“If we live in a world where the technologies we’re talking about are for rich white people in Silicon Valley then we’ve failed. The idea is to try and distribute this technology as broadly as possible.” –Bill Maris, founder, Google Ventures
And then there is the question of what purpose our economic growth actually serves. The most common advice V.C.s give entrepreneurs is to solve a problem they encounter in their daily lives. Unfortunately, the problems the average 22-year-old male programmer has experienced are all about being an affluent single guy in Northern California.
The average U.S. entrepreneur is educated with a college degree, closer to mid-career in age, from a higher income household, and more likely to be male. He is likely to be opportunity-motivated and comparatively likely to be operating in the knowledge-intensive sector (business services).
Most of the under-thirty entrepreneurs whose startups have a strong social side found the problem while traveling or doing some kind of volunteer work and used ingenuity and tech-as-appropriate to solve it.
The opportunities to change the world are numerous, all you need to do is open your eyes — if a 13-year-old can think of way to change the world, so can you.
Rellas wanted to disrupt the way liquor is purchased.
The idea was pure and incredibly simple: Alcohol delivery, connecting consumers to local retailers at the touch of a button to have alcohol delivered in just 20 to 40 minutes.
The problem is that liquor regulation makes the taxi industry look unregulated.
The question, given the amount of regulation and the fact that it differs state-to-state and even city/county-to-city/county within each state, was where to start.
Where many would have chosen to start in the least regulated market to get traction Drizly took the opposite approach.
We started Drizly in Boston, MA, a city steeped in alcohol lore and one that is so tightly regulated that there are no happy hours.
If you think he was crazy, then he was, as they say, crazy like a fox.
The definition of a tough (or hard) question is one of the the most critical things that everybody needs to know.
And it’s incredibly simple, too.
It’s something that every salesperson learns immediately, but it applies to any industry, field, situation or effort.
Rellas believed if Drizly could address every regulation in Boston, then they could address regulations anywhere — and he was right.
What we formed was a cookie cutter model of adding supply to our network that now scales with minimal capital and human investment and has allowed us to expand to over 18 cities in as many months.
Rellas wraps your take-away perfectly.
So ask the hard questions. Answer them upfront. Be truthful about your answers. There are reasons why great ideas won’t, or didn’t, work. We fight those every day. Some are insurmountable, others are not. Knowing which mountain to climb is as much of the challenge as the climbing itself. But by not asking and answering the hard questions, for a new business or a new line of business in an existing one, we’re doomed to fail from the very beginning.
A Friday series exploring Startups and the people who make them go. Read allIf the Shoe Fits posts here
Are you one of the many founders who revel in a so-called startup culture that eschews structure and ignorantly confuse process with bureaucracy?
If so, you aren’t doing your company, your people, your investors or yourself any favors.
In a 2012 post I quoted Paul Graham, co-founder of Y Combinator, regarding the need for financial controls and frugality during good times in order to survive the bad ones.
The number of leaders, investors, academics and others who have recognized the impact culture has on success is as diverse as it is numerous — ‘culture eats strategy for lunch’ didn’t become a catchphrase by accident.
“The single largest issue that causes the most emotional heartache in a startup is people challenges. Every organization has them. If you put best HR practices into place in the earliest days and are doing the right things right, you’ll have fewer and fewer issues and blowups.”
If you want to build a successful company you need a solid base that includes a consciously designed culture based on your values, financial controls/accountability that engender frugality and best HR practices that enhance growth, while protecting the company.
There are dozens of startups working on wiring everyday products to become part of the Internet of Things (IoT) and a few weeks ago I cited an article that raising money in that arena was tied to building security into a product from the beginning.
Security used to be a function to which consumers gave little thought, but that is rapidly changing.
The result of their work was a hacking technique—what the security industry calls a zero-day exploit—that can target Jeep Cherokees and give the attacker wireless control, via the Internet, to any of thousands of vehicles. Their code is an automaker’s nightmare: software that lets hackers send commands through the Jeep’s entertainment system to its dashboard functions, steering, brakes, and transmission, all from a laptop that may be across the country.
And if none of this makes IoT startup founders rethink their cavalier attitude towards building tough security into their initial design, perhaps this comment from Colby Moore, a security research engineer at the cybersecurity firm Synack, will make them think twice.
“Really, the state of security on these things right now is pretty atrocious… A lot of these device manufacturers are just not security people and they really just don’t have security people on staff, especially when it comes to IoT start-ups. What they are doing is phenomenal with all of these new uses for technology. But security isn’t a concern for everybody. It’s ship now and patch later mentality.” (…) If you are worried about it then don’t put yourself at risk. It’s kind of up to us to demand a higher security standard and hold the manufacturers to it.”
In 2011 I wrote You Are Not a Godciting the need for the same reminder to be given to entrepreneurs as the Romans gave their generals when they returned from a successful campaign.
That wisdom should be given all entrepreneurs. It should be drummed into their heads at all stages of the entrepreneurial process.
Of the 242 entrepreneurs he surveyed, 49% reported having a mental-health condition. Depression was the No. 1 reported condition among them and was present in 30% of all entrepreneurs [as opposed to the US population at large, where about 7% identify as depressed], followed by ADHD (29%) and anxiety problems (27%). (…) More surprising was the incidence of mental health in the families of entrepreneurs: 72% said they either had mental-health problems themselves or in their immediate family.
Depression is not uncommon in the US, but add the indescribable pressures that are part and parcel of entrepreneurism and you can end up with a deadly brew.
One reason for the high suicide rate among entrepreneurs.
But there is another major reason, especially in places like Silicon Valley, where entrepreneurs are considered some kind of god.
When you are a member of a god-like crowd you are unlikely to talk about personal problems, especially if the problem would affect funding, hiring and eventual success.
What happens if you don’t talk about it and you don’t look for help?
It gets worse — and worse — and worse, until death starts looking like a good option.
Which is a very stupid attitude for very smart people to have.
“There’s lots of people who go through depression without access to support. We are not those people. What creates that barrier to support is that notion that a CEO is a strong, tough male figure who acts masculine and doesn’t ask for help or assistance.”
Knowing how entrepreneurs think, it’s not surprising that a partial solution takes the form of a startup by clinical psychologist Glen Moriarty.
Moriarty’s 7 Cups of Tea is a free, on-demand, internet-based anonymous listening network, which has a special section dedicated to listening to startup founders’ problems. Since launching the startup section, Moriarty estimated there have been more than 10,000 anonymous conversations.
Moriarty is pretty pragmatic.
“I don’t think there’s an outlet for much of society. I don’t think we’re doing a particularly awesome job caring for people in other professions either. It just happens that we care about startups.”
So if you or someone you know isn’t doing too well and not talking about it it is your responsibility to talk to them, share information/links and encourage them to start talking.
Be vulnerable, not superior and, whatever else you do, don’t brush it off with some version of “don’t worry; you’ll feel better when…”
You wouldn’t ignore it and let your friend drive drunk, so don’t ignore the possibilities of depression — even when everything seems to be going right.
We met at the end of the last century over our startups.
Like me, Emily isn’t a twenty-something-guy-in-a-hoodie.
She founded OnlineHR, one of the earliest social networks, in 1999. Then 47, “I didn’t know what I didn’t know.”
Emily is back with a vengeance as an entrepreneur, although she never really left. She reached into her past to pay the bills, while searching for her next startup idea.
In search of that next unidentified problem and solution, White returned to social work 30 years after earning a masters degree. Working for five organizations—all of them related to geriatrics, a personal interest and expertise—over the course of seven years, she “saw the problem was in care transition.”
In doing so, she also tapped into her passion for better senior care and combined it with technology to find a viable, affordable solution in the booming healthcare arena.
All of that led her, at the age of 61, to two 20-somethings, both MIT graduates, with a big idea. In 2014, White joined GeriJoy as co-founder and vice president of strategic alliance. GeriJoy is a tablet-based chronic care management and virtual caregiving tool backed by real health advocates. Bottom line? GeriJoy leads to lower hospital readmission rates. (…)GeriJoy has already successfully reduced emergency room readmissions for users and, in tests, had good results with people who are experiencing various forms of dementia. The combination of a human interface and artificial intelligence puts GeriJoy at the forefront of healthcare tech start-ups.
Contrary to popular media, nearly a quarter of startups are founded by the over 55 crowd.
Leaping in to entrepreneurialism as an older adult, White is not alone. According to the Kauffman Index of Entrepreneurial Activity, 1996-2011, 23.4 percent of American entrepreneurs in 2013 were people between the ages of 55 and 64, up from 18.7 percent in 2003.
Most of the responses were justifications from VCs, but two provided a refreshing dose of reality.
Not surprising that neither are VCs.
The reason they want warm intros is because they are too lazy to research things themselves and many of them don’t know anything about starting a company or building one. The smart experienced guys at the top who have actually done something are too busy so they have the dime-a–dozen MBAs they hire do grunt work. Since the d-a-d has never actually built anything, and doesn’t really know what you do, they want a “warm” intro. Warm means someone else they can blame if they screw up yet again. —David Feldman, CEO, ZF Micro Solutions, Inc.
Classism. No further to look than that. Let’s not make it complicated by trying to avoid the unpleasant. —Michael O. Church
A Friday series exploring Startups and the people who make them go. Read allIf the Shoe Fits posts here
One of the hardest things that founders/startups face is the need to grow up and stop shooting from the hip.
I hear the reasons not to all the time
It will ruin our culture.
It stifles creativity.
It’s for larger companies.
It’s bureaucratic.
It’s too time consuming.
“It” refers to the underpinnings of all successful companies. “It” includes the following, or variations thereof, in order of importance:
Financial controls that include, but are not limited to
monthly statements of revenues by product;
discounts;
costs by department;
cost of customer acquisition;
stock issuance;
cash flow;
hiring by department
Hiring process
Annual operating plan covering the above financial measures
Organization charts and definitions of responsibilities
Long-term planning
Centralized information technology implementation and planning
Whether it’s just you, or one, ten, fifty, or more employees, whether full time, part time or virtual, you need viable processes to keep you focused—think of it as coloring inside the lines.
Everything on this list can, and should, be tailored to your business model, but financial controls of one sort or another and a good hiring process are necessary to any business.
Sure, they can’t all be implemented at once, but none of them will happen as long as your MAP rejects or begrudges them—after all, you’re the founder and people will follow your lead.
There are a tremendous number of companies looking for access in the space of early ventures. It is hard to compete against all the din.
This year’s Founder Showcase included a few dozen interesting companies at the booths. So it is not strange how even a very sophisticated and advanced companies can get overlooked.
So, what do venture capitalists look for?
Each level of the selection process for a startup is brutal in its selectivity and uses a different filter. The filter applied at the Founder Showcase was one of popularity. This induces biases that businesses and investors wouldn’t have.
One start-up, Quarrio, was the only company using AI to solve a hard problem – one of making data in tables accessible using plain English. It is a usable and complete product relative to others at the showcase. It was filtered out of the pitch competition.
The pitch competition included a selected few companies:
Makerblok: Making educational electronics for children.
Ampl: A bag that can charge all your devices so that you don’t have to worry about charging each device. Is cool but is too heavy.
Theo: MLS quality data (much more accurate in price compared to Redfin). Also there is an argument that there are many features/amenities that Real Estate agents desire.
keepe: This is a startup based in Seattle offering handyman services guaranteed in 1 hour.
Trato: This company serves up customizable legal documents to make it easier for the masses to do business.
On the Problem: VCs generally want to know how much pain is there in the problem. Who faces the pain and how much the solution removes the pain. How big the market is.
Solution: They need to know how the startup solves the problem. How credible the solution is. If there is a technical moat around the solution. Sometimes the moat is market share. If so the biggest advantage is swift execution.
Scaleability: Building connections one at a time is hard. There has to be a plan to reach people quickly. There is a lot of noise around. There should be a plan to get the business past the noise.
Capital intensity: The question here is how much money needs to be invested in the solution before it starts cash flowing. High capital requirements increase the risk.
Team: Investors look for teams when investing. Teams increase stability and credibility. A team with a background in their field of expertise is more likely to create a moat of competence. Similarly a team that has worked together for a long time is likely to work well.
Generosity: Kickstarter is another example of a generous startup that has succeeded by making many other people succeed.
A life-sciences called Suntowater was voted the best in this Founder Showcase event overwhelmingly by both the crowd and the judges. It solves the problem of clean drinking water from the humidity in the air using electricity generated by a solar panel. This innovation is considered generous because it is most useful to the underdeveloped world.
The general recipe for a successful startup is to relate to people, then promise a great future and connect the dots.
Chamath Palihapitiya, Founder of The Social+Capital Partnership, had great insights to share about the makeup of a wildly successful startup in the future. One source of information is the trend in the tastemaker in society.
In an earlier era individuals and companies paid a lot to get attention from consumers through selection by the tastemaker: companies such as AOL who rented their landing page for millions or radio stations that chose the music to be played.
Now the mechanism of taste selection has become “likes” on Facebook where everyone has a say. The downside of this mechanism is the noise. Facebook is likely to face creative destruction as the pendulum swings.
Chamath thinks that the next generation of companies will have multiple lightly curated channels either selected by humans or by algorithms. An example is Patrion, where people support the art they like, similar to Italy during the Renaissance.
Fixing education is an interesting problem. Linda frames education as a way of learning skills. This is more enlightened than the idea of education for its own sake. Startups that solve a problem can expect better reception.
In the past software giants like Microsoft and Oracle were dominant.
There has been a shift towards SaaS.
The next shift is expected to be towards outcomes as a service such as Uber.
For the investors, Warren Buffets letter to shareholders says that he sat on money for over 1/3rd of the time.
Chamath expects a funding hiccup in 2-3 years. Many companies are raising a lot of money in the current bubble. The easy money has to end at some point.
Companies that don’t have a sufficiently good product to market fit will suffer. But it’s mostly their employees who have given up pay to get stock options who will lose big.
Chamath’s advice to entrepreneurs is to raise money when the going is good and sit on it till the company figures out a good product to market fit.
Did you know that Peter Diamandis didn’t have 10M$ when he announced the 10M$ prize? Nobody asked about the money since he cleared the line of credibility. He had astronauts and the NASA chairman beside him when he made the announcement. Strangely, the winning team spent about 30M$ to earn the prize.
So, where did the money come from?
Peter approached about 150 people who declined to fund the prize. That is a lot of rejection!
Richard Branson declined to fund twice. After a lot of insecure moments, they found that there is insurance against unlikely events that could cover this event.
A private company going to space was considered unlikely, so he was offered a $3M premium to insure against the outcome. He negotiated it down to a 50k/month premium. Then it was a question of finding people who would support the bet on a monthly basis. This spreads the pain out, but it lasted for ever.
Richard Branson marched in weeks before the prize was won with an offer of $250m to commercialize the winning tech so that he could have his picture taken with the winners.
Entrepreneurs face difficulties that are hard for most people to imagine, let alone understand. You can find anonymous help and connections that do understand at 7 cups of tea.
Crises never end.
$10 really does make a difference and you’ll never miss it,
The holidays are here. Few real startups are in a position to throw lavish parties — or even modest ones.
