Third Year MBA

I just got back from a 10-day Vipassana meditation retreat. This was
my second retreat, and it was a much different experience from the
first. Very tough, but one of the most rewarding things that I've
done.

One of my biggest takeaways happened on the final day, as I was doing
a last bit of deep work. Since I began practicing Vipassana, I have
noticed a certain heaviness in my muscles as I meditate. After a
while, I started to ignore this. But it came back during the retreat,
and I realize that this heaviness was in fact tension. If I actively
relaxed my muscles, the tension went away, and I became much more
comfortable and peaceful. So the whole time I was making my life more
difficult by unconsciously resisting the process that I was putting
myself through.

I realized that we spend a lot of our time fighting ourselves. We
doubt, undermine and second guess. This is wasted effort - very little
is gained by doubting a decision that you have already made. It does
make sense to reexamine a decision after sufficient time has passed,
but this is much different from constantly worrying or reanalyzing.

Sometimes we fight ourselves by doing things that are contrary to our
nature. I am at the heart a product engineer. I build cool products
that people find useful. This is what makes me happy, and motivates me
to work day after day. If I need to sell a product to make my business
succeed, I am perfectly willing to do that. However, I will never be a
sales person. I will be a product engineer who happens to also sell
products. Everything that I do will start from my core skillset and
motivation, and flow naturally from there. To do anything else is to
deny my nature.

So you can't do it by yourself. That's what everyone told me getting
into this, but the last several months have cemented that. In order to
survive as a startup founder, you need to build a team. Figure out
what your skills are, and find people whose skills complement yours.
At the same time, you need a shared vision and passion. To be honest,
the idea isn't as important as a shared love for a given process

What does this mean? You need to find people who have both the right
skills and the right goals. In my case, that requires finding people
who can do the things that I can't, who are passionate about building
a company, and who are willing to stick with it no matter what. When I
talk to the founders of successful startups, I'm amazed by what they
were willing to do to succeed. Some of the stories are actually pretty
incredible (on some level, it even sounds glamorous in the aftermath,
although they were just doing what it took to scrape by). Sometimes I
wonder whether I have what it takes, but then I remember that every
path is different, and that you need to be willing to follow your own
path.

So, to get back to the original topic, I think that there are two
major types of companies. There is the hub and spoke, where there is a
single founder, and everyone else plays a support role. Some people
manage to make this work - usually the strong personalities who always
need to be in control. The startup founder is kind of like the
dictator of a small nation or the founder of a cult. Everything goes
through him, and other people are sort of drawn to the energy that he
puts out. I don't think this is for me.

Then there is the collaborative model, where you have a couple of core
founders, each of whom has an equal (or mostly equal) stake in the
company. Decisions diffuse out of this group. Each founder has control
over a sphere of influence, and although everything is discussed among
this group, the controller of each function is responsible for the
execution and the outcome. In order for this to work, you need fairly
equal strengths, and everyone needs to be both willing to stand up to
the others and to yield when appropriate.

I'm not sure whether this post makes much sense. I'm trying to reason
some of this stuff out as I write it.

I was at a conference today doing Guerrilla marketing (we showed up
and were randomly approaching people on the expo floor), and I
realized one of the important principles of succeeding at a startup
and at life. I have been doing this for a while in other areas of my
life, but had never formalized it. I can simply sum it up as "do it
again." In short, whatever you are doing, do it one "bonus time"
before you give up. If you're going to call it a day, follow up with
one more customer. Build one more feature. Do one more thing.

In today's case, I was pitching a product. I would approach a
customer, do a short pitch, and hand them a sticker. A couple of times
during the day, I had to go to the bathroom or to get a snack. On the
way to the break, I had to find and pitch one more customer. Often
times, that pitch would go surprisingly well, and I could feel good
about taking a break. Even if it didn't, I had still accomplished my
goal.

The Theory
This tactic works well for a number of reasons. First of all, there is
a motivation to do that last pitch (getting to go home/to lunch/to the
bathroom), so you are inspired to do it. In addition, we seem to be
motivated to quit at a high note. To get optimal efficiency, you
always want to push yourself just a little farther than that high
note...

I view any practice session as kind of a bell curve. The first few
times you do something in a day, you are rusty, or maybe you don't
have the skillset down. After you do it for a while, you start to
rapidly get into the zone, and your performance improves. Then you
peak, and it levels off. This is typically where you first want to
quit. You feel good about yourself (validated), and don't need to keep
going. If you keep pushing yourself, apathy and fatigue sets in, and
you start to fade slowly, and then quickly. Finally, it starts to
level off as your performance approaches zero.

So where do you want to quit? Most people quit at one of two places.
At the top or the bottom. I would argue that neither is the correct
place. if you quit at the top, you feel great about yourself, but you
have untapped potential (half of the bell curve). If you quit at the
bottom, you maximize your potential for that day, but you probably
damage your self-confidence. The next time you try, you will remember
the hard part at the end, and this will damage your performance.
Obviously it depends on what you are doing - if you are pitching at a
once-a-year conference, you might want to go all-out to fatigue. But
if you're going to do this again tomorrow or next week, this may be
counterproductive

My System
Here's my system for figuring out where to quit. You wait until you
hit the first point where your brain tells you it's time to quit. At
this point, you come up with a count. Typically not a high number (I
usually do one or two, although in some rare cases it will be five or
ten). You tell yourself that these are just bonuses, and that if they
don't come out as expected, who cares? At this point, you force
yourself to do that many more iterations of whatever you are doing. As
soon as these are finished, you quit (regardless of the outcome). If
you do this correctly, you should still feel good about yourself, and
you shouldn't feel burned out. The first iteration should be about as
good as the peak, and the second iteration should be slightly worse
(but still pretty good).

When I got into this, I thought that a startup was a road. You started
at one end, and marched along to the end. It could be a long and
winding road, but you essentially moved in a straight line. It starts
with a concept, and progresses to a business plan, and then to a demo.
You build a product, get customers, funding, etc...

What I have realized along the way is that this concept isn't
necessarily true. Maybe your business "catches at some point," and
then you race on towards the goal. I suppose that, if you are either
exceptionally lucky or exceptionally skilled, that you might always be
making progress.

However, the startup life is more often a journey. Imagine wandering
through the jungle, trying not to get eaten by a lion or tiger. Maybe
you have a jeep, or possibly you are on foot. I feel like we are on
foot. You wander for a while, and maybe you eventually come to a road.
Sometimes you hit a dead end, and have to backtrack a bit to find the
route. At other times, you become so entangled in the thicket that you
have to hack your way out (is there even a thicket in the jungle?)

So, enough of the metaphors - let's try to be concrete. One of my most
interesting/important learnings is that there is no one telling you
what to do. You need to figure it out, based on imperfect information.
There isn't even a single correct move to make at each point in time.
Every day, you need to figure out whether what you are doing is
correct, or whether it makes sense to bag it and change directions.

Is your idea stalled, or is it dead in the water? Should you give up
on selling to restaurants and move over to Facebook Applications (to
take an example from my current situation)? Is it better to focus on
one project, or to make smaller bets on a bunch? Is direct sales or
internet marketing the best way to sell a product? Should you keep
going in the same direction for a few days longer, or should you cut
your losses and bail?

The life of the startup founder is one of many hazy possibilities. I
think that my next post is going to be about advisors...

So, there is one question that I constantly ask myself, and that's
"Why am I doing this this?"

I think that it's a question that every startup founder should be able
to answer for himself. In my case, it comes down to a few different
things.

Before I went to b-school school, I was an engineer at Google. It was
a comfortable existence, but I felt like my potential impact was
fairly low. Big company, lots of bureaucracy, and even though there
was lots of total impact, the impact of the average engineer was
pretty low. When we launched Google Page Creator, it literally took me
six months to get through the launch approval process (lots of checks
and reviews by various people). I understand why they were in place
(to be honest, we were still under prepared when we launched), but it
ate up a LOT of my time. Time that I could have spent making the
product better (we were understaffed for pretty much our entire
existence).

Google paid me well (I can't complain about that), but overall, it
seemed fairly hard to do something big-risk/big-reward. Rewards (as
they should be) are generally distributed according to how much risk
you take, which often equates to how early you join. Paul Buchheit
made a lot of money from Google not because he created Gmail, but
because he was one of the earliest employees. I would actually argue
that his earlier contributions had higher impact to the company than
creating Gmail (which has high mind share but AFAIK hasn't been hugely
profitable). There were some big rewards for contributions that had
high impact, but these were somewhat arbitrary, and typically went to
teams fairly close to the company's core business (usually having to
do with the ads system). For the average person working on a
non-search product, the upside was essentially a nice salary, a
generous bonus, and some fairly good stock options (depending on when
you joined).

For most people, this was great. Many of the people I worked with are
still at Google (with the exception of some of the most ambitious). I
have a bunch of friends who left school and are working at comfortable
corporate jobs. I can't criticize these people. They are doing
important work for important companies that have impact on our daily
lives. In my case, however, I wanted something more. I really wanted a
few things (in order of importance):

1) To create new things that were my own. There is nothing more
rewarding than creating a product and having people actually use it. I
love thinking up ideas and putting them into practice. There are
definitely advantages to doing some of this within the framework of a
big company, but in this case, you don't really own the resulting
product. I wanted to create things and get them out there.

2) To learn about business. As an engineer and as a consultant, I was
exposed to a small slice of the business as a whole. The best way to
learn is to actually do it. While I have no intention of working a
corporate job moving forward, I would argue that entrepreneurship is
actually the best career move I can take at this point. I will learn
what I'm good at, what I'm not good at, and what I can develop.

3) To take more risks. I don't mind taking risks in exchange for
reward. I felt like I was too risk-averse in my career up to that
point. While I'm a fairly calculating person, one of my current goals
is to take smart risks. I feel like (especially at this point in my
life) a startup is a fairly low-risk endeavor that potentially has
huge upside. For me, the upside isn't a huge thing (I really can't see
how my life would be significantly different if I had a few million in
the bank), but there is definitely a thrill in knowing that my actions
directly influence my outcome. Every morning, I wake up and think
about what I'm going to do and how that will affect the company's
outcome.

So that's why I'm doing this. What would be your reasons?

A startup founder needs to speak at least two different languages. And
I'm not talking about speaking Chinese and English, or Ruby and Java.
Those are nice, but definitely not essential. What I'm talking about
are the languages "customer" and "investor."

So why do we need multiple languages? When I started doing this, I
assumed that you came up with a single vision of what your company was
doing, and that everyone would understand it. One consistent vision
internally and externally - boy was I naive. It all started to gel
when we decided to switch directions with our product. We were feeling
sort of lost, so we had a conversation with our seed investor. He
mentioned "demand pricing." We were excited - this was going to be the
next big thing.

The problem was that when we started to actually discuss this with our
potential customers, they had no idea what we were talking about. The
concept was completely foreign to them, and even when they understood
it, they didn't really like the idea. So we asked them what they
wanted, and we built that. When we showed the product to them, they
seemed pretty happy, and wanted to buy it. But then we talked to some
potential investors, and they were completely lukewarm about the same
things customers had loved.

"Sure you can make some money on that, but your sales model is too
hard to scale, and it's not a big enough idea. It isn't going to be
the next Google." This confused us. How are we supposed to build
something that our customers want AND that investors want to invest
in? Then it hit me - we need to say the same thing in multiple ways.
You tell the investors one thing, and the customers a different.
Essentially you're saying the same thing, but in terms that each can
understand and relate to (I'm in no way advocating lying to either).
One wants a huge potential market opportunity, while the other wants a
product that is useful for them.

If you do it just right, everyone ends up happy. The customer gets
what they want, and the investor gets a long-term vision that they can
invest in. And you as the startup founder only need to do a bit of
juggling.

So I think that the biggest shock of my short entrepreneurial career
has been sales. Sales is hard. It's easy to sit in your ivory tower
and build a product, but SOMEONE actually has to sell it. Unless you
build a product that no one buys, which is monetized indirectly
through ads. Then you build all of the cool features that you want,
and hope that people come and click on your ads. But that's a
digression, and probably the subject of another post entirely.

Returning to the point, sales takes skill and real work. You build
your product, and talk about the millions of users, but then you have
to actually go out and get people to pay you money. So you mean they
won't just magically come beating down your door and asking to give
you money? Well, in some cases it may work this way, but most of the
time you will have to seek them out. At least until the "viral effect"
kicks in and you experience hockey puck-shaped growth (ha).

So, in our case, we knew next to nothing about sales, at least in our
industry. I sold knives the summer between high school and college. My
business partner did a bit of telesales in the financial industry.
Walking into a restaurant and trying to get them to buy a product was
a completely different situation. No worries, though, because we were
willing to try. And we've done a lot of trying.

So here's another interesting concept that I didn't quite grasp from
business school. Even when the customer interested in the product off
the bat, it still seems to take several meetings to get them to buy.
I'm starting to understand things like cost-of-sales a bit better. You
really can't sell a product for $50 a month if you have to make three
pre-sale visits to the customer. They definitely tell you this stuff
in business school, but you don't really learn it until you actually
experience it. Eventually, you start to understand how much money you
need to make to support yourself, and then you can use that to figure
out how much each sale should be worth. Sure, you can hire dedicated
people to sell, but they add to your fixed costs. As a founder, you
can pay yourself next to nothing, but your employees don't expect the
same deal.

Which brings me to my next point: switching hats is hard. Paul Graham
and Joel Spolsky both talk about the cost of interruptions (skip to
point number 8). I have found switching hats between sales and
engineering to be very costly. Not only do you have to switch hats,
but you also have to switch mindsets. After spending some time
selling, I have a lot of trouble switching into engineering mode.

Anyways, more on this later...

I'm starting this blog to catalog the journey through my third year of
business school. BUT, you say, the MBA is only two years. I guess that
it is for most people, but for me, the classwork was just the
beginning. One of the chief criticisms of the MBA is that it creates
"managers" who know it all but don't actually know how to do anything.
I took this to heart, and upon graduating, I decided to undertake the
optional one-year practicum, also known as entrepreneurship. After
spending two years learning about finance and marketing and sales and
operations, I actually get to do all of them (often simultaneously) as
a startup founder.

We're starting sort of in medias res, so I'll go back to the start and
give you a bit of history. I think that it all started in November
2008, when I had an idea for a new product. Actually, I'll give credit
where it is due, and say that it was a joint collaboration between
myself and my friends Tyler and Mike. Anyways, we were out drinking,
and had one of those aha moments where you are like "why couldn't they
do X," and you realize that you might as well be "they." The product
(a replacement for the restaurant buzzer that sends you text messages
on your cell phone) wasn't nearly as important as the cascade of
events it set off.

So, anyways, this one aha moment led to me entering MIT's business
plan competition, forming a team (more on that later) getting to the
semifinals, applying for and receiving a bit of seed funding (at least
a post or two on that as well), and moving to Northern California
(highly recommended in any case). I guess that the real story starts
around the beginning of June, when we filled out the incorporation
paperwork and started doing this full-time. It has been about two
months since then, but I feel like it has been about a year.

Paul Graham really wasn't kidding when he said that a startup allows
you to compress an entire career into a few years. I've seen a few new
gray hairs on my head, and I'm definitely more forgetful these days.
Anyways, back to the grind. I have a big demo coming up tomorrow, and
we need to push a build before that.