Startup Lessons – Page 2 – An Operator's Blog

Reflections from the last decade as a banker->VC->operator->founder

Starting the 2010s as a fresh b-school grad, the last decade has been grueling, challenging, uncomfortable, full of highs & lows but significantly net positive on professional & personal satisfaction. Post-facto, if I have to give it a theme for myself, it would be “taking risk & embracing change”.

I distinctly remember watching the legendary Steve Jobs Stanford commencement speech on YouTube in mid-2010, while I was going through a phase of disillusionment and feeling a strong disconnect with the way I perceived the world to be operating. As I saw him speak, for the first time, I got a life-approach framework that finally made sense to me — my job was to execute on my “voice” (instinct/ conviction/ belief/ interests/ enjoyment), create enough “dots” (businesses/ opportunities/ relationships/ products/ investments) and trust the universe that these dots will all connect in hindsight and reveal the overall picture much later in life.

Following this approach, I consciously put myself through a series of diverse experiences that positioned me to create enough of these dots. These spanned various sectors & functions (investment banking, venture capital, startup operator, big tech, angel investor & now, founder) as well as markets (US, India, China, SEA). Over the last decade, I lived/ spent considerable time in Hyderabad, Chicago, Mumbai, Bangalore, Hangzhou, and San Francisco. Of course, a lot of this was a result of spotting & reacting to opportunities that presented themselves in an organic flow of life, but there was always a strong underlying intent behind taking risks, stretching limits, keeping oneself uncomfortable & embracing change.

I have been fortunate that in this last decade, this approach has resulted in several professional dots — investing in the first Internet wave of India, VC portfolio companies going public/ getting acquired, being part of $2Bn+ of tech investments from angel to late-stage, taking businesses global out of the US and China, being part of products that have touched 100s of millions of users globally, supporting & working alongside so many world-class founders, investors & colleagues, working under the leadership of the likes of Jack Ma and Joe Tsai, traveling the world and operating across cultures to get things done. My hope is that all these dots will start connecting in the next decade, and a worth-while picture shall emerge at some point.

Given the last decade has been a “foundation” phase for me professionally, I thought it will be useful to pen down my experiential learnings, with the hope that it might benefit you. The caveat is that these are all very specific from my context. I hate generalizing and therefore, will request that you absorb these for what you feel they are worth to you. Also, rather than making an overall list, I will capture the top points for each functional phase of my career during the last decade, so you can pick & choose what is contextually relevant for you. I have also ordered the sections chronologically, from the earliest to most recent.

Top professional learnings for the decade of 2010s:

A. As a VC

Identifying & backing awesome founders as early as possible is still the main driver of returns.
High-quality & timely “deal access” is key to VC success, as is identifying the winners early and doubling down on them.
As a VC professional, if top-quality founders want to take your check and have you onboard irrespective of the firm brand behind you, that’s when you know you are doing a good job.
Trusting your conviction on the “fundamental value” of a company and holding on to it even during chasms, leads to potentially outsized returns.
It takes a long period of time (min. 5 to a max. of 10+ years) for value to accrue & then get realized.
There is space for many different types of funds & investing strategies. The key is to survive the bad times.
In good times & bad times, the flywheel of “raise-deploy-exit-raise” needs to continue. Capital has to keep churning.
Important to create a few but really deep co-investor relationships, to be able to partner & grow together.
Creating an authentic & consistent personal brand (digital + offline word-of-mouth) is a source of significant professional leverage as a VC.
The world is a big place and there are many sources of capital with varying belief systems. Sometimes, just one person needs to bite the bullet for a company to be king-made.
Finally, however smart you think you are, it’s still extraordinarily hard to pick. Important to still maintain a diversified portfolio.

B. As a startup operator

Despite how much capital or how large a team the company has, it’s still damn hard to build & regularly ship a decent working product that customers like.
Despite how much capital or how large a team the company has, it’s still damn hard to achieve product-market fit. You will be surprised by how many well-known and well-funded companies might, in reality, have no PMF.
More often than not, over-capitalization induces bad behavior across multiple levels in a company.
The best way to drive positivity in the culture is rallying people around business momentum (users, revenue, shipping product etc.). No momentum = disillusioned employees + too much time to have negative water-cooler conversations + internal political struggles = screwing-up culture bit-by-bit each day.
Over-hiring is one of the biggest crimes in a startup.
Irrespective of stage & functional skillset, a solid execution ninja will always merit a place on the team.
Rigorous ops & program management is an often under-valued skillset.
In every aspect of the startup — focus, focus, focus.

C. As a big tech operator

Actively chase roles that have the potential for max impact.
Align with most-empowered & internally-influential leaders. You are unlikely to make fast progress under a weak leader.
Focus as much on building internal relationships, as external ones.
Focus as much on building your internal personal brand, as the external one.
Stay away from any role that makes you a paper-pusher.
Identify & double-down on what uniquely sets you apart from the clutter of peers.
Figure out the “game” as soon as possible (it varies for each company and often, even amongst teams). Be ready to play the game, else be prepared to get sidelined. Ideal scenario — if you have the capability & backing, change the “game” itself.
Follow-up —be persistent, don’t take no for an answer, control your ego.
Over-prepare — every meeting is important & needs prep. Every “let’s grab a coffee”, “let’s have a quick call”, “let’s do a quick huddle” will influence your perception & trajectory within the company.
Learn how to position & sell…your vision, your story, your plan, your headcount reqs, your budget, and yourself.

D. As an angel

Have invested in about 18 companies over last 5 years via my investing platform Operators Studio. Here’s what I have learned:

Write checks only of amounts that you can immediately write-off mentally.
No one can pick at an angel stage. Create an extremely diversified portfolio.
Diversify across multiple vectors — sector, vintage, markets, stage.
If you are personally convinced of the sheer ability of a founder, just write a check.
Be reasonable about what operating value-add you can realistically provide. Don’t overpromise.
Assume that in 50% of cases, co-founders will split.
Post 24 months of investment, you will likely lose all touch with founders and receive minimal company updates/ info.
Ideally, have some sort of a broad investing framework. Assume it won’t work in most cases, but will likely improve your odds.
Follow your playbook, but don’t stop being opportunistic. If you are getting a chance to board a potential rocketship, frikkin’ take it.

E. As a founder (still very early days for me)

Still in nascent stages of building Workomo, but here are my recent learnings as a founder:

Doing “0-to-1” is extremely hard.
There is no “playbook”. You have to figure things out and make your own way.
All popular startup narratives & playbooks are post-facto, polished versions of reality. Discount them heavily.
Figuring out what people want is damn hard. Making & shipping it is even harder.
In the first 2–3 years of starting-up, your biggest enemy will be your own mental state (negativity, envy, anger, hopelessness, anxiety, frustration, disappointment). Manage it proactively on a daily basis.
Try to keep your self-worth disconnected from your startup’s progress & outcomes. As Taleb says, outcomes in this world are highly random anyway.
Keep multiple anchors of happiness — family, friends, travel, health, interests, community. Don’t over-index your life on just your startup. It’s a part of your life, not your whole life.

Hope you found these decade-long learnings helpful. Let me know what you think.

A decade of YC learnings on what not to do

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.”

Who is Michael Ovitz?

Have been reading “Who is Michael Ovitz” over last few weeks. He was the founder of CAA and one of the most influential & powerful people in Hollywood for many decades, shaping & reviving umpteen celebrity careers.

The most eye-opening thing for me in the book has been how the careers of almost all Hollywood legends, from Dustin Hoffman & Paul Newman to Bill Murray & Martin Scorsese, have been riddled with the following:

Extreme highs & lows
Frequently getting typecast in a tough-to-break image
Being considered only as good as your last movie box office performance
Making critical choices just based on “who” they wanted to support/work with
Finally, being written-off many times

Remember seeing lot of these elements also play out in Andre Agassi’s outstanding autobiography “Open”, which btw is a must-read. Just goes to show the frequent mistake we all make in seeing lives of legends in a “post-facto” way, rather than understanding what went on behind the scenes. These post-facto perceptions get even more played up by the media, which loves binary narratives to generate eyeballs (someone is either a straight-line genius, or a complete loser who lacks any ability whatsoever).

Personally, I now consciously strive to peel the onion on such narratives (had written a post earlier on how Silicon Valley narratives fool us). Helps me maintain my sanity, as I build Workomo and Operators Studio :).

How Silicon Valley startup narratives fool us

One big realization I have had as a founder over last year or so — all Silicon Valley startup narrative is post-facto. Both founders and media conveniently don’t include the real “initial phases” of the company. These include things like the 2nd co-founder getting “recruited” much later, an old services biz revamped to appear like a fresh startup, an advisor/ angel joining & getting co-founder status, taking on a product that was in reality, built by other devs who didn’t see value in it etc. These inconvenient and scrappy realities are glossed over, to paint the narrative of a smooth curve — 2 co-founders, one engg. and one biz, met in Ivy league or top tech co., fell in love with same idea, launched, raised, scaled…done deal.

Till very recently, I had no idea that 1) Travis isn’t the original founder of Uber, but was an advisor to the original devs who created it and then later, saw the potential and hopped on, or 2) Elon Musk isn’t the original founder of Tesla, but had led the Series A round.

A bad side-effect of this managed PR is that new founders take all these narratives as playbooks. So, either they try and forcibly recreate it, or give up altogether once they don’t see a similar narrative coming together. Established founders & investors also don’t call this out.

Going forward, we should always try and peel the onion on startup PR narratives. Actively look for bias by asking critical questions like who is writing the story or Medium post, and what incentives are at play. Talk to operating people to get the real execution insights on these companies.

In today’s age of rapid news cycles, planted news, overzealous investors and internal PR teams, it’s foolish for founders to base our strategies and critical biz/ life decisions on what the media is telling us. In most cases (based on what I see), startup media stories are biased to tell the “curated truth”, with a specific end-objective in mind. As founders, let’s be smarter in digesting & acting on them.