By far, this is one of my favorite and most recurring questions over the years. And not just in the scope of founders, I’ve asked the same question for a multitude of titles:
Investors
On a similar note, I’ve asked investors: What’s the difference between a great investor and a great board member?
And it yielded some insightful answers.
Leaders
Managers
Executive hire
Marketers
Chefs (both since I was co-hosting a cooking competition in 2019 and 2020, but also for culinary tips to improve my own cooking)
Artists
Software engineers (when you’re hiring folks who are in a field you don’t have a strong competence in)
Auto mechanics (yes, when you drive a 2009 mommy van, it visits the shop more often than you’d like, but also funnily enough, one of the most reliable cars)
Friend versus best friend
Life partner
… just to name a few.
I love this question since its counterpart is often asked: What is the difference between a bad and a good founder? Unfortunately, the “bad vs good” dichotomy usually ends up being a vanity question. You don’t need a trained eye and years of experience for the average person to differentiate between a bad and a good. If you’re reasonably logical, you can tell the difference between a bad and a good in any industry. There are a few exceptions, like art, especially modern or abstract art. But the case holds for most other cases.
On the flip side, to be able to differentiate:
The good – top quartile (25%)
The great – top decile (10%)
And the epic – top percentile (1%)
… becomes increasingly more and more difficult the higher up you’re going. As the power law and the Pareto principle goes, the top 20% accounts for 80% of the results. In other words, the small top-performing minority account for the vast majority of the returns. For instance, the top 20% of VCs account for 80% of the industry’s returns. And the higher you go up in differentiation – from good to great to epic – the smaller the delta in inputs between the tiers. There is a far smaller difference in inputs between the top 1% and the top 2%, compared to the same percentile difference between the 50th and the 49th percentile.
Having said that, to a layperson, the most insightful answer you can get that will save you years of mistakes and failures and industry know-how is the differential between the top performers. As such, usually, I get answers that would have otherwise required a keener eye, much smarter brain, a more resilient body, and a more differentiated path than I have.
For example, here are some answers I’ve learned over the years that differentiate the good from the great:
VP Sales hire. Their ability to hire two rock-star directors from their network within 1-2 months of being hired.
Chef. Their morning routine, starting from how they set their palate in the morning to how they build a robust supply network.
Founder. Their ability to raise their team members’ potential and how close of a pulse they keep to their operating expenses/burn rate.
Manager. How radically candid they can be.
Of course, it’s one thing to know what are the differentiators and another thing to understand the differentiators. The latter requires you to internalize and cut your teeth so that you can understand the true value behind the answers to the above question.
The DGQ series is a series dedicated to my process of question discovery and execution. When curiosity is the why, DGQ is the how. It’s an inside scoop of what goes on in my noggin’. My hope is that it offers some illumination to you, my readers, so you can tackle the world and build relationships with my best tools at your disposal. It also happens to stand for damn good questions, or dumb and garbled questions. I’ll let you decide which it falls under.
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Not too long ago, I published a blogpost walking through my top 9 founder questions that deserve more attention. In it, I detailed:
The questions
My rationale for asking each of them
Surprisingly, it did really well. A few folks reached out to me before that post, which inspired its due subsequence, asking if I had a repository of questions to share. And after, asking me to do more of such calculi.
Just got asked by a friend on how I come up with questions.
1st thought, idk it just happens.
2nd thought, naw, I know I spend too much time swimming in my head.
So here's a thread 🧵. Hope it's useful to someone out there (Or an excuse to say I worked today):
While I’m compiling something of the like on the backend, with no real deadline, as it’ll grow over time, I thought I’d dedicate a series on this blog to new and old questions that come into my purview. Each paired with:
Why I ask it the way I do
In what circumstances do I find myself asking it
And if applicable, how I build up to asking that question
And as bowtie to wrap everything up nicely together, I’m calling it the DGQ series. Or Damn Good Questions. Or it’s counterpart, Dumb and Garbled Questions. I’ll let you decide what each question stands for. But I’m really not the best with naming conventions, so if anyone has a better one, I’m all ears.
As the rocket takes off, I thought I’d begin by sharing the question that inspired me to start this new series.
What would [20+age] year old [name] say about the [name] that sits before me today?
For instance, what would 45-year old David say about the David that sits before me today?
I’ve heard many variations of this question, but the wording of this question in particular is an ode to my buddy, Matt, founder of nomofomo and UCLA’s President of Thought Lounge. After all, many of the best ideas I have in my noggin’ right now are not my own. This question is no exception.
There’s this great line from the song A Million Dreams, which I’m going to spare you my sad excuse for a karaoke singer, that goes like: “I don’t care, I don’t care, so call me crazy. We can live in a world that we design.” As luck would have it, I found it when I read Mike Maples Jr‘s piece from last year on backcasting. Which, if you have a spare 10 minutes, I highly recommend checking out as well. And speaking of quotable lines, he wrote, “The future doesn’t happen to us; it happens because of us. The future is not like the weather. It doesn’t just happen. People make the future. It’s not a destiny or hope; it’s a decision.”
He goes on to say, “Breakthrough builders are visitors from the future, telling us what’s coming. They seem crazy in the present but they are right about the future. Legendary builders, therefore, must stand in the future and pull the present from the current reality to the future of their design.”
Similarly, not only the greatest founders, but I also found that the greatest life athletes live in a similar mantra. It takes real courage to stand where no one is standing and decide that is the direction you want to pursue. You might be right; you might be wrong. But there’s something to be said about the clarity you will have when you live life under the assumption that you’ve already done it.
For example, I suffer from stage fright. But I find great comfort in visualizing myself doing what scares me the most again and again, until I get comfortable standing on stage. Imagining myself giving the same talk in front of one friend, 10 friends, 50 people and even 5,000 people. Each time I level up, I imagine the fear as well as the excitement that comes with it. Embracing both the former and the latter.
In a similar way, the way the future me looks at the naïve me of today helps me find the elusive confidence I need when I’m in doubt. Would future me look at today me and shake his head in disappointment or pride? What would he tell me to do if he sees I’m struggling? And when I myself cannot manifest the courage to take a step forward, my wiser and more resilient self will manifest the destiny I am meant to walk.
As Suleika Jaouad, author of the memoir Between Two Kingdoms, once said, “[The] act of writing a future dream in the present tense has really kind of helped assuage that fear.”
So ask yourself, What would the Future You say about the You that sits before me today?
I imagine even if you don’t find powerful answers, you’ll find powerful questions that will serve as guiding principles in your own life.
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For today’s blogpost I’m going to try something new. It was requested by a reader of this blog, which for anonymity’s sake, I’ll call P. For those who live a busy life, prefer audio over text, or just find my font choice appalling, I thought I’d record myself reading the below text. Think of it like the audiobook version of this essay.
If you love or hate this format, I’d love to hear what you think. Feel free to comment below, or DM me across any of my channels. Any and all feedback welcome with open arms.
Over the years, I’ve used many different versions of the question: What would you do if you knew you would fail? Or, What would you do regardless of the outcome of the endeavor? And as long as the reason for doing so contains any combination of:
Skill acquisition
Invaluable experience
Or relationship/friendship that I value more than the project itself
… it’s a “Yes” for me. The “Yes” becomes an exploration of depth. An optimization strategy for my strengths. My superpowers. It’s something I learned from quite a few of my mentors over the years – both in an official and unofficial capacity.
Subsequently, I’ve had this belief for a long time, which will probably cause some uproar somewhere, that we shouldn’t optimize our life around reducing our weaknesses. But rather, focus our time on maximizing our strengths. That doesn’t mean we shouldn’t ever work to ameliorate our incompetencies. But:
Just enough that we meaningfully reduce our risk of ruin. Any more, there are diminishing returns over time. Forgiving my esoteric economic jargon, we should only work on our weaknesses so that we don’t lose our ability to survive. For example, if you don’t know how to cook, you shouldn’t aim to be the best Michelin-starred chef in the world, but just enough so that you don’t starve to death. Assuming your goal in life isn’t in the culinary world.
Mitigate our weaknesses that are the most adjacent to our core strengths. For instance, in my opinion, one of my greatest relative strengths is my ability to ask questions. I am by no means the best, but compared to the rest of my skills, this is one I find myself shining in a bit more than my peers. Which effectively meant I was always interested in what others were up to and how they thought. A mentor figure told me years ago that it didn’t matter how interested I was in others, no one had a reason to be interested in me. Which meant that one of my greatest and most adjacent weaknesses was to be interesting.
People who have superpowers often carry super-weaknesses. The greater their superpower, usually the greater their weakness. Humans aren’t great multitaskers. We were never designed to be. If you’re saying yes to one thing, you’re saying no to a hundred other things. Are you willing to shoulder that opportunity cost? Sometimes you are, but be very deliberate about it.
Fairly recently, I was presenting to an amazing cast of board members in a board meeting. There was a general consensus around the fact that we lacked focus as an organization, yet we were sitting on a wealth of talent. To which, one of our board members redirected us to Steve Jobs’ infamous speech when we returned to Apple in 1997. One line in particular stood out to me: “Apple is executing wonderfully on many of the wrong things.“
He follows up to say: “The ability of the organization to execute is really high though. I mean, I’ve met some extraordinary people at Apple. There’s a lot of great people at Apple. They’re doing some of the wrong things because the plan has been wrong.”
Taking a step back, as humans, as working professionals, as entrepreneurs in each and every one of our own rights, we often “execute wonderfully on many of the wrong things.” Often times, that’s on our own weaknesses, rather than our strengths.
Living in a simulation
Imagine that we live in a simulation – an MMORPG. Or, massively multiplayer online role-playing game. We start off with a finite number of stat points. The starting number of stat points varies from person to person, depending on your socio-economic class and your given genetic code. You can allocate those stat points however you want.
You can spread them all out evenly, where you’ll never have any true weakness, but neither any true strength. You’ve hedged your risk of ruin. It’s going to be really hard for you to lose, but you can never really win.
On the flip side of the token, you can minmax your build, using gaming terminology. Double down on a stat, to achieve the equivalent of a superpower, compared to your peers. But often times, if you are maximizing on a superpower, you’ve minimized your proficiency in another area. Luckily, as in any game, and as in reality, you can pick up tools and make friendships along the way that will supplement your weaknesses with their strengths.
Of course, as all analogies go, there are exceptions. But as far as I know, there are far fewer exceptions than those that fit into this analogy. And, technically, our ability to level up is infinite. The only upper limit is that, like everyone else, we have 24 hours in a day and a finite number of years to live.
So, where am I going with this?
Super-tools for (super)weaknesses
What do you not want or don’t care to have a superpower in? For the skills and tasks you use everyday, but don’t care to be the best in the world for, leverage software and tools to automate your work, so you only need to spend the minimal amount of time or energy to make sure it doesn’t become a stressor for your day. In the above gaming analogy, you use items to compensate for specific stat deficiencies. The more efficient the “item”/tool, the less energy you need to expend to make up for a super-weakness.
Here are the tools I use to supercharge my day, so I can spend more time enhancing my superpowers and less time mitigating my super-weaknesses.
Descript
Descript makes me feel like a god. As much as I love Adobe Premiere Pro, it had an incredibly high learning curve. But once you got it, they have some of the most robust tools on the market. On Descript, I love how I can edit an audio or video clip just by deleting words in the transcript. And if I mess up, and I do quite a bit, I can always voiceover in the editing process to make myself sound smarter than I actually am. Even better, I can drag and drop music, video and sound effects. If you’re listening to the audio version of this essay, you might have noticed I don’t have any of the afore-mentioned effects. The goal here was just to get you my thoughts as quickly as possible, without trapping myself in audio perfectionism.
If the Adobe Creative Suite is the endgame, Descript is the early game. And it helps you ace it remarkably well.
Notion
Notion is a dark horse (for me). I’ve seen startup data rooms, personal blogs, internal wikis, and even VC investment theses and fund strategies being produced on Notion. It always seemed like a nice-to-have. In all fairness, I didn’t give it the benefit of the doubt it deserved until late last year. Its greatest ability isn’t the ability to create a robust website or the prettiest blog. Its greatest ability is that it gets people to put ideas and thoughts on paper as quickly as possible. The barrier to entry is so low that its greatest competitors are note-taking apps, like Evernote or Google Keep, for early users. Then, you can go from notes to fully functional site in minutes.
And ever since, I’ve been a geek over it. There’s this great thread on Twitter by @empirepowder about all the applications you can build using Notion extremely quickly – from creating a blog from scratch to publishing a course to tracking analytics on your page to the ultimate tweet tracking tool.
For many of us, the hardest part about doing anything is starting. Notion solves that.
Undock
Take scheduling as another example. I know very few people, if at all, who want to be the best scheduler in the world. I know I don’t. But I find myself spending an undeserving amount of time trying to schedule meetings, rather than actually having meetings or being productive. Enter Undock. “The fastest way to find time to meet with anyone.” That’s from their website. And it’s true. When I’m in my Gmail scheduling calls/meetings with founders or investors, I never leave my email tab nor do I ever touch my mouse. No matter how many people are on the email thread, I can find time for a meeting, on average, in two seconds. That’s no joke. I timed myself.
Meetings are about communication, connection and collaboration. But maybe you’re just exhausted from scheduling them. Look, Undock is actually not “just another scheduling app”. We’re a super calendar and we come in peace.
Having and empowering others to have superpowers is literally in their DNA.
Superhuman
I’ve heard many great things about Superhuman, and about a quarter as many bad things about the platform. Superhuman’s claim to fame is being able to get you to inbox zero via one of the most seamless and fastest email experiences ever – through shortcut keys, follow-up reminders, and social media insights just to name a few. Their user interface makes it incredibly easy to respond from one email to the next, even when you’re offline. They have this 100ms rule, where every interaction should be faster than 100ms to make communication feel instantaneous. And they do deliver.
Many of its customers include investors and founders. Busy people who have more unread emails in their inbox than they care to count. Most of the bad reviews I hear from friends and colleagues are that $30/month is just too expensive.
There are many ways to look at the $30 price tag. It’s $12 more than Netflix’s premium plan, and Netflix serves you new content you might not have access to otherwise. Superhuman serves you the same content that would have been yours anyway, just in a new light. On the flip side, $30/month is $1/day. Less than a cup of coffee a day, assuming you buy your coffee every day. But even if you only bought $3 coffee twice a week, $30/month would still be cheaper.
Or in a different lens, Superhuman’s core audience – founders, investors, busy people who have hundreds of emails a week, if not a day – their time is worth at or more than $30/hour. So, if on a 160-work month, Superhuman collectively saves their customers more than an hour of time every month, then it’s worth it to them.
The way I look at it, it’s a bargain. But I don’t use it. Why? It’s not because it’s too expensive. Neither because I don’t have enough emails to go through. But rather, I happened to optimize my email workflow before I even heard of Superhuman. I’ll save that topic for a later blogpost. But if you don’t have a way to get to inbox zero (unless you don’t care. I have a number of friends who have tens of thousands of unread in their inbox. That scares me)… but if you do care about the piling mound of emails, Superhuman’s really got it in the bag.
In closing
And maybe this post might serve helpful in reframing on how you can live your most optimal life. Supercharge your strengths. And find the best tools and mental models you can to protect your downside. It’s okay if you’re not the best at the latter; you don’t have to be.
I mentioned a few of the tools I use, but your mileage may and probably should vary.
While there are tools out there that supercharge your ability to execute and perform, equally so, you’ll find there are amazing people out there that complement your weaknesses. Friends, colleagues, co-founders, life partners. In the words of Steve Jobs, find and meet “extraordinary people.” To do so, as my mentor told me, you’ll have to be interested and interesting.
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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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As I am co-leading a VC fellowship with DECODE (and here’s another shameless plug), a few fellows asked me if I had a repository of questions to ask founders. Unfortunately, I didn’t. But it got me thinking.
There’s a certain element of “Gotcha!” when an investor asks a founder a question they don’t expect. A question out of left field that tests how well the founders know their product, team or market. In a way, that’s the sadist inside of me. But it’s not my job, nor the job of any investor, to force founders to stumble. It’s my job to help founders change the world for the better. By reducing friction and barriers to entry where I can, but still preparing them as best as I can for the challenges to come.
I’m going to spare you the usual questions you can find via a quick Google search, like:
What is your product? And who is your target audience?
How big is your market? What is your CAGR?
What is your traction so far?
How are you making money? What is your revenue model?
And many more where those come from.
Below are the nine questions I find the most insightful answers to. As well as my rationale behind each. Some are tried and true. Others reframe the perspective, but better help me reach a conclusion. I do want to note that the below questions are described in compartmentalized incidents, so your mileage may vary.
Here’s to forcing myself into obsolescence, but hopefully, empowering the founders reading this humble blog of mine to go further and faster.
The questions
I categorize each of the below questions into three categories:
The market (Why Now)
The product (Why This)
And, the team (Why You)
Together, they form my NTY thesis. The three letters ordered in such a way that it helps me recall my own thesis, in an unfortunate case of Alzheimer’s.
Why Now
What are your competitors doing right?
This is the lesser-known cousin of “What are your product’s differentiators?” and “Why and how do you offer a better solution than your competitors?”. Founders are usually prepared to answer both of the above questions. I love this question because it tests for market awareness. Too often are founders trapped in the narratives they create from their reality distortion fields. If you really understand your market, you’ll know where your weaknesses are, as well as where your competitors’ strengths are.
There have been a few times I’ve asked this question to founders, and they’d have an “A-ha!” moment when replying. “My competitors are killing it in X and Y-… Oh wait, Y is our value proposition. Maybe I should be prioritizing our company’s resources for Z.”
Why is now the perfect time for your product to enter the market?
As great as some ideas are, if the market isn’t ripe for disruption, there’s really no business to be made here… at least, not yet. What are the underlying political, technological, socio-economical trends that can catapult this idea into mass adoption?
For Uber, it was the smartphone and GPS. For WordPress and Squarespace, it was the dotcom boom. And, for Shopify, it was the gig economy. For many others, it could be user habits coming out of this pandemic that may have started during this black swan event, but will only proliferate in the future. As Winston Churchill once said, “Never let a good crisis go to waste.”
A great way to show this is with numbers. Especially your own product’s adoption and retention metrics. Numbers don’t lie.
What did your customers do/use before your product?
What are the incumbent solutions? Have those solutions become habitual practices already? How much time did/do they spend on such problems? What are your incumbents’ NPS scores? In answering the above questions, you’re measuring indirectly how willing they are to pay for such a product. If at all. Is it a need or a nice-to-have? A 10x better solution on a hypothetical problem won’t motivate anyone to pay for it. A 10x on an existing solution means there’s money to be made.
Before we can paint the picture of a Hawaiian paradise, there must have been several formative volcanic eruptions. It’s rare for companies to create new habits where there weren’t any before, or at least a breadcrumb trail that might lead to “new” habits. As Mark Twain says, “History doesn’t repeat itself, but it often rhymes.”
Why This
What does product-market fit look like to you?
Most founders I talk to are pre-product-market fit (PMF). The funny thing about PMF is that when you don’t have it, you know. People aren’t sticking around, and retention falls. Deals fall through. You feel you’re constantly trying to force the product into your users’ hands. It feels as if you’re the only person/team in the world who believes in your vision.
On the flip side, when you do have PMF, you also know it. Users are downloading your product left and right. People can’t stop using and talking about you. Reporters are calling in. Bigger players want to acquire you. The market pulls you. As Marc Andreessen, the namesake for a16z, wrote, “the market pulls product out of the startup.”
The problem is it’s often hard to define that cliff when pre- becomes post-PMF. While PMF is an art, it is also a science. Through this question, I try to figure out what metrics they are using to track their growth, and inevitably what could be the pull that draws customers in. What metric(s) are you optimizing for? I wouldn’t go for anything more than 2-3 metrics. If you’re focusing on everything, you’re focusing on nothing. And of these 1-3 metrics, what benchmark are you looking at that will illustrate PMF to you?
For example, Rahul Vohra of Superhuman defines PMF with a fresh take on the NPS score, which he borrows from Sean Ellis. In feedback forms, his team asks: “How would you feel if you could no longer use the product?” Users would have three choices: “very disappointed”, “somewhat disappointed”, and “not disappointed”. If 40% or more of the users said “very disappointed”, then you’ve got your PMF.
Founders don’t have to be 100% accurate in their forecasts. But you have to be able to explain why and how you are measuring these metrics. As well as how fluctuations in these metrics describe user habits. If founders are starting from first principles and measuring their value metric(s), they’ll have their priorities down for execution. Can you connect quantitative and qualitative data to tell a compelling narrative? How does your ability to recognize patterns rank against the best founders I’ve met?
If in 18 months, this product fails. What is the most likely reason why?
This isn’t exactly an original one. I don’t remember exactly where I stumbled across this question, but I remember it clicking right away. There are a million and one risks in starting a business. But as a founder, your greatest weakness is your distraction – a line in which the attribution goes to Tim Ferriss. Knowing how to prioritize your time and your resources is one of the greatest superpowers you can have. Not all risks are made equal.
As Alex Soktold me a while back, “You can’t win in the first quarter, but you can lose in the first quarter.” The inability to prioritize has been and will continue to be one of the key reasons a startup folds. Sometimes, I also walk down the second and third most likely reason as well, just to build some context and see if there are direct parallels as to what the potential investment will be used for.
On the flip side, one of my favorite follow-ups is: If in 18 months, this product wildly succeeds. What were its greatest contributing factors?
Similar to the former assessing the biggest threats to the business, the latter assesses the greatest strengths and opportunities of this business. Is there something here that I missed from just reading the pitch deck?
What has been some of the customer feedback? And when did you last iterate on them?
I’m zeroing in on two world-class traits:
Open-mindedness and a willingness to iterate based on your market’s feedback. As I mentioned earlier with Marc Andreessen’s line, “the market pulls product out of the startup.” Your product is rarely ever perfect from the get-go, but is an evolving beast that becomes more robust the better you can address your customer’s needs.
Product velocity. How fast are your iteration cycles? The shorter and faster the feedback loop the better. One of the greatest strengths to any startup is its speed. Your incumbents are juggernauts. They’ll need a massive push for them to even get the ball rolling. And almost all will be quite risk-averse. They won’t jump until they see where they can land. Use that to your advantage. Can you reach critical mass and product love before your incumbents double down with their seemingly endless supply of resources?
Why You
What do you know that everyone else doesn’t know, is underestimating, or is overlooking?
Are you a critical thinker? Do you have contrarian viewpoints that make sense? Here, I’m betting on the non-consensus – the non-obvious. While it’s usually too early to tell if it’s right or not, I love founders who break down how they arrived at that conclusion. But if it’s already commonly accepted wisdom, while they may be right, it may be too late to make a meaningful financial return from that insight.
But if you do have something contrarian, how did you learn that? I’m not looking for X years of experience, while that would be nice, but not necessary. What I’m looking for is how deep founders have gone into the idea maze and what goodies they’ve emerged with.
Why did you start this business?
Here, unsurprisingly, I’m looking for two traits:
Your motivation. I’m measuring not just for passion, but for obsession and the likelihood of long-term grit. In other words, if there is founder-market fit. Do you have a chip on your shoulder? What are you trying to prove? And to whom? Do you have any regrets that you’re looking to undo?
Most people underestimate how bad it’s going to get, while overestimating the upside. The latter is fine since you are manifesting the upside that the wider population does not see yet. But when the going gets tough, you need something to that’ll still give you a line of sight to the light at the end of the tunnel. Selfless motivations keep you going on your best days. Selfish motivations keep you going on your worst days.
Your ability to tell stories. Before I even attempt to be sold by your product or your market, I want to be sold on you. I want to be your biggest champion, but I need a reason to believe in the product of you. You are the product I’m investing in. You’re constantly going to be selling – to customers, to potential hires, and to investors. As the leader of a business, you’re going to be the first and most important salesperson of the business.
What do you and your co-founders fundamentally disagree on?
No matter how similar you and your co-founders are, you all aren’t the same person. While many of your priorities will align, not all will. My greatest fear is when founders say they’ve never disagreed (because they agree on everything). To me, that sounds like a fragile relationship. Or a ticking time bomb. You might not have disagreed yet, but having a mental calculus of how you’ll reach a conclusion is important for your sanity, as well as the that of your team members. Do you default on the pecking order? Does the largest stakeholder in the project get the final say after listening to everyone’s thoughts?
Co-founder and CEO of Twilio, Jeff Lawson, once said: “If your exec team isn’t arguing, you’re not prioritizing.”
I find First Round’s recent interview with Dennis Yu, Chime’s VP of Program Management, useful. While his advice centers around high-impact managers, it’s equally as prescient for founding teams. Provide an onboarding guide to your co-founders as to what kind of person are you, as well as what kind of manager/leader you are. What does your work style look like? What motivates you? As well as, what are your values and expectations for the company? What feedback are you working through right now?
In closing
Whether you’re a founder or investor, I hope these questions and their respective rationale serve as insightful for you as they did for me. Godspeed!
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The amazing Paul “PG” Graham came out with an essay this month on crazy new ideas. And the thing I’ve learned over the years, being in Silicon Valley, is if PG writes, you read. In it, one section in particular stood out:
“Most implausible-sounding ideas are in fact bad and could be safely dismissed. But not when they’re proposed by reasonable domain experts. If the person proposing the idea is reasonable, then they know how implausible it sounds. And yet they’re proposing it anyway. That suggests they know something you don’t. And if they have deep domain expertise, that’s probably the source of it.
“Such ideas are not merely unsafe to dismiss, but disproportionately likely to be interesting.”
I’ve written a number of essays about crazy ideas. Here. Also here. The last of which you’ll need to Ctrl F “crazy”, if you don’t want to read through all of it. And also, most recently, here. But that’s besides the point. The common theme between all of these is that crazy ideas are not hard to come by. Crazy good ideas are. Good implies that you’re right when everyone else thinks you’re crazy. When you’re in the minority. And the smaller of the minority you are in, the greater the margin on the upside. Potential upside, to be fair.
As investors, we hear crazy pitches every so often. David Cowan at Bessemer even wrote a satire on it all. For the crazy pitches, go to episode five. The question is: How do we differentiate the crazy ideas from the crazy good ideas? But as PG says, if it’s coming from someone we know is a subject-matter expert (SME) and they’re usually grounded on logic and reasoning, then we spend time listening. Asking questions. And listening. ‘Cause they most likely know something we don’t.
That was true for Brian Armstrong, who recently brought his company, Coinbase, public. He worked on fraud detection for Airbnb in its early days prior. And he knew he was getting into the deep end with crypto back in 2012. But he realized how unscalable crypto transactions were and how frustrated he was. Garry Tan, then at YC and part-time at Initialized, saw exactly that in him. A reasonable SME with a crazy idea. Garry just released an amazing interview between him and Brian too, if you want to tune into the full story.
What if some of the variables in the equation are missing?
But most of the time the founders you’re talking to aren’t subject-matter experts with deep domain expertise. Or at least, they haven’t left an online breadcrumb trail of whether they’re a thought leader or if they’re reasonable human beings. So subsequently, in the little time I have with founders in a first or second meeting, I look for proxies.
For proxies on domain expertise, I go back to first principles. What are the underlying assumptions you are making? Why are they true? How did you arrive at them? What are the growing trends (i.e. market, economic, social, tech, etc.) that have primed your startup to succeed in the market? Does timing work out?
To see if they’re “reasonable” under PG’s definition, I seek creative conflict. How do you disagree with people? If I brought in a contrarian opinion you don’t agree with, how do you enlighten me? How do you disagree with your co-founders?
In closing
To be fair, we’re not always right. In fact, we’re rarely right. On average, in a hypothetical portfolio of 10 startups, five to six go to zero. One to two break even. Another one to two make a 2-3x on investment. That is to say, they return to the investor $2-3 for every $1 invested. And hopefully, one, just one, kills it, and becomes that fund returner. Fund returner – what we call an investment that returns the whole fund and maybe more. Of course, every time a VC invests, they’re aiming for the fences every time. As a VC once told me, “it’s not about the batting average but the magnitude of the home runs you hit.” And even in those 10 investments, it’s a stretch to say that all of them are “crazy” ideas.
But the hope is that even if we’re wrong on the idea, we’re right on the people.
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I was introduced to a founder of an e-commerce marketplace recently trying to figure out what product-market fit looks like. Specifically what might be some early tells of PMF. And I told him, “If your users are sticking around long enough to try to game your system, you have something they want. While it might not be in the most efficient format, you’re close to PMF. Subsequently, solving that frictional point that users are trying to ‘hack’ will delight them.”
Last year, I wrote that one of the tells of a great unicorn idea is frustration with the status quo. And the lagging indicators of frustration are complaints, but even better, “hacks”. Life hacks. Career hacks. Cold email hacks. Any time a forum or community comes together to share best practices is a potential market opportunity. As Jeff Bezos once said, “Your margin is my opportunity.”
Similarly, if some of your users converge around circumventing your platform, they’re hacking their way to find a better solution. But the fact they’re sticking around on your platform means you have something they want. And while it could be more elegant, you’ve solved the rocks of the “rocks, sand, and water” framework. What’s left are the “sand” and the “water”. And they come disguised as a user hack.
Sarah Tavel of Benchmark once wrote: “You must create an offering that is so compelling, it stands by itself in the consumer’s mind.” Solving all the frictional points in the user journey will get you to that compelling offering – a lovable product.
A reader reached out to me last year and said, “Thank you… [But] you have no idea how long I spend reading your blogposts with a dictionary next to me.” While it wasn’t necessarily a hack, to know there was a reader out there willing to weather through my idiosyncratic vocabulary in my earlier essays meant a million to me. But at the same time, it was a sign I was too caught up in my own wordsmithing. So, I dialed it back. While there will still be some esoteric jargon from time to time, I try to make my writing more relatable when editing. And to that reader… if you’re still reading this essay, thank you.
Back in 2007, Marc Andreessenwrote: “The market pulls product out of the startup.” In this case, that pull becomes a race between you and your users’ frustration. Can you release an update that addresses your users’ pain point before they become so frustrated they pack up and go? Either to build their own version or try a competitor’s.
I love Max Nussenbaum of On Deck’s analogy here. “If the market is indeed pulling the product out of you, you sometimes feel less like a creator and more like a mere conduit.” You, as the team behind the product, are a conduit to satisfying your users’ needs. As Mike Maples Jr.says, “Getting storytelling right means the founder is the mentor of the story (ie Yoda), rather than the hero (ie Luke.).” Your customers are the heroes of the story. Of their story. And your story. How they spend their time should offer you brilliant product insights.
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“Is your opening bid to assume trust – to assume someone is trustworthy – and to grant them the full benefits of that? Or is your opening bid to not trust, but the trust can be earned?”
Over the past weekend, my friend shared this brilliant interview between Jim Collins and Shane Parrish at Farnam Street. The same friend who recommended this podcast that catalyzed my essay on how to think like an LP. So, needless to say, when she sent me this one, I had to tune in. I’ve been a big fan of Jim for a long time, ever since one of my favorite college professors recommended that I read Good to Great. He has an amazing talent with wordsmithing – bringing seemingly incongruous concepts together in analogous harmony. So when Jim uttered the above quote, I took my Staedtler pen and 180 g/m2 paper out.
“Have you ever considered the possibility?”
Jim also shared, “Brutal fact: Not everyone is trustworthy. And the brutal fact is that some people abuse that trust.” Some people will abuse that trust. Some people will really let you down. But that, in my opinion, as well as Bill Lazier’s – Jim Collins’ mentor, is just the cost of living. That shouldn’t change your disposition in the world, but rather illustrate how much more you should cherish the ones that are trustworthy.
Jim furthered that notion with another anecdote from his mentor, Bill. “Have you ever considered the possibility, Jim, that your opening bid affects how people behave? If you trust people, you’re more likely that they will act in a trustworthy way. So it’s a double win. It’s the best people and they’ll behave in a trustworthy way. The flip side is if you have an opening bid of mistrust, the best people will not be attracted to that. If you have an opening sense of you have to earn my trust, […] some of the best people are gonna be like ‘I don’t need to put up with that. I’ll go do something else.'”
Thinking aloud
Coincidentally, a few weekends ago, one of my good friends hosted a thought lounge. The first I’ve participated after hearing about it for a few years. The purpose of which, and I quote, “is meant to be a place where passionate people come together to practice dialogue and have meaningful conversations.” Every person brings in a topic that’s designed to spark kinetic intellectual energy that each lasts for 12 minutes. And where “creative conflict” is encouraged.
It just so happens that one of the four topics that came up that day was the law of attraction. A concept that states that similar people attract each other. And that one’s thoughts can attract similar results. The more you think you will succeed, the more likely you are to succeed. And likewise the same might be true for failing. One of my fellow participants brought up a great Henry Ford quote: “Whether you think you can, or you think you can’t – you’re right.”
And it acutely reminds me of a story I once read in Tim Ferriss’ Tribe of Mentors. Robert Rodriguez, who directed one of my childhood favorite franchises Spy Kids, shared with Tim when asked the question, “If you could have a gigantic billboard anywhere with anything on it, what would it say and why?”
“I like the idea of setting impossible challenges and, with one word, making it sound doable, because then it suddenly is. So I’d choose FÁCIL! for my billboard. It’s a good reminder that anything can be done, with relative ease and less stress, if you have the right mindset. […] Attitude comes first.”
In closing
“Is your opening bid to assume trust – to assume someone is trustworthy – and to grant them the full benefits of that?”
That’s the line I need on my fortune cookie. If one day I unwittingly become a foolhardy skeptic, I want to open up a fortune cookie after a lonely meal I’ve stuffed myself to the brim on. On a quiet late night Uber ride home, thinking I’ve eaten all I can eat… I want to read that line.
My opening bid is trust. It always has been. And I hope it always will be. I know that people have taken advantage of my kindness and trust. And I know there will be more that will in the future. But I hope I never lose the optimism in my eyes.
#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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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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I recently tuned back into Elizabeth Gilbert‘s, author of Eat Pray Love, 2016 interview with On Being. It also happens to be one of my favorite interviews about creativity and curiosity. I found myself pausing, rewinding, playing, pausing, rewinding, then playing again one line again and again.
“Everything that is interesting is 90 percent boring.”
She further elaborates, “And I think one of the reasons that both my sister and I ended up being authors is because we were taught how to do boring things for a long time. And I think that’s really important, because here is one of the grand misconceptions about creativity, and when people dream of quitting their boring job so that they can have a creative life, one of the risks of great disappointment is the realization that, ‘Oh, this is also a boring job a lot of the time.’ It’s certainly tedious. It’s a boring job I would rather do than any other boring job. It’s the most interesting boring job I’ve ever had. […]
“And we are in a culture that’s addicted to the good part, the exciting part, the fun part, the reward. But every single thing that I think is fascinating is mostly boring.”
She takes it from a perspective that everything has its boring parts. So you have to learn to accept what’s boring along with what’s interesting. I think she’s absolutely right. But while I was tuning in again to that same interview – those exact same lines – for who knows, the 20th time, I thought… maybe there’s something more. Forgive my brain for having the tendency to jump into numbers and equations. That for some reason, one of the primary ways I understand life has to be through some quantitative lens. I thought, what if we take it from an expected value perspective.
Expected value = 10% * (Utility of interesting) + 90% * (Utility of boring)
The utility we gain from boring, often times, is of course, well… boring. Some utility value less than zero. Or in other words, more often than not, we lose utility. On the other hand, the utility we gain from interesting is positive. So, then it becomes a balancing act between what’s interesting and what’s boring. That in the decision to pursue something interesting, there might be the below subconscious calculus:
10% * (Utility of interesting) > 90% * (Utility of boring)
To shine a different light, is the interesting part interesting enough that it outweighs all of the boring parts combined, and ideally, more?
Take, for instance, writing for me. I love writing. It’s meditative. Thought-provoking. And it’s challenging. But at the same time, editing, filling in the keywords for SEO, finding a cover image, all the way to writing when I don’t feel inspired, but I do so to commit to a weekly routine is tedious.
Similarly, Gilbert uses the example of raising children. “Raising children — I’m not a mother, but I’m a stepmother, I’m a grandmother, I’m a godmother, I’m an aunt, and I know that 90 percent of — especially, being with very small children…
“Incredibly — it’s hard. And then there’s the moment where you realize, ‘Oh, my God, this is a spark of creation that I’m working with, and this is magic, and this is life seen through new eyes.’ And creativity is the same, where 90 percent of the work is quite tedious. And if you can stick through those parts — not rush through the experiences of life that have the most possibility of transforming you, but to stay with it until the moment of transformation comes and then through that, to the other side — then, very interesting things will start to happen within very boring frameworks.”
For many of this blog’s readers, it’s starting a business. Whether you’re changing the world or the people you care the most about, that mission is what drives you. That’s what makes it interesting. And every time you hit a milestone –
Your first user outside of your friends and family,
Rated #1 on Product Hunt,
One of your customers writes a handwritten love letter to you and your team about how you saved her family,
You finally have enough revenue to pay your team members who’ve been working with you for free for two years,
$1M in ARR,
50,000 users,
You reach profitability,
Your dream investor says yes,
A Fortune 500 business offers you 9 figures for your business,
And the list goes on and on.
… it’s exciting! But let’s be honest, not every day will be sunshine and rainbows. 90% of your days will be tedious. Some percent of those days or weeks might even suck! 90% of your days will be you working to find and reach that 10%. And if that 10% is just that amazing, it’ll make that 90% worth it.
In a sense, it’s like the Pareto Principle. 80% of your utility will come from 20% of your achievements. That star 20% – your customer love letters, providing employment for all your team members during the tough days of COVID.
In an analogous mental model, in everything that is boring, there might be a small percentage that makes it interesting. Now I’m really curious as to what I might discover here.
#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.
Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!
