team

The many faces of a product-centric CEO

When investors or entrepreneurs express a preference for product-centric startup CEOs, often the implication is that they are looking for an A-grade developer. Someone who knows exactly how to build every part of the product, from back-end architecture to front-end development.

Increasingly, this is no longer the standard. The #1 reason is that building a product that turns into a great company is no longer just about code. A decade or two ago, a huge company like Google could achieve rapid growth on the back of a great algorithm and a simple site. The most recent entrants to the unicorn club, including Airbnb and Tumblr, are much more than code. They are beautifully designed products that are built with a deep focus on the user experience.

In my limited role as an angel investor, I rarely focus on the coding ability of the CEO. Instead, I prefer that the CEO’s core competency lie in the hardest part of the business.

A classic example of this is Reid Hoffman. Based on his own words, Reid can code but is not an A-grade developer. But what makes Reid one of the best product-centric CEOs of our lifetime is that he has a world-class understanding of network mechanics.

The hardest part of building LinkedIn into a $10B+ business was creating a great strategy for building a professional network, and then sticking to that long-term strategy as a stream of social networks from Friendster to MySpace to Facebook to Twitter rose and fell around it.

Identify the hardest part of your business, and master it. If that’s code, then learn to code. Otherwise, focus on your core competency, and get started building a great company.

Screen Shot 2014-01-12 at 12.37.46 PM

How ‘serious’ websites can follow Buzzfeed’s playbook

In a 2012 interview with Sarah Lacy, Jonah explains that one big “we made it” moment for Buzzfeed came when a user emailed him to complain that his site gave her nothing worthwhile to share that day. That’s when he realized that the biggest value to Buzzfeed’s content wasn’t the direct value it provided to the user, but instead the value its content gave the user on their social networks.

Buzzfeed’s key value is simplifying the discovery of sharable content. It doesn’t matter if you’re looking for a video of a cute beagle to win brownie points with your girlfriend, or an investigative piece on affirmative action to win an argument with your friend, Buzzfeed delivers.

Viral hits follow a simple playbook:

  1. You can explain the concept in one sentence.
  2. You can immediately identify who in your network would love it.
  3. You receive positive feedback from your network.
  4. You return, looking for “your” next hit.

This model fits perfectly into the four-step process for habit-forming products described in Nir Eyal’s book Hooked:

  1. Trigger = See Content
  2. Action = Share Content
  3. Variable Reward = Likes on Facebook, Retweets on Twitter, Karma on Reddit.
  4. Investment = Return to the site regularly to find new, shareable content.

Following this model, one big “we made it” moment for LabDoor came when we released our first category report. Within an hour of emailing the protein rankings to our subscribers, one of our users had already used the link to make it onto the front page of Reddit’s fitness page. Since then, Redditors continue to cross-post and re-post this same link to cash in on the Reddit karma. And, based on our analytics data, it seems to routinely pop-up on random message boards and blogs as well.

It seems counterintuitive to try and compare Buzzfeed and LabDoor. But two companies, one powered by cat GIFs and the other built on chemistry data, really can follow the same growth thesis.

Our content makes our users smarter. And, perhaps more importantly, our content makes our users look smarter to their friends and family.

The next time the New York Times or the Wall Street Journal tightens their paywall looking to squeeze a few more dollars out of their content, they could seriously consider value to the second half of that statement.

speedometer

Developer, Designer, Driver

The ideal founding team for a technology startup in 2014 is one designer, one developer, and one driver (product manager).

Most people in Silicon Valley put a marketer in that third role, but I would argue that marketing should not be a key focus prior to product/market fit. A much more valuable role is a customer-centric product manager who sets the vision and product roadmap, and then drives the team towards the finish line.

The secondary role of this product manager is to serve as a barrier between the product development team and all unproductive distractions. Is the team worried about bouncing rent checks? Then the job of the product manager is to find initial funding. If the biggest problem is finding talented employees, the product manager becomes the HR director. And when customer feedback is needed, it’s the product manager’s job to recruit your early adopters.

If you have identified a real problem and have the right product builders, then finding the first 10,000 people to try your product should be the least of your concerns. Add this early “growth hacking” onto the product manager’s job description.

I often advocate hiring and partnering with people who fit the “jack of all trades, master of one” mold. The perfect product manager is obsessed with the customer experience and does whatever it takes to drive the product towards a solution that solves a key problem for your users.

Entrepreneurship Quote

Tech startups: The worst get rich quick scheme ever

Ever seen this quote? (Most recently seen circulating through various social networks):

“Entrepreneurship is living a few years of your life like most people won’t, so that you can spend the rest of your life living like most people can’t.”

This is the most misleading statement about entrepreneurship ever. You know what would make this quote accurate? Replace ‘Entrepreneurship’ with ‘Investment Banking.

Starstruck wantrepeneurs: Understand the real-world challenges that you’re going to face as a startup founder. It’s not just 100+ hour work weeks coding in a dingy garage while subsisting on ramen-only diets. You’ll also experience a constant fear of failure, stressed conversations with your significant other, and an ever-shrinking social life, all while living life as a cash-flow negative individual.

But you’ve already heard this spiel. In famous founder war stories, this despair is followed up by “then we rapidly scaled our startup to 100 million users, raised an eight figure VC investment, grew even more, IPOed, and I retired at 28 with 2 yachts, 3 girlfriends, 4 houses, and 10 cars.”

All that pain and suffering sounds like a tiny price to pay compared to the expected payoff. Except that is not what is actually happens. Here’s the most common way that story ends: “We got to a couple thousand users pretty quickly, but then our numbers plateaued. We started running out of money, and desperately cold-called VCs, but no one answered. One day, our money ran out, and I emailed my co-founders to tell them that it’s over.”

The celebritization of startup founders has gone way too far in the wrong direction.

Moving to Silicon Valley and launching a tech startup is a lot like moving to Hollywood and signing up for a few screen tests: you are at the bottom floor of a massive wealth pyramid where a tiny few at the top make nearly 100% of the money. But at least the starstruck movie extra understands the extreme odds they’re up against on their path to success.

There’s this nasty rumor going around Silicon Valley that it’s easy to launch startups and raise money. The next time you hear that every stupid app idea is getting VC funding, and that we’re moving ever closer to a tech bubble, give them these statistics: Of the 5-6 million companies launched each year, only 1000 companies/year receive early stage financings, and increasingly these investments are targeting enterprise startups with repeatable business models.

The few startups getting ridiculous, unearned valuations nowadays are attached to ‘celebrity’ founders. You’re no Sean Parker (or Bill Nguyen). Don’t expect to raise money like them. You’re going to need a real product with proven traction in a promising market to even get to a Series A. And even those ‘validated’ startups are facing up to 20:1 odds at a > $100M exit.

If you’re an entrepreneurial newbie and want to maximize your chances of becoming a millionaire in the near future, you have a series of alternatives to launching a tech startup that will provide you a much higher chance of success:

  1. Start a small business: These are often pejoratively referred to as ‘lifestyle’ or ‘lemonade stand’ businesses, but there are a number of small business advantages over jumping right into a startup.
    • They’re much more likely to make money. I’ve found that there is a much higher correlation between talent + effort and financial success in small businesses than startups. It’s still risky, but small businesses are a lot more predictable.
    • You will learn valuable lessons about hiring, sales, operations, and cash flow, putting you miles ahead of most ‘hustlers’ in Silicon Valley if you ever decide to join a startup.
    • Successful small business owners build great networks, partners, employees, and value, all which can be leveraged to enhance your future startup prospects.
  2. Get an education and a real job: I’m three years out of college. Do you know which of my former classmates are the closest to becoming millionaires? Not my fellow startup entrepreneurs; most of them are barely making rent. By far, the richest 25-year-olds are those math and science kids working for investment banks, engineering firms, and pharmaceutical companies. Next in line to make million(s)? My friends in law and medical school.
  3. Learn how to save money: This is the least sexy, but most practical option. Read The Millionaire Next Door. Realize that huge chunks of people who get to ‘millionaire’ status are hard-working, diligent people working regular jobs. You just need to learn how to control your spending and invest your savings.

Boring, I know.

logs

Fundraising = Sales

Fundraising Pipeline

Above: The status of my seed funding sales funnel in early 2013 (software: a plugin called Streak).

As CEO, fundraising is just one of the many sales cycles you’re expected to execute. The good thing is, you can use many of the same tools from selling your product to customers when you’re pitching your startup to investors. Here is a simple game plan to manage your investor pipeline, from lead generation through final close:

Build your sales funnel

All sales start with leads. However, if you’re like me, you don’t have any VC partners in your family tree. You didn’t go to Harvard or Stanford, and your friends and family have never made an angel investment in their lives. So where do you find your investor leads?

First, look around for connectors in your network. It may be your startup accelerator, a friend who just raised a seed round,

Then supplement this approach with some old-fashioned hustle. Read and respond thoughtfully to investors’ blog posts and tweets. Make a 30-second pitch to an investor at a conference or party (there are rules on how to approach this). Some investors even thoughtfully read and respond to cold email introductions. I know this approach has been successful a few times with Mark Cuban and Brad Feld; however, investors like Jeff Clavier are on record as having never invested off of a cold intro. It’s all about understanding your target audience.

Then, make sure to attack your leads in parallel, not series. Your goal in the early stage of your fundraising process is to fill your funnel with as many qualified leads as possible, then connect with them as quickly and efficiently as possible.

Always show positive momentum

If ever there was a time to ensure your metrics are going up and to the right, it’s the couple months while you’re closing a funding round. I’m not advocating making any product decisions that would harm the long-term viability of the business. In fact, at LabDoor, our team spent most of the three-month fundraising system investing in projects with extended payoffs, from continuous integration and back-end upgrades to content generation and customer analytics tools.

But we still made sure we hit the end of our fundraising round trending upward, and that went a long way to ensuring that the velocity of incoming funds increased through our close.

I hear stories all the time about a funding round that fell apart at the end because a key customer ended a contract. Make sure there are only happy thoughts in investors’ minds when they’re holding the checkbook.

Which brings me to the corollary:

Engage influencers

One of the easiest ways to sell your product is to have someone else pitch it for you. Whether that’s an excited fan or an interested journalist, having people talking positively about your product is an excellent tool to push investors to commit.

In our case, LabDoor received a glowing review from Fast Company just days after we launched our seed round. At a number of investor meetings that week, the person on the other side of the table would start the conversation with “I’ve reviewed your deck and some of the press about your company. Let’s now dig into the details of your startup.” I know had a 15-minute head start in an hour meeting, and someone else had primed the pump for me.

Leverage anchor tenants

No one ever wants to make the first move. Game theory indicates that it’s much smarter to shoot second, and you never want to be the only idiot that rushed into a losing battle.

That’s why so many ‘fundraising experts’ often recommend spending a great deal of effort in identifying a lead investor.

Sites like AngelList, along with standardized seed round terms, have made it easier than ever to raise without a lead investor. However, even in a ‘mass syndication’ or ‘party round’, you’ll still need to show momentum from incoming commitments before closing your seed round.

Once you close your initial investor(s) and terms, don’t be shy to press on the accelerator. Increase the frequency of your introduction requests, reinitiate contact with prospective investors, and feel free to name-drop your existing investors in your upcoming meetings.

Always be closing

(Obligatory)

Make sure you manage a consistent conversation with the investors in your pipeline, demonstrating a little more momentum each time you return (i.e. “since we last talked, our startup has closed $100K from three value-add angels.”). Few things inspire investors to finally sign and wire money than seeing the window closing on a round.

Put a little pressure on the folks that are waiting around for a lead. Use tools like AngelList’s “Invest Online” feature to close reservations from smaller investors.

Carefully leverage time and space constraints to your advantage. Give investors firm deadlines, and don’t back down on them.

Just close your seed round and get back to work.

Mailbox Inbox Zero

Inbox zero is a vanity metric

My email inbox is currently at zero, so I have approximately 45 seconds to get my point across until that is no longer the case:

Answering emails feels productive, but it can be one of the biggest wastes of time in your day.

Have you ever had a huge project deadline looming over you, and all of a sudden found yourself performing every little chore to procrastinate? Four hours later, your apartment has never been cleaner, but you’re even further behind in reaching your big goal.

Email is supposed to be the most efficient way to communicate over the internet. Don’t let it be your #1 daily distraction.

I usually triage emails with Mailbox each morning on my way to work. I’ll answer the most important ones immediately, then snooze the rest until my afternoon email break. That way, I get to work and immediately spend my first 4-6 hours deeply focused on my most important tasks of the day. During this time, my phone actually comes out of my pocket and under the desk to avoid distractions.

Once a week, usually on Sunday afternoons, I’ll sit down for a concentrated email session. This is when I draft key emails for the week, answer my email backlog, and unsubscribe from any spam that made its way into my inbox. Each Sunday night, I take a moment to savor the pretty picture that Mailbox provides me when I hit inbox zero. And then I get another email.

 

field

Best selling vs. highest quality

Protein Powder

” You get what you pay for.”

As consumers, we want to believe that spending more on a product ensures us a higher quality result. But a new set of studies indicates that this heuristic could have serious flaws, especially in the supplement industry.

There have been a rash of negative articles about supplement quality over the past month, and for good reason. Meanwhile, the FDA performs no pre-market regulation of dietary supplements, so manufacturers are left responsible for quality control.

LabDoor recently performed an analysis of 50 best-selling protein supplements and attempted to determine whether there was any correlation between quality and price in this industry.

So, how did the supplement industry fare in this LabDoor analysis? Not well. Check out the following two lists of protein supplements, alternatively ranked by sales and quality:

Best Selling Highest Quality
1. Cytosport Muscle Milk 1. MET-Rx Protein Plus
2. Optimum Gold Standard 2. Nature’s Best Zero Carb Isopure
3. MuscleTech Phase8 3. Shakeology
4. MusclePharm Combat Powder 4. MuscleTech NITRO-TECH
5. Cellucor COR-Performance Whey 5. NOW Foods Whey Protein Isolate
6. BSN Syntha-6 6. Jay Robb’s Whey Protein
7. Dymatize Elite 100% Whey Protein 7. CytoSport Monster Milk
8. Dymatize ISO-100 8. Optimum Pro Complex
9. Optimum Serious Mass 9. MusclePharm MuscleGel Shot
10. Optimum Platinum Hydrowhey 10. Nature’s Best Zero Carb Isopure Drink

Out of the fifty products selected for this analysis, no products made it onto both top-10 lists. Would the industry have done any better if the products on the two lists were chosen randomly?

LabDoor “identified a positive correlation between a product’s price per serving and its protein content per serving (n=50, R2=0.3441), but found no statistically-significant correlation between a product’s price per serving and its quality rating (n=50, R2=0.0017).

So, the next time you’re in a GNC, take LabDoor with you. Don’t leave your safety up to chance.

Vacation

Is it ever okay to take a break from your startup?

As a startup entrepreneur, is it ever okay to take a day, or (avert your eyes) even a week off?

At any sign of fatigue, my first instinct is always to hit the accelerator. Another few hours of work are just a pump-up speech (and energy drink) away. But after years of leading scientific and technology teams, I’ve long since learned the limitations of constantly returning to this strategy.

Like many tough guy rules, like “don’t show emotion” and “don’t ask for help”, “don’t take breaks” is a simplistic platitude.

Make no mistake about it – I am obsessed with LabDoor. My work keeps me up late into each night. I come home and reflect on our daily successes and failures. Many nights are spent working through major work challenges in my dreams. Then, I wake up, strategize in the shower, and get back to work.

‘Sprint and Follow’ Leadership is great for a short-term boost in work output. But every time you force your team (and yourself) beyond its limits, know that you are borrowing against future productivity.

Remember when you used to pull ‘all-nighters’ in college? It may have seemed like a good idea at the time, and may have even saved you from a few failed exams. But when you understand these three factors, maybe you’ll reconsider:

  1. Why were you in the library at 3AM Wednesday morning? Could it have anything to do with that Sunday morning hangover that kept you unproductive until 3PM that day? A big Sunday study session would have saved you a full night of sleep.
  2. Was your mind at 100% for your big test? Scientifically, that’s nearly impossible. Studies show that 17 hours of sleep deprivation has cognitive effects equivalent to a BAC of 0.05%. At 24+ hours without sleep, your equivalent BAC level would leave you illegal to drive a car.
  3. What did you do immediately after that exam? Odds are that you didn’t immediately start studying for your next big test. Be honest – you skipped your next class, went straight to bed, and paid back your sleep debt.

We’re not building LabDoor for a quick exit. We have hundreds of big tests in front of us. In our early months, we were proud of our frequent all-nighters. Now, we’re planning ahead. Consistently shipping new code every day and novel science every week. And now we’re not embarrassed to take a couple weekends and holidays completely off the grid.

This blog post was written weeks ago, and automatically published today. Our office is closed, and everyone is home with their families. LabDoor is poised for a huge 2014, and our team is going to be running at 100% all year.

BrokenPencil

CEOs vs. Journalists

I’m not the only person who has noticed a jocks v. geeks dynamic in sports journalism.

Sure, writers love to tell that story of the national hero that once bagged groceries. But even the biggest fan boys and girls can’t help but snicker when they find the star quarterback going through rehab.

If journalists can’t be cool, at least they can be honest and unmerciful.

But in the tech world, journalism turns into geek on geek warfare. The school newspaper vs. the computer club. This dynamic tends to be even more hostile.

We can both be better.

CEOs: Learn from the mistakes of professional athletes in this space. Don’t be Barry Bonds. No one ever wins a fight with a reporter, even everyone’s hero Elon Musk.

But don’t be Derek Jeter either. Ditch the clichés. Every entrepreneur ‘hustles’. We all ‘play to win the game’. Every startup wants to ‘change the world’. But very few entrepreneurs truly break down the reasons why their startup failed. It’s all about honesty and transparency. Nothing beats learning the inside story behind a team or product that you love.

Writers: Aspire to live up to the title ‘journalist’. Whether you write for the Wall Street Journal or a personal blog, find the story behind the headline. Startups launch products, raise money, and go out of business every day. What lessons can we learn? What trends are you seeing in the market? Who are the unsung stars of these companies?

There’s a big difference between analysis and antagonism. There’s a word for members of the media who constantly seek to ridicule the missteps of famous people – paparazzi.

Leading

The real value of AngelList

Too many entrepreneurs are using AngelList in the exact wrong way. They decide that they’re going to raise “$1 million” at a “$6 million valuation” on a “Convertible Note”, and then press “Publish” on their account. Then they sit and wait for their first investors to start throwing money at them.

AngelList is not yet a great tool for finding a lead investor (though this may change with their new Syndicates feature). I’ve found that at the beginning, startups have a much greater hit rate with investors in their existing network. This could be friends and family, investors in your startup accelerator, or even early customers. It’s rarely a stranger you met on the internet.

The biggest value of AngelList (besides their awesome talent tool) is the social proof that it can provide your startup once you close key advisors and investors. That green progress bar in the Fundraising section of each startup’s profile page is magical – the more it fills up, the more inbound demand you’ll see. But it can also work against you when it’s empty.

Fundraising feeds off momentum. In chemistry terms, you must overcome the activation energy in order to see the funding reaction occur. Momentum is the catalyst in this reaction. Never start from zero. Skip all the folks who are ‘waiting on a lead investor’ and go find the person willing to go out on a limb to support you. It may require giving the first folks into the round a “valuation discount.” But do whatever it takes to get your fundraising started before approaching the AngelList crowd.

Once you’re in the ‘Second Half’ of your fundraising game, that’s when AngelList really shines. Here are a few quick tips:

  1. Confirm investors and advisors as they commit:
    • If you have a strong verbal commitment, or better yet, signed paperwork, make sure they make it ‘AngelList Official’.
  2. Utilize ‘one-point’ connections to value-add investors
    • Find investors that commonly participate in funding rounds in your industry, or who often co-invest with your existing investors, and use the ‘Message’ tool on their profile to get in touch and introduce your startup. Make sure you have a shared connection that is willing to route your message through them.
  3. Heavily consider the ‘Invest Online’ feature.
    • This is another place where I strongly encourage you to seek legal counsel before proceeding. But I believe that there are few negatives to this feature. The system allows you to cash in on existing momentum, close smaller investors without dealing with paperwork or negotiation over terms, and most importantly, put money in the bank.

3X Startup Founder. Love Science & Startups.

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