out why they’re considering a new role. People often conflate the three traits of a job — compensation, scope, and title — together when making a career move. But in truth, they’re similar, but all a bit different. And I want people to know that just because they’re getting paid more doesn’t necessarily mean an increase in responsibility. Just because they’re getting a new title doesn’t mean that they’ll get more money. Then I have them stack rank the three traits. From most to least important.
If they still rank compensation first, that’s fine. Maybe they’re saving to buy a new house or to pay for their child’s higher education. And there’s nothing you nor I can do there. But if it’s one of the other two that come out on top, there’s room to create a new position or set of responsibilities where the individual feels empowered. And if it’s not at your company, they’ll be equipped to think through it at their next company. If they don’t have one lined up yet, help them through your network find one that’ll fit the criteria.
The wonderful irony
The funny thing about helping people achieve their dreams — sometimes that’s actively helping them leave your company — is that the karma usually comes back in one way or another. In this case, and I’ve seen it and experienced it before, even if you lose this person at this time and place, they’ll remember the help you gave them. To which, one day, when they have an all-star friend looking for their next opportunity, they will think of you.
There’s a saying I love. ‘The best compliment an investor can get is to get deal flow from someone they passed on.’ And here, the best compliment you can get is to get talent from someone who left your team.
In closing
Shake Shack’s Danny Meyer recently said something that echoes this notion. While he uses the word “volunteering,” he defines “volunteering” as:
“I basically, to this day, treat all of our employees as if they are volunteers, which not in the real sense. You’re going to get paid. But if you’re working for me, it means you’re probably good enough to have gotten another 25 job offers at least. And so, as far as I’m concerned, you’re volunteering to share your gifts with us.”
He goes on to say, “I didn’t have any way to motivate them with money. I couldn’t give them a raise, couldn’t dock them their pay. So I learned such a crucial lesson, which is that, if someone’s volunteering, the only way to motivate them is to have a higher purpose.”
Of course, there’s more than one way to make a team member feel like they are valued and that they value their work here. Another way is to give your prospective team member a “love bomb”, as Pulley’s Yin Wucalls it.
Give the candidate a love bomb once you're in sell mode.
Offer chats with investors. Get your team to reach out.
Send cake.
Talk to the candidate's partner, sister, kid, etc. Everyone wants to feel appreciated. Do whatever you can to show the person you want them on the team. pic.twitter.com/4pgnOQIO5S
Now I’m not saying that if Elijah did all the above, he’s guaranteed to retain the exec. Who knows? He might have. Might not. For a man with a family and financial needs, it’s a hard ask. But at the minimum, this career move wouldn’t have blind-sided him. And better, he could’ve supported that exec in making that career move.
Just like with your product, your goal with your team is also to catch lightning in a bottle. How do you attract the best talent to work with you? And then, once you are able to, how do you keep them?
With the latter, a big part of it is showing you care.
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The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.
I was reading Sammy Abdullah of Blossom Street Ventures‘ Medium post not too long ago about the value of auto-price increases in a context I’ve never really thought about. Quoting one of his portfolio companies’ founders:
“We started including auto-price increases in our renewals at the start of this year and it’s been surprisingly effective. Our starting point is 10% and we get it more often than not; some customers negotiate us down to the 3–5% range.
“The automatic price increases are a beautiful thing because they give us leverage:
we can trade an automatic price increase for an earlier renewal, longer contract period, or upselling to more features; and
when we do waive price increases, the customer walks away satisfied. They feel like they’re winning.”
It’s a great way to win on net retention. But as I’ve written about before, the net retention equation is comprised of the upgrades, downgrades, and churn variables.
Or convert more users into customers, if you’re running a freemium model
Reduce the number of customers downgrading to lower tiers
Reduce churn – customers leaving your platform
Some permutation of the above variables
Leveling up upgrades
Shivani Berry, founder of Ascend’s Leadership Program, once wrote: “Buy-in is the result of showing your team why your idea achieves their goals.” In a similar sense, buy-in is the result of showing your customers why your product achieves their goals. The best thing is that their goals will change over time. As so, your product must contain increasingly more value to your customers as they level up in their lifecycle. As they grow, you have product offerings that grow with their needs.
Take, for example, one of my favorite startups these days, Pulley, a cap table management tool for startups. Don’t worry, this isn’t a sponsored blogpost. Although it’d be nice if it was. I have no chips in the bag; I just like them. They have three tiers of pricing. The lowest for startups with 25 stakeholders. The middle for startups with 40. And the highest is for larger businesses.
Why 25? The average seed-stage startup has about 25 stakeholders. Subsequently, top of mind for them is what SAFEs and convertible notes look like on their cap table and how to structure early equity pools.
As a startup levels up to 40 stakeholders, they’re probably jumping into their first priced round. As such, they’ll need a 409A valuation to appraise their fair market value, as well as finally putting together their first official board.
Every time founders raise another round of funding, the more complicated their cap table becomes. The more they need Pulley’s software. And it so happens, the less price sensitive they become. For Pulley, that means they can charge more as their customers have greater purchasing power.
You also always want an enterprise pricing tier, where pricing is custom. Don’t be afraid to charge more. As I mentioned in a previous essay, when Intercom was only charging IBM $49, an IBM exec once told the Intercom team, “You know, I go on a coffee run for the team that costs a lot more than your product. That’s why we’re wary of investing too much more in you. We just don’t see how you’re going to survive.” If it helps as a reference point, the median ACV (annual contract value) for public SaaS companies is $27,000.
Do note that the more you charge, the longer the sales cycle will be. For ACVs over $20K, expect 4-6 months of a sales cycle. For contracts over $100K, expect 6-9 months. Of course, the contrapositive would be that the lower the price point, the easier and faster it takes to make a decision.
Reducing downgrades and churn
I’ve been in love with Clayton Christensen’s “jobs-to-be-done” (JTBD) framework ever since I learned of it a few years ago. At the end of the day, you’re delivering value. Value in the form of doing a job. As Christensen says, “when we buy a product, we essentially ‘hire’ it to help us do a job. If it does the job well, the next time we’re confronted with the same job, we tend to hire that product again. And if it does a crummy job, we ‘fire’ it and look for an alternative.”
The better it can do the job your customer needs to get done, the more you can optimize for the variables in the net retention equation. Sunita Mohanty, Product Lead at Facebook, shared an amazing JTBD framework they use back at Facebook and Instagram:
When I… (context) But… (barrier) Help me… (goal) So I… (outcome)
Here’s another way to look at it:
What features should we have that would make our product great?
What features should this product have that would make it a no-brainer purchase for our customers?
The “no-brainer” part especially matters. And to be a “no-brainer”, you have to deliver the best-in-class. Your features have to solve a fundamental job that your customer is trying to solve. The difference between a “great product” and a “no-brainer” is the difference between a 5 out of 5-star rating and a 6-star out of a 5-star rating. Effectively, the outcome in Facebook’s JTBD framework exceeds the goal, which makes the barrier irrelevant. As David Rubin, CMO of The New York Times and former Head of Global Brand at Pinterest once said: “Your service shouldn’t lead with ‘saving money’. You must create an offering that is so compelling, it stands by itself in the consumer’s mind.”
In closing
At the end of the day, in the words of Alex Rampell, building a startup is “a race where the startup is trying to get distribution before the incumbent gets innovation.”
You’re in a race against time. You’re trying to reach critical mass and growth before your incumbents realize your space is a money-making machine. And growth comes in two parts: acquisition and retention. While many founders seemed to have over-indexed on acquisition over the last couple of years, the pandemic has reawakened many that retention is often times much more difficult to attain than acquisition. While it may not be true for every type of business, hopefully, the above is another tool in your toolkit.
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While I don’t always ask this question, when I do, it provides me enormous context to how the founding team works together. What do you and your co-founders fundamentally disagree on? Over the years, I’ve heard many different answers to this question. “We disagreed on which client to bring into our alpha.” “On our last hire.” “Our pricing strategy.” And so on. As long as you contextualize the point of friction, and elaborate on how, why, and what you do to resolve it, then you’re good. There’s no right answer, but there is a wrong answer.
The answer that scares me the most is: “We agree on everything.” Or some variation of that. While people may share a lot of similarities, even potentially the same Myers Briggs personality type (although I do believe people are more nuanced than four letters), no two people are ever completely the same. Take twins, for example. Genetically, they couldn’t be any more similar. Yet, to any of us, who’ve met any pair of twins in our lifetime know they are vastly different people.
Priorities lead to disagreements
One of my favorite counterintuitive lessons from the co-founder and CEO of Twilio, Jeff Lawson, is: “If your exec team isn’t arguing, you’re not prioritizing.” He further elaborates:
“As an executive team, we never actually argued — which is a strange thing to bother a CEO. But in fact, something always felt not quite right to me when we always agreed. Clearly, we must not be making good enough decisions if we all agree all the time.
“What I came to realize was that the reason why we didn’t argue is we weren’t prioritizing. One person says, ‘I like idea A,’ and the other person says, ‘I like idea B,’ and you say, ‘Great, put them both down, we’ll do it all!’ And in fact, when you look back on those documents at the end of the year, we rarely got around to very much of anything in those documents.
“Be vigorous not just about what makes the list, but the specific order in which priorities fall. “We realized it’s not just about all the things we could do, but the order of importance — which is first, which is second. Now you get disagreements and a lot of vigorous, healthy debate.”
Starting the tough conversation
Admittedly, it’s not always easy to have these tough conversations with the people you trust most. In fact, often times, it’s even harder to have these conversations because you’re scared about what it can do to your relationship. Arguably, a fragile one at best. At the end of last year, Yin Wu, founder of Pulley, shared an incredible mindset shift when building an all-star team, which led to my conversation with her.
3/ We are not a family. We are a world class team, purpose built to win. Most founder-types do not want a 2nd family, they want to excel.
We push each other to improve. We own our mistakes so we can avoid making same mistake twice. We celebrate our joint success as a team.
You’re a team driven to change the world we live in. And to do so, you need a system of priorities.
One of the best ways I’ve learned to address conflicts – explicit and implicit, the latter more detrimental than the former – is taking the most obvious, but the one that most people try to avoid. Address the elephant in the room at the beginning.
I love the way Elizabeth Gilbertapproaches that elephant, “The truth has legs. It’s the only thing that will be left standing in the end. So at the end of the day, when all the drama has blown up, and all the trauma has expressed itself, and everyone has acted up and acted out, and there’s been whatever else is happening, when all of that settles, there’s only going to be one thing left standing in the room always, and that’s going to be the truth. […] Since that’s where we’re going to end up, why don’t we just start with it? Why don’t we just start with it?”
When it hasn’t happened yet
If you haven’t disagreed with your team yet, you either haven’t established your priorities or one or the other or both has yet to bring it up. A mentor of mine once told me, “Whatever you least want to do or talk about should be your top priority.” And the goal is to sit down with your team and figure it out. To come into the conversation suspending immediate judgment and trying to see where your other team members are coming from.
As the CEO of a startup or a leader of a team, you don’t have to use every piece of feedback or input you get from your teammates. But you should make sure your teammates feel heard. That you’ve put thought and intention behind considering their ideas and opinions. Whether you choose to deviate from your teammates’ opinions or not, you should clearly convey the rubric that you used to make that decision. And why and how it aligns with the company’s mission.
In closing
And of course, the follow-up to the first question about disagreement would be: How often do these disagreements happen? And how do you move forward after the disagreement comes to light?
I go back to a line Naval Ravikant, co-founder of AngelList, once said, “If you can’t see yourself working with someone for life, don’t work with them for a day.” Indubitably, you’re going to be working with your co-founders for a long time. And if you haven’t dissented with your co-founders – or for that matter, other team members, investors, and customers – yet, you will. And knowing what, how and why you disagree with others can be invaluable for your company’s survival and growth.
This past weekend I heard a new phrasing of disagreement I really liked from a friend of mine. “Creative conflict.” I’m adding that phrase to my dictionary from now on. And well, this is my preface to you all before I do.
Prioritize. Communicate. And embrace creative conflict.
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As part of my work, I talk to many seed-stage SaaS founders. At the seed, most of these founders are thinking about how to get to product-market fit. The one in zero to one. They’re launching their product with a select few companies to really nail their pain points. And often times, pricing and the business model take a backseat when they offer their customers the product for free or at an extreme discount. While investors don’t expect founders to nail pricing at the seed, it’s useful to start thinking about your revenue model early on. After all, pricing is both an art and a science. And with the right pricing structure, it can also be your proxy for assessing product-market fit. Here’s how.
Every product manager out there knows that customers don’t always know what they want, so asking them for a solution rarely nets valuable feedback. Rather, start with the problem. What are their frustrations? What sucks? What’s the last product they bought to attempt to alleviate their problem? Subsequently, what’d they like about that product? What didn’t they like?
There are two perspectives you can use to approach pricing: cost-plus and value-based. Cost-plus pricing is pricing based on selling the product at a given markup from its unit cost. The biggest mistake founders often make here is underestimating how much it costs to produce a product.
On the other hand, there’s value-based pricing. An approach where you determine the economic value of the service you are providing and give it to your customers for a bargain. Superhuman, for instance, prices the fastest email experience at $30/month. Or in a different light, a dollar a day. If you are saving more than a dollar of economic value a day by responding to emails faster than ever, then the product is worth it. The biggest pitfall here is that founders often don’t fully understand the value they’re bringing to their customers, which is a result of:
They don’t understand your value,
Or you can’t convince them of the value you think you offer.
To visualize both of these approaches better, let’s use the pricing thermometer, as YC calls it.
The greater the gap between two nodes (i.e. value and price, or price and cost), the greater the incentive. If you’re selling at a price far greater than its unit cost, you are far more motivated to sell your product. On the flip side, if your product is priced far below the value and benefits you provide, a customer is more motivated to purchase your product.
Buyers vs Customers
To take it a step further, if you’re planning to scale your startup, what you’re looking for our customers, not buyers. Buyers are people who purchase your product once, and never again. They learned from their mistake. Your product either didn’t deliver the value you promised or the value they thought you would deliver. Customers are repeat purchasers. Why? Because they love your product. It addresses your customers’ needs (and ideally more) again and again. Your customers’ satisfaction is evergreen, rather than ephemeral.
When you only have buyers, you have to push your product to others. It’s the epitome of a door-to-door salesperson. Think Yellow Pages.
When you have customers, you feel the pull. Customers are drawn to you. They come back willingly on their own two feet. As Calvin French-Owen, co-founder of Segment, once said: “The biggest difference between our ideas pre-PMF vs. when we found it was this feeling of pull. Before we had any sort of fit, it always felt like we had to push our ideas on other people. We had to nag people to use the product.”
Value-based pricing is playing to win. Cost-plus pricing is playing to not lose. While the latter is convenient strategy when you’re a local business not looking to scale (i.e. coffee shop, local diner, local auto parts store, etc.), it’s incredibly difficult to scale with, especially as customer needs evolve. As you scale, your customers might include anyone from Microsoft who wants you to bring a sales engineer to integrate your product to a 5-person startup team who’s just testing your product out. With cost-plus pricing, you’ll be forced to determine price points on a case-by-case scenario. With value-based pricing, you can systemize dynamic pricing based on evolving customer needs. As their value received goes up, the price does too.
As the name suggests, to generate pull, we have to start from value. In this case, your value metric.
Humans are one of the most awe-inspiring creatures that have ever graced this planet. Even though we don’t have the sharpest claws or toughest skins nor can we innately survive -50 degrees Fahrenheit, we’ve crafted tools and environments to help us survive in brutal nature. But arguably, our greatest trait is that we’re capable of writing huge epics that transcend our individual abilities and contributions. And share these narratives to inspire not only ourselves but the fellow humans around us.
A member of the our proud race, founders are no different. They are some of the greatest forecasters out there. To use Garry Tan’s Babe Ruth analogy, founders have the potential of hitting a home run in the direction they point. They build worlds, universes, myths and realities that define the future. They live in the future using the tools of today. In fact, there’s a term for it. First used by Bud Tribble in 1981 to describe Steve Jobs’ aura when building the Macintosh – the reality distortion field.
Yet, we humans are all prone to anxiety. A story nonetheless. Simply, one we tell ourselves of the future that restricts our present self’s ability to operate effectively. Anxiety comes in many shapes and sizes. For founders, one of said anxieties is attempting and worrying about the future without addressing the reality today. In the early days, it’s attempting scale before achieving product-market fit (PMF). Building a skyscraper without surveying the land – land that may be quicksand or concrete.
Here are four signs – some may not be as intuitive as the others:
This week I revisited David Sacks’ essay Your Startup Is a Movement. It was first brought to my attention during my conversation with Yin Wu, founder of Pulley. And again, with a friend who recently jumped into venture after an operating career, particularly around the topic of our investment theses. Our conversation underscored his fourth point in his Movement Marketing playbook.
It’s much easier to compete in the market of one – the only one – than in a market to be the best one. As some VCs call it, companies that are “allergic to competition.”
Why?
The goal for any startup is to achieve product-market fit before your competitors, especially your incumbents, notice the market opportunity. Frankly, the incumbents have more cash, more talent, more resources, more in every regard except one… problem obsession. Insatiable desire to fundamentally change the way we live. And with that desire comes speed.
It reminds me of a time over a decade ago, right after the spectacular Olympics which put the greatest Olympian of all time on center stage. Our swim coach asked the team, “How do you beat Michael Phelps?”
A few of my teammates suggested we work longer and harder. Another suggested that we should’ve started younger. And another suggested we wait till he retired. But my coach responded, “Just don’t race against him in butterfly. Race him in breaststroke.” While Michael Phelps is by no means slow in breaststroke, still faster than 95% of swimmers out there in it, the theory holds. It’s the stroke one would have the best chance to beat him in. But what stood out to me most was what the wisecrack on the swim team shouted out as an answer.
“He can swim while I run.”
And he was right.
Another fascinating aspect I realized in hindsight was that no one suggested the question was impossible.
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Last week, I was lucky enough to jump on a call with the founder of Pulley, Yin Wu. Backed some of the best investors out there including Stripe, General Catalyst, YC, Elad Gil, just to name a few, Pulley is the ultimate tool for cap table management. In addition, Yin is a 4-peat founder, one of which led to an acquisition by Microsoft, and three of which, including Pulley, went through YC.
In our conversation, we covered many things, but one particular theme stood out to me the most: how she built a culture of ruthless prioritization.
