I wrote this a few months back, and thought it would be worth the repost. The funding environment shifted to favor “revenue friendly” companies, and we have gone all in on this philosophy at Graphicly, continuing to grow by subtraction. We have killed more products and features in the past few months than I ever though possible. We’ve added staff, and reorganized the rest. We are truly the embodiment of “build, sell or leave” and the results have been strikingly positive in terms of revenue and user growth. I even grumble less.
Original post below:
Well that title removes any chance that Business Week, Inc, Forbes, etc will pick it up, and that other than Brad Feld and Mark Suster, no one will reblog/retweet/etc, so we can speak plainly.
(Just making sure…)
The past few weeks have been really interesting at Graphicly. We have achieved product/market fit, our new product launch has been overwhelming, and there is a clear direction and focus in the company. Revenue is doubling week over week, and our internal mantra has gotten equally clear.
“You are either building, selling or leaving.”
So much has be made of “vanity metrics” and our apparent love affair with them. As entrepreneurs, we are told by the media, investors, and other entrepreneurs that whats cool isn’t $1 million but $1 billion. That Instagram is AMAZING and their 15million plus users are the reason why.
How can we not buy into the importance of vanity metrics, when it seems that the ONLY THING THAT PEOPLE CARE ABOUT is vanity metrics?
For a company to be successful there are literally only two functions the company has to perfect. Building and Selling. Thats it. Metrics and analytics are only the score card, the reporting mechanism to determine if what you are building will sell, and what you are selling is worth building.
Last rant on this point: Find a metric that is truly indicative of what makes your business go. It may be a vanity metric like page views, or something more interesting like reads/user, photo filters per session, or times my mom shares my baby pictures on Facebook. Find it and love it. Throw out all other charts and graphs. Put ONE FUCKING SLIDE in your board deck/presentation and tell your shareholders if that number is going up or down and why. Any other metric just makes it easier for your investors and employees to tell their friends why the company they are a part of is cool in a dumbed down fashion so others can understand. But DONT CARE about those numbers.
Care ONLY about the metric that proves that you are building something worth selling, and selling something worth building.
Now, about sales.
Both Brad and Mark have written about Grinfucking. Its an epidemic. No one wants to be the bad guy. The working stiff dreams of being involved in that super cool startup with the sick lounge. When he gets pitched by that startup founder in the flannel shirt and Warby Parker glasses, Toms shoes and Charity:Water rubber bracelet on a cool new technology and he doesn’t understand it, then he is full of FEAR THAT HE IS AN IDIOT.
Which makes the awful, awful truth that the prospect will never say no.
Your goal as an untested, unknown founder, who has a product to sell that NO ONE CARES about is to find what about your product makes your users lives better. Read that again. Thats not a feature. Thats not a price. Thats a feeling. Better is a feeling. Sell the feeling.
For enterprise its 99% of the time that you are making your prospect look good to his/her boss. Thats it. Focus on that.
For consumer its 99% of the ego or time. People want to be part of something amazing, or want something to help them become amazing. At Graphicly, we consider our “Content Empowerment Platform” an easy button for authors and publishers. They want their stories seen. We make it so. Its amazing and it helps each one of them show the world how amazing they are. It makes their lives better. It makes them happy. (I hope.)
Instagram makes people happy. Its not the number of users, but the amount of engagement that is what makes them awesome.
Stop getting excited by the “maybes” and “lets have another meeting” responses you get to your product. IT MEANS YOUR PRODUCT SUCKS.
Budgets, approvals, etc are all excuses as to why they don’t want to buy, but don’t want to say no.
If it takes more than a simple presentation of your value to a prospect to get to a verbal yes, YOUR PRODUCT SUCKS. (Ok, maybe you SUCK as a salesperson. But sales isn’t hard if you are a founder. You are just making it hard.)
Get to an answer.
Build, Sell or Leave. It IS THAT EASY.
Finally, about revenue.
In todays funding climate, if you are not thinking about your business in terms of speed to self-sustaining revenue, you are a moron. Seed rounds are, and will continue to be, relatively easy to raise (sub $1mm). Series A investors are now looking for real businesses with real potential. Call it a crunch, call it Jennifer, doesn’t FUCKING MATTER if you don’t have a real business, because you will be called DEAD.
Have a real path to revenue. Test that path immediately. Ensure that its a real path, with the real ability to simplify sales, and go that way. You never want to get in the car, see the path you need to travel, press on the gas and find the tank empty without a gas station in sight.
If there is anything about you that is consistent, is that you love consistency.
About a week ago I was at a local dive bar with Drew Olanoff and his fiancee (who after I had some choice words about his usage of ‘fuck’ in a Techcrunch article decided to refer to me only as “that fucking dude, fucking micah, fucker.” It made our conversation a bit longer than I expected, but much more heart warming.).
I was telling Drew about how a couple of friends met every Saturday morning at a local donut shop. About how I loved the fact that if you tried, you couldn’t spend more than five dollars on great donuts and bad coffee. That by eliminating everything interesting–other than the people–we had a ton of fun that seemed to be missing from the larger, flashier meetups in the Bay Area.
“You should come,” I said. “It’s totally mellow. Every Saturday at 10am. No pressure. Come, don’t come, doesn’t matter, there will be one the next Saturday.”
“You sure love consistency.” Drew, in his way of making a point not only with words but both arms, his head and a bit of smirk, commented.
“Of course you do. Look at Follow Friday.”
For some reason, for the last several days, this conversation has stuck in my brain. I started to review everything I do to see if consistency was something that truly was a hallmark of my behavior. I mean, as unfocused as everyone seems to think I am, how could consistency fit?
Yet, here I am at 1 a.m. standing at my treadmill desk in nothing but my boxers (sorry ladies, I know it will take a minute for you to be able to continue on. And yes, if I was there I would totally be holding back your hair.) writing. Clearly, it has rattled me.
There is much written about how President Obama limits the choices he has to make each day so he can apply himself to the decisions that matter.
“Cool. I must be presidential.”
I mean, I eat the same breakfast every morning. I own only three pairs of shorts, one pair of flip flops, a half dozen Threadless tshirts, and a rotation of seven boxers (which I tend to replace monthly, and wash more often.). My eating and clothing choices are minimal. You could say they are consistent.
I have other routines that I follow–I have friends that I send a joke to every day around 6p, others that get a quick ‘hello’ IM in the morning. still others get a song every couple of days.–I do the same types of exercise, and I think if you ask my team at Graphicly, they will tell you that I use the same jokes over and over (but they still rock! Right guys? guys?)
Before I moved back to California, I had been seeing a therapist for about six years weekly. He was one of those therapists that liked to talk about feelings and other things that I have a hard time understanding, so most of our sessions went like this:
Therapist: “Anger is really fear, hidden.”
Me: “Shut up. That’s stupid. I am just angry. For example, I am not fearful of this check I am about to write you. It just pisses me off.”
Therapist: “Feelings live on a spectrum from pain to happiness. If you never feel pain, you will never feel happiness.”
Me: “That one I believe, because if I punch you in the face, my hand will hurt, but I will be happy.”
But, he did say something that has stuck with me, and as I have put it into practice have found some deep truth in the concept.
Relationships, in order to work, must be consistent and reliable.
Consistency and reliability breed trust.
And, for me, trust matters most, so consistency reigns.
And, maybe more importantly, I continue to learn to have a relationship (not relations. Fuck you, Drew) with myself, I am realizing that my ability to be consistent and reliable to myself leads to the reality that I trust in myself more often. I trust my decisions and actions. I learn that being me is ok.
After all, if I am going to learn how to trust people, shouldn’t I start with me?
I find the concept of a “community manager” or “expert” interesting. For those that truly understand how communities work, neither management or expertise works. There is no such thing as a “community hacker.”
And that’s a good thing.
Communities can’t be built. They don’t appear out of thin air. it’s impossible to code your way to a community, and frankly, most everyone poorly defines what a community is in the first place.
Most companies define a community as a group of people that will sell their product or service to other people, for free.
After all, what value does a community for a company have other than to sell its product?
Before doing any effort around community building, you have to answer that question. (hint: for a business, the answer is actually none. A company exists to make money, and all the activity, effort and resource expended have to drive to that conclusion.)
Just because you have 10 million people download your app or buy your product, doesn’t mean they are a community. A community is not just a collection of people that have completed the same task, they are a group of people with rules, leadership, common interests and police.
One of my favorite philosophers, John Locke, wrote on community requiring inalienable rights (Thomas Jefferson borrowed this concept for the Declaration of independence):
That all men are by nature equally free and independent, and have certain inherent rights, of which, when they enter into a state of society, they cannot, by any compact, deprive or divest their posterity; namely, the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety.
People join communities because they are able to share their passions. It could be a passion for the product or service, but more likely its a passion around what the company allows the membership to achieve. If your product or service does not allow the membership to “obtain happiness” while pursing their passion, your community will never succeed.
Ensure a path to share and drive passion (beyond like and tweet buttons), and more importantly understand what your community is passionate about. This is a common mistake of many online communities: assuming that your users are passionate about the same things you are … or your product. Listen, understand and support.
[H]e that thinks absolute power purifies men’s blood, and corrects the baseness of human nature, need read the history of this, or any other age, to be convinced to the contrary.
Your community can not be managed. It is made up of people that exist within the community to see the community continue to exist and grow. You may find that the initial group of people that start or grow the community get washed out by a newer group as the community evolves. It is often important to not look to your early adopters as indicators of the longterm shape and makeup of the community itself, unless that is what the business requires.
If that is the case, then making recruitment simple is paramount.
Any single man must judge for himself whether circumstances warrant obedience or resistance to the commands of the civil magistrate; we are all qualified, entitled, and morally obliged to evaluate the conduct of our rulers. This political judgment, moreover, is not simply or primarily a right, but like self-preservation, a duty to God. As such it is a judgment that men cannot part with according to the God of Nature. It is the first and foremost of our inalienable rights without which we can preserve no other.
For a community to grow, it must be transparent with its members. The trust between the company and the community must be held sacrosanct, and everything must be focused on that goal. The moment the community stops trusting the company, the community dies. Forever.
Don’t need a quote for this one. Communities don’t grow overnight. The online communities we all point to - Reddit, Threadless, 4chan, Etsy and others took years to grow. Years. You take a long view on building your product, you should take a similar long view on building your community.
The failures of today will lead to the successes of tomorrow.
Communities continue to be one thing that companies are measured on by investors, users and customers. A strong community, built through passion, people and perseverance, is hugely beneficial to the success of a company, and be joyous wonderful places to spend time.
I don’t often have a weekend like I did this past couple of days.
One day filed with friends and errands; and one day filled with quiet and solitude.
Late Saturday afternoon I was shooting hoops with my friend Arin Sarkissian–of Well.io–at a middle school near his house. As we often do, we chat about our startups, yet this time we also seemed to dive into our pasts and the subject came to the selling of my last company as well as my sobriety, which happened around the same time.
“It was weird,” I said, “experiencing something that humbling was the only way I could have a do over.”
(BTW, Eric Clapton’s Cocaine just came on Spotify. For those that don’t believe that Steve Jobs put some secret alien intelligence into OS X, explain that.)
For the past twenty-four hours or so, I have been thinking about the concept of a do over.
Initially, I contained the thought to myself. If I had a real do-over, what would I do differently?
It wasn’t as simple as correcting past mistakes or taking advantage of missed opportunities, it was about enacting real and meaningful change. It wasn’t about a course correction; it was about an entirely new course.
Does that mean I wouldn’t have been an entrepreneur? I doubt it. I love being an entrepreneur, and it’s what I am, more so than just what I do.
But, it would be about making a major life pivot.
Maybe that’s why I get so angry when tech journalists and others with minimal experience actually building and running a business, dismiss the pivot as failure or hyperbole.
For some reason, the emotional journey of building a startup is dismissed and marginalized into explaining it as a ever-changing roller coaster, which is true, but it also so much more as each one of my grey hairs can attest.
While we dismiss ideas as being mundane, there is nothing more special than the moment you come up with an idea that begins to consume you. The question moves from should this idea live to how am I going to do it? You start to think about all the things that Paul Graham writes about in his Startups = Growth post, all the while believing nothing else than you potentially have a fast growing, gigantic idea on your hands.
That feeling is multiplied when you are a first time or young entrepreneur when the feelings of invincibility haven’t been cracked and pitted. You start talking to everyone, maybe even prototype and get early users.
You raise a bit of money, or generate a bit of revenue. Things are going great. Or maybe they aren’t. Either way you are constantly thinking about two things: How do I get this to grow faster, and how big can it get?
And, sometimes, regardless of how things are going, the right thing to do is to raise your hand and say “do over.”
Yes, pivot. Maybe toss everything, or just a few things, but start again down a new path.
Did you lose? Did you fail? No. You saw that regardless of the early success of you (or your competitors) or the lack of success, the business was neither going to grow fast or get big enough to be interesting.
I spend a lot of time with young, first time entrepreneurs who struggle with so many aspects of their business, be it from fast, or lack of, growth. Who either have trouble raising money or find raising so easy that it becomes a burden of expectation. And, for some, they will raise their hands and ask for a “do over.” Many more than once.
Each time I sit in a room, or on the phone, with a founder with tears in their eyes, or a crack in the voice, because of some investor who turned them down, or a board member who doesn’t understand that the lack of traction isn’t because they haven’t implemented the board members favorite feature just yet, asking me if its okay if they pivot, I curse the assholes that have somehow equated pivoting to failing, and caused so many entrepreneurs undue emotional crisis.
I think about myself from six years ago and realize that the emotions and thoughts are not much different. Once its clear things have to change, the decisions are around how and how much, regardless of all the pain and confusion that comes with the decision process.
“It’s your company. Do what you think is best.” I say. “If you think a do over is the right course of action, take it. You might be surprised where the new path leads you. But, mostly know that its the ability to make the decision that sets you apart, not that you have to make it.”
Understanding and undertaking a do over comes from a place from immense strength, and I am proud of myself and all the other entrepreneurs that have successfully executed on a do over. Know this: Nobody gets it right the first time. Nobody. And, for everyone that pivots, It’s fucking hard and it hurts, but we are all better for the humility and lessons it brings. Even me.
I was born here. Not physically, that was in Fort Collins, CO, but as an entrepreneur. And not when I started my first business at the age of nine, but before that, perhaps at two when my mother and I moved to California, or maybe at three when my mother met my father.
My father, Rich, moved to East Palo Alto and across from my mother’s and my apartment from Michigan. My mom, who was dating Rich’s roommate, finally came to her senses, and dated the right guy.
At the time, Rich worked for the City of Mountain View pouring concrete. My mom, a secretary was always proud of the fact that a $525 a month, she made more than my father. And Rich was proud of the fact that most of what we had, he built himself.
That’s when I was born as an entrepreneur. And, my parents were the perfect founding team. A Hacker and a Hustler. My mom taking big chances and my dad fixing problems. The Silicon Valley Way.
The fearlessness I have in diving into any situation and trusting myself and the people around me comes from the long odds my parents faced and overcame. The understanding true success comes from Rich showing me that it was never about what we had, it was always about what we created.
Change the world, and the world will take good care of you – Steve Jobs
If you move past the gilded Twitter streams of the few, Jobs statement IS the Silicon Valley. It is not a platitude. It is not an empty saying. It is what true entrepreneurs, not the wannabes with their reality shows, and empty bank accounts (but Telsa cars) believe in their hearts.
We build awesome.
I understand that those who are new to the area or are looking at it from the outside read that line and scream “Bullshit!” in their brains. I get it. Million dollars going to copy cat business or birthday parties cloud that truth. But the folks that are building amazing things, world changing things, in the office parks of San Jose, don’t care what you think.
They just keep building awesome.
When I left the Valley I was young; now, I am old.
I was always the youngest whatever. Youngest CEO, youngest varsity coach; youngest business owner. Yet, somewhere along the line, I stopped being the youngest, and now I am one of the oldest.
Not sure what that means, except I have seen a lot of things change as they stayed the same. The focus has shifted from the South Bay and Peninsula to San Francisco, probably in great part to the laziness of the tech blogs and their inability to actually chase stories and review companies that don’t get them invited to cool parties with creative people.
True entrepreneurs look at money as a means to an end and care about legacy, not currency. Does that mean true entrepreneurs don’t throw parties with Snoop Dogg? Of course not. We are still geeks and nerds that if we could have Snoop play at a party will make it happen but its not what defines us.
What defines us is how we change the world. And, we change the world by building awesome, not by caring about money.
Nick ends his article perfectly:
The Valley doesn’t need to act as if it’s not interested in money — spending responsibly is a good thing. Focusing on making worthwhile start-ups grow is even better. We already have enough people pretending to be the Sun King.
Back in July, I wrote the post below entitled Hackers and Hustlers. Since then, there has been a lot of discussions about the dynamic, and if it was complete. I decided to add some thought beneath it. (the post is presented unedited.)
Every year when people start applying to Techstars (now in 5 cities!), I get emails and phone calls asking for my advice.
I always ask the same question, “Do you have a Hacker and a Hustler?”
Sometimes, I get the response, “Im both.”
To which I suggest that they rethink their application. Its nearly impossible for a single founder to have much success building his startup, let alone getting through a program like Techstars (or Y-Combinator or any of the dozens of others). One person can not do it all. Its really that simple.
What do I mean by a Hacker and a Hustler?
A Hacker is more than a code monkey, who can quickly build software and find interesting ways to hack together code. Thats a developer. Thats someone who is definitely an important part of a startup, but not critical to its success. A Hacker is someone who looks the problem, and solves it in a unique and special way. A Hacker finds the process of problem solving exciting and interesting, and spends the majority of their time looking at the problem in multiple ways, finding many potential solutions.
Often the Hacker is a coder, but not always the best coder you have on your team. Nate and Natty, of Everlater, are decent coders at best. In the last couple of years, they have taught themselves, by trial and error, how to code. I would imagine if you asked either one of them if they considered themselves amazing developers, they would probably indicate otherwise. But as Hackers? They are amazing.
A Hustler on the other other hand is a relationship builder. Someone who can build direct relationships with their customers. They arent really promoters, although they do a lot of promotion. They arent salespeople, although they do a lot of selling. They are passion people. They have the ability to articulate their passion clearly and in a way that gets other people equally passionate.
A true Hustler can get people using their product, or raise money, with little to no capital expenditure. Any one can run a Google Adwords campaign, or buy a billboard. Only a Hustler can get you to love their product in a way where you will speak passionately about it to your friends. A true Hustler is patient zero in a viral campaign.
My favorite young Hustler is Garry Tan of Posterous. Their recent campaign about switching from “dying” services to Posterous is genius, and a great example of the Hacker/Hustler dynamic. To figure out how to import data from one system to another is never easy, yet Posterous has hacked together some great importers. Rather than just releasing an “All-in-One” importer, Garry decided to release one a week, and build some noise around it. Not only has their been noise, but Posterous’ growth has been reported on (since they are self-proclaimed not dying) several times.
Was it just Garry’s idea? I would guess that with investors/advisors like Tim Ferriss, Chris Sacca, Paul Graham and others that it may have originated from the larger group, but his execution of it has been perfect.
A Hacker and a Hustler. Every great startup has a pair. Woz and Jobs are probably the most successful Hacker and Hustler tandem out there, there are thousands.
Ask yourself, as you begin down the path of building a great startup, are you a Hacker or a Hustler? Does your team have both pieces?
If you lack one or the other, your ability to be successful greatly diminishes.
(BTW: A topic for another post, but a company doesnt need a Hacker and a Hustler forever. Its why most startups see at least one founder leave.)
Since July, the biggest question I get is “What about designers?” 500startups often preaches the the best teams are Hackers, Hustlers and Designers, and in many ways I agree, except this: The word designer is a catch-all for a product manager, front end engineer or photoshop jockey that can either design a product or make shit pretty.
I much prefer someone who can design the product, from the flow to the feature set. I can take make shit pretty designers … or leave them.
Since the focus of technology has moved up the peninsula to San Francisco, which has long been the landing place for agencies and creative types, there has been a distinct rise in the apparent value of the “designer.” But, lets be honest – twitter, which originally was built on SMS, did not succeed because of pretty design. Neither did Dropbox. Nor Facebook or Google. They succeeded because of their products.
When looking to add a designer to your founding team, make sure that they understand function over form. Designers focused solely on the pretty may get you oohs and ahhs from the hipster set, but they will not strengthen your founding team, and that should be the initial focus.
My friend Dennis Crowley (re)posts his take on 9-11 every year. In that vein, here is my take from the 10 year anniversary.
This morning, I woke up in San Mateo, CA. Doesnt mean much on any other day. But today, being the tenth anniversary of September 11th, I began to read memories written by so many of my friends.
Ten years ago, I woke up in Oakland, CA. Did mean much on any other day. But on that day, planes crashed into the World Trade Center, and changed so much of the American fabric.
I thought about that day in Rockridge this morning. It has a unique significance because just a few months after 9/11, I left California for Colorado for what I expected to be a summer, and ended up being nearly 10 years.
That morning ten years ago, I was busying building a startup in my bedroom in a really nice house I shared with three others. As all us startup folks do, I worked late and woke up late. That morning, for some reason, I woke up early, and as I grasped my door handled and pulled it open, still groggy from the late night, one my one roommates stood in the hallway and looking at me with wide eyes, she yelled at me “Planes are falling out of the sky!”
I remember thinking to myself, “What the fuck, Chicken Little?” But, confused, I turned on CNN just in time to watch the second plane slam into the towers.
Sitting down on my bed, I watched in silence. I kept switching from local news to national news. I knew this wasnt an accident. I knew that it was something bigger. Having family in Israel, I was taught at an early age that everyone wanted to kill Israel. Bombings were common place. Many people forget, but in the first Gulf War, Iraq bombed Israel consistently for weeks without a response (on the orders of the US). Having friends and family go through the mandatory Israeli military service teaches us that the world is full of evil and I remember at the moment being so sad that Americans were getting a taste of the same hardness. It was like learning that fire burned by having a lit cigarette smashed into your arm.
My roommates debated on what we should do — should we stay home? Was the Bay Bridge safe? The news said that the bridges were being targeted as were the major buildings on the West Coast. Mostly, we each sat and listened and watched and worried.
As the days after 9/11 passed, I knew I wanted to go to NY and see the damage for myself. It wasnt until November of 2011 that I could get out to NY given it took a good couple of months for air travel to settle down and get back into a rhythm. I landed in New York with a couple of tshirts, shorts and a pair of tennis shoes. I stayed with a good friend of mine, Channing, from college, who lived in Jersey City at the time, and worked at Edelman in Times Square.
When we got to his apartment, he brought me to his gigantic window, and he pointed to the far right.
“Thats where they were.”
I stood quietly, as he talked about that day in September where he was late for his train, the train that he never missed and always transferred at the WTC stop. He talked about standing in that exact spot and watching the planes hit the towers and feeling completely helpless.
The next day, we took the train into Manhattan, and I walked over to his office. “Im going to wander the city.” I said. I want to visit places that I have never visited.
So, in a longsleeved orange t-shirt, a pair of long shorts and a new set of kicks, I started walking. Even in the middle of November, the energy of the city kept me warm enough (but clearly every New Yorker thought I was an idiot, and didnt fail to remind me it was November).
I walked to the Empire State Building, and went to the top. I marveled at the park and the straightness of the streets. I walked to the Chrysler Building. And I continued to walk, and walk and walk.
Suddenly, I remember noticing that all the noise of the city had ceased. The streets were relatively empty, and seemed to almost shine. As I looked up, I realized that I was on my way to Ground Zero. I hadnt planned walking there, but I was glad that I hadnt stopped to grab a cab.
As I approached Ground Zero, I remember getting almost surreal in its silence, and when I finally reached the site, I reached for my camera to take some photos.
Slowly it dawned on me that I stood in front of a huge fence with thousands and thousands of photos of people lost. I couldnt take a photo, and slid my camera back in my pocket.
For next fifteen or twenty minutes, I just stood there. I just allowed the enormity of what had happened wash over me, and it did. Not in waves; more like a brick. I remember that I didnt get angry, but at that moment, I understood completely the anger felt by so many of my friends. Before me stood, as cliché as it sounds, a reminder that not only were we untouchable as a country, but that people hated us for no good reason. The feeling that sat in my gut was very similar to the feeling I had when I visited Yad Vahshem in Israel and The Holocaust Museum in DC. Its not that I am comparing the Holocaust to 9/11, but the feeling of not understanding why one people hated another for what felt like such stupid reasons.
So I stood quietly. I watched a mother bring her son to the fence and talk to him about what had happened. A young couple stood and cried. And so many people just seemed tired; really, really tired.
After about an hour, I could no longer absorb the energy of the area. Sighing, I turned and continued to walk south towards Battery Park.
Are accelerators really harmful? No, but I do believe they are mis-understood. The larger ones, Techstars and Y-C, are clearly catalysts for job and company creation, and the local entrepreneurial communities (with Boulder, CO being the standard bearer) are greatly improved by the existence of the accelerator.
But what about beyond that? The exploration of that has to start with the basic premise of the accelerator itself.
It exists to make money.
Whether its has a venture fund or angel money attached, the accelerator is looking to return value to investors, and while it doesn’t operate as a standard fund (make an investment in a set of companies and then periodically check in at board meetings, etc.) it is truly no different in expected outcome, other than scale.
Think about it. If I were an angel investor that normally invested between $10 - $30,000 in a company, how much more awesome would it be to take a group of companies that I am interested in investing in, give them a bit of capital, put them all together, and watch them work for a set period of time? Add in some mentorship, access to companies they couldn’t get to on their own, and see if they can truly accelerate their businesses.
At the conclusion of that time, I can decide to invest more, or see them continue to increase in value via additional investors, traction, etc.
This is different than the standard incubator model, which provided office space, some joint resources and discounts in return for equity. Often there was little to no mentorship, a set incubation period, or a “demo day.”
Now I have 10, 20, 40, 50, how ever many companies, with small angel-type investments. I put them in a room for three months, give them some resource and mentorship. Of that group, about a third truly accelerate and will receive additional funding. A third fall into the middle, and a third end up at the bottom, of which many will fail. Solid hit rate, and the companies that fail? Well, many of them will probably go work for the companies that succeed. A win-win.
But somewhere along the way, accelerators started to up their game by offering guaranteed funding. Back in January, I wrote that overall this was a bad thing. It would drive people to start companies with a lower potential for break out success. The top accelerators would now have the extra burden of becoming filters and should start failing companies out of the program as soon as it was clear they had no chance of success.
The opposite happened. Y-C has some of its biggest classes ever. Techstars launched two new programs, and dozens of accelerators exploded on the scene. Was this because of the guaranteed funding? No, it was because companies started to see accelerators as a way to guarantee getting funded, and VCs started to direct more companies to accelerators for the same reason they started in the first place – to watch them closely over a short period of time to determine if they warranted a larger investment.
Somewhere in all of this, the basic value of the accelerator for the company got switched from company acceleration to guaranteed financing. For mentors it shifted from giving back to the ecosystem to getting free equity in a hot startup and we saw an advisor explosion. And, for the top accelerators it became so much more about competition around numbers, and those numbers are one of three things: exits, job creation and money raised.
Now this post is becoming MG Siegler-eque in length, so I apologize, but we need to discuss a unique “perfect storm” that occurred just as accelerators were taking off, the acqui-hire. Love them or hate them they are part of the ying to the yang of the accelerator. Yes, they all want to see big companies built and grow out of their programs, but like a traditional venture fund, the reality of an AirBnb or SendGrid is pretty small, and its a numbers game.
I’m not that great at math, but lets say an accelerator gives its companies $25,000 for 8%. Company gets acqui-hired for $5,000,000, the accelerator gets ~$350,000. Not a bad return for an angel(ish) type fund. Do that 10-15 times a year, and you have a solid returning investment vehicle. Push out a Dropbox, and life is grand.
Which leaves us at a point where, for all intents and purposes, its beneficial for an accelerator to bring companies on that have a low “big company” potential and a short acquisition horizon. Make it a volume game. Until the acqui-hire market dries up, and there seems to be some indication that seems to be happening.
What does that leave us with? A bunch of companies that have gotten seed investment that have unrealistic valuations based on the energy the accelerator afforded them that have little to no chance of getting a solid Series A, and no place to put them, as big companies slow down their acqui-hire activities. Creates an opportunity for the tech press (which is made up of almost no entrepreneurs, investors or the like. Its like a sports reporter who has never thrown a ball…) to scream about Series A crunches, and whatnot, and it creates a net positive effect on the ecosystem (after what might be a bad rush of companies failing) by putting talented people who have now had startup experience back into the talent pool to help the companies that are succeeding, or start another company just a little bit wiser.
Will there be an accelerator collapse? Probably. There are only so many fundable entrepreneurs with solid ideas, and running an accelerator effectively is really, really hard. (Not to mention the expectations it creates).
In my best double rainbow voice, “What does it all mean???”
The number of effective accelerators is small. The work that the Global Accelerator Network and Startup America is helpful and will go a long way to building an understanding around what goes into a successful accelerator;
Companies need to stop looking at accelerators as guaranteed funding and start looking at them as an accelerant for their business;
Accelerators need to ratchet up their acceptance requirements and move away from the “we invest in teams,” mantra. If the only value is the team, then acqui-hire becomes the primary exit vehicle.
Accelerators need to wash companies out of the programs. When it’s clear that a company doesn’t have it, don’t worry about saving face, worry about what’s best for the ecosystem.
Mentors need to stop looking at accelerators as an easy way to invest with time vs. money. I may disagree with Dave McClure’s assertion that mentors should invest money along with their time, but I also don’t believe mentors are “owed” anything for their effort.
And, most importantly, it is up to everyone to make the startup ecosystem better, and not rely on accelerators and investors to do it for us.
Accelerators are misunderstood. It’s our fault as much as theirs, and we have to drive entrepreneurs and accelerators back to basics.
Build something awesome. Support the entrepreneur changing the world.
One of the conversations that seems to be coming up more and more with first time founders is around the management of teams.
As we invest in, and see more less experienced founders, they are continually thrown into situations where there is an expectation–of what I can only assume is natural talent–to be a solid tactical leader.
Most founders are not naturally gifted at tactical decision making or leadership. Inspire investors to give you money? People to work for you? easy. Managing a team of people that are fundamentally different? hard.
In a standard decision-making paradigm, we default to what we know and how we would react to the requested action. Our perceptions are colored by our own needs and desires, and projected onto our team, leading to the level of value placed on an individual member of our team to be directly related to how a task is completed, rather than the what was completed.
It’s easy to focus on the input. What time does someone come to the office? How long are they there? Are they sitting at their desk or waking around? Do they play music? Take breaks? Are they on IM always? never? How do they code? What’s the process of their development? Do they work off product reqs or do they just go for it?
These are all input questions, and completely useless in managing a successful cross-diseplenary team.
As a CEO, the first realization you must accept is that developers work differently than business development folks who work differently than designers who work differently than product people. Your goal as CEO is not to get everyone to work hard, but effectively.
That’s why culture matters. Friday happy hours? Most BD people could care less. They have been to 15 happy hours in the last week. Uniform desks? Most developers have a style that they like. Uniform isn’t that style.
One of the common statements I hear, especially from CEOs that have a business background is “I want everyone together, working hard. I am happy to pull all-nighters to get shit done!” (yes, engineers, I hear you groaning.)
Imagine if instead, she said: “Here is our goal, and the deadline it’s due. What can I do to help you, help the team achieve this goal?” and then really listening.
That’s focusing on the output. Thats the secret.
Building a culture and management style that is focused on the output changes how you manage your team. It allows engineers to effectively manage business people and vice versa. More importantly, you get into a habit of communicating goals and requirements clearly, which makes it so much easier to do externally with investors, advisors and customers.
CEO/Founders want to feel that everyone is working as hard as they are. That is an impossible goal, as you grade how “hard you work,” unrealistically and therefore place those same unrealistic expectations on your team.
Think output. Think clear goals and milestones. Think end vs. means. Yes, in an early stage company, the end matters more than the means, or as one of my favorite CEO/Founders, Todd Vernon, used to say (to everyone), “Just hack that shit.”
It sucks that first-time CEO/Founders are expected to manage at a high level with minimal training and support. Instead of waiting until the inevitable moment when you fire yourself or are replaced by your board, become a fantastic tactical leader.
After all, do you care how your doctor studied in medical school, or the output of his surgical effort?
There is little that I love to do more than listen to my own voice.
(And, yes, I am a pathological narcissist. Diagnosed and everything. And, yes, I am watching many of you nod your heads and say “that makes so much sense,” right now.)
I enjoy discourse and given my brain is constantly processing ideas and thoughts, verbalizing those thoughts often helps me work through them. So silence is something that for most of my life was non-productive.
Always had music playing. Or the TV, or sat in a noisy coffee shop. Never much sat at my desk, constantly chatted with others, was extremely vocal in meetings. Silence was something that I abhorred and avoided.
Then a couple of years ago, I decided to see how long I could be quiet. After all, if I am good at making noise, I should be amazing at not making any at all. For thirty hours, I said nothing. Of course, this was after watching a TED talk by John Francis, who was silent for 17 years.
It was amazing. Everything slowed down. The world seemed to create an order than in my noisy haste was hidden behind spoken words and incessant iPod beats. I realized that I was missing, just missing, by not being silent.
On the eighth day, after 80 hours of meditation and silence, Ben became aware of a mental clarity he had never experienced and was so different from everything.
I became meta aware of this mental clarity. It’s how I imagine it feels to “wake up” in the middle of your dreams and control them. I directed my attention away from my body to a random thought. And then brought it right back. Then away. Then back. All by choice. It was a striking difference from what often happened during my meditation sits (and during life in general): the mind inviting hundreds of random thoughts to derail a moment of concentration.
Kevin Owocki, Founding CTO of Ignighter, was so inspired by Ben’s post, he did something similar and wrote about it in his post Beginner’s Mind.
As an engineer, my mind is often spinning out of control, and I’ve always been inspired by the idea that I could control the quality of my mental experience internally — as opposed to being at the whim of the uncontrollable circumstances exterior to me.
How is it that a little bit of silence seems to have such a positive effect? I am not a doctor, so medically, I have no fucking clue, but I know it does.
And I think I know why.
Most of us strive to be in complete control of our lives. We learn that to control everything around us, creates a sense of security and safety that is hard to come by. Yes, to develop strong relationships (professionally and personally) one has to learn to give some of that control (and yes, for some of us narcissists, thats just pretty darn hard), but by choosing to be silent; by choosing to be in a silent environment, we are wrestling back some of that control that world works so hard to take from us.
Every Saturday morning, a bunch of entrepreneurs who live in the peninsula get together for donuts and coffee. (If you live south of SF and north of Palo Alto[ish], and want to come send me a note via Facebook, and I’ll add you to the group.) My friend Arin, who was started the donut tradition with me, was launching his startup, Well, the following week.
In the midst of the discussion of all the things that he was managing as part of his launch – from press to melting servers to motivating his team – I suggested he take 5 minutes to meditate.
“There is an importance to silence. To having everything around you, and in your brain, just disappear. It forces you to be clear. It forces you to choose the thoughts that matter. It forces you to listen. It forces you to be present.”
Now being bipolar, (wow, you now know all my mental issues. Next week, daddy issues!) I lived for the mania, pre-management. For the moments when I could work faster and better than everyone else. Silence was scary, as it was the beginning of the other side of the cycle, depression.
Yet, now that I embrace the silence; seek it out, and even control it, I relish the clarity it brings.
Who knew that something as simple as shutting up would become so important?