Tag: entrepreneurship
We constantly hear about “product market fit.” But my post yesterday about The Power of Passion When Starting Your Company was about “founder market fit.” And I’ve come to believe that – especially among first time entrepreneurs – founder market fit is much more important than product market fit at the inception of the company.
I stumbled on the phrase a few times over the past year and it’s been rolling around in my head a lot since. The first time was on Chris Dixon’s blog Founder / market fit which led me to a guest post by David Lee of SV Angel on More Thoughts on What Makes Great Entrepreneurs Great.
I’ve seen this over and over in TechStars. Founders come in with something they are super excited about. As they get exposed to mentors and feedback, they quickly start moving around within the market (or domain) as they search for a clearer focus, which could be defined as product market fit prior to getting a product out there and doing any real testing. This search is usually qualitative – it involves real feedback from potential customers and users, but it’s not a measured, tested approach.
In parallel, there’s often a Lean Startup methodology going on that does more quantitative tests of the specific product. But in a lot of cases, the qualitative feedback at the very formative stages is just as, if not more, important to make sure you end up in the right zone to test.
Underlying all of this is the regular shift away from something the founders are passionate about. The Orbotix example in my post is a great one – it would have been easy for Adam and Ian to decide to work on something that had a better product market fit, like iPhone enabled door locks, instead of something that not only hadn’t been invented yet, but also wasn’t obvious what market would really want it (a ball controlled by your smartphone – ok – that’s cool, but who will buy it?)
They, and their co-founder and CEO Paul Berberian had a vision for who would want a ball controlled by a smartphone. And Adam and Ian were obsessed with the idea. The three of them had extraordinary founder market fit, well before they figured out the product market fit.
We’ve got lots of other examples of this in our portfolio. I can’t tell you the number of times I get asked “what would someone ever use a personal 3D printer for?” But Bre Pettis at MakerBot is completely and totally obsessed with bringing 3D printers to the masses. While product market fit is getting clearer with each new product release, the founder market fit in this cases was awesome. Or Isaac Saldana of SendGrid, who initially named the company SMTPAPI. He has a great chapter in Do More Faster where he wrote about how he “Looked for the Pain” as a developer, found it in sending transaction email, and created SMTPAPI (now SendGrid) to address it. Or Eric Schweikardt who is unbelievably focused on creating the next generation robot construction kit at Modular Robotics. Sure – the “market comp” in this case is Lego Mindstorms, but Eric’s vision for the market goes well beyond this, and the product follows.
I’m not suggesting that product market fit isn’t an important concept. It is. But at the very beginning, especially with first time entrepreneurs, founder market fit is even more important.
Last night Amy and I watched the first episode of Aaron Sorkin’s new TV show The Newsroom. It started out strong but by about 30 minutes in I said to Amy “this isn’t going to last for us – this is Sports Night, but less interesting.” By the end I realized Sorkin was simply following “The Formula” which many people, both creatives and professionals, fall into. I’ll explain in a bit, but first some play by play analysis (to mix metaphors).
We loved Sports Night. I’m the sports widow in this family – I don’t really care about or watch much professional sports. But we watched Sports Night on DVD from beginning to end around 2002. I remember watching five or six episodes at night at some point. We literally couldn’t stop and just raced through it. We were already into The West Wing by then and felt like we’d discovered a special, magic window into Sorkin’s brain – a parallel universe to the brilliance that was the first few seasons of The West Wing. But even faster paced, punchier, rougher, less polished, and less serious.
Isaac, Dana, Casey, Dan, Natalie, and Jeremy became new friends. We loved them – flaws and all. The dramatic tension existed in every thirty minute (well – 22 minute to allow for commercials) show. We could watch three episodes in an hour. Six in two. Awesomeness.
Thirty minutes into The Newsroom and I already recognized Charley as Isaac, Will as Casey, Mackenzie as Dana, Jim as Nathalie, Maggie as Jeremy. Only Dan was missing. The supporting characters in the newsroom all looked familiar and as non-memorable as the one’s in Sports Center. There were a few gender change ups, but not many, and the obvious romantic / sexual relationship with Will-Mackenzie (Casey-Dana) and pending Jim-Maggie (Nathalie-Jeremy) were front and center.
I won’t bother watching episode two. I’ll let The Newsroom run its course for the first season and if it gets great reviews go back and watch it later. I’m bummed because I was hoping it would feel like another West Wing to me rather than Studio 60. We’ve been looking for a new TV series to watch since we burned out on Mad Men – I guess it won’t be this one.
Back to The Formula. I got an email from an entrepreneur on Saturday. He described his new business in the words of his last successful business, which exited in 2000. I have no idea what he’s done between 2000 and 2012 – he didn’t go into it, but he used his 1996 – 2000 experience to explain why his new business was going to be great. While the context was different, the business was different, the environment was different, and the technology was different, The Formula was the same.
Big companies love The Formula. They keep doing the same things over and over again until they don’t work anymore. Suddenly, when they don’t work, they either go through radical transformation, upheaval, or disruption. In some cases, like IBM in the early 1990’s, they have a near death experience before re-emerging as something completely different. In others cases, like Novell, they just quietly disappear.
VCs use The Formula constantly. I’ve sat through thousands of board meetings where I hear the equivalent of “in 1985 we did blah blah blah and you should also.” Or, “sales works this way – you need to be getting $X per rep for direct – it has always worked this way.” I could give an endless list of examples of this. It’s one of the challenges with VCs, especially ones who had some success, drifted for a while, and then rediscovered “The Formula” as the path to being successful again. Sometimes it works, sometimes it doesn’t.
The Formula works for a while. Eventually it gets stale. If you go back 30 years, you’ll see The Formula hard at work in the sitcoms of my childhood. Happy Days. Laverne and Shirley. Three’s Company. Try to sit through two hours of these shows – you’ll pluck your eyeballs out with a tweezer. They are campy, fun and nostalgic for 15 minutes and then mindblowingly dull.
If you are an entrepreneur, recognize that The Formula is hard at work all around you. Many people – your investors, your partners, your competitors – are simply using a newer version of The Formula they used for the last 20 years. Don’t be afraid to completely blow it up – it worked in the past but people are attracted to new things, inspiring things, things that challenge the way they think. Inspire – don’t fall back on “it’s always worked this way.”
Don’t ignore The Formula. When it’s working, it’s awesome. But remember that it doesn’t work forever.
C’mon Sorkin – inspire us!
Ben Horowitz from Andreessen Horowitz has a beautiful post up titled The Struggle. He captures – in words – what many entrepreneurs, especially entrepreneurial CEOs go through. I’ve heard variants of it many times over the years and have experienced it myself in several companies where I’ve been the entrepreneur and many companies where I’ve been the investor. Ben states that there is no answer to The Struggle but offers some things that may or may not help.
I’d like to take it one step further and explain the brilliance of The Struggle. And I’ll begin at the end, by starting with one my favorite John Galt quotes.
“It’s not that I don’t suffer, it’s that I know the unimportance of suffering.” – John Galt
When you accept the complete and total unimportance of suffering, you can actually enjoy The Struggle. It’s just a step along the way, another experience in life, of the cumulative experiences before we ultimately die. Suffering, The Struggle, disappointment, failure, and self-doubt – these are all part of being an entrepreneur. And that brings to mind the famous Nietzsche quote.
“That which does not kill us makes us stronger” – Friedrich Nietzsche
Remember always that we all will die. And it’s unlikely that The Struggle will kill us. If we approach it the right way it will make us stronger. Here are a few examples from my first company, Feld Technologies (1987 – 1993).
Hyperion: While Feld Technologies was a software consulting company, the companies that installed the networks that our software ran on (mostly PC-based Novell Networks) were so shitty that we set up our own small network installation group. Some of our clients wanted to buy everything from us so we also sold them the hardware. We made about 20% margin on the hardware so this was worthwhile, especially since we were able to bill by the hour for all the time we spent on this stuff. People liked working with us – all of our new business either was “random” or “word of mouth.” We ended up working for a bunch of Boston-based VC firms and several of them referred us to their biotech investments. In the early 1990’s, biotech was white hot – these companies raised tons of money and spent it on crazy wet lab facilities, which included lots and lots of hardware. I can’t remember much about Hyperion other than they were out on 495 somewhere (it was a long drive) and they bought a bunch of hardware from us. They paid intermittently and one day we realized they owed us around $75,000 and hadn’t paid us in over 60 days. For another 30 days I called and kept getting promised checks, which never came. I vividly remember The Struggle – I was lying in bed with Amy in our apartment at 15 Sleeper Street (Apt 304 in case you were curious). It was the middle of the night and I couldn’t sleep. Amy could feel the wheels turning in my brain and asked me what was wrong. I told her I was worried Feld Technologies wasn’t going to make payroll because Hyperion owed us $75,000. I then went in the bathroom and threw up. It’s important to realize that it wasn’t that we were out $75,000, but the hardware had cost us 80% of this and we’d already paid our hardware vendor so we were really out over $125,000. We were a $1.5m-ish self-funded business at the time so this was a devastatingly large amount of money for us. After a sleepless night, on a totally empty stomach, I got in my car and drove out to Hyperion. They were still there (thankfully) – I then sat in the lobby until the CFO would meet with me, and I stayed in his office until he brought me a check for whatever they owed us. They went out of business a few months later.
Avatar: My parter Dave Jilk and I were at a gas station filling up his red Ford Tempo with gas on our way to Avatar in Hopkinton. We knew it was going to be a terrible meeting and each of us was incredibly anxious. We were in the middle of The Struggle. We’d taken on our first Mac custom software project and were using an RDBMS called ACI 4D which was new to us. It was one of the two choices on the Mac at the time (the other was Blythe Omnis) – each had their own version of suckage especially when compared to the PC-based 4GL called Clarion that we used for most of our clients. We we’re really struggling with 4D – performance on the Mac was awful, the networking dynamics were weak (and the Mac networking software was terribly slow at the time), and our understanding of how to really tune it was non-existant. We had heard of some successful 4D implementations but they were hard to find out much about. We knew this was likely our final meeting where we’d get fired, even though that rarely happened in our world. We were meeting with Tom Bogan, the CEO, and a few other people on his team. We liked Tom a lot – he was a very direct and thoughtful CEO and we knew we were failing him. Over the preceding months, we had tried extremely hard and worked many unbillable hours trying to get things working, but just couldn’t. I don’t remember the ACI folks being very helpful and I remember a number of conversations with Dave about “the fucking Macintosh.” We were deep in The Struggle. Tom eventually fired us (I don’t remember if it was at that meeting or not). He and I lost touch over the years (I’m sure he was glad to be rid of us) until I had breakfast with him in Boulder in 1997 when he was first looking at investing in Rally Software. I started out the meal by saying “hi – sorry we did such a crummy job for you at Avatar” and he responded, graciously, with “that was a long time ago, wasn’t it.”
I’ve got a lot more stories like this from Feld Technologies and several other companies I co-founded, including Interliant and Email Publishing, along with long stretches of time at Mobius Venture Capital. All of them share The Struggle and when I reflect on it from my perch at 46.5 years old, I recognize the unimportance of suffering.
I get asked some version of this question, often in the form of “I’m thinking about becoming an entrepreneur”, every day. It’s awesome to me that lots of people are asking this question but it’s really hard to answer with a simple, short response. I’ve been pointing people at a number of resources to help them get a feel for what being an entrepreneur is like and two that I’m involved in top the list.
The first is the book Do More Faster: TechStars Lessons To Accelerate Your Startup that I wrote with David Cohen in 2010. There are a bunch of reviews up on Amazon – mostly good – that capture the spirit of what we were trying to convey. Whenever I’ve aimed it at someone who asks what it’s like to be an entrepreneur or wants to learn more about what’s in the mind of an entrepreneur, I usually get the feedback that it’s useful. What surprised me early on was the feedback from early employees at startups who told me it helped them understand what the founders of their company were going through. I recently skimmed through it again just to make sure it still felt fresh to me and it does.
The second is Startup Weekend. If you’ve never done a Startup Weekend, it’s an incredible simulation of entrepreneurship. In 54 hours you’ll go through the experience of starting a company from scratch, surrounded by others doing the same thing. You’ll compress a lot of the activities into a weekend, especially dynamics around team, idea, and trying to get something out the door quickly. It’s valuable for existing entrepreneurs as well – if you are an entrepreneur looking for smart people who want to get involved with startups, it’s a great recruiting ground. I’ve known and supported Startup Weekend from the very first one that was held in Boulder in 2007 and joined the board last year to amp up my involvement.
While there is no substitute for jumping in the deep end and starting a company, I believe both our book and the experience of Startup Weekend are great ways to get a deeper perspective of what it’s like to be an entrepreneur.
What are some of the things you point people at to answer this question?
Today’s post is a guest post from my friend Nicholas Napp. We first met five years ago and while I’ve never invested in anything he’s done, I’ve tried to be helpful along the way. Nick is currently running a company called MoveableCode and has a great Kickstarter campaign going for his latest product Incantor (Magic Made Real). Go check out the campaign and support him if you are interested. In the mean time, enjoy his story about Never Giving Up and Never Surrendering. And yes, I recently “invested” in Nick via Kickstarter at the $250 level – I now am excitedly waiting for my Incantor Nobilis for 2.
First – an overview on what I’m working on now
I founded MoveableCode back in 2009, initially to do some mobile Augmented Reality research on a National Science Foundation SBIR grant. We quickly learned that we could make cool things but no money and pivoted. Two years later, we are all about innovative mobile entertainment. We have a grand vision to build a kickass company and Incantor is a big part of that.
Post pivot, I’ve been lucky enough to lure in two good friends, Kevin Mowrer and Trivikram Prasad. Kevin used to run all of R&D for Hasbro and founded their entertainment division. He used to be a client of mine. Triv was an engineer at a company I worked for when I first came to the US as a product manager. He went on to lead teams for Intel and Intuit and is now based in Bangalore, India. I’ve known both of them for 15+ years and we immediately clicked as a team. We’ve raised a modest amount of money, just enough to get some proof points and are now getting in to high gear.
Incantor is our vision of what happens when addictive gameplay is combined with immersive, community-driven fantasy. It is built on a simple premise: Magic Made Real. The game unites people, places and things and is played with your smartphone, a magic wand and your friends. The magic wand is a sophisticated bluetooth device and the game is played as a fantasy LARP in the real world.
We made the decision to go the Kickstarter route because we wanted to connect with fans. Community is vitally important to the game and we want to embrace that from day one. There’s nothing quite like it out there… and there are some really cool parts we’re not talking about yet. This is going to be a fun ride… “Do or do not. There is no try.”
Rewind to five years ago
Brad was my first VC man-crush. About five years and a couple of startups ago, I mercilessly tracked him down and he was good enough to meet and hear the pitch for the startup I was with at the time.
To say we were excited was an understatement. This was the guy that we wanted to meet. If he heard our pitch, the infatuation would be instant and we would walk away with a nice big check. We were going to score!
Sadly, I can say with some confidence that it was the worst pitch I have ever given. Everything that could go wrong did. We crashed and burned as badly as possible and Brad and his colleagues were as gracious as they could be. I even made the “oh no you didn’t” mistake of mis-dialing after the meeting and accidentally calling Brad as he went to the airport.
But as an entrepreneur, you move forward by getting up after you fall down. That startup died, but I stayed in contact with Brad and we’ve chatted many times since then.
MoveableCode is my latest startup and it’s been getting some great early traction. He’s now a backer of our Kickstarter project and I couldn’t be more pleased.
As the saying goes… Never give up, never surrender
The Magic Moment When You Shift To Executing As Fast As You Can
There is this magical moment that happens when a startup finally puts the key components together to build a successful business. After months or years of iterating and pivoting, they finally have the right product for the right market at the right price. At this point, the company has to shift gears and change their mindset a little. They need to stop looking for gold and start mining as fast as possible. My friend Chris Moody, President/COO at Gnip, refers to this as the execution phase of a business and there is no better example of execution in our current portfolio than the team at Gnip.
After 2.5 years of product development and varying business approaches, Gnip found their magic moment about a year and half ago. Since that time they have been heads down executing and the results have been incredible.
Today Gnip announced an exclusive partnership with Tumblr. This monumental partnership will give Gnip’s customers full coverage of an amazing source of social data that has never been available. With 50 million new posts per day and 15 billion page views per month, Tumblr offers a huge new data stream for companies to analyze and use to drive business decisions. The fact that businesses will be able to receive this data via the same reliable and scalable Gnip infrastructure that currently delivers Twitter and other important data sources is a major win for the ever growing social data economy.
The Tumblr partnership is the kind of announcement that companies plan their entire year around. However, in Gnip’s case, it is just the latest activity in an impressive series of events that shows the Gnip team knows how to get shit done. It is only April and Gnip has already done the following in 2012:
- In January, Gnip announced an exclusive partnership with Automattic to provide firehose streams of WordPress.com and WordPress.org data to the enterprise. This partnership increased the amount of real-time blog data available for business analysis by 70% overnight.
- In February, Gnip announced a premium partnership with Disqus. Disqus is the largest third party commenting system in the world (I use it on my blog) and the data offers tons of valuable insights to drive lots of cool business use cases. The Gnip/Disqus partnership makes this comment data available in full firehose coverage form to businesses for the first time ever.
- Also in February, Gnip released the first ever commercial Twitter historical product. Gnip’s 30-day replay product allows their customers to go back and replay Twitter history. As the old saying goes, hindsight is 20/20, and Gnip’s replay product allows companies to replay the entire Twitter stream for a full 30 days to look for things they might have missed. This product was a monumental engineering feat and a huge portion of Gnip’s customers have already taken advantage of this product in just the first two months after its release.
- In March, Gnip announced Big Boulder, the first ever conference dedicated to social data. Take a look at the list of speakers – it will blow your mind.
- Just last week Gnip announced that they added the largest microblogging service in China to their Enterprise Data Collector offering. Sina Weibo has over 300 million members; brands across the world are very interested in the conversations happening on this enormous platform. Gnip continues to push to increase the number of international data sources in their offerings and Sina Weibo represents a huge addition to their portfolio.
Okay, so the Gnip team is getting stuff done, but at what price? They must be cracking the whip pretty hard and creating a real sweat shop, right? Wrong. In spite of growing their number of employees by 300% in 2011, Gnip was just named The Best Place To Work in Boulder. Not the best startup, the best company. And, the best news of all? They are hiring!
I love talking to, meeting with, and teaching college students. A few weeks ago I sat down to do a 30 minute interview with a young woman from CU Boulder who is an engineering student. She did a great job of capturing my essence, and that of Foundry Group, in our interview. I particularly loved her conclusion, which I asked if I could repost (she said yes). It follows – I hope it’s as inspiring to you (about the next generation) as it was to me.
For Any Young Entrepreneur: My interview with Brad Feld was encouraging to me as an engineer with a passion for innovation. Brad described how he is intrigued by the array of problems that he is faced with everyday. This is especially relatable to me because I fear spending the rest of my life bored by monotony when there are so many problems to be solved. It was enlightening to hear Brad discuss how to conduct a business. I expected to hear trade secrets or how to be the next great thinker, but it really came down to focus, determination, clarity, and inspiration. Feld is another who really believes that the way to survive, as an entrepreneur, is to be open minded to new experiences instead of just being “lucky”. I appreciated seeing the business method that less is more. Yes it is the dream of many to be the most world renown business with 100% return on investment, but it can be just as rewarding to be the successful yet small venture with no need to own a market. Observing the office reminded that an entrepreneur could have a business, enjoy art, and even find time to exercise, instead of engrossing oneself in work at all times. The entrepreneurial lifestyle actually seems like a sustainable one. This opportunity has helped me realize that the life of an entrepreneur can be accomplished simply by merging the things you love with what you are good at.
Don’t Be Gunshy Because You Dealt With Bucketheads The Last Time Around
For all of you out there who are wondering, Amy is doing fine. We’re in Boulder, she’s happy, in some pain, but enjoying the delightful impact of Percocet, and making her way through MI-5 Season 8. Thanks for all of the support, emails, and kind words.
I’m about to head out for a five hour run (broken into three separate segments) in preparation for the 50 miler I’m doing in April after I help her take a shower (which ordinarily I would be excited about), but first I thought I’d write some thoughts about a call I had with an entrepreneur yesterday.
The call was about a potential financing he is considering. I’ve gotten to know him some from a distance over the past year and am impressed with what he’s created. He originally just called me for advice on his financing strategy but I started the call by telling him I was interested in exploring leading a round, would be willing to give him advice also, and would quickly tell him if I was dropping out so he could flip me into “advice only mode” if we weren’t going to end up being a potential investor.
We had a wide ranging conversation over an hour about the current state of the business and how he’s thinking about the financing. Several times over the course of the hour he sounded defensive about a particular issue – well – not defensive, but uncertain. He’d frame what he thought was a negative in the context of the way he’d heard it from a previous potential investor (let’s call them BucketHead Ventures) who hadn’t gotten to a deal with the company in the past.
One of these was around churn – he asserted that one of the clear weaknesses of the business was the high churn rate. I pressed him on what he meant and we went through some numbers. He didn’t have a high churn rate at all – in fact, his churn rate after a customer was paying for three months was minimal. The problem – described by BucketHead Ventures as “high churn” – was a combination of what happened in the first three months and BucketHead’s inability to do cohort analysis, so BucketHead looked at absolute churn on a monthly basis rather than on a cohort basis.
In my head, I thought to myself “bucketheads – they pretend to understand businesses like this but have a total miss at a basic level.” The entrepreneur understood the miss, but had internalized BucketHead Ventures feedback and was letting it color his view of his business. And, more importantly, it was making him gunshy. Instead of articulating a powerful story about low customer acquisition costs with minimal downstream churn, he lead with “the worst problem with the business is our high churn rate.”
I see this all the time. While some entrepreneurs think all VCs are bucketheads (they aren’t), other entrepreneurs think all VCs understand this stuff (they don’t). Even ones who seem to be experts, or should be experts, or claim to be experts. Especially the ones who claim to be experts. Often, they are just bucketheads. Listen to their feedback, but don’t let it make you gunshy if you think they are wrong.
Indulge me while I think out loud. I’m trying to decide if I like the phrase “poke people in the eye with the truth” or not. Help me by reacting to the following rant – good, bad, bullshit – and feel free to poke me in the eye with truth if you’ve got some, just give me a hug at the end.
Last week, at the Startup America Regional meeting, I got into a conversation about the role of state and local government in the development of startup communities. I went on my typical rant about how entrepreneurs have to be the leaders and government is a feeder to the startup community. I talked about a few things government can do that have a positive impact and a number of things government does that hurts startup communities. More specifically, I talked about specific types of people in government and their roles, including the people with an “economic development director” title (or something like that – who I’ve come to learn are called “ecodevos” which makes me think of Devo and the B-52s and then my brain goes somewhere completely else other than startup communities and government.)
One of the people I was talking to said “that’s all well and good, but I’m not comfortable telling my fill-in-the-blank-with-a-government-title person this stuff. I’m concerned they won’t respond positively to this. I strongly agree with you on what your saying, however. How should I approach this.”
I responded that “sometimes you just have to poke people in the eye with truth.” Be blunt. Be direct. Be firm. Don’t be an asshole – just say it like you see it. And if they think that makes you an asshole, that’s their loss. And when you are done, give them a hug so they know you care and are trying to be constructive.
I carried that line around with me for a week. I observed myself (which is deliciously meta) poking people in the eye with truth and then giving them a hug. My animal spirit, according to Amy when she’s in an earthy crunchy woowoo moment, is a giant polar bear. I like to think of this as the warm, cuddly, lovable version of a bear – the one that won’t crush you when it hugs you. Somehow these two thoughts merged together in my head and continue to circle around.
I’m at Venture Capital in the Rockies today. This is our annual Colorado VC / entrepreneur thingy. Last night I had dinner with a bunch of entrepreneurs who didn’t have dinner plans. It was last minute and a lot of fun. At the end of the dinner we got into a great conversation about the state of the local VC community and I was characteristically blunt about what I thought had happened, was going on now, and would go on in the future. While I have no idea if I’m right about the future, I made the strong assertion that it doesn’t actually really matter that much given the incredible underlying startup community and incredible entrepreneurial talent in the region.
While on the surface there’s plenty of political correctness about this conversation, and lots of “we need more VC money”, which I’m sure will be echoing in the hallways at VCIR today, I realized that I was once again simply asserting my belief that this didn’t really matter. At dinner, I wasn’t poking any VCs in the eye with the truth since there weren’t any there, but if they had been, I’m sure that’s how they would have felt I was behaving. It probably wouldn’t have been comfortable, but if they’d been willing to respond and challenge my assertions, it would have been a robust conversation.
I’ve got plenty of other examples of this from the last week, but you get the gist of this. Is “poke people in the eye with truth” a good phrase, or just nonsense?