A good friend that I have not talked to in years reached out to me yesterday. He had become quite successful in the Texas oil business since graduating college. However, his California roots were calling him back and he was getting the itch to return to the Golden State. Some of his friends were encouraging him to get involved in the startup scene. Max had evidently been aware that I’m involved in the space, probably because I have been very vocal about my latest project, Whttl. I’m flattered when others turn to me for advice, so I make it a point to carve out some time to provide some genuine counsel. I did just that for Max.
We had a great conversation about a topic that is common with budding entrepreneurs. I think I was particularly fond of our talk because many of the founders I speak with, and myself included, can personally identify with Max. He was very (rightfully) confident with the management experience and creativity that he had on tap, but was intimidated by the romantic and dramatic portrayal of startups. Specifically, the technical aspect seemed beyond his capacity.
As such, I figured I would publish our dialogue so others could relate and hopefully find some clarity. Here are Max’s questions followed by my answers.
How do I find the right idea to pursue? How did you get started with your businesses?
Generally speaking, the best ideas are organic. I think that more often than not, you can’t force an idea. It has to come from a personal experience, usually a problem that you have and that you want to solve. The idea you pursue should be a product of your passion, your experience, and your available resources. But do be careful about passion. As Toddy Henry writes in his book Die Empty, passion does not mean you merely have an appreciation for, or a liking to, something. It means are ready and willing to go through the hardships to come out on the other side. For many people, the only way to ensure this relentless pursuit is to find a cause bigger than themselves. If you’re seriously passionate, very little will keep you from throwing in the towel when times inevitably get tough.
I suggest keeping diligent notes of every single problem that you come across in your daily life. Problems are merely opportunities in disguise. A problem that you personally have is quite likely a problem that others have. Believe it or not, people will actually pay you to make problems go away. The more painful the problem is, the more they are willing to pay. This is what you often hear referred to as “painkillers vs. vitamins”. Advil outsells Vitamin C because people see the immediate benefit of the former. The latter’s benefits only come from years of use, so it is harder for people to assess it with a present day monetary value. When it came time to start my next venture, I literally had a list of over 300 ideas/problems to choose from. For the last five years, I’ve diligently recorded the problems and opportunities that I’ve experienced everyday. Some of the ideas were crap, a lot were good, and a select few were worth pursuing. I compared those ideas with what I had genuine passion and experience. My involvement with theSharing Economy was the most obvious. Just one idea made the final cut, which is a good starting point since it already beat out 299 other possibilities. Whttl, the Kayak.com for the sharing economy, was born.
I want to get into the tech space, but I’m a bit intimidated that I’m not technical myself.
You have to dismiss this self induced inadequacy immediately. Accept that you will undoubtedly need technical people on your team to make it happen, but understand that you can bring unique talents, skills, and experience that very few people in the world can. No matter who you are or what your journey in life has been like, nobody can replicate you exactly. This is a strategic advantage.
Let’s look at the case study of Nick Woodman, founder & CEO of GoPro, which recently went public and has a market cap of nearly $9 billion. GoPro makes some of the world’s best cameras, and yet the founder is not a technical engineer. The incumbent tech companies like Sony and Samsung had infinitely more engineering talent than Nick and his early team had to produce a similar caliber product. But Woodman had the vision, the drive, and the passion to create more than product. He created a movement, a lifestyle, a community. GoPro is one of the most powerful brands in the consumer electronic space, and even more so in the actions sports industry. Very few people in the world were capable of coming up with the same recipe that he had for building GoPro into its current form. Woodman took advantage of his passion and ability to build a culture, and empowered himself to avoid being slowed down by any engineering shortcomings.
If I’m being honest, I too have had feelings of technical inadequacy. I still battle with this. In the software world, knowing how to code is like having an invitation to the hottest nightclub in town. Every once in a while, the door swings open, and you get to peer in and see a glimpse of the party. But alas, you aren’t allowed in, no matter how much you try to bribe the bouncer. It seems exclusive and selective… and you feel like an outsider.
However, it is within your control to change this. Nobody was born knowing how to code, it all came with practice and experience. Sure, becoming a great programmer requires years, if not decades, of experience. Many expert programmers began coding in their early teens, but it doesn’t mean that you’re a lost cause by the time you are 25. Think about how much you could know in 5 years if you started today. As the Chinese proverb goes: The best time to plant an oak tree was 20 years ago, but the second best time is today.
Don’t think of achieving programming knowledge as daunting nor insurmountable. It is not binary, meaning that you either know code or you don’t. There is a spectrum, and every bit you can advance helps. After all, you aren’t looking to become an expert programmer, you just want to demystify it a bit. Apps like Treehouse and Codecademy can make learning code easy and fun. Learning to code will 1) allow you to talk the talk and help you with project management, 2) lift the veil of the some of the dark-magic-mystery that shrouds programming, and 3) make you more confident overall because you’ve added another skill to your repertoire.
As a sidenote, there is a paradox in learning code. At the same time learning to code reduces some of its secrecy, it makes you realize just how incredibly valuable talented programmers are. There is a lot of talk about how programmers make unfairly exorbitant salaries. Well you know what? I think they deserve every bit of it, perhaps even more. When you can understand the work that goes behind the scenes, you’ll get a better understanding of the products and the people that build them.
If I find a technical cofounder, what is to keep him from stealing my idea?
Paul Graham states in one of his essays that “Starting a startup is too hard for one person.” (See number one.) If you find a technical cofounder that thinks he can run with the idea, he’s mistakenly optimistic. At the early stages, building product will occupy nearly all of an developer’s time, leaving little resources for promotion and harnessing feedback. To paraphrase Eric Ries in his biblical-esque book The Lean Startup, there are only two things you should be doing in the beginning: building code and talking to users, the latter requiring promotion of the product. To do all three of the aforementioned items, at a bare minimum, takes two founders working full time.
I think even more importantly, you shouldn’t be going into business with anyone who you don’t completely trust. You should have an existing relationship with any founder. Remember, it’s like a marriage. You can meet someone and get married that same week, but empirically, marriages seem to have a higher success rate if you date for a bit.
Perhaps instead of starting my own thing, what about joining an existing small team?
Mathematically speaking, joining a small team is not the optimum choice. The risk/reward ratio is not as favorable as it is with doing your own thing, or even joining a more established company. Last year, I was offered a position with a 10 person team, and part of the offer was a 0.1% equity share. The company was later acquired for $13,000,000. Certainly not a bad overall exit, but I would have made only $13,000 off that deal, after my shares had fully vested in 4 years. Given that the risk of failure was still present, this was in no way worth it. Bear in mind that this is only financially based advice. There are other intrinsic reasons to join a small team, such as for learning, camaraderie, experience, etc. These may outweigh any economic approach for you.
Let’s look at an extreme example like Facebook. When the company had its IPO, over 1,000 employees become instant millionaires. If you joined Facebook when it was already relatively large at say, 600 employees, you were later granted a life changing cash sum. All the while, there was little risk that the company would fold by the time you joined. For these early-ish employees, they got the best of both worlds.
Finally, when you create your own company, you have the biggest potential reward. When companies are sold, it is usually for at least millions of dollars. Granted, the risk of complete failure is also the greater than joining a team of any size, but the risk/ratio reward here beats any of the alternative options. Assuming you don’t take on any personal debt, the worst financial outcome is the opportunity cost of a (bigger) salary during the life of your company. If an exit comes though, it is positively life changing.
Should I start a startup, or a small business?
Peter Thiel’s thesis in Zero To One is that a startup is a company that creates a product or service that has never existed before. Paul Graham takes it one step further by saying that a startup is, by definition, a company poised for rapid growth. I think it’s important to understand the difference between a small business and a startup, because the latter is radically overused, especially with the term’s rise in notoriety over the last few years.
Just like the previous question, it boils down to risk versus reward. All else being equal, a small business probably has less inherent risk than a startup. After all, others before you have already blazed a trail. You aren’t reinventing the wheel. But alas, basic economics suggests that with a smaller risk comes a tradeoff for a smaller potential reward. Startups have huge risks, with the vast majority failing in the first few years. However, the proverbial big payday can be massive.
When assessing your choices, think about your long term vision. How big do you want to grow? Do you want to create or execute?
Henry Ford said “Whether you think you can or you can’t, you’re right.” If you are thinking of starting a startup, don’t count your shortcomings. Focus on what you do have, work your ass off, and never ever give up. I promise that something will come out of it.
