Category Archives: Entrepreneurship

The self inflicted wounds that cause early burnout among startup entrepreneurs

Envy.

That’s the word of the day.

Try to avoid keeping up with the Kevin’s. That’s the digital entrepreneur equivalent of keeping up with the Joneses.

I know many entrepreneurs who are constantly comparing themselves to other fellow founders and wondering a) how did they raise money for “xyz” company, or “how did they raise money so quickly? b) why did I not come up with that idea? or c) how come they are growing faster than us? d) how are they able to get more press than we can or e) why is everyone talking about their company more than ours?

There are any number of reasons why entrepreneur’s envy other founders.

Envy causes a ton of stress. It is not limited to entrepreneurs alone, take the case of MIT students.

Stress causes you also to make irrational conclusions and bad decisions. When you operate under stress, you will end up making the mistake of “good data, wrong conclusion, bad decision”.

So, how do you handle stress? Since this is largely a self inflicted wound, it is “curable”, but requires a lot of discipline.

1. The most important thing I have learned is to keep routines and exercise to relieve stress. Many folks read to relieve stress, others cook, still others eat. The worst of the 3 of these is to eat. I have known at least 30% of the founders who come to our accelerator program, gain more weight after the program. The biggest reason for the weight gain is the increased food intake, especially bad foods such as those with excess sugar.

The time that I found most of our entrepreneurs eat the worst is between 2 pm in the afternoon and 6 pm in the evening. The afternoon snack is likely the worst.

Most entrepreneurs tend to wake up late, so they tend to skip breakfast. Lunch, most likely will be relatively healthy since they tend to have guilt from the previous night’s drinks. Dinner is takeout for most days among the founders I know. The older ones tend to eat at home with the family, so they tend to eat a healthy dinner.

2. Make healthy choices about eating. More than not exercising eating bad causes more weight gain. That’s one of the prime reasons to carter food to your office, instead of “grabbing a burger” for lunch. Sit down with the team and eat healthy. That’s going to work wonders for the team and you tend to eat a lot healthy.

3. Have small milestones weekly that you can celebrate. I am a big fan of frequent celebrations, for achievements, how ever small. They reinforce the belief that your team is in it together and everyone is contributing towards building the company. Celebrations also tend to reinforce culture.

Above all, try to reduce your stress by not comparing your startups progress to others, even the competitors. It may seem to be that winning is all important and that you have to beat the competitors, but I found that the founders that achieve the best or “top dog” status, believe that their sacrifices were rarely worth the stress.

Happiness Manifestor: A framework for picking your battles, while keeping your vision

I want to introduce you to a new personal productivity tool, that I am testing with myself, which I think will help you as an entrepreneur. You are welcome to use it even if you are not one, but YMMV.

As a founder there will be many situations when you will disagree with many folks in your organization. With your cofounder, your investors, employees, etc. I have learned the hard way that many of these disagreements result in irreparable damage to relationships, and in some cases permanently. You will become very unhappy in this situations. This tool is to help you avoid many unhappy moments.

Of course, it is very hard, in fact sometimes impossible to be objective about the situation or have a very high level of Emotional Quotient to ensure you are doing the “right thing”.

One of my investors ages ago taught me this lesson early, but I have a blind spot, which I have learned, which is my innate desire to be the “smartest person in the room” and also to be the person that’s “right most of the time”.

This is still in the works, so by no means am I an expert, take this tool with a lot of salt.

When you have a vision as a founder to solve a problem, the first thing I’d advice you to do besides write it down, is to put it in a notepad file or sticky notepad and keep it on your desktop screen all the time. Write down also a list of things you wont compromise on and things you are willing to let go.

Here’s an example: I am making this up on the fly, so bear with me.

Your vision would be, for example, or what happens when you achieve nirvana.

AmazingCo envisions a world where working mom’s are fit and healthy and eliminate their propensity for lifestyle diseases.

Now for your mission statement - or why you exist.

AmazingCo exits to make the best fitness application for working mom’s who have to juggle multiple chores and priorities by making it easier to integrate exercise into her daily routine.

Then the next thing I’d do is to make a list of values - things you  and your cofounder believe in firmly – these will define your culture to a large extent: For example:

1. Speed – we value people that move quickly and make decisions fast

2. Open communication – we value honest feedback

3. Collaboration – we believe people should work with one other well, team before self.

etc.

These will help you determine who you’d like to hire and how they’d be successful in the company.

You and your cofounder may have disagreements about this as well, and that’s the whole point of this exercise.

As a side note, dont be fixated on having 3, 5, 7 or some odd, but arbitrary number of values – list as many as you care. Of course, larger the number, the harder it gets to communicate them. If you need help, read the list of values and culture of the best leading technology companies.

When you have disagreements with your founder, the first thing to know about your self, is to find what triggers and what emotions overcome your self, when you feel disappointed, angry or despair. This is the MOST critical part. I would say the first step is knowing more about yourself.

What I found was that I lacked the ability to overcome the emotional barrier. I recognized the barrier, but I was unable to not go “ballistic”, when that happened. By ballistic, I mean, getting really upset enough to disagree and try to win the argument so I could prove that I was smarter or that I was right.

So, the best thing to do is to appoint yourself a helpful friend, colleague or significant other as your “personal trigger detector”. This person’s sole job is to remind you when you are getting into the unproductive zone.

When you have finished your mission, vision and values, the next thing you need is your “happiness manifesto”.

This list of things is items you consider sacred to your happiness. They should align closely with your values, BTW, so dont be surprised if you repeat them here.

1. I will be happy when things are clean around my work area

2. I am happy when people acknowledge my points, even if they are not valid.

3.  I am happy when I am able to get food on time.

The next part of your happiness manifesto, is what you are willing to compromise.  I have found that this compromise list feed off the values / happiness lists.

What are you okay with because you chose to value certain things will be on this list.

1. I am okay with other people having a messy work area.

2. I am okay if we have many bugs in our product because I value speed over perfection

3. I am okay with many difficult questions from employees because we value open communications.

Then I would put this on your communications and keep reminding yourself to pick your battles.

If a situation arises which triggers responses from you that you dont like, remind yourself to look at your compromise list to see if it deserves a response.

Most likely it wont deserve a response. Move on.

Pick your battles wisely as an entrepreneur – use the happiness manifesto and let me know if it works for you.

It is not that I dont think you are great, but I am not confident about my ability to pick winners consistently

I had a very interesting conversation with an entrepreneur yesterday who I was keen to invest in. He had soft circled $250K of his $750K seed round. I have been a big champion of him and really respect his determination, thoughtfulness and diligence.

I committed to $50K and was going through the details of the investment with him, but letting him know that even if it took him a while to raise the remainder of the funds, I would ear-mark the $50K for his venture.

He then asked me “You know and influence a lot of other investors as well, can you please convince them to join the round”. I said that I can introduce him to investors who have invested in the past with me, but they will have to make their own decision.

I was not going to lean in on them to invest.

He mentioned that I “leaned in” on another VC to invest in a portfolio company, which is what he heard from the other entrepreneur, who I had worked with.

He was correct. I did lean in. So, the signal I sent him (although that was not my intent) was that I was not as committed to his venture as I was to other the one where I leaned in.

First, I dont have as much influence as entrepreneurs give me credit for. That’s just the truth. They may attribute the fact that I am at Microsoft Ventures as a signal that the corporation thinks this is a good investment, which is absolutely untrue.

Second, I believe there’s a HUGE difference between an angel investor (who I dont like to lean in on) versus a institutional investor (who I will lean in from time to time).

Most angel investors invest by reputation, connections and referrals. VC’s will judge an entrepreneur and their opportunity on its own merit, do their required due diligence and will likely pass EVEN if there was a strong referral from a person they trust.

Referral’s get you in the door with an institutional investors, whereas with an angel investor it will usually get you a deal.

Most angels I know have “day jobs” or “other interests” with angel investing being their side project, activity or means of giving back. That does not mean they don’t want a return on their investment, it just means they don’t do as much diligence as an angel group or an institutional investor would.

Knowing that, I believe the biggest challenge is the confidence in my ability to pick winners all the time. I am investing as an individual investor because I believe in the entrepreneur. I don’t know if that entrepreneur, problem set, idea or market is right for the other angel investors I know and invest with.

Well, I do know that to a certain extent, but with angel investors, the relationship I have would be personal as well as professional. With VC’s it is rarely (exceptions exist) personal.

So, when I meet the other angel investors over dinner, with their family, I don’t like having uncomfortable conversations about “the investment that went south”. Many of them are great folks, but not mature enough as an investor to realize many of these angel deals (in fact 70-80% of them) will return in loss of their investment.

Many of the angel investors I invest with are not in the “early seed market” for the long haul and have not seen ups, downs, sideways deals, etc. So, end up investing in 1 or 2 companies, solely because of referrals and recommendations.

I don’t think I have confidence in every deal I do to end up returning my money or generate a great return.

That does not still mean I dont believe in the entrepreneur when I invest in them.

This is truly one of those cases, when its not you, its me.

Counter Intuitive: To have a successful customer development process startups should qualify out prospects

There are many counter intuitive things that happen during a startup’s life. Many have been out there already – a) initially do things that dont scale b) focus on culture more than skills when recruiting, etc.

When I was in sales early on, I used to get this advice from my manager all the time – the objective initially was to qualify out customers.

That seemed rather bizarre. The whole objective of customer discovery is to find the right customers for your product. Or did we all get it wrong?

Turns out before customer discovery, there is actually a problem discovery step.

Before you find the customers for the problem you are trying to solve, you are trying to find out if the problem really exists.

There are many contours of the problem, and one of the best people I have seen articulate this is Manu Kumar of K9 ventures – he talks about Frequency, Density and Pain

To find a problem worth solving these 3 criteria are important.

So when you do find a problem, your next step is to find the contours of the problem along these dimensions. Are potential customers having this problem, how much of a pain it is and how often is this a problem?

Now the hard part of customer development and qualifying potential problems is that we all have cognitive biases which makes us want to fall in love with our idea. Instead, the best way is to try and find ways that you should not do this (idea) versus something else.

This is why I maintain a to-dont list. (pdf) Apply that to your problem discovery process.

The entire goal of customer development (after problem discovery) is to ensure that you only get those customers who have the 3 qualifying criteria of frequency, pain and density.

You will find initially that to make the problem “solvable”, you will need to focus on one feature or one part of the problem which is the “most painful”. Your potential customers are willing to sacrifice scale, failure, lack of bells and whistles, etc.  because it solves the one piece of the problem which is the most excruciating.

Deciding which is the most excruciating part of the problem is hard and tricky. You will get many head fakes from many of the people you talk to who could be potential customers.

If you are an introvert and don’t like talking to new people (which is most of us), then your initial customer development list is relegated to colleagues, friends, family and acquaintances.

Most of them don’t like to disappoint you, so even if your product is not solving the problem or not solving the real problem they will likely say things to ensure you are not discouraged. Which leads to you thinking that you are actually solving a real problem.

Which comes back to customer discovery and the goal of meeting every potential customer – it should be to qualify them out as a potential early user. The problem you are trying to solve may not be as relevant, as painful, as intense or as immediate as others.

You want to qualify them out. Early, often, quickly and constantly.

That’s very counter intuitive.

The cofounder dilemma – or when the biggest reason for success is also the biggest for failure

Over the last 2.5 years I have had the chance to closely observe over 70 startup teams for more than 6 months each (some a lot more) to find out which of them succeed (by their own definition) and which of them fail.

The thing that struck me 2 nights ago at the TIE dinner was a question that was asked by one of the solo founders – why do investors insist on having co founders if one of the biggest reasons for companies closing is “founder issues”?

If you look at the data from multiple sources about the biggest reason for failure in technology startups, I am struck by how high “co founder issues” comes up in the reasons for a startup folding.

After “no market need” and “ran out of cash” – which by the way is another way of saying there was no market need, the biggest reason was team and co founder issues.

Initially that struck me as odd. I mean, as investors, we keep telling entrepreneurs that we don’t fund solo entrepreneurs. Or that we invest in teams. Or that we like a well rounded hacker, hustler and hipster teams. Most investors have a bias against solo founders. We are prone to say – if you can get one person to join you as a co founder, why should an investor join you?

I have one theory around why we do what we do and say what we say. I am going to say it is a theory for now since I have not validated this and certainly can’t speak for all investors.

The reason is that the biggest reasons for failure (poor co founding teams) is also the biggest indicator of success.

Historically, great technology companies have 2 co founders.

Most investors pattern-match.

So, they tend to talk to 20 folks and form an “informed opinion”. If you look at startups in the technology space historically, the 2 co founders insight has borne out more often than not – Microsoft, Apple, Yahoo, Google, etc.

So, as investors we assume that data (that 2 cofounders is better) trump judgement (that sometimes a solo founder can be just as good – DELL, Amazon, eBay, etc.

So, the question is – why we do insist on having a 2 founder (or more) team than a solo founder?

The answer is fairly simple – investors, like entrepreneurs have biases, or a deviation in our judgement.

If you are a pattern-matching investor, with not much operating experience, then you will go by “best practices”. Then you find other ways to rationalize those decisions. For example – you will quote how startups are very hard and during the hard times you need someone (your co founder to keep your spirits up), or that you need folks with complementary skills to form a company, etc.

Those are largely true and maybe not rationalizations at all, based on the experience of many investors, but I have found that early stage (angel investors) tend to have these biases formed and opinions they have been “handed down” from seasoned investors, who have their own biases.

So, what does this mean if you are a solo founder and still need a “cofounder” since your investors are telling you they invest in teams.

Ideally, you should look for people you want to work with and have worked with before. Note, I did not say “you know well” – that’s necessary, but insufficient. If you worked with them that’s the ticket.

If you don’t have that person and keep getting feedback from investors you are trying to get on board that they don’t fund solo founder companies, what they are really telling you is that there’s other problems that make them not want to invest.

The problem might be that dont know the market, dont understand your product, or any number of other reasons.

That’s the real problem to solve as a solo founder, before you solve “let me get a cofounder” problem.

When you don’t know what made you successful, you make new mistakes

Most startup founders tell me they learn more from failure than they do from success. The reason primarily seems to be because you can point to one (or many) things that directly affected your failure, but success tends to have multiple factors contributing to it.

Then there’s the age old “I got lucky”. Which is interesting in itself, because the most successful people I know attribute their success to luck more than to anything else.

Success does have its challenges though in terms of being a good teacher. Most often we are told that what got you to a certain point wont get you to the next “level” and that you need to change your processes, systems, people and technology stack.

I had the chance to talk to 3 founders in consumer internet companies, over the last few weeks about their pilots and how their initial MVP’s are going – most of them had “successful” beta products with engaged users and many referrals. The one thing though they all felt was that they did not learn what made their products stick.

The superficial learning – about features in the product or the instant gratification a user got from their product was mentioned often, but that’s not enough.

To truly go from Minimum Viable Product (MVP) to Product Market Fit (PMF) the most important thing I have learned is that you need to know what made your product a “success” for your customers.

Let me give you one personal example and one professional one.

When I set out to lose weight and get fit (I lost 50 lbs in 25 weeks), I thought the key was to eat less and exercise more. In fact I thought they were equally important. I also believed a calorie lost was a calorie gained. Not true actually.

“A calorie lost is worth at least 2-3 calories gained”.

I learned this the hard way.

When I started, I put my data into MyFitnessPal (MFP) and it said I needed to eat 1650 calories each day or less. MFP, also tracks your exercise (automated via API from MapMyRun and FitBit). So the first few weeks I tracked what I ate and also automatically tracked when I exercised.

I would eat about 2000 calories and workout for about an hour to burn 550 calories and assume that it would turn my weight in the right direction. Turns out that was an incorrect assumption. My weight was flat.

When I truly started to eat less than 1650 calories, and still keep up the workout regiment was the only time I lost weight.

Then I experimented with my workouts and my eating. I tried eating 1500, then 1400 and finally 1300 calories or less each day for 3-4 weeks. My exercise regiment was constant. I lost a lot more weight than I anticipated.

I tweaked it further (because of travel) and reduced my workout to 45 min and still tweaked my eating for 3 weeks from 1500 to 1400, and finally to 1300 calories a day for 3 weeks. I lost the same amount of weight as I did when I worked out for 1 hour.

So the key to success was portion control and food, not exercise as much. That was something l learned. Now, that may work for my body type and may not for all, but it is important to experiment the key to ensure you understand the contours of your success.

Now for a more professional example.

I used to write more often that I do now, but over the last 8 years I have written about 800+ posts to average about 100 per year. Many are forgettable, so there.

I tried to experiment with writing short posts, then longer ones, then ones about current technology (newsworthy and topical) and finally about humor and self learning.

The ones about technology and news generate the most page views. Which, I know I am not supposed to care about, but I do.

The ones where I talk about what I learned from entrepreneurs generate the most comments, which I love again.

The blog posts which are short generate more likes on Facebook and the longer posts tend to get more shared overall.

I experimented more with length of my posts, the topic, the category, the sharing options, and the titles, but I don’t think I have found the formula for “success”.

The only thing I know is that if I write often, I tend to get more emails from entrepreneurs, talking about their own experiences, which I love the most.

So what happens when you don’t know what makes you successful – you tend to make more mistakes, but you tend to also learn a lot more.

If learning is your objective and constant learning at that, then I suggest you dont find out what makes you successful.

I learned that blog posts about my reflection tend to generate more interest than those written dispassionately about the world and its affairs.

I still have to find out what makes a successful blogger and have to define success first. Until I do that I have to be content with the assumption that I will learn more and make more mistakes, not knowing what made a post a “success”.

What value do #startup accelerators provide to #entrepreneurs?

Many entrepreneurs and other venture investors have a perspective of the accelerator space with little context or a construct to think about their value. I am biased and run the Microsoft Accelerator and I think most programs are extremely valuable, though I am an insider.

There are key questions I thought I’d answer that are top of mind of most entrepreneurs and investors about accelerator programs.

How do we think about accelerator programs?

The best construct to think about accelerators is the MBA program for entrepreneurs with new age changes and modifications.

Instead of tenured professors, you have (hopefully) experienced entrepreneurs who can share their story and journey towards entrepreneurship.

Instead of textbooks with theoretical knowledge you have playbooks based on actual experiences.

Instead of one teaching assistants you have mentors who have relevant experience in the area that you need help.

Is the MBA program great for everyone? No. It is only relevant for those that believe in the power of the network and want to take advantage of the connections (not only customers and investors but other fellow entrepreneurs as well).

What happens to existing MBA programs? Will they go away? No, but there will be a serious consolidation. I can see a future where MBA programs are catered to generating folks purely to be placed at a large company such as Goldman Sacs or Bain. Tier 2 colleges and MBA programs will have to fold up.

Is there value in other accelerator programs besides YCombinator? If you believe the MBA program construct, then this is a question that answers itself. Even though there are many that falsely believe there are no programs that are better, that’s like saying if you get a MBA from any other school than Harvard, then your MBA is useless. Similar to MBA programs you pay a lot (in the accelerator space you pay equity, not cash) to get that “stamp of approval” or “credibility”. Is that worth it? For most it probably is.

What value to accelerator programs provide? For most novice entrepreneurs it is advice, for amateurs it is mentorship and for the professional entrepreneurs it is guidance and connections (the network).

Do most entrepreneurs benefit from accelerators? Or just the young, first-time-as-an-entrepreneur do? Do most experienced professionals (who work before joining an MBA program) benefit from an MBA program – absolutely. In fact I would argue they benefit more from the program than young fresh graduates, because they are able to take advantage of the connections, network, mentorship and guidance immediately.

What does the future of accelerators look like? Similar to MBA programs, accelerators are beginning to specialize to compete better. There is a need for a lot of management thinkers for companies beyond the consulting and banking industries, which is why so many MBA programs are churning out graduates.

Depending on how you see entrepreneurship play out – will it be a winner-take-all market or a very competitive one with many startups and many entrepreneurs, there’s a likelihood that many accelerator programs will consolidate or get “acquired” by venture capital teams.

In a winner-take-all market, YCombinator wins. Which means, they get the 80% of the best entrepreneurs and rest are fighting for the scraps.

In a more competitive market, YC, like the others has good share, but only 30% of the best companies graduate from YC, and the rest from other programs.

I personally think it is unlikely that the accelerator market is winner-take-all. Similar to Venture capital firms, where there are tiers (Sequoia, Accel, A16Z, etc.) form the top tier, and there are over 300+ VC firms still doing well and many return good money to their LP’s. Granted the large funds deliver over-sized returns, but the rest are still doing pretty well.

Should entrepreneurs apply to multiple accelerator programs? It depends on the connections and networks you choose to leverage. If you are a health company, YC will be of value, but not by much. You want to attend YC to get the stamp-of-approval, but you will benefit a lot more from programs like Rock Health.

I don’t know of too many folks that have gone to attend multiple MBA programs, so I think that a startup going to multiple accelerators will just dilute themselves too much. Unless they attend a program that offers no dilution – like the Microsoft Accelerator program for example or many others.

Which is why TechStars is starting to offer their “equity back” (like a money back guarantee) program – You got value or your equity back.

What others questions do you have about accelerators? I’d love to think about this construct and see if it addresses more questions about the value of startup accelerator programs.