Saturday, June 29, 2013

How to hold better startup demo days

This week, I was with Jeff Tannenbaum at Manu Kumar's recent K9 Ventures shindig.  Manu is an awesome investor, brilliant guy, and all-around nice person.  Hard to say why he invited Jeff and I to his party, but hey, when do I say no to free food?

During the event, Manu had his entrepreneurs (and in some cases, alumni from successful acquisitions) provide 30-second pitches for their company.

Both Jeff and I (after our initial horror after realizing the party included a demo day in disguise) were truly impressed by the presentations.  The companies and their businesses were impressive, of course, but what caught our attention was the economy of the quick pitches--short and sweet.

That led us to muse on how to improve the demo day format.  Since I don't have the time or energy to register and launch a consultancy to leverage this IP, I'll just let you have it for free:

1) 30-second pitches.  As absurd as it sounds, 2 minutes is too long.  If you can't convey the gist of your startup in 30 seconds, you've got bigger problems.  Instead of forcing all of us to sit through 2-minute presentations, give each company a private conference room to deliver a more detailed pitch to whichever investors are most interested after hearing the 30-second pitch.

2) A progress bar.  At every demo day I attend, the investors pore over the program religiously...not to look for companies, but rather to try to figure out when the presentations will end and the bar will open.  Why not provide a progress bar, complete with estimated time of completion!

3) Instant voting and feedback on screen.  As the presentations occur, we're all gossiping and rating them to our neighbors anyway--why not have that input displayed on screen during the presentation.  It would be great for the entrepreneurs to get better feedback, and investors would be more involved.

I'm sure there's more we've forgotten--feel free to add your own suggestions!

Valuation is the universal lever for mitigating startup investment risk

I am a well-known valuation hawk.  That is, I have often gone on the record as saying that investors should care about the valuation they pay when they invest in startups, and that valuations are too high.

This doesn't make me popular in many circles, but I care more about speaking what I think is the truth rather than popularity.

But the reason I'm a valuation hawk isn't just that I'm a cheapskate (though I most certainly am a cheapskate).  It's that valuation is the universal lever for mitigating the risk of investing in startups.

I care about four things when I invest: People, Product, Market/Traction, and the Deal.  The problem is, in early-stage investing, there's a lot of uncertainty associated with the first three terms.

You may think the startup has an awesome team, but how well do you really know the entrepreneur?

You may think the startup has an awesome product, but can you be certain the mass market will concur?

You may think the startup has identified an awesome market, but how do you know it will develop as planned.

It is true that if a company is wildly profitable and growing fast, things are reasonable certain, but this is almost impossible when it comes to seed-stage companies.

Therefore, no matter how you try to mitigate risk, there is only one lever that is absolutely reliable: Paying a lower price for your investment.

I don't think I'm smart enough to pick all winners.  If I were, I wouldn't care about valuation either.  But I am smart enough to know that paying $X is better than paying $2X for an investment when it comes to generating a good return.

Design for your best customers, not your worst ones

When you're startup is fortunate to have paying customers, it's very tempting to evolve your product based on the feedback you receive from them.

After all, isn't that the best practice--to iterate based on customer feedback?

The problem is, if you base what you do solely on the feedback that comes in from customers, you're probably building exactly the wrong product.

There's an awesome World War 2 story (possibly apocryphal) that illustrates why.  Statisticians checked fighter planes after every mission, and recorded all the damage they could find.  Pretty soon, they had a chart of the fighter that showed that the damage was concentrated in specific areas.

Most people's gut reaction would be to add armor to the areas that took the most damage.  But that would be exactly wrong.  The information the statisticians were gathering didn't show which areas were most likely to get hit...they showed which areas were most likely to get hit without destroying the plane.

The smart designers instead added armor in all the areas that weren't marked on the chart, reasoning that these were the actual vital areas, where a hit wasn't survivable.

The best customer pays your startup a ton of money and never calls customer support.  The worst customer pays your startup very little and constantly calls in with problems.

Waiting for customer feedback to come to you is like armoring the bullet-riddled areas--it feels good to do something, but it might actually harm your chances of survival.

Instead, be proactive--identify the people who are your best customers and initiate the conversation.  Those are the customers you should be designing your product for.

Almost any idea (yes, including yours) can be improved by collaboration

I once worked with a very successful entrepreneur.  He had founded a company, taken it public, and made him and his shareholders hundreds of millions of dollars (the total wealth created was over a billion, but I don't think any one entity ended up making 10 figures).

He told me once about how his engineering team had presented him with a present after a particularly grueling launch: A baseball cap adorned with the letters JFDI.

The cap commemorated one of his favorite management sayings, which he used to end most arguments: "Just fucking do it."

Now obviously, he was very successful.  And other CEOs Steve Jobs have employed the same technique.  But I believe that collaboration is a better approach for almost everyone.

We're working on an important new feature at PBworks, and as the VP Marketing, one of my jobs is to come up with a pricing plan for it.  So I wrote up a brief on the feature and what I wanted to do, including three different options.

We then convened a meeting at which anyone in the company who was interested could participate (product touches everyone).  Despite the time pressures of a Friday afternoon meeting, we took the time to discuss and refine the different options.  While there was disagreement  at times, we reached a final decision that everyone agreed to.

It takes longer to write up a brief, allow people to review it, and hold a detailed discussion.  It would have been faster for me to say, "I'm the VP Marketing, and it's my call.  JFDI."  But the net benefits of collaborating far outweighed the costs.

First, holding a real discussion gets all the involved team members bought in.  Second, we dramatically refined the proposal, and figured out a lot of tricky details, thanks to the expertise in the room.  Finally, it only took an extra 60 minutes to write up the proposal and hold the discussion.

This is a feature that we hope will be a major strategic advantage and generate a big chunk of revenue; taking an extra 60 minutes to arrive at a better plan is well worth it.

Are You Really Listening, Or Just Taking Turns?

Communication is critical when you're a startup.  Things usually begin well; the founders are old friends or colleagues, and already know how to work together.

Eventually, however, you reach a point where you've expanded the team, and need the ability to get people on the same page.

In my experience, the same passion and determination that makes entrepreneurs successful can sometimes get in the way of good listening.

When an employee brings up an issue with a founder, a common response I see a lot is that the founder attempts to persuade the employee to that founder's point of view via a combination of passionate rhetoric and appeals to the need for speed.

The problem with this approach is that it treats the employee's issue as a speed bump or obstacle, not as an opportunity to learn something about the team.

When people bear bad news, do you really listen?  In other words, do you make the effort to understand what they're saying (and not saying) and consider things that might require you to change your worldview?

Sadly, most people view conversation as a matter of taking turns.  "I need to let him have his say, then I'll make my points."  Rather than listening, you spend the time the interlocutor is speaking to assemble your own arguments in your head.

Take the time and make the effort to really listen.  Not only will it improve your relationship with your employees, you'll probably learn something too.

Friday, June 28, 2013

Willingness to try + Ability to learn + Listening to feedback = Success

In our zeal to pursue the Lean Startup methodology (which is an excellent approach), we tend to focus on techniques (MVP! Customer Development!) rather than the underlying abilities you need to apply them successfully.

I think that there is a formula for iterating your way to success:
Willingness to try + Ability to learn + Listening to feedback = Success

Willingness to try:
The odds are stacked against startups.  If you only do the things that conventional wisdom says make sense, you will fail, because giant companies with orders of magnitude more resources are able to follow conventional wisdom.  You need unconventional wisdom to win, which means you need an unusually high willingness to try new things.

Ability to learn:
There is no handbook that tells you what to do (not even "The Lean Startup").  This means that you need to learn the lessons for yourself.  Your ability to learn those lessons quickly and well will determine whether or not you succeed.

Listening to feedback:
Regardless of how much you learn by reading, talking with experts, or simple experimentation, you need to listen to the feedback that results.  You'll probably be wrong at least 90% of the time with the things you try; listening to feedback is the only way you'll be able to decide what constitutes the 10% that does make sense, and that you should build on.

Make things you think will be successful, not things you think won't fail

In his enormously entertaining and insightful interview on the Kevin Pollak Chat Show, director and actor Eli Roth (Hostel, Inglourious Basterds, Hemlock Grove) made an important point about the movie business, and why it was hard to work with many studios:

"People don't make movies they think will be successful; they make movies they think won't fail."

Studio executives have a great job--they get to collect fat salaries, take pitches from directors and producers, and decide which pitches to green light.  It takes so long to make movies that as long as the decisions they make are justifiable, they can keep their jobs for years, even if all their movies eventually flop.

Sound familiar?

Many of the same incentives affect and infect the venture world.  VCs hear pitches all day long, but are ultimately responsible to their Limited Partners.  Take a risk and lose, and you're in for harsh criticism.  Avoiding risks might kill your returns in the long term, but it makes your life easier in the short term.

As an entrepreneur, you need to understand this effect.  The feedback you get will often focus on risk mitigation, and avoiding failure.  But you need to remember that in the startup game, the results are binary--either you make money or you don't.  If you make money, it doesn't matter how eccentric you are (cough...Zuck...cough), you'll be hailed as a genius.  If you lose money, it doesn't matter how much sense your decisions made at the time.

Do what you think will make you successful; there is no way to eliminate all chance of failure.

Don't play to the crew, play to the audience

Another lesson from the great Kevin Pollak.  One of the points he makes about acting is that many novices make the mistake of playing to the crew.  When you're on the set of a movie, there is no studio audience.  The closest thing are the members of the crew--all the gaffers, grips, and best boys whose names you see at the end of the movie credits, but whom you have no idea what they actually do.

In a similar way, when you're working on your startup, most of the people you interact with are "crew"--your colleagues, investors, advisors, and so on.

What both crews have in common is that they aren't even remotely like the intended audience.  A film crew consists of seasoned pros who have seen it all; the things they find funny tend to be highly original and edgy--broader, less transgressive comedy falls flat because it is too familiar.

You startup crew installs new apps on a daily basis, and is used to firing up tools to check source code and event logs.  The things that impress them are meaningless to the real audience, and vice versa.

As you build your products, you need to play to the audience, not the crew.  To do this, the members of your product and engineering team need regular exposure to real users and customers.  In the film world, this means test screenings; in the startup world, this means bringing in outsiders to use your product and interact with your people.

Why product first impressions are important:

I often draw lessons for startups from the world of entertainment.  In one episode of my favorite entertainment podcase, the Kevin Pollak Chat Show, Kevin discussed why he thought it was so important to nail the first joke of a movie.

Kevin's point was that the first joke has to let the audience know that they're in good hands.  The level of uncertainty is highest right at the start of the show.  The first joke lets the audience know whether they're in good hands.  A great first joke signals that the filmmaker knows what he or she is doing, and that the view can relax and enjoy the ride.  A flat first joke increases the tension, and makes it even harder for the movie to recover.

(Lest you think it only applies to comedies, I think a similar point applies to dramas as well, hence the James Bond films' focus on providing a crackerjack opening sequence, even though it usually has nothing to do with the rest of the movie.)

When you are fortunate enough to get someone to come to your startup's website, sign up for an account, or download your mobile app, it's critical that you let the user know that he or she is in good hands.  That's why the fit and finish matters.  It's not that it really affects the user experience that much; it's that it affects the user's confidence in you far more.

Wednesday, June 26, 2013

Don't be negative; do be realistic

One problem I often encounter in the startup world is the tendency to push things to Manichean extremes.  Perhaps its because we have to live with so much uncertainty, we crave definitiveness.  Or perhaps its because the kind of mind that can write and debug thousands of lines of code likes binary answers.

At any rate, I often run into conversations where a person will advocate X.  Then, when I point out a few minor issues, the immediate reaction is to abandon X.  This makes no sense.  Decisions are rarely clear cut, and allowing any negative feedback to shut down a course of action means you'll miss a lot of good options.

Or, as Obi-Wan Kenobi put it, "Only the Sith deal in absolutes [except for me, in this very statement, of course]."

Criticism is important in the startup world.  We are trying to do things that haven't been done before, and we are likely to fail.  90% of the time, criticism is justified, because 90% of the time, we're likely to fail.

But when you criticize, you need to learn the distinction between being negative and being realistic.  We've all met the guy who's against everything, and seems to take delight in tearing others down.  Instead of saying, "You're wrong," which is both personal and unmeasured, it's best to be specific.  "I'm not sure I agree with some of the assumptions that are implied by that plan."  You can raise legitimate criticism without being negative.

By the same token, when you are criticized, you need to exercise the same restraint.  It bugs me when the reaction to criticism is the petulant, "Okay, we just won't do that then."  This is essentially the playground tactic of, "I'm going to take my ball and go home."  It may feel good for an instant to perform this childish act, but it doesn't help your startup.

Tuesday, June 25, 2013

Why Entrepreneurs Are Lonely (And What You Can Do About It)

A lot of people write about why entrepreneurs are lonely (including me).  Among the things we usually cite: Uncertainty, not being able to confide in others, having to be relentlessly upbeat even as disaster strikes.

I think we're actually missing a key insight.  I recently read Jonathan Haidt's book, "The Righteous Mind."  It's a great read, but the relevant point he makes is that we are both selfish and groupish, and that human beings suffer when they fail to meet both needs.

Entrepreneurs become lonely because of the all-consuming nature of their quest.  In their relentless focus on their startup, they tend to drop all their other group affiliations.  Think about how often we hear about entrepreneurs neglecting their friends and family, let alone groupish outlets like sports teams or churches.

But the thing is, they can't get their groupish needs met via their startup because they have to lead that group.  Everyone else gets some groupish benefit, but the startup founder/CEO doesn't get the chance to blend in, give up their autonomy, and surrender to the hive mind.  He or she is leading the hive mind!

Ironically, their "selfless" actions leave them unbalanced--to much selfishness, not enough groupishness.

There are two obvious answers to this problem.  The first is to be a different sort of leader--one who facilitates, rather than commands.  This works fine if it's your natural style, but may be difficult for some.

The other is to set aside time to maintain your groupish affiliations, whether it's playing in a regular sports league, attending church, volunteering, or simply calendaring family game night every week.

What you can learn about communications from the humble bug report

Consider the bug report.

It's a little talked-about, little-loved part of working at a startup.

Every application has bugs.  These a complex systems with thousands or even millions of lines of code.

But unless your developers are using the application every minute, they're unlikely to find all the bugs themselves, no matter how much your QA team tests.

And so startups rely on bug reports, usually from end-users.

The problem is that most bug reports are crap.  "Feature X didn't work."  This drives developers up the wall, because they need to spend more time trying to hunt down the problem and reproduce it than it will take to fix it.

I've dedicated a surprising portion of my life to writing good bug reports.  A good bug report does the following:

1) Tells the story of what led to the bug.

2) Describes, step-by-step, what happened.

3) Includes a careful exploration of the problem

(For example, I wrote on bug report today on a dialogue box that accepted two pieces of input.  I tested all three error cases (A missing, B missing, both A and B missing) and wrote about what I found.)

4) Explains the consequences of the problem and why it matters

5) Offers suggestions, but with the understanding that the person responsible knows more

You know what?  Those aren't just good guidelines for a software bug, they're good guidelines for any communication you have at your startup.

After all, what are startups but attempts to fix the bugs we find in the real world!

Sunday, June 23, 2013

Why it's so hard to work with designers

I often hear folks complaining about how hard it is to work with designers.  "They're prima donnas," people say.  "They always insist on getting their way."

As a proud holder of a design degree from Stanford, I feel unusually qualified to respond to these criticisms.

Design is ultimately about making choices with limited information.  It that sense, it's very much like entrepreneurship.  Every single product or web site that you see is the product of thousands of decisions, many of which were made unconsciously.

As a result, decisiveness is one of the most important traits of a designer.  We praise bold lines, not cautious incrementalism.

This actually caused me to struggle in design school.  Many of my classmates had firm convictions about everything.  When they approached a project, they had a firm point of view that they went after 100%.

In contrast, I always thought things like, "Well, there are many possible answers."  Great for enlightened management, not so good for designing products.

My answer was to focus on process--I researched the problems, created numerous design iterations, and trusted that with enough feedback and revision, I could produce a good design.  But it was much harder for me than many of my classmates, even though according to things like grades and math skills, I was "smarter."

Needless to say, when I got into the workplace, I got out of the design department pretty quickly, and shifted to the business side.

It takes unusual decisiveness to stare down the terrifying sight of a blank page and start drawing bold lines.  The kind of person who has strong opinions about everything isn't always easy to get along with.  But that same strong personality is what allows your designer to do great work.

Is Writing Now A Core Focus For Top Tier VCs?

I read with some interest the news that Michael Copeland was leaving Wired to join Andreesen Horowitz to lead that firm's "content strategy."

It makes perfect sense that Andreesen Horowitz would make this move.  Not only has a16z flourished by departing from the traditional VC model (hiring tons of non-investing staff to add value for portfolio companies, eschewing the standard practice of bringing in experienced CEOs), it gained valuable credibility during its early days from the thought leadership that Marc and Ben generated on their respective blogs.

In a world in which entrepreneurs are better informed and better educated than ever before, pursuing thought leadership is one of the best ways for VCs to market themselves.  Rather than relying on partners to squeeze in writing on the side, a16z is bringing in a top gun professional to help them create more and better content.

I think this is a canny move, which will probably also spark copycat moves by other top tier firms.  Perhaps people who can write quickly and eloquently about the startup ecosystem are about to become a hot commodity.

Hmmmm.  I wonder if I can think of anybody who would fit that description?

First Round upped the ante even further by launching First Round Review.  Will this set off a content arms race?  If so, all of us will be winners.

Is AWS a lifeboat for enterprise SaaS?

Continuing my series on enterprise SaaS, the private cloud, and other hybrid strategies, I want to offer some hope for startups that are reluctant to abandon their 100% SaaS strategy.

I understand your position, because I can clearly recall arguing in 2007 that SaaS was on the "right side of history."  I had been in the enterprise software business before, and I saw that SaaS was a better choice, given the madness of annual releases, massive implementation consultancies, and multi-year investments in shaky software.

I underestimated the ability of the Empire (e.g. CIOs) to strike back:

Yet while Amazon's recent contract to provide a private version of AWS to the CIA might seem to sound the death knell for enterprise SaaS, it might also be a lifeboat.

If the CIA is willing to accept the AWS architecture as a standard, and if Amazon can convince other CIOs to do the same, AWS could become the underlying platform for startups to offer enterprise SaaS applications.

These startups could develop for AWS and know that this would allow them to apply their code to the hybrid infrastructures of major government and private sector customers.

There is a danger that Amazon could get into the Facebook business model, and start ripping off their partners, but to date, Amazon has shown an admirable focus on the platform, rather than providing apps.

The Hybrid Cloud is Here To Stay

I've already written about how "Enterprise SaaS" might be a misnomer:

Now comes a major piece of news that reinforces my prior post.  Amazon has just signed a $600 million contract with the CIA to construct a private version of Amazon's cloud infrastructure inside the CIA's datacenters:

If any company has the wherewithal to remain a purist when it comes to "Enterprise Saas" or "Open Cloud," it's Amazon.  Amazon has multiple revenue streams, and could easily continue to grow AWS while remaining "100% in the cloud."

No company is more trusted.  No company is a safer bet for public cloud services.  AWS runs 1% of the Internet!

Yet even Amazon is pursuing a hybrid strategy, after previously scoffing at the notion of building private cloud infrastructure.

If you serve the enterprise, and you don't have a hybrid strategy, you'd better get one.

Want to be an expert? Create a resource people rely on.

I recently ran across the Wheel of Persuasion:

It's a catalog of online persuasion techniques, perfect for persuasion junkies like me and Ramit Sethi (which is where I suspect I found the link).

But it's also a great example of how putting in the work can establish your status as an expert.  It's marketing genius.

The Wheel of Persuasion is from Bart Schutz, who runs a consultancy in the Netherlands called Online Dialogue.

Had I ever heard of him before?


Will I remember him now?


If you build a resource people rely on, you create a massively scalable sales tool.  You can only have so many conversations.  Events like speaking gigs can multiply your audience, but a uniquely useful tool can reach orders of magnitude more people.

What's stopping you from building a Wheel of Persuasion equivalent to promote your startup, or your personal expertise?

To judge an entrepreneur, meet their spouse

Tony Tjan has a great post on HBR's blog network about 10 questions he uses to become a better judge of people:

(Bonus trivia: Tony had just graduated from HBS and started his first company when I entered HBS.  He and his co-founders raised $100 million dollars in a single round.  Can you name the company?  I'll provide the answer at the bottom of this post)

It's well worth reading in full, but I want to focus on a single question that I think isn't asked enough: "What's the spouse like?"  I'd also add the corollary, "How does the person treat their spouse?"

Whom an entrepreneur marries is the most important decision in his or her life.  It might very well be the difference between success or failure.  Presumably, it's also the decision that he or she made with the greatest care.  As such, it tells you a lot about the entrepreneur.

Anyone who meets my wife Alisha learns several things.  First, I like smart people.  Second, I don't mind people who challenge me.  As she likes to tell people, she views poking holes in my often-swelled head as one of her most important jobs.  Third, I believe in partnership, not command-and-control.  (What people learn about Alisha from meeting me is a question I'll let her answer!)

All of these are key insights that help people understand what kind of person I am.

Here's another story, about an entrepreneur who shall remain anonymous to protect his identity.  This entrepreneur came over to my house to pick up some paperwork (always a good way to make sure you get signatures in time).  We started talking, and I invited him in.  After about 90 minutes, he said, "Hold on a minute, I need to go back out to my car to check on my wife and see how she's doing."

I practically had to restrain Alisha to keep her from killing him on the spot.

Many people feel that a person's personal life has no bearing on their professional life.  I disagree.  A person who treats their spouse well might still be a low-down skunk, but a person who treats their spouse poorly is never going to be someone you can trust.

Trivia Answer: Tony's company was Zefer.

Business Idea: Truly Trusted Communication

I was reading a BuzzFeed piece on the proliferation of notifications (, when I was struck by a business idea:

What if you provided a truly trusted means of electronic communication?  This tool would require you to specifically grant communications privileges to specific people or data sources, and probably impose a strict limit on the number of sources.

(In many ways, this sounds a bit like Path, but more oriented towards messaging)

Right now, my most trusted communication medium is the text message--it is both instantaneous and rare enough such that the signal to noise ratio is high.  Yet the issue is that anyone with your telephone number can message you.

Imagine instead a tool which pushed notifications to your desktop and mobile devices (like MightyText), but only from specific individuals (another similar service, albeit just for email: AwayFind).

It would be used solely for communications, as opposed to the Twitter/Facebook broadcast model, and you could rely on your messages being presented instantly, with the maximum chance of getting read.

Like Path, you would be limited to specific number of connections (10? 25?) so that every message would count.

Does anyone know if this startup already exists?

Overcoming Email's False Sense of Progress

Dan Ariely has a new book out where he discusses the psychology behind why we overinvest in email, to the detriment of more important priorities:
"First, people have a really bad habit of coming in and checking e-mail first thing in the morning. And for many people, the morning is the most productive time. E-mail is very, very tempting, so they basically sacrifice their productive time for e-mail.

The second issue is that in doing things, we like to feel that we’re making progress. So if you get to erase ten e-mails from your inbox, you feel like you have achieved something. But if you think carefully about it, it’s not clear that you’re going to get something out of it.

Every time you’re doing something, you’re not doing something else. But you don’t really see what it is that you’re giving up. Especially when it comes to, let’s say, e-mail versus doing something that takes fifty hours. It is very easy for you to see the e-mail. It is not that easy for you to see the thing that takes fifty hours."
I've written before about my use of the Pomodoro technique:

By dividing up the day into 20-minute chunks and being explicit about when to work or rest, the Pomodoro technique helps me keep on task.  I've also applied it to email, along with one of my other favorite productivity techniques, compartmentalization.

Essentially, I decide in advance whether a particular 20-minute chunk is going to be devoted to email or not.  I try to alternate, so that I'm always making progress towards crucial goals, even when my inbox is overflowing.  If I find myself drifting into email when I'm supposed to be working on a broader initiative, I reel myself back in.  If I drift into a more important priority, I usually let things play out.

This allows me to make steady daily progress, another favorite technique:

The downside is that I'm not making email a priority--a fact that is reflected by the 5,000+ messages in my inbox.  But in a sense, that's the proof that the technique is working.  I'm able to maintain focus on what counts without letting email distract me.

Smart Investors Should Seek Out Female Founders

I loved the points that Kat Gordon made in her recent guest post on
"1). Women are amassing wealth, influencing spending, and driving tech usage at rates well beyond men. By 2030, women will control two-thirds of the nation's wealth.
2). Founders are most likely passionate about something that meets a need or interest that originates from their own life experience.

3). If 19 out of 20 meetings are with male founders, how do VCs hope to meet the needs of the true market: women?"
I couldn't agree more.  As an investor, it's very easy to get lulled into simply responding to inbound inquiries.  We're all so busy, that we could spend all our time simply on entrepreneurs being introduced by friends.

Yet if we follow this path of least resistance, we simply reinforce the current patterns, like a wagon wheel in a rutted dirt road.

Smart investors need to set aside time to proactively seek out and nurture relationships, both with female founders and with potential female founders.

Many of the most important events in my career resulted from relationships that began years before, and that I nurtured with no particular end in mind.  In most cases, those were relationships with young men, which means that, like many, I have more work to do to live up to my beliefs.

Why, mathematically, startups make more sense than ever today

The underappreciated engine behind the startup boom is the reduction in startup costs...but not for the reason people think.

Most people believe that the lower costs of starting a company (thank you, Amazon Web Services!) have resulted in a startup boom because it has allowed more people to start Web companies.

This is true.

Many others believe that there is a benefit to investors because founders can now seek product-market fit and traction on their own (bootstrapped) dime.

This is also true.

But most people don't realize the math behind the impact lower startup costs have had.

The simple fact is that startups are call options.  They offer huge potential upside, but include enormous risk.

The way to think of startup value is to apply (in a loose way) the Black-Scholes model for option pricing:

According to Black-Scholes, all other things being equal, increasing volatility increases the price of the option.

Thus lower startup costs have a double impact.  First, they lower the price of the option, making them more attractive.  Second, the crowded startup market that results is more volatile, increasing the value of the option.

The result is that the options (startups) are both worth more and priced less than in the past.  It's small wonder that both entrepreneurs and investors are jumping in.

But we ought to remember that Black-Scholes is a model, not a surefire formula.  Myron Scholes and Robert Merton shared the Nobel Prize in economics for Black-Scholes (Fischer Black had died a couple of years prior).  Less than a year later, their hedge fund, Long Term Capital Management blew up in spectacular fashion.

Writing Takes Away The Power Of Bad Things

I am a huge believer in storytelling.  Whenever something traumatic happens in my life (and despite my incredibly lucky existence, bad things have happened), one of the most important steps I take to get past the initial emotional shock is to boil it down to a simple story, and lay out what I'm going to do about it.

It turns out that there is science behind this.  Here's a passage from Adam Grant, the author of the recent book, "Give and Take" (H/T PandaWhale):
"In total, well over a hundred experiments have documented the health benefits of disclosing thoughts and feelings about negative events. “When people write,” Pennebaker summarizes in The Secret Life of Pronouns, “healthy changes occur.” Talking into a recorder works just as well as writing, but it’s not effective to express the trauma without language, through mediums such as art, music, and dance. It seems that people need to express the negative experience in words—either through writing or speaking—to reap the health benefits."
Language has the power to define and crystallize our feelings.  It forces you to make rational decisions in a way that more inchoate forms like music and dance do not.  Not is this limited to helping with negative events:
"Research by Laura King shows that writing about achieving future goals and dreams can make people happier and healthier. Similarly, there’s plenty of evidence that keeping a gratitude journal can increase happiness and health by making the good things in life more salient. And Jane Dutton and I found that when people doing stressful fundraising jobs kept a journal for a few days about how their work made a difference, they increased their hourly effort by 29% over the next two weeks."
The great news for entrepreneurs is that you can even keep the writing private.  It's lonely in what I call "the big chair."  A founder/CEO needs to be strong for everyone else, even when her own heart is filled with foreboding and doubt.

But through the written world--whether it's a formal journal or simply a text file on your phone--you can be honest with yourself, and express all the things that are ready to burst out.

Why It's Good You Don't Always Get What You Want

I just finished listening to Kevin Pollak's amazing interview with filmmaker Peter Farrelly ("Dumb and Dumber", "There's Something About Mary", "Hall Pass").  You can watch it on YouTube here:

(Note: This is a 2 1/2 hour ready to be seated for a while!)

Farrelly covers his entire career, how he became a writer, and the time he encountered a UFO on I-295.  It's a great interview.

At one point, Farrelly said something that I immediately wrote down in my phone, because I knew I wanted to share it.  Here it is:

"If you get everything you want, your world is limited by your imagination. If you don't, the universe takes over, and you might get something even better." --Peter Farrelly
As an entrepreneur, you have to be open to the possibilities.  Larry and Sergey wanted to sell Google to Yahoo for $500,000.  Zuckerberg wanted Facebook to be a file sharing network.  Your greatest success may come from the universe taking over.