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CHAPTER 1
The Early Days
WHEN YOU WANT TO START A COMPANY
Dear Founder,
Really?
Why do you want to do this? I hope it's not because it's the cool thing to do ... it's easy to become an entrepreneur, but it's way harder to become a successful entrepreneur!
These days it seems everyone wants to be an entrepreneur. People become enamored with the idea of pursuing their own passion and being in control of their own destinies. Yet that's a romanticized notion of what really happens.
I hate to be the bearer of bad news, but most entrepreneurs fail. It's not just the statistics that show us this; it's also common sense. It's very hard to turn an idea into reality, and even harder to turn that new reality into something of great significance.
Sure, we know the breakout stories — those A+ ideas that took off from the beginning, like Facebook, Google, or eBay. Yet the fact is that these companies are very rare. Oftentimes, the world is not ready for a new idea and the majority of companies don't get traction. Intrepid entrepreneurs go back to the drawing board and pivot, but that maneuver is not representative of the reality of startups. Most companies fall in a middle space — there's some traction, but the flywheel isn't spinning, and you're not sure if the idea will scale. This uncomfortable middle place is what I call a "tweener" and it's a dangerous place to be.
So, you're still keen on starting something? A number of questions for you:
• What are your motives? Are you in this for money or impact? You must know what you're really chasing; otherwise, you'll never find it.
• Do you have an idea that you are deeply passionate about? This question is perhaps the most important one. If you pursue your idea, you will likely be waking up every morning of the next two to ten years touting its value not just to your employees, but also to your customers, to your friends, to your family, and to your significant others. Even if you are the first to realize the concept, large entities and new startups will be quick on your heels. There are thousands of opportunities for new businesses — pick one that's right for you.
• Do you have a co-founder who will join you? If not, open the letter "When you are selecting a co-founder" next.
• Do you have the right team to take this on? Often, the best teams have spent much of their time working together before, through good times and bad, with each member bringing something distinctive to the table.
• Are you comfortable with risk? If you need certainty, being an entrepreneur probably won't make you very happy. At its core, starting a company is a high-risk/high-reward endeavor.
• Can you afford to live on a small income for years in advance? You certainly won't get paid handsomely in the beginning. For example, Eddy Lu (cofounder of one of our portfolio companies, Grubwithus, now called GOAT), slept in his car when he started his company.
• Do you mind working way harder than ever before, and under conditions of much higher stress? You will wear more hats and have more responsibility than you've ever had. You will also be responsible for the well-being of your team, and the satisfaction of your customers.
• Do you really want to go for years without great benefits, long vacations, work-life balance, etc.? There is no balance when starting a startup!
• Do you need outside validation? If you need a pat on the back, you may not make a good entrepreneur. You need faith in yourself; you cannot rely on others to keep you going. Find strength in your passion for the idea and your interest in changing the world.
• How do you deal with rejection and how much grit do you have to pick yourself up and make something out of nothing? Know that conviction is required. You'll get nothing but pushback all day long, from everyone you encounter — investors, people who use the product or service, people who are testing it out. You cannot get depressed at hearing "no" or that your idea is "stupid." Instead, you need to be inspired by it.
If you can get through all of my skepticism and doubt, and you still are game for trying, here's my advice:
• Go for it! There's nothing more fun than creating something out of ether.
• Keep your eyes wide open. Determine the amount of time and resources that you are willing to commit to this project. For example, "I'm going to self-fund up to $100,000 and spend six months testing out my idea," or "I'm going to commit to this idea/company for the next five years without thinking about anything else."
• Make sure your family and friends are supportive of the risk you will take. There will be many sacrifices all around, and everyone needs to be on board and understand the road ahead. Otherwise, you may end up with more pain in your personal life than you desire.
• Can you dip your toe in the water? Can you start trying to do this while you are still employed? I did this when I created WIN, and my early experience encouraged me to transition more quickly.
• Once committed, don't look back and wonder; put all of your energy into making this successful. Pledge total focus and commitment. Building a company is a long-term proposition. Knowing that you're making a commitment for a decade will give you the perspective you need to make it through the tough moments.
Is it difficult to be an entrepreneur? Absolutely. But it's also fun (and terrifying at same time). It's just like caring for a baby. You are excited about the idea, but there are times when everything turns to poop and you're constantly up in the middle of the night. You are going to be tired and frustrated, but also fulfilled beyond anything you could have imagined.
If that sounds right, you are ready to handle the ups and downs of being an entrepreneur. If not, it's not your time to have a startup — after all, unlike with a baby, you can't hire a nanny to do the work for you.
All the best, Maynard
WHEN YOU ARE SELECTING A CO-FOUNDER
Dear Founder,
Well, since you opened this letter, it seems like you don't have a natural cofounder in mind.
That's okay. I'll offer some suggestions below on how to find and vet someone, but you'll need to first accept that the magic formula to finding a co-founder is more complex than it seems. When it works, the equation looks like this: 1 + 1 = 3.
You probably already know that building a business is lonely and hard work. It's easier (but still not easy) with the right partner by your side. Having the right co-founder increases your chance of success, enabling you to go further faster. A few reasons why:
• Having a partner increases your commitment level. Making a commitment to someone increases your chance of following through with your goals. It forces you to answer to someone. Having someone hold you accountable is especially important in the beginning, before you've taken any money from investors (other than perhaps your friends and family, who tend not to pay too much attention to the speed of progress).
• A co-founder can help keep you sane. The days are filled with roadblocks and disappointments and often end with self-doubt. It can be easier to stop doing this work than to continue through with it. A partner who shares the same passion and who is driven by the same goals, vision, and values will offer the appropriate encouragement and pressure to stay at it. You can't underestimate the value of having a sounding board, therapist, and cheerleader on deck.
• A co-founder enables you to do more. A great product person needs a great engineer. A great visionary needs a great operations czar. When I created WIN and Everwise, I did them with cofounders. In both instances I needed someone who was willing to run the organizations full-time. In both cases I also found having someone with me made the whole dialogue richer and the end result better. Different individuals bring different skills to the table, as well as different perspectives. Co-founders often push each other in their respective disciplines — and this interaction drives overall results. Look for someone with skills and abilities that you don't have and that will complement — and extend — your own.
You have to pick the right partner because the danger of making a mistake throws the entire equation off balance. With the wrong partner, 1 + 1 can equal 0. So, how do you find the right person? A few tips:
• Consider someone you know. The best of all worlds is finding a cofounder whom you already know, someone you have worked with before, and someone you trust and know inside and out. Greatness often happens with someone you have already collaborated with. Consider how Jerry Yang and David Filo hacked together in school before building Yahoo! My co-founder at WIN worked with me at LiveOps and my co-founder at Everwise was an affiliate in my investment network. I knew the magic that could be created with these people.
• Determine what they add to the equation. You'll want to select someone with complementary skills (e.g., sales/marketing vs. engineering).
• Get to know them deeply, and spend lots of time together. Founding a company is a big deal. You might want to work your way into it and see if it is working. At Everwise, co-founders Mike Bergelson, Colin Schiller, and I investigated the market and spent a lot of time collaborating before we turned it into a formal endeavor. You have to review how the collaboration is working along the way. Do you crave more time together, or wish it had ended earlier? Does this person bring you energy, or take it away? Early interactions with negative chemistry are not going to get better over time.
• Find references upfront (and back channel). The more of a 360-degree view you can achieve, the better your perspective will be. Look at the references they give you, but also speak to people they did not give you as a reference, but who may have worked with them or know them in a more personal capacity. (Also, if they've given you a reference and it's not strong, that's a big red flag.) Ask others about how they handle pressure and good and bad situations. You'll also want to learn what motivates them.
• Is this the one person that you would seek out to solve the deepest problem? If you are choosing them out of convenience, maybe you need to spend more time looking for a great partner. Look for someone who has the deepest experience in the universe in your topic area. Maybe this person is someone you've worked with before, as was the case with Andy Ludwick and Ron Schmidt who created magic together at SynOptics. Maybe it's someone you've never worked with before, as was the case with Marc Benioff and Parker Harris at Salesforce.
• Make sure you are aligned. People want different things in life. Just as you need to discuss what you want before entering a marriage (e.g., Do you both want kids?), you must discuss what you want for the company — and reconcile any differences. Some people want a change-the-world business, while others want a lifestyle business. Neither is bad, but they are different. Figure out your values and motivators upfront and discuss the following: How do you think about work-life balance? Compensation structure? How big do you want to grow this endeavor? What's the ideal exit strategy?
• Determine roles and equity structure. Are you looking for an equal partner (e.g., 50/50 split)? Or, are you looking for a more junior co-founder? Think ahead about what you want your working relationship to be like. Are you okay being challenged? Are you willing to have this be totally equal in terms of equity even if only one person is the CEO? There are pros and cons and ramifications to each of these decisions and they are long-standing.
There are few decisions that you will make in your company's life — including picking the right co-founder, deciding on the right board members, and choosing a strategy — that have the potential to make more of an impact than any other choices. Take your time and make sure you potentially are making the right decisions. If all goes well, these decisions will be with you for decades.
All the best, Maynard
APPENDIX
Do I even need a co-founder?
Perfectly paired co-founders are as legendary as Hollywood power couples and beloved bandmates. The conventional playbook says that you receive more by working together than you give up by splitting all of the winnings. Yet is the calculus that simple? The good and the bad of starting a business alone versus with co-founders:
THE PROS OF FLYING SOLO
• You retain full ownership of all upsides. There are much stronger financial incentives should the company be successful.
• You have the opportunity to completely define your company culture and business model. Going at it alone forces you to gain experience across all aspects of the business, such as hiring, selling, managing a technical team, fundraising. You'll fast-track a well-rounded education.
• Decision-making is easy. You make all of them!
• You started this business with a vision — and you'll get to keep control of it (at least in the early stages before you have a board). You are the only one calling the shots on evolving the idea, hiring the initial team, raising money, and building the corporate structure.
THE CONS OF BEING ON YOUR OWN
• Even if you have a team in place, it can be lonely to be the only founder and to bear all of the responsibility exclusively. The early days of starting a company can be very difficult — rejections are common and losses happen — and it can be beneficial to have people who are in it with you.
• You lose the benefit of having a debating partner with nearly the same vested interest as you. The toughest decisions in business often involve weighing different sets of opportunities against one another. Having several voices can encourage rich discussions and can bring new ideas to light. With fewer founders, there are also fewer resources to leverage — each founder will vastly increase the network that can be tapped for key efforts such as recruiting.
• You sacrifice the opportunity to gain a partner with complementary skills in areas that you don't have. Often the best product leaders are not the best developers or salespeople. Having multiple founders can encourage specialization and playing to each individual's strengths. Different individuals bring different skills to the table, as well as different perspectives, and different roles.
• There's someone to answer to. Co-founders keep each other honest. A bit of healthy competition can be useful. Co-founders often push each other in their respective disciplines — and that drives overall results.
While there are always exceptions to the rule, we believe that there are greater benefits to collaborating with co-founders. We often find two founders with complementary skill sets to be the best formula for a successful startup. The more self-sufficient an early founding team is (in areas such as tech, sales, marketing), the less dependent it will be on early hires and the more control it will exert over its destiny.
WHEN A CO–FOUNDER ISN'T PULLING THEIR WEIGHT
Dear Founder,
Selecting a co-founder is one of the most pivotal decisions you've made to date. You went in hoping for a decades-long partnership. You've admired what the legendary co-founders — Bill Hewlett and David Packard, Steve Jobs and Steve Wozniak, Larry Page and Sergey Brin — achieved, and you wanted the same destiny.
The reality is that even these celebrated partnerships hit serious and sometimes insurmountable roadblocks. You're not alone.
Still, that doesn't matter now. It's upsetting when you're working your tail off and someone else isn't as engaged or committed. This situation has to get resolved — immediately. First, as always, you need to investigate what's happening to understand what's behind the change in commitment. Suddenly not pulling one's weight is a symptom of something else.
Is the lack of effort new?
Was your co-founder once a tiger, and now is a mouse? Was your co-founder once a "step on the brakes" person that always had to be told to slow down, but now things are not happening at the same pace and you need to tell them to "step on the gas"?
If so, what has changed? Is this something related to work, or not?
Find out why this behavior is happening now.
Do this investigation with an air of wonder. Approach the situation in exploration mode. Never open with criticism; that will not lead to a great resolution.
(Continues…)
Excerpted from "Dear Founder"
by .
Copyright © 2018 Maynard Webb.
Excerpted by permission of St. Martin's Press.
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