Saturday, August 24, 2013

The Real Lesson of Steve Jobs: Results Trump Personality

Like many people, I'm addicted to reading about Steve Jobs.  I've said before that he's a towering figure whose name will be on a par with Ford or Rockefeller--an all-time great.  But I've also had a hard time reconciling the greatness and pettiness of the man.

I recently read a Wired article from 2012 that offers a useful taxonomy for how people react to Jobs' story:
"In one camp are what you might call the acolytes. They’re businesspeople who have taken the life of Steve Jobs as license to become more aggressive as visionaries, as competitors, and above all as bosses....

The second camp is what you might call the rejectors. These are entrepreneurs who, on reading about Jobs since his death, have recoiled from the total picture of the man—not just his treatment of employees but the dictatorial, uncompromising way that he approached life."

I freely admit to being a rejector.  After all, as early as 2006, I wrote that I'd rather prioritize family over business success:

Yet I understand the hero worship of the acolytes.  Jobs is the greatest business genius of our time, and a man of nearly unparalleled charisma, the kind of man who could win over a room even as he was insulting them:

But I believe that attributing Steve's success to his harsh personality is mistaking correlation for causation.  The real lesson of Steve Jobs is that success is the best deodorant.  When Steve was a stubborn arrogant jerk in the 1980s, he was fired from Apple--not because he was a stubborn, arrogant jerk, but because he wasn't delivering business results.  When Steve was a stubborn arrogant jerk after his return, he was celebrated--not because he was a stubborn, arrogant jerk, but because he was delivering business results.

It's like a beautiful actress with a "difficult" personality--she gets parts in spite of her personality, not because of it.  Or, as one writer put it when describing a young Denise Richards, "Let's face it--if she looked like Kathy Bates, she'd be slinging Popcorn Chicken at KFC."

By all means, have high standards and demand greatness.  Those are Jobs character traits that helped him succeed.  But don't lump them in with his cruelty and selfishness.  For every 1,000 wannabe entrepreneurs that revel in their "bluntness," I'll bet there's 999 assholes who are doomed to failure, and one entrepreneur whose talent somehow manages to compensate for his toxic personality.

Friday, August 23, 2013

The Material Doesn't Matter

I live in Palo Alto, which is a pretty wealthy neighborhood.  Add in the fact that there are a lot of only children, and you have a lot of kids whose rooms look like an FAO Schwarz showroom.

Under those circumstances, a lot of parents are tempted to make sure that their kids get all the same toys as their friends.  After all, they don't want their kids to suffer the "hardship" of not having their own iPad.

I don't subscribe to that philosophy, and not just because I'm a cheap bastard (though I am).

When I was growing up, I lived in Santa Monica, which is a pretty wealthy neighborhood.  And while I certainly didn't lack for anything growing up--after all, our family got our first personal computer (an Apple II+) when I was 7--it's also the case that I had fewer toys than most of my friends.  Much of my childhood was spent scheming ways to get to go over to other people's houses so I could play with their toys and video systems.

Yet while I was somewhat jealous of my friends who had Super Nintendo systems (we never upgraded from the Atari 2600, and I spent a *lot* of time playing the text-based "Tuesday Night Football" game on the Apple II+, the fact that I didn't get everything I wanted didn't bother me that much or affect my happiness.

Beyond a certain point, the material doesn't matter.  The bigger house, the expensive toys, the luxury car--none of that actually makes your kids any happier.  In some sad cases, unlimited wealth only causes misery.

Your kids need your love, not your money.

P.S. Let me again emphasize that I'm solely talking about the "first world problems" of kids; anyone who's suffered real deprivation understands that the material is all that matters when you don't have enough of it.

You Never Have The Perfect Tools For The Job

A while back, I read a popular blog post on "Why I'll Be a Solo Founder Next Time":

The author, Denny Britz, writes about how his previous startup failed because he and his co-founders were "bad" founders, and vows to do things differently his next time out:
"If you haven’t found the right team yet, keep looking. Don’t settle. You are better off starting alone and adding the right people to your team when you find them. No one can guarantee startup success, but a bad founding team is a guarantee for failure."
It's certainly true that you're better off as a solo founder than with a bad founding team, but resolving to be a solo founder is an overreaction.  I should know, since I've lived this.

When I started my first company, it was during the height of the Dot Com boom.  The joke then was that you based your hiring on "the mirror test."  If a job candidate could fog a mirror, you hired him (or her).  This is how we ended up with a software developer who was working for us from 1-7 PM, and whom we discovered was working for a separate company from 6 AM to Noon.

I was traumatized by my experience, and for a long time, I was reluctant to trust co-founders I didn't know, or even employees.

But after another couple of startups, I realized that you never have the perfect tools for the job.  There is no such thing as a perfect team, just like there's no such thing as a perfect spouse or a perfect child.  The right co-founder is someone you can live with, not someone you can't find fault with.

And if you're honest with yourself, you'll admit that you're not perfect either--anyone who picks you as a co-founder has to make the same leap of faith.

By all means, be selective.  I wouldn't advise you to marry whomever responds to your OK Cupid posting first.  But recognize that you're always going to have to make compromises.  Accepting that fact will allow you to deal with people generously, rather than brooding on their flaws.

I find that I do better when working with people who have high expectations of me, and vice versa, not people who constantly criticize me for my (many) flaws.  I suspect the same is true of you.

Always Get A Lead Investor

I love Jason Lemkin's writings about entrepreneurship and building SaaS companies.  Jason's most recent success is EchoSign (sold to Adobe), and he was unusually candid about the importance of having a VC investor rather than a "party" round:
"Everything else, for funding, in the end didn’t really matter.  The first $2m?  Great, but we had multiple offers.  Whatever.  The $6m in Series B?  Again, 3 offers in 2 weeks.  Great, and truly, deeply, muchly appreciated — but not really a big event given that it was pretty easy to get and low stress.  But that $500k gap between Series A excitement and the results necessary for Series B — that was the most critical $500k I’ve ever gotten.  Otherwise, we would have died.

It’s great to have 20 cool execs invest in your company.  And they won’t ask for anything, no board seat, no financials, no nothing.  But what are the odds they’d collectively had written that second, $500k check for us?  Zero.  Absolutely, Zero."
I've gone through the same process multiple times.  Each time, I was damn glad that we had solid VCs who had invested in the company.  I've never had a company or any size that didn't require a "pass the hat" round from the existing investors to get it through a rough patch.

There's a reason why I leave a space on my due diligence template for listing the lead investor of the round.  If the shit hits the fan (and it always does), I need to know that the lead investor will put in more cash, and just as importantly, twist the arms of the other investors to do the same.  I've put more money into certain companies that I knew were long shots, but I did so because I didn't want to be blackballed by the lead investor.

The rise of Angel List has enabled the party round, where the entrepreneur sets the terms, and all the various investors simply opt in.  But while this may seem easier up front, taking the time to get a lead investor to believe in you, and invest in you--not just with money, but with time and trust--is almost always going to be a better option in the long run.

Talk To The Software

Sometimes, the best salesperson is an error message.

One question that often arises for SaaS companies that sell to the enterprise is whether they should funnel customers through salespeople, or offer a self-service product.

Usually, the partisans of the two sides are like opposing factions in a holy war.  The Church of Sales insists that human salespeople are better at selling software than any order form, because they can understand the customer's needs and help them find the right (and more expensive) solution.  Meanwhile, the Self-Servicists argue that buyers hate salespeople, whom they consider a waste of time, and that anything that comes between the buyer and an order button is a waste of time.

Both sides have a good point; salespeople are critical for consultative sales, and it's a rare company that will sign off on a 6- or even 5-digit purchase without talking to a human being.  On the other hand, many buyers screen any phone calls they receive from vendors, and view negotiations as about as pleasant as a dentist appointment.

Our experience at PBworks is that you need to try to leverage the best of both worlds.  Ultimately, we're agnostics who combine self-service and sales in an ecumenical strategy that I call, "Talk to the Software."

Here's the secret: Your goal should be to play "Good Cop, Bad Cop" with your salespeople playing "Good Cop" and your software playing "Bad Cop."

Once upon a time, we were members of the Church of Sales; we wanted to learn as much as possible from every deal, so every communication went through our Sales team.  The problem was, this put our salespeople in the position of being the bad guys.  Customer over their storage limit?  Have Sales call them.  Customer needs to buy more user licenses?  Have Sales call them.

The net result is that customers start avoiding your Sales team.  When we became agnostics, we turned enforcement over to the software.  Now our software plays "Bad Cop" and blocks users who violate their licenses, leaving it to our sales team to play "Good Cop" and help them get back in compliance.  Our Sales team has better, more productive conversations, and because they don't have to act as enforcers, they also have more time to find expansion opportunities.

Don't make your salespeople play Terminator--let the tireless, ruthless servers in your datacenter handle your dirty work.

Why You Have To Be A Value-Added Investor

One of the tempting illusions about angel or VC investing is that you can relax once you've made the investment.  After all, if you've picked the right startup, isn't that 90% of the battle?

Alas, this is just an illusion.  In fact, once you've made an investment, it's critical that you demonstrate your value to the entrepreneur.  Let me walk you through the logic:

1) To make money, you want to invest in the best entrepreneurs and their startups.

2) The best entrepreneurs and their startups are usually hot deals; investors can be lemming-like, but if a company has a great team, a great product, and is growing at 100% per month, it's not that hard to smell value.

3) Hot deals are a seller's market; the entrepreneur can pick and choose from among interested investors.

So the question is, how do you get an entrepreneur to pick you?  That's where adding value comes in, and more specifically, adding value in the future.

Ultimately, if you're competing to get into a hot deal, entrepreneurs will make decisions based on the value they believe an investor will provide in the future, rather than the value an investor has provided in the past.  It may seem ungrateful, but it's the reality.  Moreover, investors act the same way.

Some VCs rely on track record and brand to prove their ability to add value.  But for most of us, that isn't an option.  Furthermore, the best entrepreneurs aren't starstruck in this way.

In general the best way to prove you'll be able to add value in the future is to have already helped the company.  The second best way is to have helped people the entrepreneur trusts.

Who is an entrepreneur going to pick?  The investor who's offering a slightly higher valuation, or the investor who has helped build three different companies whose founders the entrepreneur trusts?

VCs that tried to buy access to Series A opportunities by spraying-and-praying seed investments but without adding value discovered this to their chagrin.  If they didn't add value for the entrepreneur during the seed stage, there wasn't much reason to favor their Series A offer.

Entrepreneurs should focus first and foremost on building traction.  If you have traction, you'll always be able to raise money.  The equivalent for investors is adding value.  If you repeatedly prove your ability to add value to your investments, your money will always be welcome.

* This post was inspired by a TechCrunch editorial by my friend, the great Ben Narasin:

Thursday, August 22, 2013

Why Worry?

The great Eric Barker recently reviewed the research on fear, and found that there are three secrets to fearlessness, as practiced by courageous types like firefighters and special forces operatives:

1. Training and Preparation
"The Navy SEAL team that killed Bin Laden trained for weeks inside a full scale replica of the compound they would be attacking so that when they arrived, it would be like they’d already been there."
2. A Feeling of Control

"While training produces more of the ability to actually control a situation, even an illusory feeling of control can reduce stress and thereby increase performance. In fact, the illusion of control is so powerful that overconfidence is an asset, not a liability, during disaster scenarios."
3. Humor
"When people are trapped in a stressful situation and feeling overwhelmed, they’re stuck in one way of thinking: This is terrible. I’ve got to get out of here. But if you can take a humorous perspective, then by definition you’re looking at it differently — you’re breaking out of that rigid mind-set."
These points really resonate with me, because they strongly fit with my experience in the startup world.  I almost never worry about my startup activities, even though they are fraught with risk, and the vast majority are likely to end in failure.

Why am I able to stare down stress with equanimity?

A) I constantly study and work on my craft.  This means that the further I get along in my career, the more relevant training and experience I have.  This in turn leads to...

B) I'm confident in my ability to make things happen in my chosen field.  There's always a lot that's outside my control, but in the domain that I define as mine, I feel a strong sense of control.

C) While not everyone agrees with my approach, I'm constantly seeking the humor in the situations my startups face.  It may sometimes need to be gallows humor--obviously, not all of them work out--but all of it helps to relieve the tension and make the day more enjoyable.

I know that I'm lucky to have a positive disposition, but apply these same principles can help any entrepreneur handle the stress inherent in this high-risk endeavor.

How Your Startup Is Like Jello

It's brightly colored, and made from rendered animal skins and bones....

Nah, just kidding.  (Not about the animal bones--that's absolutely true.)

Your startup is like Jello because it starts of in a liquid state, but undergoes a phase transition and becomes (more or less) a solid.

When your startup begins, it is completely fluid.  You can change just about anything, practically overnight.  It won't even count as a pivot, because a pivot requires that you establish a solid position from which to pivot.

This fluidity is what makes startups powerful.  Unlike established companies, they aren't tied to the traditional ways, and can better serve new or changing markets.

But your startup loses much of that fluidity even before you become the Evil Empire.  As soon as you start taking in money from investors and customers, your sloshy soup of collagen firms into a jiggly semi-solid.

And if you've ever tried to reshape Jello, you know that it's possible, but difficult (and your hands are likely to get sticky and stained in the process).

Make sure you've found the right mold for your startup *before* you raise money, or you might end up stuck with an unappetizing Jello salad.

The Real Problem With Shiny Objects

The always-insightful Mark Suster has another winning post up, "The Perils of Shiny Objects."

"In today’s uber-connected, social media, everything-is-public, people tell you there’s killing it with these new features, investor & mentor whiplash – it’s hard to avoid the latest thing.

Pinterest is killing it with their new UI. 4 months later every fucking product I see looks like Pinterest.

Skeuomorphic design. No, wait! FLAT design. Native apps. HTML5. Open graph. Twitter Amplify. Voice messaging. Video messaging.

All of this whiplash is destroying your business. All of these features, products, business models in their own right are valuable. Slowly. Sequentially. Thoughtfully. Methodically. Tested. In due course. Done quickly while you rush to the next toy is a disaster."
Mark's absolutely right.  Trendsucking entrepreneurs are guilty of practicing cargo cult capitalism--they mimic the outward signs of success in the mistaken believe that correlation equals causality.

The real problem with shiny objects is that they distract you from the things that really matter: Listening to customers, even though they can't articulate what they want.  Trying to sell your product, knowing that you'll fail, but also knowing that you'll learn in the process.  Deciding what to focus on and sticking to it until the circumstances significantly change.

The implicit assumption with shiny objects is that you can learn from other's mistakes, and achieve success without making your own.  But you don't achieve success by using first principles to figure out a perfect plan; you achieve success by going out into the market, getting your ass kicked, learning some hard lessons, then going back out again.

Following shiny objects is fun; taking dull, ugly objects and making them useful is what succeeds.

Monday, August 19, 2013

It's Cheaper In The Long Run To Pay For A Professional

I firmly believe in the truth of the old saying, "It's cheaper in the long run to pay for a professional."  It's an axiom that applies in nearly any situation, from decide whether or not to attempt to fix your own plumbing problems, to dealing with groupies if you're a young All-Star.

Yet while most people would agree with the above examples, we seem insanely reluctant to actually pay for software.  Here's a survey on how much people would pay for a Google Reader replacement:

55%: Nothing
23%: $1/month
10%: $2/month
4%: $4/month
5%: Whatever it takes to make sure it doesn't go away

I use an RSS reader every day, for at least an hour per day.  It's one of the most important tools I have, along with Twitter, Blogger, and PBworks.  I'd gladly pay $20/month for the best RSS reader because at that rate, I'd be paying about $0.50 per hour of usage.

Yet 88% of survey respondents weren't willing to pay more than $2/month.

The Internet has been a bonanza for free, and offering free and freemium products has produced untold billions of value for companies and consumers.  But the consumer mentality has to change.  We have to be willing to pay the cost of one miserable Starbucks coffee per month for a mission critical tool that we use every day!

Paying for a professional makes sense because it's a sustainable model, and makes the incentives and payoffs explicit.  Free is marketing; it's not a business model.