Founder; One of the things I was thinking about was how you think about yourself as a founder, your skill set, and what you should be thinking about in terms of am I ready, how do I get ready, and is it the right thing for me.
A great founder is someone who is skilled in all areas. Steve Jobs, Bill Gates, Elon Musk, Mark Zuckerberg, and Jeff Bezos are among the most well-known. This is analogous to a skill panopticon for the founder as a superwoman or superman. They are well-rounded, diverse, and have the ability to bat on all skills.
"I understand product market fit," for example. I am particularly skilled at product development, strategy, management, and fundraising. I am capable of handling all of these different responsibilities. And, according to the founder as superperson theory, part of what you're looking for in a great founder is someone who is great at all of these things.
Founder or startup entrepreneur stereotypes.
It's partly due to the founder's image as a superperson, which is that a great founder can do anything, you know, jump over tall tall buildings in a single bound, all of these kinds of things, and the reality, right, is that the founder deals with a slew of different headaches, and no one is universally super powered.
In general, you'd like to have a few superpowers. Some things that are unique to you. Some aspects specific to the problem you're attempting to solve.
Some things that may assist you in gaining an advantage because competitive differentiation and competitive edge are critical. However, it is not a function of genius, and it is frequently difficult to distinguish between madness and genius because the results are usually what matter.
When dealing with unpredictability, you could be a genius and later thought to be insane. Or you could be a lunatic who happens to be lucky and is later thought to be a genius.
So it's a difficult set of, like, how do you think about these sets, you know, what is the entire set of skills and what we mere mortals, you know, come into this kind of battle, what is the right way to think about it?
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What does it take to be a successful founder?
- start with the team.
- The following consideration is location.
- you got to be both flexible and persistent.
- listen to data, listen to customers.
- You must be willing to take risks.
- Let's start with the team.
1. start with the team.
The myth of the super founder is that it's usually best to have two or three people on a team rather than a solar founder. "It's not that you get ten out of ten on all of these, you know, you're the entrepreneurial Olympiad. You are, in fact, the best at all of those things," says David Weinberger.
Not to say that solar entrepreneurs do not exist and cannot succeed. However, most of the time, two or three people are far superior. There are a lot of questions about how to adapt your company to be successful, and if you have two or three founders with different skills, you can compensate because, by the way, everyone has flaws.
You can make up for each other's flaws. You can actually attack the wide range of problems that you will face as a founder. One of the things I recommend when looking at essentially a founding team is to have a strong preference for having cofounders.
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2. The following consideration is location:
The reason why Silicon Valley startups are so successful is because all of these great people immigrate here, which is hugely important for talent and founders and everything else, and that's part of the reason.
When you think about it, it's actually from basic math, ne, even if you take something that Silicon Valley is super strong at, which is essentially software skills in the last two decades.
Not all of the best software developers relocate here. There are numerous of them in other parts of the world. Great founders seek out the networks that will be critical to their problem and task, and they understand that it isn't just about, like, kind of like, I am super person.
To be successful, I need to go to where the strongest networks are, by the way, Silicon Valley excels at certain tasks. However, it is not proficient in all of them. Having massive sales forces was a key component for GroupOn in its early days. Network strengths and weaknesses frequently coexist.
Silicon Valley is generally hostile to plans that involve, say, oh, we're going to rent a 25-story building and have floors of salespeople in 20 of those stories, and that's how we're going to get this thing going.
That kind of plan here tends to get a lot of interest, a lot of criticism, a lot of talent po-, aggregate to it, and a lot of financiers talking up things like capital efficiency and network effects and other kinds of things that are important here.
So it's not surprising that Groupon required that you be in Chicago, which is extremely good at this. As a way of actually getting started and demonstrating that even software startups can be in other places, but even if you start thinking about it, you say, okay, well, what kinds of, of, of other kinds of startups would someone be an idiot to move here to do?
Think of someone were doing a fashion start up. Not fashion a la Poshmark which is you know, a mobile marketplace et cetera which are a bunch of things that are good here. But like I'm develop, designing a new fashion company and I'm going to come to silicon valley to do it. That's actually not such a great idea.
To be a contrarian these days is very fashionable, if not conventional. If you can't think of a smart person who is somewhat knowledgeable in that field who believes your idea faces serious challenges, it isn't contrarian.
In the early days of LinkedIn, I advised all founders to go talk to every smart person who would talk to you and provide feedback. Two-thirds or more of my network, including some very smart people, thought I was insane.
There's something I know they don't know about that will actually come to pass. Now, in this case, as a founder, it's good to be a contrarian in the true sense and right.
Most consumer internet startups are only successful because of rocket ships. LinkedIn never experienced a rocket ship moment. It did, in a way, compound year after year. However, in the consumer internet, this is not always the case. That gradual compounding curve can be extremely valuable.
So you start to run into a bunch of problems that, essentially, founders run into, such as, should I be doing the work or should I be recruiting people and delegating the work?
The traditional answer to this is that you need to do both, and sometimes, even though I'm not very good at math, both at 100%. So, when you consider what makes a great founder, you'll notice that this is actually classic.
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3. you got to be both flexible and persistent:
This is because entrepreneurs are frequently advised to, you know, have a vision. Face adversity head on. You know, realize that you have this vision that is contrary to what others believe, and just keep going, get through the difficult times, and get there.
4. listen to data, listen to customers:
Another piece of advice given with equal zeal is to listen to data and customers. pivot. Be adaptable! Part of what this means in terms of being a great founder is to ask, "When should I be persistent, when should I be flexible?"
The most common vehicle I use for this is to have an investment thesis on a project you're working on, such as a company, that essentially states why you think potentially contrarian. Why do you believe this is a good idea?
It should include what you know that you believe other people don't know, and as you enter the battlefield, you should consider whether your confidence in your investment pieces is increasing or decreasing.
Because my confidence is growing, oh, stay on track, you know, be persistent. And, by the way, even in the face of adversity, your confidence can grow. It is not necessary to jump out if it is decreasing.
PayPal, LinkedIn, Airbnb, and a slew of other startups I've been a part of months where you were like, oh my God, why did we think this was a good idea? It was a valley of the shadows moment.
So, for example, in August 2000, we were burning $12 million in one month, the expense curve was exponentiating, we had no revenue, and confidence was low, but we said, okay, what do we do to fix that, and that gives you your immediate action plan.
Another question is whether you should believe or be afraid. Right, should you essentially say, "Well, no, I have this vision of how the world should be and I should ignore everything else and just go at that?"
Again, part of being a great founder is being able to hold the belief, to think about what you want to do and where you want to go, but also being smart enough to listen to criticism, negative feedback, competitive entries, where you're kind of going, okay, is this changing my investment thesis?
Is this going to change what I'm going to do? It does not imply that you have lost confidence. You have the assurance, but you also have the danger. Again, how do you combine these two things? Should I focus internally, build the product, ignore the world, ignore competitors, etc., or should I focus externally? Should I go out and recruit? Should I go out and meet people? Should I collect network intelligence?
Again, the answer is both, and the reason I'm focusing on it's, it's both rather than either or is because being flexible across these lines is part of what makes a great founder. To be 90 percent one way some of the time and 80 percent the other. Make a decision about how to solve the current problem. How can I say, when I'm trying to solve this, that this is what we should be doing and how should I divide the work?
People say, well, when you think about these things and you just say, like, this is another one that's kind of classic. Data drives my entire motivation. It's what users say in user groups. You understand? I've seen a lot of lean entrepreneurial methodologies discussed, such as gathering data and being guided by data. Actually, data exists only within the framework of the vision that you're creating.
Bitcoin, according to PayPal cofounder Peter Drexler, could be the new global currency. He believes that the concept of a universal network that allows anyone to pay and anyone to become a merchant is critical to BitCoin's success. "We're creating a kind of Universal Network that allows people to pay each other," Drexel says.
Bringing electronics into the speed of commerce at any business being transacted. So you're constantly combining vision and data. And the data is contained within the framework of a vision. And, of course, what you learn can alter your perspective.
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5. You must be willing to take risks:
That is correct. You must be willing to take risks. You have to be thinking about how to make a really coherent bet on risk because, in fact, the only really big opportunities, the only contrarian opportunities on which smart people disagree with you, are ones that involve risk.
On the other hand, when you're starting to apply how you think about risks as an entrepreneur, you're starting to think about how do I take intelligent risks. How do I take a focused risk that if I'm right about one thing, a slew of other things will fall into place?
When I start doing that, I try to figure out how to maximize my, my, on shot possibility, e.g., how do I minimize other risks? How do I take this risk in an intelligent way that isn't just oh yeah risk? Wind is a risk. What does it matter? But let's get started.
Now, returning to what I was saying about having an investment thesis, part of having an investment thesis is charting it out, which is essentially a list of bullet points. You say, for example, that in the early days of LinkedIn, it seemed like everyone was going to benefit from a public professional network.
Everyone, including companies, will realize that it is preferable to have it play out this way. The initial wave of adoption will come from people who were able to visualize the role and thus were willing to play with it, and then the mass market will come on as they begin to have a network that is already delivering a value proposition to them.
That's how an investment thesis might look, and then you've got economics like initial recruiting and then broadening and other things. You have an investment thesis, and you ask yourself, "Is my confidence in my investment thesis increasing or decreasing?"
Do I believe that the data I get from the market, when I talk to smart people, changes my confidence in it? And this is how you effectively minimize risk. So, for example, in the very early, very early days of PayPal, they said, okay, well, we're going to do cash on mobile phones. We'll do cash on Palm Pilots because it's so simple.
Even before we launched the product, we realized that cash on Palm Pilots would not work. Because what happened was that I went in and said to Max and Peter. I said, "Look, here's our challenge," and our challenge is that we probably don't know what Palm Pilots are.
They were similar to early PDAs. So, yeah, we lived in Palm Pilot territory. And the entire use case was splitting the dinner bill, and no matter how many people were at the table, everyone at the table would have a PalmPilot Zero to one in every single restaurant.
So, just thinking about it, you realize that the path you're on is going to hit a minefield and you need to pivot, and that's when Max Legend came up with the idea of saying, actually, we could sync by emails, we could have email payments as the backbone of this, and we were like, oh, that's a good idea.
Of course, that's where the whole thing ended up. And that is part of thinking through risk minimization as you execute. Here's another oldie but a goodie. That is, should I have this long-term vision? Or should I focus on solving short-term, local issues?
Again, both are correct. These are the paradoxes, and the question is whether you can jump between them. You should always keep a long-term vision in mind because if you completely lose your, your directions will eventually change.
You'll find yourself in a situation where there's no way out, but if you're not focused on solving the problem in front of you, you're screwed. So part of the question about how you put these things together is that you say, okay, in the short term, what do I need to be doing today? Have I made any headway today? Have I made any headway this week? But is it mostly on track?
So let me give you an example of how this works in terms of startup funding or strategy. As a result, many people believe that product strategy is critical to how start-ups operate. As an example, I have a product idea, that's a thing, and I'm a founder.
In reality, the next level of strategy is usually product distribution. Whether it's consumer Internet, enterprise Internet, or something else. Because no matter how good your product is, if it doesn't reach customers, you're screwed.
As a result, product distribution is usually more important than the actual product itself. And the one beneath it is for financing. And the reason it's financing is that if you run out of money, the entire effort collapses, even if you have a fantastic idea.
So often, when you're executing a good strategy, you're actually thinking about the next fundraising. When I'm raising money, this fundraising, I'm thinking about the next fundraising. I'm thinking about how I'm going to prepare for it, I'm establishing relationships that will be important to that, and I'm not executing as if the only thing that matters is that I get to the next fundraising because you have this business that you're building.
But I'm thinking about that as a core strategy in terms of how I'm executing, and you're frequently thinking about, okay, how does my product distribution work so that the financing works well?
That's sort of how you put these things together. So, how do you know if you have what it takes to be a great founder? So, you should have some superpowers. Being a good product person is generally useful in software. It's beneficial to have good leadership skills in terms of bringing in networks and persuading people. To have both that kind of belief and paranoia about whether I'm on track with my investment thesis?
That is, in general, how you become a great founder when you do it correctly. One of the most fundamental things is to consider product distribution as critical. And we had a couple of things going for us on LinkedIn. So, for starters, the web was dull in 2003.
Basically, everyone thought the consumer internet was dead, so they focused on clean tag, enterprise software, and everything else. It's a much more difficult problem now. because everyone thinks the Internet and mobile phones are cool.
So breaking through the noise is critical. As a result, our strategy would be ineffective. We simply set up, sent out some invitations to a small group of people, and then tuned the mechanism to have, as well as did public relations to attract people. One of the wise early decisions we made was to limit it to invite-only events. Should we allow cold sign-ups?
We should allow cold sign ups because the people who are super excited about this aren't necessarily the people you know, so they will sign up and spread the word.
That was the type of decision we made. Now, that challenge is much more difficult because the challenge when thinking about product distribution is how you compete for potential customers' or potential members' time and what they think, what they have to believe in.
Back in 2003, it was a professional network. What the hell, that could be a good idea. I'll experiment with that. There aren't many other options for me to consider. There are a lot of things today, so your strategy today, when it comes to product distribution, must be, what is my truly decisive edge? What is the hack that I know that others don't?
How do you tell if someone has approached you? So, how can I tell if someone is a good founder or not? It's not that I don't believe in references. Normally, I only ever, no, 100 percent of the time in this case, meet with someone who comes to me through a referral.
I believe there was a question over here as well. So, do you think that the intensity of insight is a strong indicator of great founders? Can you say it again? Density of insight is a strong indicator of great founders.
Being able to extract a thesis from or operate on a thesis. A lot of doubt to a short sentence. Well, I would say that the ability to articulate something and say it coherently is essential.
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That isn't attempting to boil the ocean or a Swiss army knife approach, but rather one focus like look, if we're right about this, it works, and that is actually pretty important to be able to judge a founder because if you don't have that level of clarity, you won't be able to assemble the network behind you.
You won't be able to find investors, and you won't be able to find employees. You must be able to articulate a very clear mission about what you're doing, and insight is beneficial, though this varies depending on the stage.
I'm always drawn to founders who have done a good job of analyzing the problem, but I've also seen great founders who don't present good analysis but have a good instinct about what they're doing. So you can better track what's going on around them. When Lincoln had like five years of like, I guess Wrap up times, like what, what can keep doubling down on the original?
So, how do I maintain my persistence when, actually, LinkedIn went through, you know, for those who remember. One of the tests that I frequently use in interaction is I push on the idea some. I'm looking for, no, I have conviction in what I'm thinking and I'm arguing it.
Some people will say, "Look, I've learned to mimic that behavior, so I've learned to say, for example, I've learned to look, look like I'm reasoning with you and I look like I'm thinking about the challenge you're bringing up, but in fact I'm ignoring you." Right? And ignoring me might be okay. Right?
Ignoring the world in general is almost always a recipe for disaster. So those are the kinds of things that you can see getting wrong in the measurement. But, most of the time, the type of reference questions I asked about founders were about adaptability.
One of the phrases I frequently search for is "infinite learning curve." Because each entrepreneurial pattern is unique and new to some extent, and can you learn the new one? That's one way of doing it. So, does the learning fall apart, or is there some major skill-set? Is there an ego problem interfering?
As in, I must be the. Like, everyone, everyone must adore me, and this will cause you to behave incorrectly in dealing with the problem. That sort of thing. I believe I have one more question. What about the woman in the back?
It's a fantastic co-founding team. And, in your opinion, what constitutes a good partnership when determining how to be a great co-founder? Cofounding team, evaluation, and how to think about cofounders.
So, first and foremost, it is critical that you collaborate effectively. That was the kind of point I was making during the team, at least in the beginning. Because, if you don't have a good deal of serious trust, you know, kind of a way of.
I'm supposed to stop at 150, right? 205, man. Oh 205, no, no, no Sorry. I miscalculated the time. So, I'll have time for more questions, sorry for being late. So, okay, let me give you a slightly longer answer. So, when thinking about founder, founders, the key question is, do you have a diversity of the necessary strengths across the entire range of strengths that would be useful?
Often, only one technical founder is required. You should have someone who is dedicated to the business side, fundraising, and other such things on a regular basis. That's a more traditional skill set.
When you consider the numbers two to three. And it's usually some kind of composition across them. When you get to the next level deep, that's kind of like what you think of as founders one when you're thinking about a founding team.
One of the things that people will typically tell you is that you should not invest in a husband and wife team. And it appears that this adds a little extra weight to it and everything else because, you know, personal dynamics are also upsetting what's going on.
I actually think that what you're looking for is do they collaborate well, do they help each other get to truth. Like for example, one of the things that was pretty common in PayPal is Max who invented the prod systems and everything else would frequently come into Peter's office, Peter Thiel, mass legend and say, look here is some things that are going to kill us.
Right so, it's not like we're all just kind of saying, oh yes, we'reAll sitting here. We are adjusting to what is truth and what's the problem we need to solve, and that composition within the team that collective problem solving, that collective learning is the kind of thing that actually usually makes great teams.
The talk focused on what I consider to be unique about the mindset of founders. That is a fantastic founder in the context of all founders. An attempt to say, "Look, there are differences." If you screw it up in hardware, you're dead.
As a result, precision is critical. So if you build and ship the wrong thing, you're screwed, so there are domain-specific attributes. So, for example, one of the classics is how good must you be at operational efficiencies in terms of margins, cost controls, and so on.
You've got to be really good at dealing with the worlds of atoms, including commerce. It makes no difference if you're running a digital game or a Zinga-like startup.
So you look for that kind of fix and proclivities, and part of the problem is that it's not true that one person is good at everything. I'd have one of the most amusing conversations with a guy, a friend of mine who worked for me at my first start-social up's network.
You mentioned that you're taking longer than you'd like to see growth, and speak a little bit about when, how do you know whether or not to say, and when to give up on, possibly with respect to your personalize life and career goals. Where it fits in So the question is, "How do you know when to pivot?"
Part of the reason for having an investment thesis and having confidence in your investment thesis and being clear on that is, generally speaking, the answer that I give people is if your confidence has been unmeasured for a fairly long time or is decreasing, because unmeasured for a fairly long time should be decreasing and it is decreasing.
Then you go into intense mode, trying to figure out what kinds of things you would do to boost your confidence. That's correct, and it's a failure. That's a great time to consider pivoting Right, and you might have a thesis on can we raise money.
You might have a thesis on will, what is the pattern of product distribution and growth, or, you know, viral limitation, SEO, or anything else that will work. And, well, I tried these things, and this fourth thing doesn't seem to be as good as these three and the next two things that come to mind.
Worse, this begins to erode your confidence, at which point you should consider pivoting. Waiting until you've essentially crashed into the wall and everything is dead and you can't make any and you can't maneuver anymore is a common mistake when it comes to pivoting.
Now, in terms of personal career goals and so on, you know, that is one of the things that I meant to talk to you about during the slides, but because I misread the time, I rushed through it a little bit. One of the classic questions is about balance, and I believe that founders lack it.
One of the funniest conversations I've ever had was with the governor of Colorado, who said that because we have this balanced lifestyle, we're going to attract really great entrepreneurs. Like, if I ever hear a founder say, oh, this is how I have a balanced life and so on. They're not serious about winning, are they?
So the only truly great founders say, "I'm going to pour everything I have into this." Now, it may only be for a few years. I might do this for a while and then go do something else. But I'm unbalanced at this thing while I'm doing it.
That's not to say you don't take breaks or go on dates or do anything else. But you're completely focused on this because it's extremely difficult and there are numerous ways to die. And it is for this reason that the metaphor of jumping off a cliff is one of my favorites.
So your definition of sorry is based on the idea of identifying uncertain opportunities that others may not see. In general, how effective do you believe the startup ecosystem is at identifying promising opportunities? So, how good is the startup ecosystem at spotting risky opportunities?
Let's see what happens. That is a challenge. Because it becomes less contrarian as it becomes more popular. I'd say it's a mixed bag. I take this radical shot and I take this radical shot because part of what makes a great investor is the ability to go look.
I take this risk, and there are usually enough people or investors, if you can find your way to them, network finding your way through the network. Sometimes it's difficult to get to the signal because there's a lot of noise.
On the other hand, there are times when things are completely out of the ordinary. One of the funniest things is that Benchmark was the only one willing to fund eBay. You know, if you asked most people in the Valley about Bitcoin a year or 18 months ago, they would have said something like, "What? What bit?
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They don't know what it is. And, by the way, it's still unclear how BitCoin will play out, though I believe that a distributed trust system on cryptocurrency will almost certainly exist in the world, and the real question is whether BitCoin will be the first or last cryptocurrency.
First and foremost, there are new ones and new features. Last because it has network effects and is already running. And so. I think it works well with it. People frequently believe they are contrarians because they are engaging in an unusual con-, unusual combination.
I'll give you two examples, and hopefully the founders of these people who sent me these cool pictures, because I get about 30 pictures sent to me every day. That I don't look at unless or until something in the title makes me laugh. In which case, I see it primarily as a comedy.
I'll show you two comedies. Wearable diapers were one of them. You know, you have the computer monitoring you know. The other one was a sort of customized e-commerce bongs. And you know, like, "Oh, I have a contrarian idea." But not in the correct manner.
Going after something that most people don't believe is a market, but you have reason to believe it, is often a good bet. It can freq, but it can also completely flame out. And this is one of the things you do when you test your investment thesis. What made me wonder if there was a market there or not?
So they say, but people just realize it's a classic entrepreneurial blunder. A classic is that if people just realize it exists, they'll realize they really like it and will line up in droves for it. There are a few entrepreneurs who can do that, one of whom is Steve Jobs.
Most of the time, it doesn't work out that way, so you have to explain in your investment thesis why you're thinking about a market that doesn't yet exist. That which you know that others do not know on a rural basis leads you to believe that a market should exist, correct?
So, for example, a micro one with LinkedIn was, in fact, the classifieds means of recruiting was a newspaper exercise, an information age exercise. And, in fact, recruiting directly to people is a feature of the networked age and the internet, and it is how recruiting should be done.
It was now relatively simple to validate that. But, you know, that's the kind of thing where you consider the possibility of a new market. Finally, Mr. Boss. When do you know you've known someone long enough to start a business in their presence?
Stan told us in the first semester that you know someone you know for a but when you guys started PayPal. For example, how long did you do it? It was a large group of people, so how do you know okay, I trust the people enough to start a business.
As a result, the reading I'm repeating the question in part because we're recording everything and I want to make sure everyone hears it, but the question is basically how do you know you trust someone enough to be a cofounder.
There are a lot of variables that go into it, and, look, it's one of the risks you take. And you arrive at the conclusion, "Do I think I know them well enough?"
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Now I'll parallel something that I believe has a parallel here that I believe is extremely useful. So that is one of the things I tell my portfolio company CEOs or founders when they are considering hiring a CEO.
I believe that the only way to accomplish this is to spend 20 hours or more with the people you are considering hiring as CEO. Right, where you go into as much detail as possible in a conversation about any possible difference.
Of opinion, belief, work style, so you've identified all of this up front so that you're, you're, you're not like, oh signing a contract, this is how we do it. But we've started a conversation.
We've gone through all of the parameters and had a discussion about what we might agree or disagree with. One of the topics that I frequently believe is worth discussing is the divorce. Why would we want to divorce, for example?
So, what would cause me to conclude that this isn't working? And to include that in the beginning. Because it is at that point that you enter the field of battle. You go through this valley shadow of the moment, which is extremely stressful.
You've at least got the foundation of we've already talked about a wide range of topics, we've set up some expectations about what, you know, how we might be planning together, and if it starts to deviate from that, it's relatively easy to bring it up in a way that you're problem solving.
That is the type of thing I believe you do frequently as a Great Founder, and you should be fairly certain that you have that level of trust. It is frequently for me to have a series of robust conversations. As in, if something comes up later, it's like, well, we talked about this inversion, and we can bring that up, so whatever. Thank you so much.
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