Why do startups fail?
They run out of money, of course. That's an oversimplification and actually it's more the result than the root cause.
A lot of times, it comes down to failing to produce results, and enough of them. What I've realized recently, though, is that smaller, faster results are key--and it doesn't always matter whether those results are good or bad.
I know a few startups that are struggling with their execution and it strikes me that they don't have any enough small victories. Their goals are all or nothing, like big product releases. For months, they're building the next thing, and there's little for the CEO to accomplish in the meantime.
Similarly, they get stuck in trying to negotiate with a huge customer for months on and end it ties up their resources.
Even in the beginning, some founders can't move forward until they raise their seed round. All you ever hear from them is whether they raised their seed round or not--and the company just seems dead in the water.
There are no small victories.
Having small victories isn't a function of winning and losing--it's about the design of your goals and your approach to them.
Language is incredibly important here. It starts with your team's disposition around new goals.
When your team decides that enterprise users should be able sign themselves up, that's a big project. That involves automating a ton of things that aren't automated yet and untold headaches for your tech team.
What's the reaction when the CEO says "I've gotten feedback from customers that they want to just try the product out themselves, and the setup and support team is already overloaded...what would it take to allow people to set themselves up?"
If the first reaction from an already overloaded tech team is a face palm and an "ugh", that's a problem that goes deep. That means the people involved are only thinking of the end goal and nothing in between--and not positioning themselves to allow for small wins. Each new challenge feels like a burden that will have no near term payoff.
What if the answer is more about what they can do right now?
"Well, the easy part is setting up just the basic account--name, ID, password, etc. We do that on our end and we could have an interface up by the end of the day for them to do at least that. There are some parts that would obviously take longer, but let's make a list of what they *could* do within a week or so and then we'll decide if that's enough. I can have that list by tomorrow morning after talking with my team."
Getting to a result, faster.
That's the kind of conversation that excites everyone. It creates a culture of a can-do attitude. It also gives everyone across the team something to shout about. Maybe you create some kind of self signup that isn't nearly full functionality, but it's actually more than your competitors have. That's the kind of small victory that allows for you to have something to announce as PR *every week*.
It excites board members and potential investors. That's because you appear to be moving faster, when in reality you're working just as hard and fast, but just breaking up projects by results-based tasks.
Results are just things that people can point to. They're completions. They are the answers to what you accomplished today. If all you did was work on something, and tomorrow you work on that thing, and the day after, it's going to feel like you're living out Groundhog Day. What did you actually accomplish today that you can share and feed good about?
"Today, we let users change their screen names without creating new accounts."
It's a thing you can point to. Every day, you should have results--if nothing else, for your own sanity.
A lot of the hidden value in moving to a results focus is market and customer feedback earlier. Turns out that customers wanted to create their own accounts for some other reason that you never even realized--and the functionality they needed in the short term wasn't really the big project, it was the small thing.
We have a lot of systems like this in place for product management, but they should be present in everything the company does.
You decide you want to hire, so a Tweet and a few emails should go out almost immediately, before you fully fleshed out and approved the description and job requirements.
A result. Faster.
You want to start talking to customers in a new industry, so a page goes up on your site the same day with some text about what you could offer to them. It's not the fully built out marketing plan for that industry--but it's a start.
A result. Faster.
You're going to start fundraising for your next round. Don't make the only thing a two week long project to built out a deck. Just make a quick list with your investors of who might be interested. You can do that right now--and what you might realize is that they come up with someone you already know pretty well. You could probably grab coffee with that person this week just to float the idea of raising even before you have a deck. Now you're fundraising and getting a meeting with an investor is a result--and you just did it faster because you focused on smaller, quick victories.
What about your sales process? Is there a trial offering you can get people into at the end of the very first meeting? If your product requires a lot of custom work is there a version you could at least get people into that helps make the custom work easier later? If the only possible result in the sales process comes in six months, the whole thing is going to feel like a slog--both to your salesepeople, the board, and the industry. Everyone involved wants to hear about wins, big or small, every week.
So the next time you build something, get asked to do something or have some opportunity think about what the earliest possible result you can get to might be. Get your team to think this way. What can I do *right now*? What can we get done *this week*?
You'd be surprised at how much you could get done so soon.
To date, I've backed three fashion related companies--Refinery29, chloe + isabel, and Ringly--and now I have the pleasure of joining the syndicate of investors in Bradford Shellhammer's new company, Bezar.
Could I a less likely candidate for such a portfolio? :)
Bezar is where you find people who design the kinds of things that I see in other people's apartments and stop to pick up, inspect, wonder at and think, "That's awesome... I would have never thought of adding that to this place."
It's the kind of place where you buy clothing that make people notice because it's cool and interesting--even people like me, currently typing this with a Mets t-shirt on and jeans that I bought at Macy's.
It's a platform that puts the emerging designer up to be celebrated and I'm just as excited for the designers that are going to be featured on the site as I am for Bradford and his terrific team.
How I got to this investment was another long term story. I was a huge Fab.com buyer in the early days when we backed it at First Round Capital. It was the only marketing e-mail I opened up everyday--because it always had the coolest stuff. Each e-mail brought with it something that I felt that need to tweet and share--and many, probably too many times, something I bought.
That was the core of what Bradford brought to that company. It was built around his design sense.
But Fab fell into the trap that many companies who go down the VC route fall into--too much money, too soon, and growing too fast. Money pushed the whole thing off the rails and made it into something that wasn't the exciting thing it was when it first launched.
After Bradford left, I reached out to him and asked him to get dinner. I wanted to hear his lessons learned and help him figure out his next thing. Small world, it turns out I also knew his husband from the finance world having met him over 10 years ago.
We had a great chat and stayed in touch. When he told me he was launching Bezar and asked me to be involved, I was thrilled. Fab was a huge part Bradford, and Bradford is Bezar, but Bezar is not Fab. It's so much more.
The team is hard at work improving upon the concept of a designer focused site that will inspire the creative juices in all of us. It's fitting to be led by someone who experienced and learned a lot in his first time around. Bradford said something to me that I think every entrepreneur should consider, "This might not be a billion dollar company."
The list of companies where if only *someone* had said that at any point, especially the VCs involved, things would have turned out differently is as long as my arm.
Not to mention the fact that a lot of billion dollar companies get there by not necessarily trying to be a billion dollar company on paper, but by obsessively focusing on the customer experience, building a team that shares your mission, and just executing well. I'm excited to watch and help this team get there, no matter what that final number winds up being.
I love thinking about career paths and how people get from A to B. It's my favorite thing to teach as well--and I'll be giving a class at Startup Institute this Tuesday night about it. They're a career accelerator, which is a pretty neat concept--doing what YC and Techstars do for startups, but for your career.
Anyway, 2015 marks a couple of big career anniversaries for me.
Twenty years ago, I got my first job. I started working in 1995 at the age of 15 in the mailroom at Waterhouse Securities (which became TD Waterhouse) at 100 Wall Street.
Ten years ago, in 2005, I started working for Union Square Ventures as their first analyst.
I've always thought about plotting where I was in my career against where I thought I should or could have been at my age. Sure, there are outliers who start companies at age 19, but that didn't seem like a fair comparison. I was aiming more for the top quartile--who was at top of my field that didn't seem to get there via a fluke--whose career might actually be replicable.
When I was working for USV, I learned of Chamath Palihapitiya's career. At 28, he became the head of AOL's Instant Messenger (AIM), which was a big deal at the time. When I was 26, I called him up and asked him about his background to try and figure out how, in two years, I could be running AIM (or rather, the equivilent impactful job).
What I learned was that Chamath's career path was the product of three things: First, being really good at what you do, obviously. Second, was taking risks. He didn't aim to become the head of AIM. He joined a startup that wound up getting bought by AOL. He later took a similar risk by joining Facebook when it was just a year old or so.
I reiterated the notion of risk taking when giving career advice the other day and how when I joined Union Square Ventures, it wasn't the USV it was now. Fred and Brad didn't have the reputations they do now. Barely anyone had ever heard of them. Getting a job at USV was much easier then than today--but that job isn't the same as when I had it. When I took the job, the New York startup ecosystem was nascent. You could literally get to know everyone in the local tech community at the time. Now, the community is orders of magnitude larger and the number of investors who invest here has grown significantly. In other words, it's all baked now. You can't rise up as fast taking a job at a VC firm in NYC the same way you could 10 years ago--and you can't get that USV job as easily as you could. Plus, even if you could work for someone like a Fred Wilson now, would it make as much sense to do so, or would it be a better option to figure out who the next Fred Wilson is? Who's the VC that everyone *isn't* trying to network with.
The third important ingredient for Chamath was making an ask. He didn't apply for that AIM job. He asked for it because it was the most interesting thing to do at AOL at the time. If he didn't get it, he was going to leave.
That's one of the reasons I like to mark my career over time--because I want to understand how what I'm doing now compares to what I *could* be doing at this stage. Back to Fred--he became a partner at a VC firm after apprenticing there 7 years. He was 33. He was 36 when he started his own fund, Flatiron Partners. I started my own fund at 32, so just to mark time against the career of an industry leader and mentor, that seemed pretty good.
Things didn't always match up well.
When I turned 30, I found myself at perhaps the lowest career point I've ever had. I was down to the last few weeks of capital at my startup, after almost two years of work. It wasn't clear where I'd work once it went under, and I certainly didn't feel like I had much in the way of any skills to offer.
Somewhere I must have made a wrong turn.
When I joined USV I was 25, working for an quickly up and coming and visible VC firm.
Now, at 30, I was a failed startup CEO who was going to be out of work soon. Oh, and in between those two jobs I was a product manager for a year for a product that didn't really go anywhere.
On the experience versus accomplishment chart, I felt like I was in quite a trough, having peaked quite a while ago.
Little did I know that I was about to start the biggest continuous upswing of my career. I suppose I could have seen that the pieces were there--but that's the problem with these kinds of charts. They only measure accomplishments. They don't measure skills, network, and the changing nature of the ecosystem around you.
At 30, I had built one of the best professional networks in New York City--a market that was on the verge of passing Boston as the second largest startup ecosystem in the country. That's why I got hired by First Round--to help them build a presence in NYC. I had something VC firms were interested in.
Sounds pretty good when I put it that way--but it didn't feel like that at the time.
The point is--it's good to measure yourself, where you've been, and where you are now--but keep in mind that the measurements are probably lacking in their ability to predict the future. They're too focused on jobs and titles, versus the actual predictors of creating opportunities for yourself: what you have to offer and who knows about it.
A friend of mine is starting a huge new project. She told me that 2015 is going to be the craziest year she's ever had.
I suggested to her that it will certainly be the busiest, but that she didn't have to let the crazy in.
We throw around the word "crazy" but in all seriousness, mental health is something that doesn't get much discussion in the startup world. There seems to be a blog post, book or boot camp for just about everything you could hope to learn as an entrepreneur, but no one really seems to focus on how to mentally survive entrepreneurship.
It bothers me that we just take stress as a given. Why does fundraising have to be stressful? You know the possible outcomes. You're either going to make it or you're not. You know what happens when you don't. You could go out of business. You won't die. You're not likely to become homeless.
Disappointing for sure, but does it need to twist your head into such knots that you get physically sick over it?
I can't say I stress out about anything. That's not so say that I don't care about things. I do care--deeply. I just don't get into the habit of experiencing anxiety or mentally locking up in the middle of the most uncertain or difficult times.
That's the key--it's a habit. I fully believe that habits and training can meaningfully impact your physical experience. They say that entrepreneurship is a marathon, not a sprint, but it feels like few people marathon train for it. If they did, they'd be a lot more focused on enduring--being able to last the daily wear and tear--than going as hard as they can all the time. That includes mentally. The more mental defenses and best practices you built up, the easier it will be to survive the journey over the long haul.
Here are a few things that have helped me:
1) Take care of your physical self.
Your brain lives in your body.
It's been proven that exercise, eating well, and getting sleep improves your mental state. It's simply something you have to make time for--and if you're not, you're doing a disservice to your investors, your employees and your company. It improves your ability to deal with stress. When you're feeling good, it takes a lot more to bring you down--so start out each day with a natural physical high as a barrier to stress.
2) Consider the worst case scenarios and have a plan for them.
I was talking to an entrepreneur yesterday who was very confident that two huge enterprise customers would come through in the first quarter--and so the small add-on round they were doing now would be more than enough to see them through. I asked what happened if they didn't come through--or just got delayed.
Life doesn't always happen they way you plan it--and knowing what your options would be in the worst of all cases ahead of time helps you deal with them better. Don't push it off because you don't want to think about it, because at the moment that it's happening to you, you're going to feel so stressed out about it that you'll be less able to deal with it.
3) Always try to do your best work, but know and accept your limits.
I try to walk away from every situation knowing that I did my best work. If that wasn't good enough, I have a clear conscience. Maybe I just wasn't good enough then. I'm not perfect. It's alright.
Nine times out of ten, it feels like bad situations are the result of something you did half assed that wound up going off the rails. It's something a little more time and effort upfront could have saved you a lot of headache later. Compound that with pangs of regret, where you feel like this is something that was your doing or you came up short and the whole thing is going to hang over you bigtime. Doing stuff right the first time and walking off knowing you gave your full effort (which does not mean bloodshed or giving up your firstborn--reasonable effort) is the best way to go.
4) Try to think as linearly as possible.
Things seem to happen all at once, and if you have eight thoughts in your head, you're simply not going to be able to deal with them all. We convince ourselves that we are multitaskers, but we're really not. Try and focus on one thing at a time, do what you can, and then put it away. Move on completely to the next thing. If you're doing this thing now but focused on what you have to do tomorrow and then next day, you're going to get stressed out.
5) Don't accept other people's timelines as your own.
You can only go so fast for so long. You have natural output limitations. Other people rarely consider that when they ask for stuff and set deadlines. In fact, they rarely consider anything. Most times, I find the expectations that other people have around time are arbitrary. They don't *really* need that thing right now--and if you gave it to them tomorrow, the world will go on.
Don't be afraid to say, "It's not going to happen by that time. Here's when I can have it for you."
There's really no way to argue against that. If you draw lines and say no, they're just going to have to figure out an alternative and accept.
6) Be extremely protective of your time.
The best schedulers can fit a lot of things in. Stop in to your event? Sure. I can make that! Meet so and so? Yeah, if I come into the city early, we can do an early breakfast. It's tempting to fit all the people, opportunities and events in.
The problem is that it leaves little time for yourself--and for other more appealing activities. If you don't build in some flexibility, you'll wind up finding out about more appealing ways to spend your time, and then you'll really get stressed about needing to move things, miss things, or reneg on commitments. Don't try to say yes to everything. Know your priorities and make time your most stingy investment.
7) Get an assistant.
There is no reason anyone should have to deal with the insanity of back and forth scheduling, signing up for stuff, filling out forms, ordering supplies, paying things off, etc etc. Free yourself up from as much administrative overhead as possible because it's not what makes you happy and you'll need that time for other things--like taking care of yourself.
8) Reverse engineer the life you want to live.
Sometimes, it seems our goals are always "Do the next bigger thing." It's all about more, faster, next--just this continual, upward climb. When does it stop? When can you look around and say, "This is what I actually want."
This happens a ton in the venture capital world where bigger always seems better--but maybe it's not. If you picture the business and life that would satisfy you, does it require having 300 employees and raising a ton of money to get there? What else is really important to you?
There's a scene in Wall Street where Charlie Sheen says he wants to make a lot of money so he can motorcycle across China. The reality is, you hardly need any money to do that. Realize that many of your dreams and goals are a lot closer at hand than you think--and if you aim for them versus the hamster wheel of bigger, better, faster, stronger, you might actually get to enjoy them sooner.
9) Let other people in.
No one expects you to be perfect. Have a consistent dialogue about what you're feeling with people you trust who care about you. They can often provide helpful perspective--and, if nothing else, the exercise of just talking things out yourself can do you a lot of good.
10) Get rid of the people and relationships that drain you.
Some people improve your life, others drag it down. Addition by subtraction when it comes to your social circle can be a very powerful thing. There isn't any single person who can be so impactful on your life that you absolutely must have them around, despite the fact that they are emotionally draining and stress inducing. Move on. Find some other way to get there without them.
Today, Backupify announced that it is getting purchased by Datto. It's a solid exit to a company that has lots of revs, is growing, and together will form a very formidable player in the data backup space--one that can definitely be a public company in the next couple of years.
I'm super proud of Rob, Ben and the whole Backupify team--and this is particularly special for me because Backupify was the first investment I ever made as a VC, and the first board I ever sat on.
In fact, my history with Rob and Backupify goes back almost ten years, well before the idea of cloud backup was ever a glimmer in anyone's eye.
I started reading a great blog called Business Pundit in 2004. It was written by a guy about my age down in Louisville, Kentucky. A former engineer, Rob was a great writer and a thoughtful student of management. I don't remember when I started talking to Rob, but I know it was before February of 2005, because I found "firstname.lastname@example.org" in the contacts I ported over when I left GM and went to USV.
We used to chat a fair amount via our respective blogs about management and entrepreneurship. He was an interesting guy and I watched him throughout a bunch of interesting projects, like a complete open source business where all the employees got to make the decisions.
I didn't actually get to meet him in person until SXSW in 2007. That was the year Twitter took off.
I took this picture of Rob, Michael Galpert, and Danny Wen of Harvest. Even then, Rob was an optimizer, trying to map the best routes around Austin.
I liked meeting Rob so much that when I drove across the country that summer, I made it a point to go visit him.
We stayed in touch and I got to know a bunch of the Louisville startup and creative crew, like Todd Earwood, Matt Winn, and Ashley Cecil.
Rob messed around with some local video thing in 2008, which everyone but Rob thought was a pretty terrible idea. Later that year, I sent a tweet that inspired a company that initially only Rob thought was a pretty terrible idea:
Using FlickrEdit and a JungleDisk network drive to backup all my Flickr photos to S3. I'm fearing the day Yahoo goes "Oops!"— Charlie O'Donnell (@ceonyc) December 29, 2008
Still, he got his guys in the Ukraine to code something up. On January 6th, just 9 days later, I got an e-mail from Rob:
"Flickr backup is now working. We will integrate the design and be live for testing end of next week. I will keep you posted."
And keep me posted he did. "Lifestream Backup" became Backupify and the service started gaining traction--just as the company that I started was losing traction. Right around the time that Rob finally got convinced that Backupify was a good idea and needed some more resources, I wound up on the doorstep of First Round. Less than 100 days into joining FRC after winding down my startup, I offered my friend Rob the first term sheet I ever sent out--to lead the seed round of the company I accidentally inspired with a Tweet.
We got the round done with some great names around the table--Jason Calacanis, Chris Sacca, and General Catalyst. I joined the board and I was assuming everything would always be up and to the right, because that's the way success happens, right?
Well, it turned out the company was probably too early to the market--and while that gave them a lot of time to create the best technology, customer traction wasn't happening nearly as fast as we were spending money on AWS.
Fundraising for the Series A looked like it was going to be difficult--and that's when Rich Levendov from Avalon Ventures stepped in. He met Rob at a conference, took a liking to him and saw the same vision on where the space was going. He took a long term view and jumped in with a check. He was also there for the company in a big way during what would have otherwise been some bleak follow on rounds. I thank Rich and his team, as well as David Orfao from GC for their support of my good friend long after I left First Round.
I'm excited for the company's next steps. In his note to users, Rob talked of a good future for their combined effort:
"In most acquisitions, technology gets neglected, falls behind, or worse, gets shut down. None of that will happen here. Datto is an R&D company at heart, and the plan is to double the size of the Backupify engineering team, and accelerate our vision of supporting all your cloud apps. We are working toward a joint vision of building the world’s only comprehensive data protection platform, to protect all of your business data, no matter where it lives, and available in seconds when things go awry, to keep your business running."
I'm proud of the whole team at Backupify and have been really impressed with Rob's ability to grow and learn as an entrepreneur over time.
Plus, I'm glad he sold now, so maybe he can jump in as an investor in my next fund just like Wiley Cerilli did after he sold Singleplatform. Maybe I should be writing that into my term sheets from now on: "If this crazy thing works, you have to invest in the next fund after you exit."