Seeker's Journey

Dear Entrepreneurs: Please Stop Shooting Yourselves in the Foot.

Wed, 14 Jun 2017 11:11:04 -0700

I was going to start this post with a few links to recent events, but frankly there are so many it is dizzying to do so. So, I am going to presume if you are reading my blog you are at least a little familiar with what is going on at Uber, including today’s resignation of board member David Bonderman.
Sadly, I see this stuff in startups all the time – unprofessional, juvenile actions and communications initiated by the senior leadership or founders and justified under the guise of ‘we like an edgy culture’ or ‘we were just being funny’ or something like that.
To all of you I’d like to suggest something: Grow up.
Here’s the thing. All your stakeholders want you to win. Your investors provided capital (often with limited control) because of a belief in you and what you are trying to do. Your employees choose to come to work for you every day, over other things they could be doing, presumably because they also believe in that mission.
And you know what is true about your mission? It is really, really hard to actually accomplish it. You are constantly trying to do the impossible, to create products and services that haven’t existed before. You face ridiculous timelines, incredible competitive pressure, difficult decisions that don’t have consensus, challenges with hiring and retaining your people, and of course the looming pressure of continuing to raise capital to lengthen your runway, all in the service of this mission that you deeply believe in.
With all the challenges you face, why do you need to self-inflict more?
Entrepreneurs I have worked with who have found themselves on the wrong side of these issues usually defend themselves with either the ‘culture’ argument or the ‘its my personality’ argument (and of course those two are deeply intertwined.)
To that I ask, is it worth risking your mission? Wouldn’t it be better to understand that these sorts of behaviors do more harm than good? Can’t you create a great culture without resorting to frat bro humor? Don’t all these recent events indicate that perhaps these actions are simply not worth the downside?
I’ve written about culture before, but to summarize, culture is about actions and it almost always is created (whether they understand they are doing so or not) by the founders. If you want my advice, you should build the culture that will best serve your mission – one of integrity, excellence, performance, and delivery of the dream. Anything that diminishes this is shooting yourself in the foot.
Isn’t what you are doing hard enough already?

The Sky Breaks Open Blue sky, finally! The Dish, behind...

Tue, 21 Feb 2017 22:29:20 -0800

The Sky Breaks Open

Blue sky, finally!
The Dish, behind rolling greens
Smiles at the sunshine

Blustery Afternoon Impending rainfall Green leaves shuffling in...

Mon, 20 Feb 2017 00:32:31 -0800

Blustery Afternoon

Impending rainfall
Green leaves shuffling in the wind
Breathing misty air

Helluva Lifestyle Business You Got There

Thu, 02 Feb 2017 11:49:52 -0800

brycedotvc:

Unicorns and venture capital go hand in horn. Or so the story goes.

Have a billion dollar idea, raise a little bit of money, show a little traction, raise a lot more money.

Rinse and repeat.

You can’t compete with out it! They say.

You can’t scale without it! They say.

Weaponized balance sheets have become the competitive strategy of this anabolic age.

Anything less makes for a less ambitious business owner running a “nice little lifestyle business”

But there’s an interesting trend brewing.

If you look at the last 6mo. of $1B +/- tech exits, you’ll notice something peculiar.

Of the 9 exits in that range there are 2 IPOs (The Trading Desk and Nutanix) and 7 M&A transactions.

4 of those M&A transactions are what you’d expect:

- AppDynamics acquired for $3.7B ($314M raised from from VCs)
- Jet.com acquired for $3.3B ($565M raised from VCs)
- Square Trade acquired for $1.4B ($248M raised from VCs)
- Merkle acquired for $1.5B ($124M raised from VCs)

Then there are 3 that look very different:
- AppLovin acquired for $1.4B ($4M raised from friends and family)
- Media.net acquired for $900M (no investment from VCs)
- Outfit7 acquired for $1B (no investment from VCs)

Over time, ambitious founders have been trained that billion dollar exits are reserved only for those who follow a very defined playbook for blitzscaling a business. Yet, 3 of the 9 tech exits in the billion dollar range in the last 6mo. were not VC backed.

The biggest disruptive threat to venture capital is not crowdfunding or Angel List or hedge funds.

No.

The biggest disruptive threat to venture capital is when the very best founders realize they need very little of it to scale.

Given the energy and focus we are putting behind Indie.vc, we anticipate that this trend will not only grow, but accelerate.

#startup #venturecapital #vc #entrepreneurship

Making procedurally generated art for our living room

Mon, 30 Jan 2017 01:01:22 -0800

randylubin:

My fiancee Avital and I have started a new annual tradition – making art for our house.
This year we decided to use p5.js to create procedurally generated art. p5.js is an amazing open source project that empowers you to code all sorts of great static, animated, and interactive art pieces.
We focused on random patterns of shapes and explored various combinations of different figures and colors. Ultimately we settled on white squares with black borders, all of random sizes and angles. We also played with how many iterations the program would run (i.e. how many squares it would create). Here’s a sample output:
The art was for our living room and we decided to make it a triptych of one sequence at three different stages. We tried many different iterations across scores of different seeds (random generations) before picking the final one: Seed 156 at steps 60, 350, and 3000.
We then wrote the code to output the image as a high resolution png and stitched the images together into one big image. Then we uploaded the file to the Costco photo center and had them print on 20″ by 20″ canvases.
Here’s the final output on our wall:
We’re going to give all of our art ridiculous, overblown names. This piece is called (Assassination of an Artist at the Hands of a Computer)² Seed 156
The project was a blast and we’re looking forward to more art projects!
If you’re interested in playing around with the code, the files are up on GitHub and pretty well documented. If you have any question, I’m happy to offer help or advice!

Neat!

stanfordbusiness: “‘Yet’ may be the most impactful word I’ve...

Sat, 14 Jan 2017 09:55:01 -0800

stanfordbusiness:

“‘Yet’ may be the most impactful word I’ve adopted while at the GSB. Let me explain. I came to the GSB to clearly identify my strengths and shore up known weaknesses. I wanted a list, something I could use to answer interview questions and address in performance reviews. I essentially viewed my strengths and weaknesses as more or less fixed. Sure I could make marginal improvements, but who I am and how I act was pretty well set by now. Wasn’t it?
I’ve learned that isn’t true. My weaknesses have ‘yet’ to become strengths (or at least not weaknesses). My strengths have 'yet’ to be stretched in new ways. And actions I’ve never taken before have 'yet’ to be employed in new settings. At the GSB I’ve learned that I can experiment with my behaviors and mindsets, and I’ve had many opportunities to experiment. My transition from a fixed to a growth mentality is ongoing but it has helped me do and become more than I am now.” –Bryce Peterson (MBA ’17) #GSBinthemoment
View more portraits and reflections: stanford.io/2jbuvSO
Photo by Natalie White

stanfordbusiness: “In life, there are certain decisions,...

Sat, 07 Jan 2017 13:06:57 -0800

stanfordbusiness:

“In life, there are certain decisions, certain moments and certain experiences that will have the power to define who you really are and shape your future; coming to the Stanford GSB’s MSx program is definitively one of those life defining moments. It’s a unique opportunity to surround myself with some of the most brilliant people (faculties, fellows, business leaders), be humbled and learn from them about varies topics: leadership principles, strategy framework, technology evolution, and future vision. It’s a wonderful journey to embrace life full of possibilities. It inspires me to be a better version of myself, to be someone bigger than who I was, and to do more than just exist.” –Yan Gao (MSx ’17) #GSBinthemoment
Photo by Kiefer Hickman

Meaningful Exits for Founders

Sat, 24 Dec 2016 00:47:54 -0800

brycedotvc:

For an industry that doesn’t do it for the money, we sure talk about money an awful lot in the world of startups.
A few posts were written this past week diving deeper into the numbers that drive VC returns which, in turn, drive behavior in startups who’ve raised money from VCs.
One post, written by Samuel Gil, outlined what is considered a meaningful exit for VCs. According to Sam’s math, a meaningful exit for a fund should have the ability to return 33% of a given VCs fund, a “home run” exit should be able to return their entire fund in a single investment.
This is a helpful visual he put together to show the resulting math behind meaningful exits at various fund sizes:

Across all of these scenarios, the smallest meaningful exit for the tiniest fund is a purchase price of $85M.
Now, we don’t know much in this scenario beyond the 20% owned by one fund. We don’t know how many rounds this company has raised, how many other VCs are on the cap table, nor how much the founders own.
(sidebar- most $50M funds would kill for 20% ownership these days. 5%-10% range is much more likely after the initial round of funding and dilutes rather quickly in successive rounds as reserves for pro rata vary wildly by firm).
Another post from Capshare surfaced this week touching on that last bit about founder ownership at various levels of VC funding. Specifically, this post highlighted, after having analyzed over 5,000 VC backed cap tables, that founder dilution is fairly predictable based on the rounds raised by a given company. There are plenty of graphs to pour over in the post, but the summary reads as follows:
If your company exits around Series D, you can expect the following splits:
Founder ownership: 11-17%
Other employees: 17-21%
Investors: 66-68%
The data suggests startups generally have 2-3 founders so divide that number by the number of founders, and that’s the predictable founder ownership level of a Series D funded company (in the Capshare post the Series D valuation was $210M).
Reframing those numbers another way, a founder selling at the Series D price of $210M, would make the same amount of money at exit as they would have if they’d sold for $38M after having only raised a seed round.
Lifetimes of work and risk lie between a Seed round and a Series D round. And, despite increasing the value of the underlying business 7x, the dollars at exit for the founder remain roughly the same. It is also worth noting that an exit at $210M would not even qualify as a home run for even the smallest fund in Sam’s examples.
There are many paths to managing dilution- be it raising fewer rounds at higher and higher valuations, or raising one round and scaling a business on revenue and profits generated from customers.
Through our work on Indie.vc we’ve met many founders who’ve raised successive rounds of funding and had opportunities to exit their businesses for life changing sums of money; however, those acqusition offers were not meaningful exits or homeruns for their investors.
Many are looking to avoid, or at least be more aligned, with investors on the companies they are working on now. As Marc Hedlund wrote in his post about why Skyliner chose to work with us:
It should not be surprising that we chose to work with Indie.vc. It’s a choice many more entrepreneurs should make, whether you have tons of experience or are just starting out. Don’t let the normal VC business model drive your work into a low-probability, high-reward outcome, when a higher-probability outcome is well within your reach, especially one that does nothing to limit your growth.
So, let’s keep saying we don’t do it for the money.
Fine.
But, it might be worth looking more closely at the numbers before so quickly trading what’s a meaningful exit to a founder for what’s a meaningful exit to a VC.

What traction do I need to raise money?

Sun, 04 Dec 2016 21:13:38 -0800

hippoland:

I’m going to get a lot of flack for writing this post. Lots of fellow investors are going to DM / email me telling me that I’m wrong or not accurate. Guarantee it. But here we go anyway, because it’s more important to be 50% right in this case than not at all helpful.
Entrepreneur: So what do you think?
Investor: You’re too early. Come back when you have more traction.
Entrepreneur: Can you give me a sense of how much traction you’re looking for?
Investor: Mmm…there’s no hard and fast rule.
Super annoying…! How are you supposed to know what target you’re shooting for? I’ve written about fundraising milestones for SaaS companies before on Jason Lemkin’s blog SaaStr. Christoph Janz of Point Nine has also written about SaaS funding as well. But in this post, I’m going to generalize it a bit more to other industries.
Let’s first establish what the seed landscape looks like today in 2016 here in the Silicon Valley. Note: the below doesn’t apply to other geographies and all of this will probably become obsolete in the next few years. Roughly speaking, there are 4 stages of early stage investing based on traction:
Pre-seed: < $100k net revenue run rate
Seed: $100k-$500k net revenue run rate
Post-seed: $500k-$2M net revenue run rate
Series A: $2M+ net revenue run rate
Note: Your ability to raise is NOT just about your traction. There are a LOT of other caveats and criteria, which I’ll go through at the bottom of this post. So hold your horses before you start tweeting at me!
Pre-seed
New investors tend to do a lot of pre-seed deals when they are first getting started, but as they get access to more and more dealflow, they tend to move downstream and take on less risk. My employer, 500 Startups, is a good example of this – a few years ago, we were funding lots of companies that were super early. Heck, they funded my company LaunchBit when we were basically at the idea stage. These days, in most cases, 500 Startups is not even the first check in.
Pre-seed rounds today are done by family & friends as well as new investors who don’t yet have a lot of dealflow. A number of incubators and accelerators will also fund companies at this level. As a result, this type of round is extremely difficult to do, because you either need to be well-connected OR you need to hunt down angels who don’t yet have a brand, which is tough to do when you don’t know who they are. For this reason, this is why I’m inviting new investors to interview with me on my blog so that they can get more visibility and so that entrepreneurs can become familiar with new investors on the scene.
Seed
The seed level is typically comprised of more established angels who have dealflow as well as well-known accelerators / seed programs (such as YC, TechStars, 500 Startups, et al).
Post-seed
A lot of microfunds that have cropped up in the last few years and have established their brands. They may have started out as pre-seed or seed investors but have moved downstream in many cases. Part of this is also driven by the fact that as they’ve become successful, many of them have raised bigger funds, which means that they want to deploy more money in startups at slightly later stages.
Series A
This is largely dominated by traditional, well-established Sand Hill Road VCs. The Series A round in the Silicon Valley is basically what the old Series B round used to be, because the traction requirements are often so high to achieve.
On traction
I use the term “net revenue run rate” above to attempt to put all revenue-generating startups on the same standard. SaaS companies have really high margins, but a marketplace might only have say 20% margins. You can’t really compare marketplace businesses to SaaS – this is an apples to oranges comparison. BUT, even though it’s not perfectly accurate, I’ve found that a rough rule of thumb is to look at net revenue run rate, and the bar is roughly the same across revenue generating sectors. For example, if a marketplace startup has a 20% take between its supply and demand sides, then it needs to do ~4-5x more sales than say a SaaS company to be equivalent from a traction perspective. Again, not perfect, but rough rule of thumb to give you a sense of what order of magnitude you need to be hitting to raise each round.
Caveats
Now, there are of course, there are a TON of caveats here. As I’ve mentioned before, eacjh of the 4 categories of startups are looked at very differently.
If you are a business that is immediately-revenue-generating, all that I’ve said above applies. But, if you are in areas that are say 1) highly regulated (such as fintech or healthtech), 2) are extremely technical (such as only 5 people in the world can build what you’re building), or 3) are a pure consumer product (e.g. Snapchat), then these traction benchmarks don’t apply. Investors will look at other things such as your user growth or your prototype or how you’re navigating regulations, etc. Those are much more subjective and hard to distill into numbers.
Moreover, even if you are an immediately-revenue-generating-company, just because you hit a certain traction number doesn’t necessarily mean you’ll necessarily be able to raise money from investors who back companies in the traction category you’re in. Lots of other things matter too.
For example, if your growth is stalled, you probably won’t be able to raise from anyone! Or if you have an awesome team with a past track record or have pedigree, you may not need any traction at all to raise your next round! Or if your space is super competitive, you may need to prove out a LOT more traction than what someone else might need to achieve.
Tons and tons of caveats here. But, even if this is 50% accurate, I hope it was still helpful to give entrepreneurs a sense of what rough numbers they should be shooting for. Moreover, I think these rough numbers are important to know because it helps you figure out strategically what your next milestone should be and working backwards, you can figure out how much capital you’ll need in order to make that happen.
Fundraising is a nebulous process that I aim to make more transparent. To learn more secrets and tips, subscribe to my newsletter.

Lessons in Social Entrepreneurship: Test Fast & Pinpoint Pain Points

Wed, 28 Sep 2016 09:35:26 -0700

stanfordbusiness:

Through their education nonprofit MindRight, Ashley Edwards and Alina Liao (both MBA ’16, pictured above) are working to help at-risk youth recover from trauma caused by exposure to community violence and other poverty related barriers. Below, the Stanford GSB graduates share the experiences that led them to launch their startup and offer tips for others pursuing their own entrepreneurial journey.
Can you share a story or two about the path that led you to become social entrepreneurs?
Ashley: “My dad used to share stories with me about his time growing up in Newark, New Jersey where he was exposed to violence and crime on an almost daily basis. Years later, when I returned to Newark to work in education as director of operations of a charter high school, I saw my students face the same daily obstacles that my dad faced growing up. Nothing had changed decades later. Many of my students suffered from trauma from exposure to daily violence, never received help because of our school’s limited resources, and had to beat incredible odds to escape a cycle of poverty. I have a personal conviction to ensure that no other child has to grow up that way. Social entrepreneurship is a way for me to make that conviction a reality.”
Alina: “Before the GSB, I led a transformation of the organizational structure of the consulting firm where I served as vice president. This experience got me thinking about a future in entrepreneurship. In my free time, I tutored low-income youth in Washington, DC. I was both inspired by the potential of the kids I served and angered by the failures of the status quo to provide them with basic needs that all children need to thrive. I went to the GSB to change careers and explore how I could make an impact for underserved youth. The classes Startup Garage and Social Venture Practicum helped me discover that being an entrepreneur allows me to channel my strengths and past experiences into what matters to me most - unleashing the brilliance of at-risk youth.”
What are some entrepreneurial lessons you’ve learned so far as you’re working on your education nonprofit?
Lesson #1 “Throughout our journey, we’ve learned the importance of testing fast. Before we had any technical platform built, we were able to test our user experience and value proposition by simulating the experience of the technology we envisioned. We decided to start texting users manually ourselves to start receiving feedback on our basic idea, before we even decided whether we would create a mobile app or a texting platform. This helped us hone in on our current product of an SMS texting platform. By doing this, we were able to gain valuable insights on our user experience before spending significant resources on product development.”
Lesson #2 “We’ve also learned the importance of narrowing the pain point of our target users. Untreated PTSD and traumatic stress in under-served communities is a huge, complex problem. Naturally, we were pulled in many directions in our early ‘ideation’ stage. However, by speaking with the youth we serve, we gained a more nuanced understanding of the barriers that keep at-risk youth from getting help. We heard repeatedly from teens living in areas with a high prevalence of trauma, ‘you’re just expected to live this way.’ This narrow pain point we uncovered revealed a crucial barrier in getting youth the help they need. We were able to design a targeted solution around helping youth better understand what trauma is and that they can overcome it with the right skills. We’ve since received validation from our early users.”
How do you come up with new, creative ideas? What inspires you?
“The youth we serve continually inspire us to do our work. Teens from South Los Angeles to Newark are incredibly creative, artistic, and resilient people, as we’ve witnessed through our daily interactions to help them tackle adversity in their lives. By holding focus groups and embracing user-centric design, we are continuously inspired by their stories and able to use their feedback to generate new ideas to meet their needs.”

Learn more about MindRight here.

Lessons in Social Entrepreneurship: Test Fast & Pinpoint Pain Points

Sat, 03 Sep 2016 16:42:43 -0700

stanfordbusiness:

Through their education nonprofit MindRight, Ashley Edwards and Alina Liao (both MBA ’16, pictured above) are working to help at-risk youth recover from trauma caused by exposure to community violence and other poverty related barriers. Below, the Stanford GSB graduates share the experiences that led them to launch their startup and offer tips for others pursuing their own entrepreneurial journey.
Can you share a story or two about the path that led you to become social entrepreneurs?
Ashley: “My dad used to share stories with me about his time growing up in Newark, New Jersey where he was exposed to violence and crime on an almost daily basis. Years later, when I returned to Newark to work in education as director of operations of a charter high school, I saw my students face the same daily obstacles that my dad faced growing up. Nothing had changed decades later. Many of my students suffered from trauma from exposure to daily violence, never received help because of our school’s limited resources, and had to beat incredible odds to escape a cycle of poverty. I have a personal conviction to ensure that no other child has to grow up that way. Social entrepreneurship is a way for me to make that conviction a reality.”
Alina: “Before the GSB, I led a transformation of the organizational structure of the consulting firm where I served as vice president. This experience got me thinking about a future in entrepreneurship. In my free time, I tutored low-income youth in Washington, DC. I was both inspired by the potential of the kids I served and angered by the failures of the status quo to provide them with basic needs that all children need to thrive. I went to the GSB to change careers and explore how I could make an impact for underserved youth. The classes Startup Garage and Social Venture Practicum helped me discover that being an entrepreneur allows me to channel my strengths and past experiences into what matters to me most - unleashing the brilliance of at-risk youth.”
What are some entrepreneurial lessons you’ve learned so far as you’re working on your education nonprofit?
Lesson #1 “Throughout our journey, we’ve learned the importance of testing fast. Before we had any technical platform built, we were able to test our user experience and value proposition by simulating the experience of the technology we envisioned. We decided to start texting users manually ourselves to start receiving feedback on our basic idea, before we even decided whether we would create a mobile app or a texting platform. This helped us hone in on our current product of an SMS texting platform. By doing this, we were able to gain valuable insights on our user experience before spending significant resources on product development.”
Lesson #2 “We’ve also learned the importance of narrowing the pain point of our target users. Untreated PTSD and traumatic stress in under-served communities is a huge, complex problem. Naturally, we were pulled in many directions in our early ‘ideation’ stage. However, by speaking with the youth we serve, we gained a more nuanced understanding of the barriers that keep at-risk youth from getting help. We heard repeatedly from teens living in areas with a high prevalence of trauma, ‘you’re just expected to live this way.’ This narrow pain point we uncovered revealed a crucial barrier in getting youth the help they need. We were able to design a targeted solution around helping youth better understand what trauma is and that they can overcome it with the right skills. We’ve since received validation from our early users.”
How do you come up with new, creative ideas? What inspires you?
“The youth we serve continually inspire us to do our work. Teens from South Los Angeles to Newark are incredibly creative, artistic, and resilient people, as we’ve witnessed through our daily interactions to help them tackle adversity in their lives. By holding focus groups and embracing user-centric design, we are continuously inspired by their stories and able to use their feedback to generate new ideas to meet their needs.”

Learn more about MindRight here.

How the Tech Press Forces a Narrative on Companies it Covers — Backchannel

Mon, 22 Aug 2016 19:08:22 -0700

How the Tech Press Forces a Narrative on Companies it Covers — Backchannel:

I first learned about this the clock analogy for media cycles from Raymond Nasr at the Stanford Graduate School of Business. Aaron Zamost has done a great job articulating and expanding it.

Create a Team with Complementary Strengths

Tue, 02 Aug 2016 09:07:27 -0700

stanfordbusiness:

“Winning teams pull together people with complementary strengths,” emphasized XSeed Capital Partner Alan Chiu (MSx ‘11) in a recent entrepreneurship talk at Stanford School of Engineering. Chiu shared advice for how engineering and business startup teammates can effectively and compassionately work together. Read top takeaways below:

It takes a team to win. Focus on maximizing value creation.

When starting off on building your product, aim to deepen your customer insight as much as you can, says Chiu. “You want to minimize the probability of building the wrong product. Building something that nobody cares about is hugely expensive.” In the early days of your venture, it is often helpful for everyone in the company to get customer exposure in order to understand their needs. Over time, you need to determine who on your team will be driving customer interviews and synthesizing the learning. Engineers can absolutely be the ones to do this, but it will force a tradeoff between how much time they spend with the customers and how much time they spend working on the product. Remember that each person on the team only has 24 hours in a day.

In order to scale your effectiveness, “you have to focus on what you can do for your company that can create the most value.” For both business people and engineers, this means asking yourself, “‘What is the one activity or limited set of activities that I do that will create the most value for the company?’ For everything else, find others who are best in class to take it on,” advises Chiu. Create a team of people with complementary strengths.

Building trust takes time.

Entrepreneurs should understand that both the technical and business teammates will have moments of vulnerability. Engineers could be concerned about their business partners’ level of dedication; they don’t want to be left hanging if the business person decides to go work on something else. On the other hand, if the business cofounder came up with the product idea, he or she is depending on someone else to build it. What if the engineer takes the idea and runs off with it?

Trust doesn’t happen overnight. Team members need to consistently deliver on their promises to show the other parties that they are serious and committed. Look for an ongoing, iterative accumulation of trust.

Step into your teammates’ worlds.

“Everyone is the center of their own universe,” reminded Chiu. Both engineers and business people can benefit by stepping out of their worlds and into their colleagues’ worlds. By empathizing with another person’s stress, pain, and fear, you’ll be more effective in understanding what you need to do to help that teammate be more successful. Connecting with the other person’s “universe” can even open up additional opportunities for you. Who wouldn’t want to work with someone who consistently helps make them successful?

Read more from Alan: “Overcoming Common Challenges Between Business and Technical Cofounders” and follow him on Twitter: @AlanChiu

#stanfordengineering #stanford #teambuilding #startup

How to Succeed in Product Management

Thu, 28 Jul 2016 09:05:27 -0700

stanfordbusiness:

What does it take to be a product manager?
XSeed Capital Partner Alan Chiu (MSx ‘11) kicked off his Stanford GSB talk, “Career Pathways in Product Management,” by first exploring the definition of product management. “If you asked 10 people, you might get 12 answers,” he shared. “It means different things at different companies.”
Chiu defines product management as being the “CEO of the product.” A product manager has to nail strategic marketing, product definition, and the voice of the customer. Product management is NOT:
Project management
Just about working with the engineering team
Just about executing the CEO’s product directives
So what does it take to succeed in this challenging role? Chiu shares five key characteristics of product managers:

1. High IQ and EQ. As a product manager, you’ll be the nexus for customers, sales, engineering, and more. In other words, you’ll be pulled into a million different directions. You need to be able to manage a lot of different opinions and data, and influence many people without having authority over them.
2. Respect of the engineering team. Even if you don’t have an engineering background, you can still earn the team’s trust. What does it take? You need a genuine love and curiosity for technology. Get into the engineers’ world and relate to them on a technological level. With openness and understanding, learn as much as you can about the strengths and limitations of the product architecture, as well as the tradeoffs of different engineering and design decisions.
3. Deep customer insights. Empathy is key in working with customers. Meet or speak with customers several times a week and bring quantitative and qualitative data back to your team. As you grow your customer base, you also want to grow data on their behavior: what’s working and what’s not? Show up with customer stories and metrics to help convince the engineering team that your next priorities are the right ones to work on. It’s vital to become a trusted customer proxy within the company.
4. Courage to make tradeoffs. In this role, you’ll have an endless feature request list to work on, so you’ll never be able to please everyone. You have to be comfortable with people being unhappy with your decisions, yet still respecting you. Focus on the priorities that move the needle on the metrics that matter to your business, and make sure no one is so unhappy with the choices that he or she will sabotage you.
5. Diplomatic skills. If you join a company that’s founded by a CEO with a strong product vision, how do you gain her or his trust so that you can grow your ownership of the product? Start by involving the CEO very early in product brainstorms; create a safe environment where he or she can disagree and you can make changes. Bring in qualitative and quantitative customer insights to share with the CEO so you can have an intellectually honest dialogue. Earning the CEO’s trust is just as important as earning it with the engineering team.
For more insights from Alan, read “Overcoming Common Challenges between Business and Technical Cofounders” and follow him on Twitter: @AlanChiu.

#productmanagement #stanfordgsb #stanfordbusiness

stanfordbusiness: Sam Kamara (MBA ’15) explores how mindfulness...

Thu, 16 Jun 2016 10:49:15 -0700

stanfordbusiness:

Sam Kamara (MBA ’15) explores how mindfulness can lead to better decision-making for individuals, corporations, and countries: http://stanford.io/1UQLeaF

stanfordbusiness: “My favorite author Junot Diaz once said,...

Wed, 08 Jun 2016 20:45:14 -0700

stanfordbusiness:

“My favorite author Junot Diaz once said, ‘The safety of perfect work unrealized does not compare to the enormous beauty of flawed work realized. We have to endure as artists being extra bad. If you want to produce anything worth someone’s attention, first you have to suck at it for a very long time.’

I didn’t understand that quote until I saw the perseverance that Diaz was talking embodied in my classmates at the GSB. I’ve been inspired by their relentless pursuit of self-improvement, and emboldened by their willingness to persist in the slow burn needed to solve our world’s biggest problems, no matter how long it takes. They’ve taught me how to be comfortable living in that slow burn too, and that it’s ok to face an uncertain future tomorrow if the risks I take today are worthy of my values, vision and principles.

Most platitudes about fear or failure make it seem as if it’s all about taking the first step into the dark abyss – but it’s not. It’s about the moment after you take the first step. It’s about greeting the self-doubt and the unknown head on, looking it in the eye and learning to live in its presence. If you can see the beauty in flawed work realized or endure being extra bad for a long time, you can do great things. You’ll stumble because everyone does, but the difference between the ones that make it and the ones that don’t is that you just have to keep going.” –Kene Anoliefo (MBA ’16)
View more #gsbinthemoment student portraits and reflections: http://stanford.io/1T2bT3e

Word.

stanfordbusiness: “Leading the first ever Global Study Trip...

Mon, 30 May 2016 14:51:12 -0700

stanfordbusiness:

“Leading the first ever Global Study Trip (GST) to my home country, Honduras, was one of the most rewarding and fulfilling experiences I had while at the GSB. The participants were so inquisitive and engaged. I learned so many new things about my country as I was able to see Honduras through 31 foreign, diverse, and attentive eyes. I didn’t feel like I showed them my country, we saw it together. I did not teach them, we taught each other.

This wonderful cultural exchange that ensued would not have been possible without the effort and coordination of the planning leadership team. One of my teammates later shared with me that my love for Honduras and my desire to successfully execute the first-ever trip to my country really drove them to go above and beyond. This experience taught me to never underestimate the motivating power of passion.” –Carolina Rivera (MBA ’16)

View more #gsbinthemoment student portraits and reflections: http://stanford.io/1T2bT3e

Photo by Toni Bird

The secret behind VC partnerships...

Mon, 30 May 2016 14:51:01 -0700

hippoland:

I was talking with a Sand Hill VC the other day. They do Series A deals.
“We don’t have a consensus model here. If someone on the team loves a company, we’ll do the deal. But conversely, if someone on my team really hates a deal I love, I would probably back away. As much as possible, we want to have a united front here at our firm.”
This was a really telling statement and confirmed what I’ve known all along as a VC but was clueless about when I was an entrepreneur. A few takeaways:
1) If you’re talking to a VC, you should find out how decision-making happens.
I’m not just talking about the decision-making process (although you should definitely figure that out). You should also figure out if a firm has a consensus-based decision-making model or a champion-based decision-making model.
A consensus-based model means that all partners need to agree to do a deal. If one partner dissents, then the deal is off.
In a champion-based model, if one of the partners really really wants to do your deal, the others will let him/her.
And then there’s everything in-between; hybrid models.
Now, this is important, because it says a lot about how your interactions will go with the firm as a whole. For example, at a consensus-based VC firm, you know that if they do your deal, everyone at the firm loves you and your company. And all the partners will go to bat for you and will help you out. The firm is truly behind you. But, it’s very difficult to get a deal with this type of firm.
At a champion-based VC firm, it is much easier to get your deal done, because you don’t need the whole investment team to agree. But, there may be a lot of contention within the investment team of that firm. Other investors at the firm may think you’re an idiot or that you’re in a small market and may not want to help you. But you won’t know who and you won’t know why. You only know that your champion is your advocate. So, the right way to think about this is whether you would love working with the partner who is your champion rather than whether you like that VC firm.
2) Find your champion at a VC firm.
Your champion at a VC firm is going to be the person/people who interviewed you in the early stages. In order for you to make it to later due diligence stages, you’ll need to win over this person/people first, so you know where they stand if you continue the conversation with the firm.
As such, in many cases, there’s a lot of luck here. If a firm says “No” in the initial stages, it’s because you were not able to convince the initial partner to champion your deal. However, in a parallel universe, it’s possible that another partner at the firm - had you met him/her first - may have loved your deal and championed you.
Now, before you go off and try to find other investors at all the VC firms you’ve already been dinged by, it’s important to understand why you were dinged in the first place. For example, if your company was considered “too early” for the firm, then meeting with someone else in the partnership will not help you find a champion. But, if the initial partner you met with thought that your market was “too small” or he/she just simply “couldn’t get excited” about your deal because he/she knows nothing about the space, then it’s possible that winning over a different person at that same firm might be more helpful. THAT SAID, in general, VC firms try to have a united front about their stance. And most organized VCs are using CRMs or other methods to track deals so that all partners know if someone at the firm has met with you before.
So trying to approach a different partner about championing you after being dinged may or may not help you UNLESS something SIGNIFICANT has changed between when you last met with the first partner and now. It could be a difference in traction or strategy or customer audience or product offering or whatever – but, you must have a compelling reason for someone at the firm to talk with you again.
In general, I also personally find it most compelling when an entrepreneur A) owns up to the fact that he/she has already talked with others at 500 Startups but B) wants to talk with me for particular reasons pertaining to my personal background that are unique to me. Otherwise, my belief is that if my colleagues, whom I trust, dinged you already, then there is no reason for me to take the call. Do some research here on individuals at the firm.
Regardless of whether a firm you’re talking to has a consensus-model or a champion-model, you will still need a champion. And, this is the person who will shepherd you through the whole fundraising process with his/her firm and will likely be working with you for years after he/she does the deal. So, make sure that you like him/her and think that he/she is useful.
3) Befriend and win over the firm
So let’s say that a champion-based VC decides to do your deal. Hurrah - congrats! This means that you know at least one person at the company loves you / your company. But, the other investors may be indifferent to your deal, because they just don’t really know you or your company. Worse yet, there may be investors who hate your deal at the same firm. Some of the best deals are the most contentious ones. If picking startups were so easy, there would not be so many failing VCs.
An extreme case where you should apply this thinking is at 500 Startups. We do SO MANY DEALS. I think we are averaging about 1 deal per weekday right now worldwide across all our funds. There is no way that I have personally met every company we’ve invested in, let alone championed. As such, I can’t just start opening up my rolodex to entrepreneurs I don’t know – even if they are portfolio founders. So, if a champion-based VC does your deal, it’s in your best interest to try to befriend other partners at the firm. Get to know them. Don’t just become Facebook or LinkedIn friends with them. And, it goes without saying that you should definitely NOT assume that someone championing your deal at a firm will automatically mean that someone more prominent at the firm is your champion. For example, if I champion your deal, you should not expect Dave McClure or Christine Tsai to love you / your company. They simply don’t know you. So, work on befriending them / winning them over as well. And, if you can do this, you can potentially get lots of different kinds of help from within the same firm.
(Side note: This is how you befriend us at 500. Maybe.)
The flip side is that if you meet w/ someone on the investment team who just doesn’t seem very helpful after meeting him/her a few times, either he/she is not a helpful person or you know what he/she really thinks about your deal. And, that’s ok. You can’t win them all (and as you make progress in your business, you may be able to win him/her later by showing traction and progress). This is why it’s important for you to love and value working with your initial champion in case no one else at the firm is your champion.
So, in conclusion, even though entrepreneurs will say things like, “Oh Sequoia is in my round,” they should really say things like, “Oh Alfred Lin from Sequoia is in my round.” It’s really about working w/ an individual champion and in some cases, where relevant, upselling into a firm to get more individual champions. VC firm dynamics are not altogether clear to entrepreneurs, and it’s important to understand how these dynamics work.
Fundraising is a nebulous process that I aim to make more transparent. To learn more secrets and tips, subscribe to my newsletter.

stanfordbusiness: “Professor David Bradford teaches a class...

Mon, 30 May 2016 14:49:44 -0700

stanfordbusiness:

“Professor David Bradford teaches a class called High Performance Leadership in which he challenges the concept of a heroic leader who knows and does all well, charging ahead to lead her flock at all times. He suggests instead, a much humbler candidate who is not only aware of her limitations, but is also willing to acknowledge them with her team, so that each may help her (whether by complementing or coaching) to compensate for those weaknesses. By establishing a culture in which self-improvement is the standard, this leader enables a grounded and high-performing team. It is this ability to work together to gauge what’s most appropriate – to put egos aside and focus on the task at hand – that makes for great impact.
David Bradford has completely set me free from trying to hide my imperfections and has given me a set of tools to try to expand my limitations and shape my best self. What a gift!” –Onsu Natalie Wegner (MSx ’16)
View more ‪#‎gsbinthemoment‬ student portraits and reflections: http://stanford.io/1T2bT3e
Photo by Toni Bird

Why I cringe when you say you’re raising a $1.5m seed round...

Mon, 25 Apr 2016 17:08:02 -0700

hippoland:

“We’re raising $1.5m.”

I cringe. There’s nothing inherently wrong with raising $1.5m…UNLESS you have not thought about your raise strategically (99.9% of entrepreneurs I meet with).

Most entrepreneurs understand on some level that fundraising is all about messaging. But, most people only think about this in the context of storytelling. But, messaging how much you are raising and for what specific milestones are equally important.

Let me give you a concrete example. Here’s a tale of two companies. Same business but different raise-amounts.

Company A:
-Raised a seed round of $500k
-Now raising another seed round of $2.5m to expand the business

Company B:
-Raised a seed round of $2m
-Now raising another seed round of $1m to expand the business

Should both companies successfully raise, they would’ve raised the same total amount of seed money - $3m.

BUT, Company B’s situation yells RED FLAGS all over the place. As an outsider, it sounds like they burned through a hefty $2m and now are short of Series A milestones that they need another $1m to bridge them through. And, no investor wants to sign up for a desperate situation like that.

Company A’s situation sounds much more appealing. They raised a small seed round – perhaps to get them to some initial milestones, flesh out the idea, get some initial customers. And, now, they are ready to grow based on what they’ve learned.

Notice we know nothing about these businesses, but I’m already making assumptions about their scenarios. Why? Because this is commonly what you see in the trenches as an investor. And even if Company B is truly growing quickly and is only just a couple of months away from gearing up for a strong Series A, I know lots of VCs who won’t even take a meeting with Company B to hear them out. That’s just how it is. Just poor messaging.

As an entrepreneur at the seed level, you need to think deeply about the signaling (and what to do) if you are not able to hit milestones for the next round. If you are planning on raising $1m-$2m on this round, you had better hit your Series A targets (or get to profitability on this round). In fact, I call $1m-$2m raises “No (wo)man’s zone”. You should consider what happens if you fall short of Series A targets, because you will have a super tough time raising from external investors. Do you ask your current investors to re-up? Can they? Can you bootstrap to Series A milestones? Think about all this BEFORE you end up in a tough situation.

Seasoned entrepreneurs, you should be especially cautious. As an experienced entrepreneur, the natural inclination is to think, “Oh I can totally hit any milestone - I’ve done this before. No problem.” I know - because I’m that person too and think that way too. But, in my short time as a VC (just 1 year), I’ve seen multiple companies whom I met with at the beginning of my VC career already go out of business or take a terrible acquisition (or are about to), because they didn’t raise enough money but they raised too much to get them another seed round. In fact, many of them had businesses that were just beginning to take off, but because of poor fundraising strategy, their companies went under. They could’ve been amazing businesses.

Additional things to consider:

Series A milestones go up ALL the time and are only going up – for example, I met with several B2B SaaS companies a year ago who were able to hit $1m runrate within a year on fast growth but died / were acquired for cheap because Series A milestones were higher than they had expected.
Spaces become competitive – when many companies enter a space, investors get very nervous about whether they are backing the right horse; so, you must show above-and-beyond traction to suggest you are the winner; it’s not just about hitting milestones if you’re in a competitive space
So, if you’re super early – i.e. still building product, very much pre product-market fit, don’t have a handle on your unit metrics, don’t know your customer persona inside and out, etc, you should strongly consider raising a smaller round (say < $1m) such that your next milestone is to hit post-seed milestones rather than a series A milestones. Be strategic and message your raise well.

Fundraising is a nebulous process that I aim to make more transparent. To learn more secrets and tips, subscribe to my newsletter.