Recently came across a great conversation between Keith Rabois and AngelList, back from Aug’18. So many tactical insights for operators, founders, big co./ startup teams, or anyone who is interested in understanding how leaders should operate on-the-ground. My key takeaways below:
Talent can be classified into “Barrels” (can independently execute end-to-end, from idea to product-in-market) and “Ammunition” (require supervision, execute only specific elements well). The number of Barrels in your team governs how many parallel things you can do.
Every business can be ultimately distilled into an “equation”, with key revenue & cost variables that ultimately drive profit. Founders need to understand their business’s equation really well, which is what drives strategic insights that lead to better decisions.
A key job of a founder or CXO is to compress “time” for the business, via a communication strategy of “simplify” and “clarify”.
In the majority of cases, larger engineering teams tend to slow execution down. Paraphrasing a quote by Eric Schmidt — “one of the most powerful things is 2 engineers working together”.
Put your best people on the most challenging problems, irrespective of what it does to your org. chart.
The more transparency around data and information that the CEO can create, the better everyone else can make day-to-day operating decisions that align with the company goals and strategy.
There is a saying in sports that a particular team has been “coached to play fast”. This is what startup leaders need to do to increase the speed of execution — coach their teams in a way that they can take fast decisions & react instantly, and in high fidelity to company goals.
As a leader, it’s important to speak in “Whys?”, and not “What we are doing?”.
As a leader, it’s important to change your management style as per the kind of individuals or teams you are working with at a particular point in time.
The CEO is the “Chief Editor” of the company. You aren’t actually doing a lot of the functional work yourself but your key job is to a) simplify things for others, 2) create consistency across teams, and 3) create a coherent narrative & voice, internally & externally.
As a founder, it’s important to understand the difference between a “bad” team and an “incomplete” team. Both require very different strategies.
Best way to onboard talent (from intern to exec) -> start with as narrow a scope as possible, let them succeed at it, and then keep expanding their scope & pushing their range.
Hiring is a muscle — you get stronger as you do more of it.
An important question to answer while hiring: are you hiring for upside creation (is there a spark?) or downside protection (rigorous value creation role)?
A simple best practice to improve hiring is to borrow your network to vet candidates and do comprehensive reference checks.
I already started implementing a bunch of these at my startup Workomo. Would love to know if you have used some of these tenets in the past, and your experience/ key learnings from it.
Recently saw an amazing SaaStr talk by Michael Seibel (YC Partner) on a decade of learnings from YC (or to put it in another way, top mistakes startups make post demo day). These have been framed as learnings mainly for the post-seed stage (once a company has raised $1–2Mn), but in my view, are broadly applicable to any startup. As we close out 2019, I thought I will recap the top 10 highlights from this talk, just so all of us have this sober perspective heading into 2020.
Assuming that just because you have raised a seed round, you have achieved PMF — “Don’t let investors convince you that you are further along than you actually are.”
Hiring too quickly — per Michael, the standard startup model is, post a ~$1Mn seed round, grow to 8–10 people. Once this happens, the primary job of a CEO becomes “management” whereas it should be driving the company to PMF. Side notes (2a) Trying to take on too many problems or products at the same time. (2b) You want employees who are excited to drive the company to PMF, and not be under the impression that they are joining a company that already has PMF. (2c) An early stage, pre-PMF company should be minimizing # of non-essential employees. (2d) If an employee isn’t becoming an essential employee in first 3 months, it’s unlikely they will ever become one.
Not understanding their business model — “not just pursuing the business model strategy that interests you, but one that is commensurate with what your product needs.”
Not understanding what’s the right time to sell your product to founders/ tech startups as early customers — there are both pros and cons of this strategy. It really depends on what you are selling.
Assuming investors will be a large differentiator — “An A grade investor is someone who signs the paperwork, wires the money on time, and then doesn’t bother you.”
Not establishing best practices around hiring — “do simple things like setting up an intelligent interview process that candidates will enjoy going through, having an open communication process around equity & clearly talking about the candidate’s roles & responsibilities.”
Not establishing best practices around management — “eg. consistent 1:1 meetings between employees and managers, some type of all-hands meeting, getting employee buy-in on direction & strategy.”
Not clearly defining roles & responsibilities between founders — “avoid each startup decision going into a founder committee for resolution.”
Not having level 3 conversations within founding teams to resolve conflict — creating an environment of resolution, not attacking. Not bottling-up conflict issues.
Assuming Series A will be as easy to raise as an angel round — “important to get into Series A discussions with adequate leverage”. Side notes (10a) Don’t get impacted by TechCrunch articles on some Joe raising a $10Mn round for a business that will clearly fail. You don’t know the background circumstances behind that deal. (10b) People who had trouble raising money in their 20s, were finding it significantly easier to raise money in their 30s — this is because 1) investors are considerably more inclined to invest in 2nd-time founders, and 2) if you have been in the Bay Area for 10 years, you are most likely pitching people you already know.
Closing thought: as per Michael, the struggle with most companies is not that their thesis was off. It’s that either their timing was off OR they couldn’t iterate enough on the product to get to the solution that actually solves the problem statement. So, if you keep the team small, iterate quickly and ignore the hype, you can actually spend the time required to solve the problem. You might end up taking 1 yr or 3 yrs to get to PMF — stay lean till then and go to Series A once you have PMF, which gives you significant leverage.
PS: I loved this final quote from him — “In the startup journey, be prepared that both good times and bad times will feel bad.”
In the book, David talks about coming from an extremely disadvantaged background and an environment full of poverty, domestic violence, an abusive father, racial discrimination and learning challenges. From a stage in his life where he was extremely overweight, doing menial jobs like cleaning vermin for restaurants in graveyard shifts and essentially, not knowing why he even existed, he rose to become a Navy SEAL and in process, cleared not one, but 2 Hell Weeks. A Hell Week is the single most-toughest military training of its kind in the world, where trainees don’t sleep for an entire week, do multiple land, sea and air based exercises, in an environment where trainers try and break them at every moment to get them to quit.
David just didn’t stop at becoming a SEAL, and went on to test his mental toughness while finishing multiple ultra-marathons, ultra-triathlons and other endurance feats.
How did David do this? And what do you and I have to learn from this?
For me, this book has come at a great time. Over last year or so, as I have been trying to build Workomo from scratch, this book has led me to view these initial building years as my own (of course, a much, much, simpler version of) SEAL training. And there is something to be learnt from David here!
It’s all in the mind. All of us have limitless potential. The only reason we don’t stretch our boundaries is because we let our minds create walls of comfort, risk and certainty around us. Essentially, optimizing for survival vs shooting for becoming the best version of ourselves. The mind is our greatest enemy…and friend. When David couldn’t control his mind, he was aimless, unhealthy & unfocused. When he made his mind his best friend, he rose from weighing more than 225 lbs and not being able to run continuously for more than 10 mins, to completing 2 Hell Weeks and becoming a Navy SEAL in….less than 12 months!! For all of us either already working on big challenges, or trying to get the motivation to take on big challenges, we have to actively work on our minds first.
But how do you become mentally tough? The answer lies in a simple question — “why am I doing this?”. David Goggins shares an interesting trend from his extreme pursuits — be it during the SEAL Hell Week or during a 100 mile, 24 hour, non-stop ultra-marathon, there comes a point where the pain is too much to handle, where your mind, your body, your soul, everything is on the verge of giving up. I call it the “chasm”. At this point, a person typically asks an internal question — “why am I doing this?”. For instance, during a SEAL training chasm, a trainee starts thinking of being at home, curled up in bed, next to their partner. Or while at the 3/4th mark in an ultra-marathon, thinks of rather being at a beach, having a beer and chilling out. At the chasm, people go two ways. The ones that don’t receive a strong, fundamental and cathartic internal answer to the “why” question, quit. The others — they get an answer to the “why” question straight from their soul. To them, alternatives aren’t an option, winning this will save them, give them meaning, give virtue to their existence, maybe even keep them sane.
Interestingly, for the 2nd bucket of people, getting this answer from their soul re-energizes them. They cross the chasm and enter what is called as the “Second Wind” — a burst of fresh energy, feeling less pain, getting a new wave of intent & motivation. David mentions his second winds during ultra-marathons, where he stopped feeling ankle fractures, blisters on his feet or dislocated toe-nails, and just kept running. This second wind usually carries people to the finish line.
Another by-product of crossing the chasm. People who don’t quit, then start accepting the pain, and even enjoying it. The answer to their “why” impacts their very existence, and they know that living through this pain is probably the only way they will get closer to finding the answers they are looking for. They might never find them, but are at least trying & getting closer.
As a founder, I face cycles of steep highs and deep lows. Some days start with a panicky feeling, others are full of “what should I do now?” questions. Am sure every founder would confirm experiencing the chasm on a periodic basis, especially in the first 36 months of trying to build a company. What I have learnt from David Goggins is observing my answer to the “why am I doing this?” question. Is it coming from a deep place inside me? Is it cathartic enough? Does it have a direct impact on the meaning of my very existence? In smart people, a current state of “desire” is always there. The more important question is the source of this desire. How deep & soulful is that source is what will ultimately determine whether you quit at the chasm, or enter your second wind.
Reading about the life of David Goggins has had a big impact on the way I perceive myself, my journey as well as other startup teams, both as a founder & investor. When I see pedigreed, Ivy League founders giving up quickly at the chasm, I now have additional perspective of the “why” question and perhaps, their answer to it wasn’t strong enough. The “return-on-pain” wasn’t justified in their life math!
Relatedly, I now try to probe the “why” question much more deeply for anyone am looking to collaborate with. For teams/ companies/ individuals that have not quit at the chasm and survived, I feel there will be tremendous latent value in them. As a founder, I am now consciously training my mind to survive the chasms, while as an investor, I will proactively look for teams/ companies/ individuals with these characteristics.
If as a startup team, you are in a good market and have a demonstrated ability to survive the chasms (which also means, the answer to your “why” is cathartic enough), your probability of success is significantly higher. Become the David Goggins of your field!
“Contrarian” is one of the favorite words of Silicon Valley. Investors want to be contrarian in their picks, founders want to be contrarian in their ideas, employees want to be contrarian in the company they choose to join. In today’s age of near-perfect information flow, one has to be a contrarian to generate any sort of “Alpha” as a professional. This is in terms of both spotting opportunities, as well as timing your entry and exits. Of course, just being contrarian isn’t good enough. As Howard Marks (legendary value investor and Founder of Oaktree Capital) cheekily says, “you have to be a contrarian…and you have to be right!!”.
Over my career, I have made several moves that, at least at the time, I thought were fairly contrarian. Left a Partner track VC job to move to the Bay Area and start from scratch as a startup operator in a brand-new ecosystem. Had 2 startup offers — one from a pre-IPO enterprise software company and other from a maverick Series B startup trying to beat Google in search; joined the latter. Left a meaty role at Alibaba to start Workomo at a tricky mid-stage of my career. Invested in several companies at Operators Studio, where the businesses were (and are) considered “unsexy” from a VC perspective. Whether the above moves turn out to be right or wrong, I need a decade more to find out 🙂
Am a believer in what Robin Sharma says “if you do what everybody else is doing, you will get the results that everybody else is getting” (which is, being average). Through-out my career, I have consciously sought risk and tried to keep myself uncomfortable.
Since early 2018, when I started institutionalizing the Operators Studio investing thesis as well as ideating for my startup, I noticed something interesting. When I discussed some of my previous contrarian moves with friends & colleagues, while they perceived them as “hard to understand” or “highly risky”, I was able to naturally see those opportunities as “an obvious gap” or “the downside is really quite limited”. Clearly, these choices were taking me down a different path compared to my peers, and therefore, perhaps I was being contrarian in spotting & evaluating those opportunities. But I hadn’t articulated the mental model that I was intuitively using while making those decisions.
Over last year or so, I have tried to de-construct the above decision-making process, and then put it together again to arrive at what I call my “Zone of Real Contrarianism”. One caveat — this is my deconstruction of how I attempt to act in a contrarian way during big decisions. Not claiming this as a universal mental model but perhaps, you might derive some value out of it.
The diagram is pretty self-explanatory — to me, real contrarianism is at the intersection of what you have really high personal conviction on, and what the majority are unable to see or agree with. However, it’s important that your personal conviction is:
Authentic — needs to come from an authentic place inside you; represents your personality, values, ideals, and what you stand for (not copied or overly influenced/ inspired by others)
On-the-ground — original beliefs result from exhibiting skin-in-the-game in this world; being out there, understanding & playing the game (not deriving ideas & conclusions from being a desk-jockey or paper-pusher)
Execution-led — observing your environment as you execute; the unpredictable, unplanned & idiosyncratic nature of execution makes it a prime breeding ground for non-obvious ideas & gaps
Nassim Nicholas Taleb defines complex systems as where the behavior of individual elements doesn’t explain the behavior of the collective or the ensemble (eg. while people are individually sane, they are prone to exhibiting irrational mob behavior as a collective). My thesis is that due to this very nature, complex systems are a gold-mine for contrarian ideas, provided you operate with skin-in-the-game in it. As a professional, I seek them out proactively (starting companies, venture investing, white space opportunities in large companies, operating in radically-new geographies & markets) to at least have a shot at generating career alpha.
Would love to hear your feedback on this mental model, and your thoughts on how to be a true contrarian in one’s career (& life).
PS: am currently building Workomo, a smart & simple professional relationships management hub for the new-age professional. If you find it intriguing, do sign-up for free private beta access.
Recently, Brian Armstrong (Co-founder and CEO of Coinbase) did a tweetstorm on how there are way too many investors, vs builders/ operators, in Silicon Valley. And how founders in their prime-age are opting to become full-time investors, rather than starting-up again, even after a relatively small exit.
Brian makes some good points about a trend, though short-term in my view, that even I am seeing in the Valley. Here are my thoughts on why this is happening and how it will eventually get corrected (I did my own tweetstorm with these views).
I think this is a side-effect of the last decade of over-liquidity across markets. Companies got over-funded, assets got over-paid for, specific skillsets (mostly engineers) have gotten astronomical salaries relative to their skills & experience. Also, there is no inherent entry-barrier to becoming an angel/ seed investor, provided you have “some” liquidity, especially as cost of starting businesses has come down a lot and early rounds have gotten increasingly syndicated/ fragmented across multiple small investors.
Given excess liquidity, a person who ordinarily would have been an individual angel, is now getting a shot at raising a small fund. While institutions would still keep a high bar, there are enough friends/ colleagues/ relatives willing to commit funds to ride the tech gravy train.
So am not surprised that many are jumping on the professional investing bandwagon, instead of starting-up/ operating companies. What many wouldn’t realize is:
This asset class has a 10 year feedback loop. You might end up concluding after a decade, that you aren’t really that good as an investor.
While raising a “small” first fund from personal well-wishers is relatively easy, scaling up to 2nd fund and beyond, esp. getting institutions to buy-in, is much harder.
Once you raise other people’s money, you are locked-in for many, many years. Not easy to switch career tracks.
Unlike a startup, it’s really hard to “pivot” or “reset” a fund. If your thesis/ strategy turns out to be faulty, or your Partner team chemistry doesn’t work out for some reason, you are still going to be stuck with these mistakes for a relatively long period of time.
In professional investing, showing commitment & consistency over a long period of time is critical. Yet, this is really hard to do, especially when you have decades of your career ahead of you.
In the end, market forces will weed out short-term players and restore balance. This could start once the current boom cycle turns around and liquidity becomes tight.
My personal philosophy — the world is shaped by “Builders”, not “Investors”. Why would you want to be a full-time cheerleader, when you can play the actual game?
