Sunday, September 27, 2015

Fighting the Imposter Syndrome

The great Eric Barker just wrote generally about fighting the effects of the Imposter Syndrome, in which successful people are convinced that they are frauds, and do not deserve the success that they've achieved.

Imposter syndrome is extremely widespread, affecting 70% of successful people, according to a study by psychologist Gail Matthews.  If it affects you, you might think you're alone, but it probably affects your successful friends as well.

I believe that entrepreneurs are especially prone to imposter syndrome, in part because their press clippings tend to paint a glowing picture of them and their companies that would make the most outrageous Facebook-brag look modest.

Eric's post offers some great advice for those who find themselves feeling like frauds:
"Focus On Learning: Forget appearing awesome. You can get better if you try, so focus on that.
“Good Enough” Goals: Stop trying to be prefect. (Yes, that was a typo. I’m not fixing it. It’s good enough.)
Take Off The Mask: Talk to someone you think is facing the same issue. You’re not alone."
Let's take each of these in turn.

Focus On Learning
The entrepreneurs I admire most are the ones who admit their lack of omniscience and focus on learning.  This doesn't have to mean following the advice of others; rather, it means keeping an open mind, yet taking a skeptical and experimental approach to the world.  If you focus on the status you've achieved, you'll worry about losing it.  If you focus on learning, you'll realize that no one can take away what you've learned, and that there is always more to learn.

“Good Enough” Goals
If you measure yourself against others, you'll never be happy.  There's always a bigger fish.  Even Mark Zuckerberg, who has achieved more at a young age than anyone since Alexander the Great, could still be disappointed.  Adopting modest goals doesn't mean that you cut off achievement; at one point, Larry Page and Sergey Brin offered to sell Google to Yahoo! for $1 million, and were bargained down to $750K by Vinod Khosla.  The deal only fell apart because Excite refused to pay that exorbitant sum.  Oops.

Take Off The Mask
This is where having real friends and loved ones comes in.  In my own life, I have been the subject of both adulation and scorn.  But I never let either affect me that much because I am fortunate to have a spouse that loves the real me (and married me long before either the adulation or the scorn) and true friends who don't really care about who thinks what in the Silicon Valley bubble.  For goodness sake, maintain relationships with people outside the Valley.

You shouldn't feel bad if you find yourself falling into the imposter syndrome.  But you don't have to suffer alone, and in silence.  Follow Eric's advice, and you'll be able to see yourself as you truly are, and understand that what others think doesn't matter that much.

The Implied Assumption of Success

One of the mental traps that I try to avoid is what I'm going to term "the implied assumption of success."

This trap occurs when entrepreneurs say something like, "If I raise $2 million instead of $500K, I'll be able to get much farther, so I should raise $2 million."

The issue, of course, is that the implied assumption of success glosses over the fact that your chances of raising $2 million are probably very different than your chances of raising $500K.

I was struck by another version of this when I read the seemingly contradictory facts that mobile browsing traffic was 2X that of native apps, and that native apps accounted for 80-90% of our time on mobile devices.

The punchline is that both are correct.  Far more people visit mobile websites than use mobile apps, but people spend far more time on the few mobile apps that they bother to use.
"Deepest engagement for the longest period of time happens in apps, so apps matter, and they matter desperately for brands who want to connect to customers. But since, as we’ve seen in our research, apps-per-smartphone users is maxxing out at an average of 50-60, and no-one besides Robert Scoble is going to install an app for each company, service, or site he or she interacts with, your mobile web experience has to be good, and it has to be strong."
In other words, a person who downloads and regularly uses your app is way more valuable than someone who just visits your mobile website.  But this doesn't mean you should invest all your efforts in your mobile app.  Indeed, consider the plight of major retailers--of the top 30 US retailers, only 2 of them drove more than 50% of their mobile usage via app: Amazon and Walmart.

The implied assumption of success tricks us into investing in desirable, but lower-probability initiative.  When you are considering several alternatives, make sure that you account for the probability of success, not just the magnitude of potential benefit.

Friday, September 25, 2015

Entrepreneurs who slack off after raising money aren't entrepreneurs

Paul Smith recently wrote about the phenomenon of entrepreneurs who slack off after raising their seed round:

"Here’s what I see three quarters of startups doing immediately after they raise a seed round: 
  • After months of working 60 hour weeks (and the rest, usually) to launch and demonstrate early growth to convince investors they’re worth it, the founders start working 9am til 5pm, five days a week — they’re taking it easy before the hard work starts;
  • Because raising money offers a financial opportunity to address their work/life balance, their Facebook feed slowly fills up over the following weeks and months with snaps from weekends away on city breaks, at parties and gigs;
  • They almost certainly find the time for a holiday, or a trip home to see the family, because they deserve it;
  • A new apartment or house is high on their priorities since they can now pay themselves proper wages;
  • There’s finally time to make amends to a long-suffering partner — perhaps they can finally plan that dream wedding they’ve talked about for months.
If this is still occurring in the weeks after the raise has happened, these startups will likely be dead before they raise Series A.
I agree with Paul that these are terrible signals.  What is mind-blowing to me is that this even needs to be said.

Personally, I always find that I work *harder* after raising money than when I bootstrap or self-finance.  My mentality is that once I raise money, a bunch of people have put their trust in me, and I am going to work like a maniac to avoid letting them down.

Yes, the investors are typically professionals who can afford to lose their investment, but that's not the point.  If it's not okay to discriminate against people for not having money, it's not okay to discriminate against people for having money.

As a founder, you've agreed to become a good steward of your investors' money.  If you don't treat it more carefully than you treat your own, you've abdicated your founder's responsibilities and become an employee.

I can still vividly remember the moment I realized this distinction.  Back at my very first startup, during the height of the Dot Com boom, I asked my employees to do some work to avoid wasting money.  One of my product managers said, "Why are we going through all of this hassle just to save $25K per month?"

It was all I could do to keep from launching myself at him.

Founders have a higher duty than employees.  In the book, "The Horse and his Boy" from the Chronicles of Narnia, King Lune of Archenland describes the duties of the king to his long-lost son, the crown prince:
"For this is what it means to be a king: to be first in every desperate attack and last in every desperate retreat, and when there’s hunger in the land (as must be now and then in bad years) to wear finer clothes and laugh louder over a scantier meal than any man in your land."
You could hardly come up with a better definition of what it means to be a true entrepreneur and leader.

Thursday, September 24, 2015

Extreme Altruism and You

This morning, I read a long profile of an extreme altruist, who believes in a) giving away as much as possible and b) focusing on whatever will provide the greatest benefit, regardless of whether that means helping loved ones or strangers.

In one passage, she worries that she'll have to give up her dream of becoming a mother:
"But once Julia opened herself up to the thought that children might not be necessary – once she moved them, as it were, to a different column in her moral spreadsheet, from essential to discretionary – she realised just how enormous a line item a child would be. Children would be the most expensive nonessential thing she could possibly possess, so by having children of her own she would be in effect killing other people’s children. Julia talked about this with Jeff and she grew very upset. Once the prospect of giving up children felt real to her, it felt terrifying and painful."
In the end, she agrees to her husband's logic:
"He calculated that if the child gave away around 10% of its income, then they would likely break even – that is, the money their child would donate would be equal to the money they did not donate because they spent it instead on raising the child. Of course, this did not take into account that it was better to give money now rather than later, especially to urgent causes such as global warming and Aids, so some discounting would have to be factored into the calculation. All this made Julia feel better for a while, and even though she realised that it would be pretty weird to tell a child that they expected it to pay for its existence in the world with a certain percentage of its income, she figured she was going to be a weird mother anyway, and her child would probably be weird, too, and so perhaps to a child of hers all this would seem perfectly sensible. Finally, Julia decided, sometime before her 28th birthday, that she would try to get pregnant. Their baby, Lily, was born in the early spring of 2014. The thought of leaving Lily in order to go back to work upset her, but she knew that she had to start earning again so she could keep donating. She felt that there were people in the world who needed her money as much as Lily needed her presence, even if their need did not move her as Lily’s did."
For people like me, who are wired with a "normal" level of altruism, this kind of thinking seems batty at best, and monstrous at worse.  I'm not ashamed to admit that I care a heck of a lot more for my kids than anyone else's, and that I pour a disproportionate amount of money into rendering their childhood safe, health, happy, and fulfilling.

My guess is that the instinctive revulsion most of us feel to the idea of extreme altruism is based on the basic principles of evolution.  Natural selection favors those who pass on their genes; people who agonize over whether or not to have children, and then refuse to care more for their children than strangers are pursuing a losing strategy as far as Darwin is concerned.

That revulsion I feel is billions of years of self-preservation taking one look and doing the cartoon "cuckoo" gesture.

But, our modern environment is radically different than what existed for most of human history.  The challenges that face most of us these days aren't figuring out how to scratch out enough food to avoid starvation.  It may be that extreme altruism, while individually maladaptive, is what our species needs to survive, since our own essential instincts will cause us to consumer more than our environment can support.

While it may be tempting to dismiss extreme altruists as wack jobs, I seem them as a useful experiment--an insurance policy that explores on way that human behavior may need to evolve to suit a new environment.

Just as long as they don't ask me to join them.  I'm running a different experiment!

UPDATE: Slate's Laura Miller did a great job of encapsulating most of my feelings in a single passage:
"Do-gooders take something we all want to believe is quintessentially human—the willingness to extend ourselves to strangers—and place it in direct conflict with something that is even more fundamentally human: caring for our own.
The result is a bit like a reverse version of the famed Uncanny Valley effect, in which a representation of a human being becomes more disturbing as its resemblance to an actual human being increases.
Do-gooders are already human, of course, but as they ratchet up their selflessness, they begin, ever so slightly, to depart from the fold. They look like us and talk like us, but they abide by rules that we understand we could only adopt were we to abandon something that feels essential to ourselves."

Monday, September 07, 2015

A Capitalist Visits Burning Man

"You?  And Ben?  Going to Burning Man?"

When my friend, co-author, and business partner Ben Casnocha and I announced that we were going to Burning Man, the reactions we received, both in person and on social media, ranged from disbelief to shocked disbelief.

My typical in-person response was, "Why are you so surprised?  Is it because I hate the outdoors?  Despise hippies*?  Don't do drugs?  Avoid parties?  Enjoy sleeping?  Dislike electronic dance music and any dancing outside a ballroom?"

* It's important to understand the context of my allergy to hippies; I grew up in Santa Monica, with classmates who had names like Rainbow, Cinnamon, and Blaze.  Wealthy hippiedom was the dominant culture, and was less focused on generosity and giving and more on ostentatious self-righteousness.  Throw in the fact that hippiedom during this era was anti-science and anti-technology, and you can understand how my feelings developed.  Spending the summer in Santa Cruz in 1999 didn't help.

The irony is that I believe that many of Burning Man's attendees go for the hedonism, cloaked in the guise of community.  Since I don't have any vices that Burning Man satisfies, the only reason to go was for the art, community, and experience.  I can't speak for Ben, but judging from his own Burning Man post, we went for the same reasons.

When people ask me to describe Burning Man, I've taken to calling it, "a crowdsourced bizarro Disneyland where the attendees run the attractions."  What I mean by this is that Burning Man shares a couple of crucial characteristics with Disneyland, but differs in almost every other way.

How Burning Man is like Disneyland:

  • It's a safe environment.  I wasn't worried about anything, other than choking to death on the omnipresent dust, or getting run over by an art car.  Part of this may be due to the Burning Man spirit; more cynically, I'd argue that the price tag and inconvenience make Burning Man unattractive to criminals.
  • It's clearly distinct from the everyday world.  Just like Disneyland, passing through the entrance takes you to another world.  Money isn't allowed.  Normal rules of behavior don't apply.  You expect everyone to be friendly.
  • There's an endless array of things to do.  Everywhere I went, there were exhibits, ranging from the half-assed to the breathtaking.  With 70,000 attendees, there were probably thousands of camps that welcomed visitors.
How Burning Man is not like Disneyland:
  • No central organization.  There's no helpful cast members who ask if you need help if you look confused for a couple of seconds.  In fact, the least friendly, least helpful person that Ben and I met the entire time was the volunteer who was staffing the central information building.  When I asked him how to find the "Geek and Greet" dinner for BRC's tech staff and vendors.  He answered gruffly, "Look on the map."  When I couldn't find it and went back, he said, "Try harder."  If that happened at Disneyland, he would have been summarily executed.
  • Constant hardship.  The dust is an enormous pain.  Even on the rare occasions when there isn't a dust storm blowing, the dust gets everywhere and makes any and every activity difficult.  I can't even imagine trying to have sex while covered in dust!  I also spent the entire time carrying a heavy backpack (to make sure I had enough water) and futzing around with my goggles and scarf to make sure they weren't leaking dust.
  • Wildly varying standards of quality.  Camps and exhibits ranged from carefully engineered to slapdash, and from awe-inspiring to profoundly lame.  The highs are higher, but the lows are lower.
  • Not family-friendly.  Duh.
I'll post my raw notes at the end of this piece (written down at 7 AM in the driver's seat of a Toyota Avalon, which is where I slept the night), but I'll focus on the highlights, lowlights, and lessons learned.


  • The spirit of radical inclusion.  I love welcoming communities, like Stanford or the Unreasonable Institute, and I found a similar feel at Burning Man.  One guy, Jeff, politely asked us to move our car (it was on top of his canvas tarp), then gave me a three-minute silent hug to welcome me to Burning Man.  I love this kind of openness (though as I noted to Ben, if he had started to move his hands down my back, I would have broken things off--not that there's anything wrong with that).
  • Enthusiasm.  Ben and I both noted that there's something incredibly appealing to us about sincere enthusiasm, whether from the scientist who told us about the geography and ecology of the Playa, or the burner who was getting ready to celebrate her 10th wedding anniversary at Burning Man.  She and her husband met at Burning Man, got married at Burning Man, and celebrated their anniversary every year at Burning Man.
  • The maker spirit.  Simon Fire Edition 2.0 was what people love about Burning Man--enthusiastic engineers who put their electrical, mechanical, and computer engineering skills to work to build a delightful and whimsical attraction.
  • The enormous scope of the event.  The playa is 2 miles across, making it the size of downtown San Francisco (but a lot more logically laid out and navigable).  I especially enjoyed the view from the 4th floor of the Altitude Lounge, which let me see nearly the entire playa.  I went in the afternoon, then went back at night to check out the night-time view.
  • The view at night.  When the sun goes down, the entire playa becomes a bizarro version of Disney's Main Street Electrical Parade.  Flashing colored lights and gouts of flame are everywhere, and rather than lasting 30 minutes, they go all night.
  • Did I mention the dust?
  • When a port-a-potty in the middle of the desert has been in use for the better part of a week, it's not a pleasant sight or smell.  Each stall contains a small mountain of human excrement which is all too visible and pungent.  I can only imagine the horror of being a woman in that environment.
  • For me, the nights, while visually stunning, are pretty unappealing.  It ultimately depends on how you feel about raves, drugs, and EDM.  The entire playa becomes a gigantic, psychedelic rave.  To me, this is the least interesting part of Burning Man.  The party sounds and feels like any other party, just in the middle of the desert.  Parties rarely offer the chance for thoughtful conversation or reflection.  (In fairness, if I were in the market for a Playa girlfriend, perhaps I would have felt differently, since then the vast quantity of gyrating, scantily-clad, intoxicated women would have been a feature, not a bug.  One of my campmates was incredibly affectionate with the woman who was obviously his girlfriend.  She was an interesting character, who was a circus acrobat from New York who did nude photography of other circus performers.  When we asked her how she'd met her boyfriend, she replied, "I met him yesterday night.")
  • Not truly a lowlight, but it did strike me that Burning Man is a remarkable case study in capitalism.  Rather than a monetary economy, it runs on an attention economy, and there is only so much attention to go around.  Attracting visitors to your camp is a winner-take-most affair; just like at a trade show, the biggest parties sweep up 90% of the party-goers.  Tons of camps were open for business, but were completely empty.  At one point, Ben and I walked past a puppet show, where the performers were performing without an audience.  (To be fair to the audience, the puppeteers weren't very good.)  When someone actually stopped, the performers were ecstatic.  Attendees who set up camps for visitors invest colossal amounts of money, time, and hard work with uncertain psychic return.

Lessons Learned for next time:
  • Rent a trailer with a toilet, sink, power, and air conditioning.
  • Noiseproof your sleeping area (if you're a light sleeper)
  • Treat it like Disneyland.  Get a copy of the guidebook, and plan out which camps you'll visit and when.  At the very least, mark the places you want to visit on the map.
  • Take advantage of the mornings--it's not yet hot or dusty, and there's still plenty to see and do 
Ultimately, I'm glad I went to Burning Man.  I freely admit that I optimized my trip to minimize downside, rather than maximize upside.  I kept the visit to 24 hours (which is actually up from my original plan of 8 hours, which would have allowed me to avoid trying to sleep in the middle of the desert).

Ironically, Burning Man was less of a physical challenge than I expected; the worst part of the trip was actually the charter flight back to the Bay Area, where I became ferociously airsick, and had to pull a Ziploc out of my backpack in case I needed an airsickness bag.

If I were to return, I'd follow my own lessons learned, and spend longer on the Playa.  We actually spent a little time in the trailer of an experienced Burning Man staffer, and it both incredibly pleasant and a huge relief from the external hardships.  Of course, renting a luxury trailer to eliminate the hardships of Burning Man is both a) expensive, and b) against the Burning Man ethos of self-reliance, so I don't know when I'll make a return trip.

Of course, if one of my readers is a member of a luxury camp and has an extra spot, let me know!  Same time next year?

Raw notes:
  • Insanely dusty.  Dust storms are constant.
  • Hands are constantly dry and covered in dust 
  • Not as hot as expected (though this year may have been unusual)
  • Trailers are awesome (provide shelter, refrigeration, air conditioning, a toilet)
  • Port-a-potties suck, and fill up with excrement
  • It's easier to interact with people during the day, versus the nightly raves
  • Lots of EDM, especially at night.  Occasionally heard a little jazz or 80s music.
  • The Playa is visually stunning at night--colored flashing lights and flames everywhere. 
  • The radial structure makes it easy to navigate, but it's still hard to find stuff
  • It's an attraction where all the attendees *are* the attractions
  • People send vast amounts of time and money to set up free clubs, art galleries, restaurants, etc.
    • I speculate that they are seeking meaning, or at least meaningful connection
  • Attracting visitors is a winner-take-most affair; just like at a trade show, the biggest parties sweep up 90% of the party-goers.  Tons of camps were open for business, but were completely empty 
  • The view from the 4th floor of the Altitude Lounge was amazing. 
  • Simon Fire Edition 2.0 was what people love about Burning Man--enthusiastic engineers who put their electrical, mechanical, and computer engineering skills to work to build a delightful and whimsical attraction.
  • People meet at Burning Man, get married at Burning Man, and celebrate their 10th anniversary at Burning Man!
  • Silently giving and receiving a three-minute hug is a very interesting experience.  You are communicating with another human being in a very unusual way.
  • I can see the appeal of Burning Man to celebrities--you have the chance to be anonymous (especially during a dust storm) and yet still be treated well
  • A party at Burning Man still sounds like a party, and if you don't like drinking, drugs, and dancing to ear-shattering EDM, they still suck
  • Over and over again, we kept saying, "That looks like something out of Mad Max."
  • I actually wished I had worn a watch; I was afraid that the dust would kill my phone!

    Thursday, August 27, 2015

    The Odds Are Always Against Startups

    Y Combinator CEO Sam Altman just released a fascinating set of statistics about the firm.

    The numbers are pretty stunning; Y Combinator's 940 companies are now worth more than $65 billion.  That's an astonishing mean value of $69 million...and recall, that Y Combinator buys into those startups at a sub-$1 million valuation.  Now that's a great business!

    But while Y Combinator itself is a great business, I want to point out that embedded in those stats are the fact that the odds are always against startups.

    I'm fond of telling audiences that only 10% of venture-backed startups succeed, by which I mean achieving an exit of $100 million or more.

    Y Combinator estimates that 40 of its 940 companies are now worth more than $100 million.  That's 4.3%.

    Even if we double this number to account for the fact that many Y Combinator companies are too young to have reached their final stage of growth, we still only get 8.6%.

    Meanwhile, YC has produced 8 "unicorns," which implies a ratio of 8 / 940, or 0.9%.

    In other words, even if you get into the world's greatest, most successful accelerator (Y Combinator), your chances of building a unicorn are only 1-2%.

    This is one of the paradoxes of startups: Collectively, startups are a fantastic business that contribute greatly to society.  Individually, the odds against any individual startup and entrepreneur are incredibly long.

    Friday, August 21, 2015

    Ambition vs. Meaningful Goals

    Leo Widrich at Buffer recently wrote about how he has been reflecting on the dangers of ambition:
    "[Ambition] gets in the way of doing the great work of our lives, of living out what we’re already naturally gravitating towards. It also blinds my awareness especially of accepting things how they truly are—instead of making them fit my ambitions. It’s like trying to straighten something out forcefully that isn’t meant to be straight, which instead wants to follow its natural course."
    The key related point I'd like to make is that we need to be very clear about our implicit definition of "ambition."  I think it's telling that Leo never bothered to define ambition; we consider it so fundamental and common that it needs no definition.

    Google's quick definition of ambition seems to reflect the unsaid words in our heads: "desire and determination to achieve success."

    Yet this simply kicks the can down the road--what do we mean by "success"?  Again, Google does a good job of reflecting the common belief: "the attainment of popularity or profit."

    Put it all together, and I think you get an accurate definition of how people use the word ambition:

    "Ambition is the desire and determination to attain popularity or profit."

    The problem with ambition is that it combines a good thing (desire and determination) with a bad thing (allowing others to define what is important).

    When you focus on what others define as important--popularity and profit--you abdicate responsibility for your own life.  and even if your ambition is rewarded, and you achieve popularity and profit, it doesn't bring any intrinsic meaning to your life.  It just means you're good at playing someone else's game.

    Don't settle for being ambitious.  Instead, develop the desire and determination to achieve personally meaningful goals.  That's how you do the great work of your life.

    Friday, July 31, 2015

    The Ultimate Startup Success Plan (based on 10 years of data)

    First Round Capital, the first and foremost of the "micro" VC funds, recently released a retrospective set of lessons learned based on 10 years of investing data.  It's an incredible trove of data, some of which I love, some of which makes me feel uneasy.  But since I always believe in working with the world as it is, rather than pretending it's something it's not, I've decided to synthesize First Round's lessons into the ultimate startup success plan:

    1. Get a female co-founder.
    "Companies with a female founder performed 63% better than our investments with all-male founding teams."

    2. Get started young.
    "Founding teams with an average age under 25 (when we invested) perform nearly 30% above average."

    I don't like supporting the ageism of Silicon Valley, but the data is the data.  It may make sense to seek out younger co-founders so you have a mix on your team.

    3. Go to an elite college.
    "Companies with at least one founder who attended an Ivy League school, Stanford, MIT, or Caltech performed 220% better."

    Again, I don't necessarily like the data, but this is the single largest effect First Round found.  Find a co-founder who went to the right schools.

    4. Work at a brand name company.
    "Teams with at least one founder coming out of Amazon, Apple, Facebook, Google, Microsoft or Twitter, performed 160% better than other companies."

    5. Keep starting companies.
    "Our investments in repeat founders didn't perform significantly better than our investments in first-timers — mainly because successful repeat founders’ initial valuations tended to be over 50% higher."

    The investors' loss is your gain if you're a serial entrepreneur!

    6. Find a co-founder.
    "Teams with more than one founder outperformed solo founders by a whopping "

    Presumably the winning strategy is to recruit a female co-founder who went to an elite college and worked at a brand name company!

    7. Whether you need a technical co-founder depends on whether yo163%u're an enterprise or consumer company.
    "Enterprise companies with at least one technical co-founder perform 230% better; consumer companies with at least one technical co-founder perform 31% worse."

    I'm actually quite skeptical here; Apple, Google, and Facebook all had technical co-founders, as did recent successes like WhatsApp.  But again, the data are the data.

    8. Move to Silicon Valley.
    First Round's data found that their non-Bay Area/NYC companies slightly outperformed.  But this outperformance is based on investment returns; Bay Area/NYC companies are so much more expensive that their high valuations drag down returns.  As an entrepreneur, you're better off in Silicon Valley.

    9. Referrals aren't the only way in to a VC firm.
    Another example of data not meaning what you think it means.  First Round found that referrals underperformed direct contacts from entrepreneurs and finding investments via press coverage and events.

    I would argue that since VCs ignore most direct appeals from unknown entrepreneurs (I know I do!), a company has to be particularly good to punch through the noise.  Similarly, a company that was accepted into an accelerator, or is being written about in the press, is significantly more likely to have traction.  And since hype tends to bring higher valuations, the data suggests that the hype was justified, since despite paying higher valuations, First Round still made more on this type of investment.

    10. There's no reason to move to San Francisco.
    First Round's data showed that over the past 5 years, 75% of their investments were started in San Francisco.  This doesn't mean it's a good idea to move there.  Indeed, First Round didn't report that SF-based investments did any better (which I'm sure they would have reported if it were true).  Furthermore, I strongly suspect that more than 75% of companies are being started in the City these days, which suggests that your odds of being selected by someone like First Round are actually better if you're outside SF!

    When I combine all these lessons together, I can now paint a picture of the perfect startup:

    A 25-year-old female co-founder with a technical degree from an elite college, and who worked for Apple or Google is partnering with another young co-founder to start her second company, an enterprise software venture that is accepted into YCombinator and moves to Mountain View.

    If you match this description, please contact me right away!

    Sunday, July 19, 2015

    The Only 4 Reasons Investors Say "Yes"

    Alex Schiff is a great guy and the creator of one of my favorite products, Fetchnotes.  I met him when he was raising money for Fetchnotes (in the end, I decided not to invest because while I loved the simplicity of the product, I concluded that there weren't enough self-organizing people like me to represent a big enough market...sadly, I was right, and I've seldom been sorrier to be proven correct).

    Alex recently wrote a terrific "lessons learned" post about his experience with Fetchnotes, which demonstrates that he is also a talented writer (before he dropped out of school, he was a journalism major).  The whole post is well worth reading, especially for first-time entrepreneurs, but I want to highlight one paragraph in particular which I think does a great job of summarizing why investors say yes:
    "There are only four ways an investor says yes: 1) you have massive traction, 2) you have social proof from other trusted investors/accelerators/mentors, 3) they have a personal passion for the problem/industry/product, 4) they have a personal relationship with the founder. If one of those doesn’t apply, you might get someone to take a really deep dive, but in the end there will be some stupid, idiosyncratic reason they say no at the last minute."
    I frequently talk with entrepreneurs who are smart, talented, and capable, but who are trying to raise money too early.  Alex's list is a great checklist for anyone thinking about raising money.

    1) Do you have massive traction?

    As I've written before, nothing matters more than traction.  I often joke that if we made contact with an alien civilization that practiced baby cannibalism, and one of its members started the next Uber, investors would find a way to rationalize investing.  "Who am I to judge another person's culture?  After all, we're talking about alien babies, not human babies.  And C'hixelgleep is really killing it when it comes to making the numbers!"

    It's only if you don't have traction that you have to fall back on the others.

    2) Do you have the imprimatur of trusted investors/accelerators/mentors?

    As much as I decry the groupthink of investors, brand-name accelerators are a powerful sign of quality.  I've had one company get offered a spot in YC, and turn it down after failing to negotiate down the equity component of the standard YC deal.  I urged the founder not to screw around, and told him that *I* were to start a company, I'd apply to YC even though I already have a vast network of friends and contacts throughout the Valley.

    One interesting point is that trusted mentors can also be your gateway to receiving investment.  One of the reasons that entrepreneurs still reach out to me (other than desperation, of course!) is that I have a pretty good hit rate when I introduce a company to investors.  The fallacy lies in believing that I or other mentors have any real power to push a particular company, independent of its merits.

    First, I only endorse or recommend companies that I believe in.  My reputation is not for sale or rent.

    Second, the only reason that investors continue to take my introductions is the fact that they know that the prior point is true.  The instant I tried to game the system, I'd lose my credibility.

    Third, investors always make their own decisions anyways.  All I can do is provide access; you have the close the deal on your own merits.

    3) Does the investor have a personal passion for the product/industry/market?

    Personal passion is helpful, but unlike traction, it's not definitive.  Remember, I loved Fetchnotes (and still use it every day).  That didn't convince me to invest in the company.  Most investors can distinguish between product quality and business prospects.  A great product is necessary, but not sufficient.

    4) Do you have a personal relationship with the investor?

    The obvious thing here is to raise money from friends and family.  But unless you're fortunate enough to come from a long line of Drapers, or went to Stanford with Peter Thiel, this won't help you much when it comes to raising an institutional round.

    (Side note: There's a reason why friends and family are usually the first money in.  That investment is an irrational bet on you.  And if you're unwilling to take their money, that's also a strong indicator of how much you believe (or don't believe) in what you're doing.)

    It's almost impossible to build a personal relationship while courting an investor (though it is possible; one intrepid entrepreneur got my money by showing up at every event that I spoke at, just to give me updates on his business--fortunately for him, his business was going well).  Instead, build relationships before you need to raise money; it's a lot easier to get a meeting with a VC who is a personal friend than it is via sending cold emails.

    Bear in mind, however, that when an investor is considering an investment, they are wearing their "investor" hat, not their "friend" hat.  I invested in one entrepreneur who was shocked when he was unable to raise a Series A round for his startup.  He couldn't believe it, because he had a wealth of personal friendships with VCs, and they happily signed up to speak or sponsor previous events and gatherings he had organized.  The facts of life are that, in the words of Cyndi Lauper, money changes everything.

    As I wrote earlier, I encourage you to check out Alex's entire piece, which should be required reading for any first-time entrepreneur!

    Tuesday, May 12, 2015

    Don't Feel Guilty, Feel Committed

    I like to say that I don't feel guilty about things.

    For example, I don't bother replying to Christmas cards.  Every year, I receive boxes of cards.  I never send a single one.  And I never feel a single pang of guilt.

    Yet even though I don't feel guilt, I'm not a sociopath.  I try to help people, and I feel terrible if I let someone down.



    Here's how I draw the distinction:

    There's a big difference between guilt and commitment.

    Commitment means doing what you promise you'll do.  I'm very committed.  If I say I'll do something, I'll do it.  And if I can't do it, I'll feel terrible.

    Guilt means letting someone else make promises for you.  I don't believe in guilt because I don't believe that I have any moral obligation to keep commitments that I didn't make.

    Remember those darn Christmas cards?  I didn't ask to receive them.  So I reject society's illogical belief that I need to reciprocate.  That doesn't make me a bad person, just an independent one.