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The Continental Europe Toxicity
Europe isn’t Silicon Valley - don’t be fooled by the number of accelerators, incubators and other things aiming to help startups across Europe. But any entrepreneur from a European country who recognizes the weaknesses and strengths of the local environment can push forward.
You just need to filter the knowledge and stories from successful Silicon Valley-based startups, put it into your context and adapt it. That’s the best way to know what to apply to your life and your company, and what isn’t applicable to the European reality.
When The Family was just 24 hours old, we were making a pitch deck to introduce ourself to the world. If you go back and look at that pitch deck today, you’ll see that almost nothing in it actually happened. But one thing has stayed there from the beginning, and that was on the very first slide, which asked, “Why are we opening The Family?” And the answer was because France is toxic. Now I can say, after traveling around, launching in Berlin and London, that in truth Europe is toxic. There’s something so specific about our environment and its relationship with innovation that makes it very difficult to be an entrepreneur.
Because when we talk about an ecosystem, it is everything around us: air, water, buildings, ideas, developers, investors, and entrepreneurs.
When we live in the European world of new ideas and entrepreneurship, toxicity can be found all around us. When we complain about bureaucracy, when we complain about public money, when we say there is no hope, when we are surrounded by pessimism, when there are no role models to be found or when the role models give bad advice…that’s toxicity. Toxicity puts people in a mindset where things aren’t possible, where if something hasn’t happened before, it’s never going to happen. That’s ok when you’re already big and people doubt you. But when you’re little and you’re hunting for growth and confidence and money, it’s hard to fight that toxicity. It makes you question yourself.
Don’t get the wrong idea — a toxic ecosystem doesn’t mean that nothing can survive.
The entrepreneur that recognizes the weaknesses and strengths of their environment can push forward, and some can even overcome challenges that only become more critical as time goes on — they may be few in number, but those that do emerge from a toxic ecosystem are even stronger than you’d ever imagine.
Some might not believe me, asking how toxic can things be — after all, there are accelerators across Europe, France is full of incubators, there’s news coverage, there’s this startup out of Bulgaria that just raised 2 million, everybody’s a software engineer, hell, in some countries, everybody’s a CEO!
But that’s the difference between hype, which is useless, and hope, which is useful. In Europe, our perspective on hype can get even worse when we look out at what’s happening in the United States. If you rely on TechCrunch and Medium to give you hints on how to be an entrepreneur, you risk three things: the first is that you believe it’s all true. The job of any good entrepreneur is to sell a good story. Nobody sells you the horrible things going on with the company (at least not until after the company is well on its way to being dead). The second is that you miss critical information filters that can help you understand which parts of that information are useful in your context — because it is not the same ecosystem. The third risk is that you start to think it’s easy. Looking at the US from Europe, you think that it’s easy to raise money, that you can find a market for your idea, that growth is just a matter of deciding when it’s the right time.
The reality is that all of these comparisons fall apart as you start to truly evaluate Europe’s context and Silicon Valley’s context. Tech content itself can be useful and fun to read. But we need to filter it, put it into our context and adapt it to our reality. If you hear that a seed round is usually at a valuation of $5 million, you need to understand that a seed round in the United States is usually at a valuation of $5 million. I haven’t seen a valuation in Europe at that valuation since the tech bubble of 2000! Having this implicit localization filter will help you know what to apply and what isn’t quite yet the case.
So what to do if you ignore the hype and choose hope?
You have two choices: the first is that you move — go to the Valley, go play the game that is happening there. But if you choose to stay in Europe, you have to play within the European ecosystem in order to have success. Realize that the local challenges of your ecosystem require creativity. Don’t try to simply apply other people’s solutions to your problems. Be aggressive in building something new that’s linked to your ecosystem, not constrained by it.
This means that you can’t just complain, instead you have to master the system. Don’t rely on it to change, because the ecosystem is not going to adapt itself to your needs. And remember that no one in Europe is forced to stay in their local ecosystem. Europe’s freedom of movement allows you to move, to adapt, to hunt down the best conditions for each part of your project.
Don’t fall into easy traps when thinking about how to defeat a toxic environment. Toxicity is not simply a lack of resources. A toxic ecosystem does not necessarily lack capital. A lot of toxicity is invisible, with dangers hidden even in things that seem positive (like chasing after public funding, for example). It’s the invisible toxicity that is the hard part. If you can see the problem and people are talking about it, you can overcome it. The real problems comes with all the toxic things that you don’t see.
The common factor is that all toxicity encourages you to waste your time. That’s what a toxic ecosystem is, a machine for wasting time. That’s why interior discipline becomes huge, since your use of time is the number one thing that you can control.
In Europe, we like to waste time. We say that we manage time differently, but really, we waste it. We take a long lunch, we reflect, we love to debate. With companies at The Family, one of the biggest things that we have to teach them is to avoid debates. If you are having a ton of debates in your startup, things aren’t working. This is also why you will see stupid entrepreneurs who succeed — they don’t sit around debating every aspect of an issue. They just act without thinking. They’re acting quickly, making mistakes quickly, and doing something else to find what works.
As an entrepreneur, there are three things that you need: capital, talent, and time.
Money and people are needed to make any project work, but they are replaceable: there’s always someone willing to write another check, and there’s always someone who you can find to take over a particular job.
But you can’t get back time. A bunch of people sitting around, saying that they’re working, talking about new projects every two months, focusing on getting a grant rather than getting a sale, those are people in a toxic ecosystem who are just wasting time. Luckily, you have 100% control: you choose what tasks you prioritize and what distractions you ignore.
So discipline yourself for radical solutions. Anything that will only achieve a partial result is a complete waste of time. Aim for the complete solution, the one that will give you back a 100% return on your time, and don’t settle for anything less. Focus your ambition on what you can do today, and make sure that you do it to the best of your ability.
Ambition isn’t about having unrealistic goals. Ambition is about pushing everything to be better every day. And it’s about not giving up on those goals. In Europe, what oftentimes happens is that people just keep lowering and lowering and lowering their ambition and their goals, until there’s nothing left from what you originally wanted to do. And by doing that, you end up with nothing.
Instead, start with what you can do. Start building in your neighborhood, get a monopoly there. Then push out to your entire city. Then push out to the whole country, and then to the world. If it works, great. If not, don’t sit there readjusting your goals and pulling down your ambition. Be disciplined with your ambition.
That becomes a question of focus.
Where are those 20% of tasks that are going to provide 80% of the results? Learn to recognize fake work — anything that doesn’t bring you closer to more customers, that doesn’t bring you closer to a better product, that doesn’t put people in contact with your solutions. Applying for public money, going to conferences, taking meetings, this is fake work that doesn’t help you with your business model, doesn’t identify problems and solutions, doesn’t show you the actual goals that you have to achieve in order to have success. Real work does all of those things.
And as long as what you’re doing is real work, don’t worry about making a mistake. So many people get frozen in fear of making a mistake. Let me give you a very rational piece of advice about mistakes: nobody cares. You will make mistakes, and trying to avoid them is a waste of time. Entrepreneurship is a field that’s absolute: if you’re right, you make money. If you’re wrong, you lose money. And that money you lose is the price of learning. You lose money one day, you are wrong, you learn from it, now you know something new. You make money, you are right, you know something new and you’ve got more money, which is good. Reaching that mindset is necessary as an entrepreneur, because it’s liberating. It frees you and allows you to breathe. If you don’t have that mindset, you try to avoid mistakes. And believe me, trying to avoid mistakes is exhausting and it will eat up all of your time.
You have to realize that if your ecosystem were healthy for startups, they would already be there. They’d be all around. Once you realize that the culture isn’t sustainable for startups, don’t spend your time trying to change it — fight back against it. And find productive ways to do it. What is productive? Make your own money — find clients, not backers.
Building your revenue stream is the single most freeing thing that you can do.
At the beginning, when you are able to keep costs very low, that’s your opportunity to be profitable. This isn’t big-corporation profitable. I’m talking about what Paul Graham called ramen profitable, maybe in Europe we can call it pasta profitable. This is being profitable in a way that allows you to make enough money to control your own destiny.
You don’t need a business model to do that. You can make money and be opportunistic in terms of finding revenue streams without having a business model. If you can make money, you’ll have time to figure out the right business model. You won’t have to rely on investors who don’t understand your goals. You won’t have to rely on finding an exit before anyone realizes that finding the exit was easier than actually building your revenue stream.
In Europe, many people will go out and fundraise with whoever will give them money rather than thinking about trying to hack their revenue stream. They won’t take advantage of all of the opportunities. And that’s bad, because it’s much harder in Europe to find good investors. Finding bad investors can be worse than having none at all, because letting someone in to your company as an investor is like letting them into your DNA. They’re going to have an effect. So giving yourself the opportunity to be free is one of the best things that you can do. That revenue, that freedom, they help you survive.
Making money also allows you to keep your ambitions high. That’s important, because all kinds of things can kill ambition — your family who wants you to succeed but doesn’t see how this idea can possibly work; your early employees who start looking for some stability and reduced risk; you run into a skeptical group of supposed experts. External pressures can kill your ambition. Don’t let them. Being right just once can make up for 1,000 mistakes. That’s why in entrepreneurship it’s actually a larger risk to not be bold and ambitious. We know that only a fraction of companies survive, which means two things. One, it’s better to be ambitious, lose, and be dead sooner rather than later. And two, it’s better to win something big than something small — especially considering the amount of time involved.
Sustain yourself by connecting with people who have the same ambitious ethos, who are facing similar pressures and who refuse to back down.
Create a strong environment around you that encourages you to focus on your goal. Look around to see if you can connect with others who have faced those pressures before and succeeded. And it’s better for this group to be small, particularly at the beginning. It may grow larger with time, but keep it small at first.
That means don’t run around looking for role models! I promise, like investors, having a bad role model is worse than having no role model at all. Just because someone is successful does not mean that they are able to give you good advice. Finding someone who can help you is great, but don’t lose sight of the real goal. Focus your energies, and you can end up becoming a role model for someone else.
Let’s be clear: toxicity is not only a problem, it can be an opportunity. When you are able to achieve success in this type of environment, it is a symbol of strength. What advantages can toxicity bring? For one, European entrepreneurs show a great deal of discipline in both raising and spending money. Toxic environments discourage expenditures, and teach you how to maximize every dollar and every day. This type of capital efficiency is a huge key to achieving true and lasting success at the highest level.
European entrepreneurs also show an amazing ability to exploit the beneficial aspects of their home communities even while focusing on different markets. That’s why we’re building out the local The Family offices, as an Unfair Advantage for entrepreneurs. Algolia, one of our most successful startups, has exploited its initial presence in Paris to build a world-class technical team there, attracting the best talent thanks to the founders’ personal connections in the best engineering networks. Yet as a cloud-based search engine operated as a Web service, Algolia seeks customers not primarily in France, but all over the world. It’s the same model that The Family uses to help its Fellows rely on their base at home, but also launch their operations wherever there is a need, enabling us to be market-driven, not nationality-driven.
In the end, toxicity pushes you to work harder and to be more clear in your thinking. You can’t fool yourself in a toxic environment. You see the results, or the lack of results, and you have to act.
Acting sometimes takes the form of helping others — the pay it forward mindset.
This is not just about networking, this is not about collecting a stack of telephone numbers that you can call when you decide the time is right. Pay it forward is about giving as a matter of discipline, even if you get the feeling that it will never pay off. This may seem a bit mystical, but you can push to create an environment where so many people are helping others, that it will eventually come back to you. You don’t have to know how exactly, you can’t plan it, but it will be there. And there’s a more immediate benefit as well — helping others creates positivity, it helps you to feel better, it breeds success. It’s one of the ways that you can push a toxic ecosystem in the direction that you want it to go.
But that’s all without ever losing sight of the fact that you cannot change the ecosystem, you can only fight back against it. That means your ultimate responsibility is not to anyone else, it is not to the ecosystem as a whole, it is only to yourself. We can do more to help the ecosystem by creating value in Europe and creating the next 100 European billionaires than in fighting for some political solution that claims to help entrepreneurs. Do not count on anyone else saving you — you must save yourself. Ask yourself, what do I need? What does my business need? Focus on these questions, and you can overcome the toxicity around you. You can survive, and you can thrive.
Europe is a toxic environment for entrepreneurshipThat does not mean that it’s impossible to be an entrepreneur, it means that in general it is much harder in France and in Europe than elsewhere. This is revealed in many small things: paperwork, labor codes, social pressure, and an overall mindset with widespread pessimism, skepticism, distrust, etc.
To survive in this toxicity, you need to get strongerYou need to get in shape just like an athlete, but here it’s your perspective that you need to build up: construct an ambition filter that lets you analyze and sort out what you are hearing (and toss it out when necessary).
Beware of the startup hypeEntrepreneurship is becoming trendy. The media tell the stories that people want to hear, not the truth: do not get fooled by fantastic acquisitions and extraordinary fundraising rounds, things that you read that make it seem so easy. It is not easy. But that doesn’t mean that you shouldn’t read the content: tech is the only sector where top minds take the time to share their thoughts and experiences in blogs.
Beware of the Silicon Valley hypeLet’s kill the myth: you won’t fundraise easily just because you go to the US. Competition is huge precisely because everyone who is trying to fundraise goes there, including the best startups in the world. And that’s without mentioning the fact that you don’t know the system or anyone who lives there, making you into just another immigrant, like all the others :)
If you’re still dreaming of Silicon Valley, just book a fucking ticketSpend 3 months there and find out if it is where you want to live. If it is your dream, nothing should stop you: never play the “what if” game in your mind.
If you stay, understand and accept the local gameIf you are in Europe, play European, not American. You’ll have to deal with toxicity and remember, the less obvious it is, the harder it is to fight. Obvious difficulties are openly discussed and there are even startups that launch to try and solve those problems. Invisible toxicity is the most dangerous.
Never forget that time is preciousIn Europe, we like to take our time. Endless brainstorming, meetings and debates are the sign that something is wrong with your startup. Morons make successful entrepreneurs: they don’t think too much and they act fast. No one plans for indecision, but indecision is where you can easily end up. If you have enough users, A/B test - don’t debate. If you don’t have the users, make a random decision, flip a coin. Spend time acting instead of thinking and talking. An entrepreneur needs 3 things: Capital, People and Time. Only the first two are replaceable.
Be radical: never settle for lessAdopt the “upward push” attitude: always ask yourself, “What can I do, today, with my means, that would be at the highest level of ambition?” At the beginning, those things may be relatively simple: ambition does not mean contemplating unrealistic steps, it means getting better every day. It also means having the courage to stop and restart something new from scratch instead of continuing a downgraded project, just so that you don’t have to admit you failed. Get big or go home.
Focus on real workAlways ask yourself “Is this fake work or real work?”: real work is what brings growth for your startup, and fake work is what only brings you pleasure. Public grant? Fake work: if you don’t prove your business model, you will have money but no idea how to use it. Worse, you’ll feel happy with what you’ve accomplished, which is never a good thing for an entrepreneur. Pitching competition? Fake work: without a specific goal, it is a waste of time. Building the next feature? That comes down to the potential impact of that feature on your Life Metric (for the vast majority of startups it is their revenue): if your life metric is growing, you are alive, if not, you are the walking dead.
Don’t be scared of making mistakesFirst, nobody cares. Second, thinking about the next mistake you want to avoid is a waste of time, while making a mistake is never a waste as long as you learn something. In entrepreneurship, there is an absolute criteria of truth: if you are right, you make money; if you are wrong, you lose money; and the amount of money you lose is always the right price for the right lesson. Losing money is something you need to learn very fast. And remember: you only need to be right once.
Dare to fight backIt is not about changing the toxic culture, it is about preventing the culture from infecting you. In Europe, we define each other by who we are (our background, family, studies) and not what we are doing (that’s one reason why we have a big problem with failure). Fight back, especially with yourself, because the important thing is what you think, not anybody else.
Don’t be part of the zooEntrepreneurs are hyped and in great demand, especially from people who cannot bring them anything. Before doing something, always ask yourself: “Is this useful or not?” Be very disciplined. In a toxic environment, every single tiny breach in discipline can cost you the victory.
Make your own moneyBe opportunistic to become profitable ASAP, and stay independent from investors, as they are the first cause of toxicity. You don’t need to be really profitable, that takes years - but be “ramen profitable,” get to a point where you’re surviving. An entrepreneur is someone who does things without resources. You do not need a business model to make money, as that is just a methodology to provide value at scale.
Connect with othersFind people who have the same mindset than you, who are living the same things. Enjoy yourself: being disciplined does not mean that you can’t have a life outside your work.
Pay it forwardGive before receiving and at some point you will be repaid. If everyone in the community does that, it will be the real antidote against toxicity. Force yourself to give everyday.
Save yourselfNo one is strong enough to save a country or an ecosystem. At The Family we fight to save the 200 best companies in Europe. Save yourself: be disciplined enough to grow, good enough to take people with you, work hard, focus, build amazing things and everything else will follow.
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Europe, I love You
Differences are opportunities, they are virgin lands waiting to be discovered, developed and enhanced. A startup begins as a simple solution to a very local problem that eventually proves to be useful in many other locations and for way more people. Do things your way, with your style, according to your environment. If no one has cracked the European market yet, that’s not because it’s impossible, that’s because it’s still waiting to be done. Your culture is a strong barrier to entry.
Let’s make those differences become advantages.
Too many startup founders I meet are obsessed with copying what goes on outside of Europe. We forget our strengths. The things that give us incredible unfair advantages. An unfair advantage is anything you can use in your favor, making such a difference, that it seems to be unfair.
Break down these geographic barriers.
One example of this is geography. I’m always surprised by how many Europeans don’t take advantage of this. We live in a place where any major city can be reached, by plane or train, in about 2 hours. More or less. London, Paris, Berlin, Barcelona, there are cheap flights and good access to these places. But people still live inside their geography.
In my case, people are always surprised when I explain that I live in London and Paris. If I take the Eurostar from Paris to London, it only takes me two hours. If there’s an event to attend in Paris, I’m there. Same in London. But people can’t wrap their head around the idea. If someone tells you he lives in the suburbs, and it takes an hour and a half to get into the city center, you won’t be surprised when he comes into Paris to have dinner. It’s more or less the same amount of time involved, to go to London from Paris or to come into Paris from the suburbs.
It might be expensive to travel. But as an entrepreneur, it is much cheaper to travel, than it is to deal with the problems that exist where you live. That’s why Skype has their engineering team in Estonia, and their headquarters in London. They built their organization by putting each part in the place that made the most sense. They didn’t get caught up in the idea of borders.
So why think about these debates, will Paris or Berlin be the next startup capital, all of that? Why should that be a question?
First of all, none of us will really get anywhere without the others. We need to have a European mindset. That doesn’t mean that it’s not complicated. It’s complicated to have multiple locations, and to open operations in multiple countries. There are local problems that come up. Right now, we opened up our office in Barcelona, and we’re still waiting for the paperwork to go through the system. So you definitely add in some challenges. But it’s worth it. It’s worth it to overcome those problems, because it gives you a larger footprint, a larger pool of potential employees, a larger pool of customers.
And you don’t have to be as big as Skype to do this. We have one startup who came to us and said, “oh, yeah, we set up our bank account in Germany. It was really easy, it’s all online, we went and met them one day, it took us 10 minutes.” Now, there is not a single startup that I know in France that doesn’t complain about banking. In France, there are so many problems that come with trying to open an account. But you’re not obliged to stay in France to do your banking. So why do it? Why not take advantage of the possibilities that exist in other European countries?
If you look at all the countries in Europe, you’ll find things that work really well, and things that are terrible. For example, a lot of countries in Europe have horrible corporate law systems. Investing in a company in France is a mountain of paperwork, it’s diabolical. And it’s like that in a lot of European countries. But not in the UK. In London, the rules and the procedures are so simple, it’s the best designed corporate law in Europe, in my opinion. So why would anyone want to open a purely local company? This is the same reason why every corporation in the United States is incorporated in Delaware. And we can do the same sort of thing in Europe.
Now, there are tax implications and all sorts of other things to think about — but that’s ok, you pay your tax where you live, it’s part of the deal. But just because you pay your taxes in France or Spain, doesn’t mean that you have to do everything in that country.
That geographic element is very underused right now in Europe. It will keep getting more common, but we really need to change our mindset about that. Right now, we don’t live with the idea of Europe as a business opportunity. It’s just some fictional thing floating in the sky. We need to see Europe as a concrete thing that we can use.
Get comfortable with the fact that your team and your market aren’t in the same place.
Another thing that we forget is how we can find B2B clients. People in Spain hate trying to work with their corporations, in Italy, same, Romania, same, France maybe a little less, but still. Depending on what you’re selling, you’re not restricted to your local market. If you’re developing software, take a wider look. When we have a SaaS company come into The Family, we tell them to build their team locally, and look towards the rest of Europe, toward North America, towards the world to build their market.
Use data to figure out where you want to go into. If that’s the US, great. If your data says you should go into Poland, hey, that’s the best place. And maybe expansion isn’t even a matter of geography. Be willing to launch into the Internet Nation. The Internet Nation is that portion of the population, in France, in Europe, worldwide, that is into the world of entrepreneurship online, and speaks English. It’s an active group that you can reach out to, without any real barriers, and that can significantly widen your available market.
So the point is that we need to recognize our advantages, especially what we might take for granted or what we see as a disadvantage. Another quick example: what’s the biggest perk right now in Silicon Valley? It’s the amount of vacation days that they’re giving to their employees. In the US, the standard is 2 weeks, and tech companies are now competing and they’re giving somewhere between 6 and 8 weeks of vacation. Now, take the example of France. In France, we already have a standard of about 6 weeks of vacation. But as Europeans, we see that vacation time as a given, or even a sign of weakness. We see it as something that is preventing us from working hard. There is a difference between being productive and being stupid. Working all day and not getting anything done, that’s stupid. You may not work all day, or take your vacation, but you get things done well, that’s being productive. So if we push ourselves to really be productive, the European system of time off, compared to the American one, can already largely be seen as an advantage.
B2B sales are forever.
One comment that came up a few weeks ago was “As a B2B company, we’ve found that selling in Europe is harder at first, but once you’ve sold once, they stay with you.” I liked this because it really expressed something that is true: in the United States it’s easier to get a sale, but it’s harder to keep your position. In Europe, it’s harder to get a sale, but because the rate of change and innovation is slower, it’s easier to keep your position for a long time.
At the same time, you have to be very careful with this, because it has the tendency to make the market weak. You can fall into the mindset of the “no need to change anything”. But if you combine the advantage of maintaining your enterprise client base relatively easily, with avoiding the disadvantage of complacency, you create a magical thing that can be a home run. You can get a big win from understanding both sides of this aspect of European markets.
There is a desire in Europe for the Robin Hood type figure.
The solution that comes sweeping in, taking away from the older, established interests and giving advantages to the consumer. And it’s no secret that we in Europe are in a part of the world where there is a lot of tradition, conservatism, bla bla bla. One of the reasons behind that is that the countries in Europe are oftentimes so small, that it’s easy for a big company to lobby for specific advantages and privileges. There’s always such a proximity between people who run the government and people who run big companies. But it develops big gaps between what people want and what companies are delivering. As an entrepreneur, that gives you a lot of opportunities to focus on what customers really want. You can move into the market and provide a much better experience, if you’re able to survive the backlash of regulation and vested interests. You can create new market segments, and you’ll be able to do it with the help of the people.
Captain Train, CityMapper, these are examples of companies that are able to do that. They’re doing the service better than the old service providers were doing, and they’re having success. These are great product teams focused on the consumer, and that’s the key.
Save the consumer!
The number of problems we’re facing could potentially lead to a lot of solutions. In Europe, that sense of facing many problems often ends up in pessimism. And I think that this pessimism is actually a huge opportunity. In Silicon Valley, there’s almost the opposite problem, in that there is so much optimism that it can be hard to pick an idea and run with it. In Europe, though, everyone tries to understand why you’re going to fail. If you’re able to overcome that mindset, you can be in an extremely strong position as an entrepreneur.
This is the same situation as when, if you’re going to start running, you should practice running on sand. Because running on sand is hard, and if you practice doing that all the time, when you’re finally not stuck in the sand anymore, you’re able to run very fast. Building a startup in Europe is exactly that, you’re running on sand. If you push through, you’ll find that your company is well-trained and able to face a great deal of challenges.
That pessimism can also help you to figure out where the real problems are. We’re always repeating that founders should find a problem to solve, rather than a brilliant idea. It’s easier to see a problem in a pessimistic environment.
European entrepreneurs become very efficient with capital.
It’s not so easy to raise a lot of money in Europe. Plus, the market for employees is currently unbalanced to the point that there is much more supply than demand. So when you start a company in Europe you get used to not spending much money. And that’s important because capital cycles go up and down. When the fast money runs out, many entrepreneurs in the US aren’t prepared to not have money. Meanwhile, people look at European companies like BlaBlaCar and they can’t understand how they’re doing so well and how they’re growing so much without spending much money. They look at Save and can’t believe how much revenue growth Save has compared to their capital burn. Don’t see a lower amount of capital as a problem, see it as a benefit that will make you and your company stronger.
Leading the way of lifestyle.
People who are not from Europe look at France, Italy, Austria, Sweden… they see a certain lifestyle. Let’s take that perception seriously enough. This isn’t just a question of luxury, either. You can make a good living in the luxury industry, everything’s pretty, there are businesses that you can develop. But I’m not sure it’s really what entrepreneurship is about, since we believe that entrepreneurship is ultimately about providing exceptional service at scale. If you want to truly scale, luxury isn’t really what you’re aiming at.
The idea of a lifestyle doesn’t have to mean luxury. All over Europe, you can find a sense of detail and service that is exceptional. As a startup, you can take advantage of that. You don’t have to just copy and paste the things that you see coming out of Silicon Valley, where things are much more robotic, there’s less soul there. There’s a reason that Airbnb, when they saw how their team in Paris was able to handle the customer experience both in terms of hosts and guests, had that team start teaching their other teams all around the world. The sense of delicacy and attention in their Paris office was the best, and so that was the model that Airbnb spread throughout their company.
Capitan Train is a good example of this as well. They aren’t providing a luxury service. But their customer support team is focused on basically being exactly like Ralph Fiennes’s character in The Grand Budapest Hotel, this old-school concierge who looks after every need of the guest. That’s how they see their relationship with the client. That doesn’t mean that their service is a luxury service. They’re just trying to apply those rules of care and detail within their startup. And it makes them stand out, to customers and to other companies.
That question of lifestyle doesn’t end with your business, it also has to do with your happiness.
Many people will ask me, where should I start my company. And the answer is wherever you want to live. That’s the most important thing, the business questions can be worked out, but the type of life you want is something that you have to listen to carefully. Motivation is your drive. Depending on who you are and what it takes to make you happy, motivation will be affected by where you live. We had a debate whether or not it was a good thing as an entrepreneur to be on unemployment and paid, and use that time and money for your startup. Some people said that unemployment benefits were a good thing, since it gives you some measure of freedom and security, others said it was better to have a job and work on a startup, others said that it would be better to have nothing and be desperate and really push yourself to succeed with your company. And my answer, like with where to work, is that it’s not that simple. Each of those situations has its benefits. For me, personally, I like the desperation of having to do something, because if not, there are checks coming due next month that won’t get paid. For me, that’s a motivator and it is exciting and it makes me more efficient. But not everyone is like that. I can definitely say that I’ve seen many people take their time on unemployment, and acted like a tourist for 18 months. But you can have a story that shows how someone has used that time and that security to actually build something too.
Are you aware enough to figure out how to build the infrastructure that will get the most out of you?
That infrastructure is extremely personal. One infrastructure isn’t objectively better than another one. Maybe unemployment isn’t a good motivator for you as an entrepreneur, but maybe it’s an advantage for your employees. Maybe, since your potential employees have European unemployment benefits, you can offer your early employees equity rather than a salary. That’s just one idea. It’s an example of how you can look at a situation and not ask whether it’s good or bad, but how can you turn it to your advantage.
Europeans have found other ways to entertain themselves. For example, in France, do you know how many writers have published a book in the last 20 years? It’s incredible. In a country of about 65 million people, 3 million people have published a book. Maybe no one reads it, ok, sure — but writing the book might have given those people something to do, it gave them a purpose. And we see this going even further, with blogs, social networks, etc.
As we move toward what is called “a jobless future”, these questions of what we do when we’re not working become bigger.
And in Europe, we can have an unfair advantage in that we’ve been thinking about those questions for much longer than, say, the Americans have been. America isn’t ready to lose 80 million jobs to technology in the next 10 years. But that might well be what happens. And then what are they going to do? They’re going to turn to Europe and ask, hey, what do you guys do all day?
So use all of these advantages. Every city in Europe has its fans, there are people who love Berlin, who love Paris, who love Rome. Just take a look at the list of films by Woody Allen, and you’ll get it. No one loves Palo Alto, I promise. People love the people they meet in Palo Alto, they love the work, they love what is going on there, but no one is ever going to say, oh, I love strolling through Palo Alto. In Europe, there are people who dream of our cities. All sorts of people would love the opportunity to be working in our cities. And that can become a worldwide advantage in terms of hiring talent, if you know how to use it correctly.
We are underutilizing our European infrastructures. Many of the barriers that we think we see, if we really look closely, we can see that there are ways around them, and or that they aren’t actually barriers at all. And the best is when we see how the things that other people see as barriers can actually be unfair advantages for us. That’s how you play the big game, and that’s how you build big companies.
So look around, be honest with yourself, and stay cool.
We should be proud to be Europeans and grab the opportunities that provides. Here’s how.
Start where you want to liveDo not move only for business reasons. Choose where you want to live based on your personal life before thinking about where you want to start your business.
Copy smartlyCopying a foreign startup is often a good idea as a first experience, but do it the smart way. First, do your homework: don’t trust the press, do your own research, apply for a job, go to the interview and ask all your questions. Second, be careful to adapt to your local environment: the market, the legal constraints, the existing infrastructures... Finally, remember that copying is always temporary: if you win against your competitors, you will have to innovate and build your own path.
Do not get caught by bordersEurope is much more united in terms of culture than the US. The language barrier is not a problem anymore: translation is cheap and multilingual employees are easier and easier to find, such as in customer support, which is always a touchy issue when you scale. Expand your horizon: travelling in Europe is easy, cheap and fast. You can build a pretty useful network in just a few years, which will be a true unfair advantage.
Our specificities are opportunitiesWe are used to uncompetitive markets and monopolies. European customers are eager for disruption. Even pessimism is an opportunity: you will be the one bringing water in the desert. And what’s more, don’t underestimate our lifestyle: it is an argument that can attract talent, so don’t hesitate to use it and market it well.
Take the best of every country: decentralizeLet’s face it: for the moment every European city sucks as a whole. But each of them has its own advantages and you should capitalize on them. Skype for instance has its engineers teams in Estonia, its social headquarters in Luxembourg, its corporate headquarters in London and its Accountancy Department in Switzerland.
Think of Europe as a whole: optimizeLocal operations should never be launched by local people. Uber has a launching team who launches every city around the world: they are specialized and have a strong know-how. As a first step, you can have specialized teams based in a particular country that operate for all of Europe in Sales, Customer Support or Engineering. Even on the longer term, your team does not need to be where your market is. It’s not easy, it’s not perfect, you may have to over-invest in your internal communications, but you have to adapt to your constraints.
Stop being obsessed by the American marketLaunching in the US as the second move after launching in your mother country does not make any sense in 80% of the cases. On the contrary, becoming pan-European is an opportunity: take strong positions to fight against your US competitor when it does arrive.
Let data guide youDo not launch randomly - trust the data. Communicate in every language and see where it lands best, see where your early users are, and then launch.
Meet the Internet nationA new country is born, a transversal one, with citizens who speak English and share a digital culture. It could be the first country to launch your product.
Be ambitiousBeing smaller means we need to be more ambitious than average, not less. Small things are not ok in Europe: think big.
Articles to go deeper
The Mistake Companies Make When Marketing to Different Cultures
5 Things US Startups Need to Understand to Succeed in the EU
Your Startup’s Competitive Advantage Can’t Just Be “We’re French!”
The Power of the Tongue: English in the Digital Economy
Building the Global Startup
The Martian Approach to Launching a New Venture
What’s Your Problem?
Don’t fall in love with any brilliant idea. As an entrepreneur, you’re fighting against a problem, you’re not cherishing ideas. You’re about to dedicate all of your time and energy to tackle this problem. So make sure it’s a good one. A good problem is real, you can clearly acknowledge and define it. It has a huge impact and it’s getting worse every day. A problem is difficult to overcome. The pain is obvious and not already solved - the way you think it should be. So leave your ideas and concentrate on the problem that is obsessing you. Let’s go!
As an Entrepreneur, you need a problem. It’s the first step in finding a solution. But it’s not always easy to see the problem, or to really understand it. So here are some questions that you need to ask yourself.
Is it a real problem or not?
Today, this gets tricky right away. You have to live at the center of contradicting possibilities: how do you find good ideas that might seem bad to others, and how do you find the real problems amongst all the fake problems? Good ideas that solve obviously real problems, everybody’s working on those. They’re easy. What you need is a real problem, not a problem that you imagine, and you need a solution that’s not obvious to everyone else.
Let’s take the case of Google. When Google began, there weren’t enough websites for it to really be a problem to keep track of all of them. When they said they wanted to store and search all the information on the web, it wasn’t a real problem. But Google saw into the future, when there was an exponential explosion in the amount of data on the web. So they had a real problem that was not obvious because it was a future problem; and they solved it with a good solution. (And don’t fall into the trap of people who say that, “Oh, of course it was going to be a problem! Anyone could have seen that!” The future is unpredictable, and anyone who claims to always know what is coming is a liar. That’s part of why it’s so hard to identify those future opportunities today, and why Google became what it became.)
Identifying problems like that means that you have to get inside the thing you’re trying to change. That’s how you see the real pain points and the real trends that indicate problems. If you’re not sure it’s a real problem, you’re already lost. Because the execution of a solution, there’s a lot of people who can help you to do that. Execution follows similar patterns all the time. But if you want to identify real problems in an industry, you have to truly understand its day-to-day realities.
It’s hard to find real problems. Sometimes you have to keep trying. So do that — keep trying. But be clear about what you’re looking for — don’t invent problems that don’t exist and will never exist.
Can you define the problem?
Being able to define your problem in detail, and to explain it using very few words to whoever is listening, is an absolute necessity for an Entrepreneur. It takes time to do it right. Anyone who tells you that there are overnight success stories is either a journalist who is selling you a story, or an Entrepreneur who is selling a story to a journalist.
Defining the problem well is important because even if you find a real problem, what happens with your business isn’t going to exactly follow the road that you originally saw. There are going to be roadblocks and maybe even dead ends. But if you have defined the problem properly, you’ll see either a way around those roadblocks, or a new road taking you out of that dead end.
Is the problem big?
This comes down to choices, because here’s the reality: whether you start a big company or a small company, you’re going to deal with the same issues. Whether your ambition is huge or small, you’re going to come up against the same horrible things when you start out. Finding success as an Entrepreneur, no matter what you’re trying to do, is hard. The percentage of success is extremely low. That being the case, you need to clearly see the upside of your risk. When you finally find success one day, it’s better for it to be a significant success rather than a small one.
So don’t pull back in terms of ambition, and make sure that the problem you’re aimed at is big enough to make it worth your time and effort.
Is it a difficult problem?
If you think that the problem isn’t that difficult, be worried. Because if it isn’t difficult, why hasn’t anyone already done it? What’s more, difficulty isn’t a bad thing. The more difficult the problem, the more opportunity there is. Not only will the potential success level be higher, but it makes it more unlikely that anyone else will also be able to succeed. Too many Entrepreneurs only go after projects that have low-risk problems. Good Entrepreneurs take on the big problems and the difficult problems, the ones that really need to be solved.
So don’t hesitate to tackle something big. WhatsApp was a great example of this. The particularity of WhatsApp was simply that they took an extremely difficult problem and were the only team that said, “We can do this and we can do it across every operating system at the same time.” Every engineer would see that as an incredibly difficult problem. WhatsApp decided to do it anyway. And you saw how that story turned out.
Is the problem obvious?
WhatsApp is again a great example here. Of course there was a problem that people wanted to be able to communicate with their friends, no matter whether their friends were on iOS or Android. It’s clear that no one only wanted to be able to communicate, essentially for free, with their other friends who happened to have the same phone as them.
Chipotle is another one: any restaurant chain has an issue with scaling. The easiest way to scale is to accept a reduction in quality. Whether it’s a restaurant or a hotel, you run into the same problems in terms of decreasing quality as you scale up. Chipotle was the first one to say, “We’re going to scale and we’re going to use organic ingredients all along the way.” No one else did it because it’s so hard. But once they decided that was a problem that they were going to solve, it became obvious that it would work. Because it’s something that people would want, but that was never available to them.
Has the problem already been completely resolved or not?
Whenever a bad Entrepreneur starts investigating an idea, they look around at the competitors and say, “Oh, well, somebody’s already doing it, guess I’ll keep looking.” But the question isn’t about competitors. The question is whether or not the problem is completely solved.
Why is it that there are competitors to Google that keep coming along in the search field? It’s because as great and as massive as Google is, there are still issues that haven’t been solved in terms of search. Google’s almost a $500B company, and they’re still having competitors come along. And that’s good.
Because it’s not simply a matter of looking to see if something else already exists that’s addressing the problem. Until the problem is completely solved, there’s always an opportunity. Either you can find an opportunity because there are fundamental problems like geography that others can’t overcome, or there’s an opportunity because the response to the problem can be adjusted and improved.
Is the problem getting worse every day, or not?
My favorite. If you’ve got a problem that’s constantly getting worse, send us your application for The Family today.
Take something like pollution. Every day that goes by, it’s getting worse. Sure there are a lot of people working on it. But it hasn’t been solved yet. That’s the indicator of a huge market opportunity.
So those are the seven questions that you need to ask yourself about your problem. Once you know the answers, you can move on to thinking about some other important things.
Understand your Market
Like understanding your market. Are you trying to break into a market that is growing, with more and more people every day who need your solution, or are you going after a market that is shrinking, with less and less people needing your help?
By definition, the market is alive. It’s never static. And you have to evaluate it on three shifting levels: the target market, the served available market and the total available market. When a startup is thinking about its market, it always falls into the trap of thinking about the total available market, all of those people in the world who might eventually be your customers. They start thinking about competitors for that market.
But for a startup, the target market is the real goal. Apple didn’t start out aiming at the total available market that they have today in 2016. They started out with that personal network of computer enthusiasts in Palo Alto in the early 1980s.
Once that’s clear, you can move up a level and look at your served available market, which is the market that you can actually reach with your startup. Only once you’ve gotten past those two steps, finding your target markets and then filling your served available markets, is there any question about competition.
Let’s be clear: Coke and Pepsi are competitors. If Coke sells less, Pepsi sells more. That’s how it works, because they’re dealing in the total available market. But when you’re an Entrepreneur launching a startup, the likelihood that there will be a direct relationship in which you’re going to sell more because your competitor is selling less is extremely low.
When you do get to that point of addressing a total available market, you’ll be able to hire people to worry about the competition, and you’ll be able to pay them very well. But until then, why worry about it? Your job as a founder is to conquer your target market. Period.
So do yourself a favor: forget about your competition. Ignorance is bliss, and that’s doubly true when you’re trying to stay focused on your product. You can’t control your competition, so why waste any time on them?
That doesn’t mean that you can’t take a look around and see what other people are up to. But you can’t be doing it to see what the competition is doing, you need to be doing it to see if there are any good ideas out there that you can use. And when you see something good that can help you, use it — but use it intelligently. Never turn off your brain. Adapt those good ideas to your context and your needs. Don’t just go around copy/pasting, actually think about what you’re doing and how it helps you.
Inspiration is everywhere, especially for startups
And go looking for inspiration in industries and domains that aren’t your own, not just in the tech world. We’ve got thousands of years of world history, in which there were people doing absolutely incredible things. If you want to find people who faced universal problems and in moments of crisis created new paradigms (for better or worse), you just have to go back into the history books!
There were people in art, literature, medicine, the railroads, who did things that will blow your mind. In the tech world, there’s about 20 or 30 years of stories to go through, and that means there aren’t that many, relatively speaking. So don’t get stuck in the world of Entrepreneurship and startups. Let your mind go free, and as long as you keep it working and not on autopilot, you’ll find amazing stories that lead you in new directions.
None of this learning is done in a weekend. But if you want to be an Entrepreneur, it’s something that you take on as part of your long-term lifestyle. Because once you’ve seen what people have done, the theories that people have developed, the studies that are out there, all of the excuses that you could have for not trying something new just fall apart. You aren’t too young, you aren’t too old. You don’t have enough experience, great. It’s not a requirement. You aren’t too dumb, and neither are the other people out there. You don’t have any business experience, that’s ok — no one else did either when they first started out. You don’t have any ideas? Open up Google and look for one. Or use a different search engine, they’re out there.
The excuses don’t work. The only thing is whether you’re willing to take the risk or not. And if you’re not, that’s ok. Not everyone needs to be an Entrepreneur. But if you’re going to take the risk, take it — be ambitious, be aware, and be fast.
Your idea equals your solution, your problem equals your market. Many entrepreneurs are obsessed with their idea: that’s a mistake, because startups are market-driven, the result of an intimate relationship between a team and a market with a problem. So what’s your problem?
Is your problem real?Fake problems are problems that only the entrepreneur sees. Be careful not to think that your bubble is reflective of the outside world. BUT never use traditional market research methodologies such as a market study or going to a market expert. Those are based on the assumption that exploring a market means asking what people want. But people do not know what they really want until you push it to them, such as was seen with cars, TVs and cellphones. There is a huge gap between what people say, what people think, and what people really think. The question, “Does my problem matter or not?” is a very good clue of your project’s long-term value.
Can it be defined?If you have a well-defined problem that you are trying to solve, your “why” will be obvious (watch the TED video “Start with the why”). By the way, you should always explain the problem and not the solution because that’s how you’ll connect with people.
Is it big?The present market is not the reference, the future market is: you can become as big as you can make the market grow. That means you have to conquer the existing market AND create a market that does not exist yet. It’s that latter opportunity that is key.
Is it difficult?Be ambitious: the more difficult a problem seems, the more valuable the solution will be if you succeed. In the European paradigm, difficult problems are the one that create big companies on the long term. You have 2 choices as an entrepreneur:
- Do things that lots of people are trying to do - this will be quick and mainly consists in execution, as you’ll need to be the best to succeed in a very competitive landscape;
- Choose a very long-term approach and work for the next 10 years on a problem that is not obvious - within 10 years you can become an expert in any field, and that path never fails.
Is it obvious? That is to say, has it been solved?Obvious problems are already solved. But has it been solved the right way? There is always room for competition, but the more a market has been solved, the more impressive the new solution must be.
Is it getting worse?There are 2 kinds of problems:
- those that are naturally improving, meaning that the market is decreasing;
- those that are getting worse and more painful, which means ever-bigger opportunities to offer a game-changing solution. Remember, it’s much easier to sell painkillers than a vitamin ;)
Understand your marketAll of the above questions should help you truly understand your market. Markets are alive: they are like animals, they all have their personality traits and they are very unequal, and something that applies to one market is dead wrong for another. That’s why early-stage startups should not talk together about their businesses.
Focus first on the target marketMarkets are too big to be conquered at once, so first find your problem (the big vision). Then, as a second step, narrow your vision and find the small segment of that problem that you will solve - that is your target market.
Forget the competitionComparing your inside with the outside of your competitors will only distort your decision-making.
Unless it’s for inspirationStill, it’s better to look at other industries for inspiration and adapt it to your situation, since when you look at your competitors you never know if you are looking at winners or losers (and then you take the risk of copying mistakes).
Inspiration is everywhereYou can read blogs and Techcrunch, watch how-to videos, but the most important source of inspiration remains the outside: movies, novels, biographies of non-entrepreneurs, your Facebook newsfeed, and your own history. One life changing article you should definitely read: The Cook and the Chef: Musk’s Secret Sauce. A Cook is someone who follows a recipe, a Chef is someone who reinvents cooking.
It takes timeIt takes time to know your problem, to understand your market, to become an expert. Stay a project as long as possible because as soon as you become a company, collateral problems will arise. Be a project that becomes a company and not a company that is looking for a project.
Are you willing to take the risk?If not, try something else, because entrepreneurship is about great risk and even greater boldness.
Articles to go deeper
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Why Too Many Startups(er) Suck
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Sangeet Paul Choudary
The Art of Focusing
As an entrepreneur, you must accomplish all kinds of things. To find your way through this chaos, you have to dedicate most of your time to tasks that impact your growth. Design, product, team, legal… Learn how to prioritize and organize your roadmap. Being focused doesn’t mean being narrow minded. It’s actually what allows you to properly use your determination and recognize when you need to be flexible.
One of the things that an entrepreneur hears most often is, “Stay focused.” At The Family, we repeat it so often, and about so many things, that people can maybe get confused about what exactly “focus” means. If you’re staring at a tiny spot of paint on the wall, you’re focused — but you’re not doing anything that contributes to the success of your startup.
And that leads us to two key points: being focused isn’t simply concentrating on a single task, and it needs to be in the service of growing your business. Being focused starts with clearly understanding your goals, the path to achieving them, and what steps bring you further down that path.
Two rules for being focused: first, never do anything without intensity. And second, be very smart about prioritizing.
The first rule, do everything with intensity, is a question of fully applying your powers to whatever you’re doing. If you’re in the process of talking to customers, you need to be completely focused on how you can get them to purchase or install your product. Do it with urgency — the more efficient you are, the more information you have about who is interested in your product, and the faster you can apply that info to your next sale. If you look around and find yourself doing things in a half-assed way, you need to reevaluate how you’re working, or reevaluate the value of the task.
That reevaluation is part of the second rule, prioritize smartly. What provides value? An entrepreneur is constantly faced with things to do. Some of those things provide value, and some don’t. Some things contribute to growth, and some don’t. What manual tasks are you doing that could be farmed out to others? As an entrepreneur, why would you spend your time entering data into spreadsheets or keeping the accounting straight? We’re living in an age of software, upwork, freelancing, e-lancing — use them. There are people out there who can help you to save time (which, as I’ve talked about elsewhere, is the #1 commodity of every entrepreneur).
This doesn’t mean that you can ignore those tasks that don’t impact growth.
Your accounting, for example, is a legal responsibility that you have no choice but to do. Just because you aren’t focusing on something doesn’t mean that it doesn’t get done. But you have to be smart and recognize the 20% of things that don’t grow your company but that have to be done anyway. Get good at streamlining and automating that as much as possible. It’s what allows you to maintain focus on the things that only you, the entrepreneur, can handle.
What should you be prioritizing as an early stage startup?
Talking to customers and developing your product. Period. We’re always impressed by entrepreneurs who understand this instinctively. One of our most focused — and most successful — teams is Algolia. Day one, you could see their focus, as their absolute priority was installing their software solution on as many computers as they could. That didn’t mean meeting people, talking to them, and then sending them a link in their email that they may or may not click. That meant the Algolia team was going around, meeting people and right there opening up their clients’ laptops so that the team could install the software for them. That was how they built traction at the beginning: they were focused and left nothing to chance. Now, people install Algolia’s software on their own, and the team can concentrate on other tasks. But that’s the type of focus and energy that you need at the beginning.
What’s the biggest distraction for an entrepreneur? Your inbox.
Today, the big problem with email is that many of us cling to an archaic idea, namely that if someone writes to you, you’re obligated to write back. This goes back to older customs, from when it wasn’t all that easy to write to someone. Writing took time, you had to buy paper, you had to get a stamp, go to the post office, all of that. So if someone did all of that and wrote to you, it was polite to write back. Now, there’s no barrier involved in writing to someone. There is absolutely no barrier to entry for an inbox. You can copy/paste, you can send a quick note, there’s nothing to it. And because that’s the case, because anyone can write to you, you should feel free to ignore anything that is outside of your focus.
At the same time, you should focus on part of your inbox: the mail coming from your customers. I don’t understand a company where customer emails go to a support email address managed by some intern. To me, these are the most important pieces of communication that you deal with, because it gives you precious user information and it creates a bond with your customer. We tell it to every company in our portfolio: the support email for your company should be the CEO’s inbox. And the CEO should reply to every client email until the moment comes when she finally can’t do it all. At that point, you have to delegate and install a happiness support team. But the same amount of care should still go into it, because it’s important.
All of these things come back to a big benefit of being focused — in the end, focusing is the best way to see whether you’re right or wrong.
For example, every young entrepreneur faces the question of, “Well, who’s your user? What’s your market?” And what’s the response — “My project is great, everyone’s going to love it, my market is everyone!”
That’s unfocused thinking, thinking that won’t tell you whether you’re right or wrong. If you’re aiming at all users, you’re aiming at teenagers, at college graduates, at middle-aged females, at retired seniors, the data that you gather is going to be extremely diluted. It won’t give you any conviction about what you’re doing. It won’t help you train your hunches about what’s going on deep inside your business.
Instead, let’s say that you decide, “My market is teenagers.” And you really focus on teenagers. But none of them are using your product. At the same time, you notice a spike in users between the ages of 30–35. You see very quickly that the teen market isn’t for you, and you won’t waste time moving forward with trying to sell to them. You were focused and now have data that helps you change your market segment. That information helps you develop your product and see the next steps to take.
So being focused reveals if you’re right or wrong, and it helps you do it faster. A good and focused entrepreneur is able to identify strengths and weaknesses quickly.
Another place where entrepreneurs are often unfocused is in hiring.
Focused hiring can bring great things to your company, and unfocused hiring can suck away your time, energy, money, and opportunities for success. Almost every startup makes the mistake of hiring too fast, too often, and too early. There’s a reason for this: hiring people can be very gratifying. You meet people, they want to work for you, you have a sense of power and accomplishment — even if you haven’t actually done anything yet.
Let’s be clear: bad companies try to solve problems by hiring. They realize that they have a problem, and they try to solve it by hiring. A good company hires because it’s going to translate into growth. Knowing the difference is a result of being focused.
What other distractions do startups give themselves? Don’t incorporate too early.
It gives you administrative issues that don’t translate into growth. Don’t have an office, don’t print business cards. Many entrepreneurs think that these things legitimize them, they can tell their family and friends, “See, I’m not crazy! I have a real job! We have an office and everything, here’s my card!”
But that search for outside approval doesn’t get you any closer to the two things that will actually legitimize what you’re doing: building a product and finding customers. That means that yes, being an entrepreneur is a lonely enterprise. Don’t look for ways to be more comfortable as an entrepreneur: look for customers. Don’t look for articles in the press about your startup. There’s no article, no outside voice that can truly validate what you are doing. Validation comes from inside, from what you know and no one else knows. So set your own goals, set your own internal celebrations. These may be goals that no one else understands. But if you have a solid internal roadmap, you can maintain your focus on the things that truly matter.
And most of the time, for an entrepreneur, success and failure can go on a chart. Get used to tracking your KPIs, and know the differences between them. There are basically three types that you can track: your life metrics, your operational metrics, and your vanity metrics.
The life metrics are the most important, and for 99% of companies, they come down to revenue.
It’s never too early to think about revenue and it’s never too early to focus on revenue growth. You can point out examples where user growth is important, those few companies that can put off thinking about revenue until later. But two things to remember: one, no first-time entrepreneur is in a position to do that. Not focusing on revenue is a luxury reserved for people who have already been successful in building a company. And two, aside from Facebook, take a look at what’s been happening with social media company valuations lately (and the key there is that Facebook pursued revenue — and found it — from day one).
So you need to track your revenue, and that number needs to keep going up. Think in terms of absolute numbers: if you sold $100 this week, next week you need to sell $120, and the week after that $140. That’s what you need to track.
The second type of KPI is operational. Just ask Google, there are thousands of operational KPIs you can use, it’s a question of finding what’s right for you. But choose a few, and focus on those. Be harsh with yourself, and don’t look for reasons to say, “Oh, look, that metric is good, things are going well!” Track a few operational metrics that are actually contributing in direct ways with your life metrics.
The last set of KPIs are vanity metrics. These are the ones that you need to look at when you’re about to send out a press release or when a journalist calls, but really, they don’t mean anything. The number of likes on your Facebook page, for example: journalists are blown away by Facebook likes, but they don’t really have any effect on your company. A like is not a sale, and sales are the only thing that matters. Vanity metrics can sometimes have their place, they can help your company at times; but don’t confuse them with your life metrics, and don’t be as impressed with them as the outside world may be.
As an entrepreneur, KPIs become your best friend, the person who tells you when things are going well and when things are going badly. They’re there to give you a baseline reading of success and failure. Focusing on them, even at the beginning when you have to push through the fact that there isn’t much of interest to see, trains your brain to understand them. You’ll start to see the little variations, and connect them to whatever you did that week. You’ll understand how you can impact the numbers, implanting the ups and downs of your business in your unconscious.
I’m saying all of this because it’s good advice based upon my experiences and the experiences of the startups that we work with at The Family. But in the end, it’s not simply that I can give you a list, focus on this, not on that. You have to feel it. In that way, entrepreneurship is a bit like learning to ride a bike. Your parents can try to tell you how to do it, they’ll use words like “balance,” “equilibrium” — but those are words that you don’t understand until you actually do it. You keep falling, and you get frustrated. But you keep pushing, and all of a sudden, you’re upright and keeping the bike going steadily along. That’s the “click” moment when you fully understand. And after that, you never forget how it’s done.
The objective of this session is to give you very concrete explanations of what being focused means for an entrepreneur, because it is a key to success.
Do everything with intensityBeing focused is not about doing only one thing at a time: entrepreneurs are forced to deal with multitasking. A better definition is to do whatever you do at the highest level intensity, i.e., the highest level of energy. For instance, focusing on Sales means you will try to sell your product to every single person you meet.
Growth is your only jobYou should separate your tasks into two categories: tasks that result in growth and everything else. Focus on the first ones: as an early stage startup, before product-market fit, the only 2 things that result in growth for your company are talking to customers and building your product. For the other things, you need to do them anyway; but keep them as backend processes, and for the stupid, repetitive and non-value-added tasks like data crunching, either outsource or automate them.
Focus gives you convictionBeing focused is the only way to learn how to do your startup. It is exactly like learning to ride a bike: you’ll learn by doing, not by thinking, you’ll learn with your instinct. Being intense forces you to have a very concrete and precise idea of what you are doing, letting you know much faster if you are right or wrong.
Hire for growthDo not hire too fast or too big. Do not hire because it is an enjoyable, self-esteem boosting process. Do not hire to solve a problem. Do not hire in advance, hire for the present. The right time to focus on hiring is when you are growing: you need to find the right people to sustain that growth.
Seek the right kind of validationBeing unfocused make you feel good: going to conferences, networking, having an article in the press and being congratulated. Do not be fooled: that is the wrong kind of validation, it doesn’t say a thing about your startup’s health. So create your own agenda of celebrations: clearly define your milestones and be sure that each fulfilled milestone is celebrated internally.
Understand what not to doIt is what you do not do that defines your company. Learn to say no. Distractions may seem like opportunities, so filter carefully, do nothing that cannot bring you anything and be comfortable with missing some good opportunities if they are outside of your focus.
Do what matters todayEntrepreneurship is about being good and getting better every day, not planning the future. Reduce your time frame: one day, then one week, one month maximum. That way you’ll automatically focus on the right things, the ones that result directly and quickly in creating value. Forget everything about strategy: strategy is defining how to spend capital over time, and you have no capital. Say hello to survival mode.
Discipline yourselfOrganize your time and schedule. Everybody’s life is defined by Work, Family, Friends, Entertainment, and Other. Pick two. If you are serious about making your company take off, you have to make hard choices in your personal life (don’t worry, it’s not forever).
Investors have their own agendaBad investors (= 80% of investors in Europe) have 2 tools to unfocus you:
- Asking for stupid reporting: reporting to your investors is your duty as an entrepreneur, but it is not your job to do their portfolio memo; be sure to build a reporting system that is valuable to your company, and keep track of your numbers;
- Providing random introductions: never meet anyone without a clear agenda. Be hardcore, build your own spreadsheet to rate people based on their matchmaking talent and the value they bring to you, and reply to their intros accordingly.
Beware of your inboxA mailbox is basically somewhere anyone can write to you without any barrier to entry, and above all it is an unsolicited To Do List that others impose on you. As a CEO, customer support must be in your mailbox as long as possible; internship applications or invitations to random events must not.
Your KPIs are your best friendsBuild a dashboard with your carefully chosen KPIs and track them weekly. There are 3 kinds of KPIs:
- Life Metric: most of the time this is your revenue. It must be the last step of any process in your company and it must always go up (in absolute value).
- Operational Metrics: track as few as possible or you will get lost and receive the wrong message.
- Vanity Metrics: they do not mean anything but they impress PR :) Play with it, make it scary, but never look at the Vanity coming from your competitors.
Protect yourselfWrite down simple rules that will act as a test for everything happening in your company and always check compliance with these rules.
Be the captainIf you lose focus as a founder, your entire team will do the same. Every new hire is a threat to your startup during the first 6 months, because people come with their own intuition and methodology and they will try to impose it. A key success factor is your speed of onboarding new hires, which comes with a very intense culture: people adapt or leave.
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The Founder’s Dilemma
Problems between founders is one of the main reasons why startups fail. Choosing a cofounder is the most important decision you will make when starting your company. Projects can change, but people remain the same. And you have to make a bet, because nothing is predictable. But here are some key issues that you should clearly put on the table. They help you to make sure you find the right people, develop your trust in them, and keep your communication transparent and your goals aligned.
From what we see at The Family, I can tell you that besides simply running out of cash, the vast majority of startups that fail can trace that failure back to a problem between founders. If a team is not really together and on the same page, it’s much harder to do something great. And choosing a cofounder comes back to a few questions about who you are as an entrepreneur. How can you be a leader? How can you build a great team? Because in the end, managing the relationship between cofounders is the most intimate aspect of managing a team.
What ‘PG’ said
To evaluate a founding team, you can go back to some advice given by Paul Graham years ago. The qualities that he outlined, determination, flexibility, imagination, naughtiness and friendship, are a great place to start evaluating yourself and anyone else would could be on your founding team.
Before we go on, though, notice what isn’t there. Intelligence is not on that list. If you ask people what makes a good founder, most of them are going to say that the founder needs to be smart. And that’s because a lot of people want that to be true, they want to believe that the people who built great companies are smart. And it’s not necessarily true. Now, that doesn’t mean that a good founder is stupid. But what we can say is that being stupid or smart doesn’t have any real influence over whether or not you will be a good founder.
In reality, being smart or stupid has less impact on whether someone will be a good founder than on what market they should aim at. For example, if you know that you’re not the smartest person, head toward real estate — it’s a field where you don’t need to be smart in order to be a good, successful founder. But if you’re Elon Musk, you’d get bored with real estate. And so he looked to revolutionize cars, and then solar power, and now he’s trying to go to Mars. Why? Because even for Elon Musk, going to Mars is hard. Making sure that he is always aiming at a market that keeps him interested is the best way for him to not get bored. And being bored is a death sentence for an entrepreneur.
As helpful as Paul Graham’s qualities can be to start thinking about yourself and your founding team, it’s important to remember that there are no golden rules and that no person and no team is going to be at the very top of every single quality. It’s not a question of making sure that you fit the blocks together properly. In the end, the biggest need is to create your own story as cofounders, to have a completely transparent way of interacting together, and exercising flawless leadership together. And no cofounding team is simply born perfect: perfect teams grow up together, they get better together, and they become perfect.
Part of communicating honestly and openly is knowing who does what within the team.
Let me be clear: there is only one CEO. And the CEO isn’t necessarily the smartest guy in the room. It’s not necessarily the person who had the idea. Let me be clear about another thing: ideas have no value. You don’t have to make someone CEO just because they had an idea (and you don’t need to give them more equity, either). Never put yourself in a position where you think that having an idea gives you the right to anything other than the warm, fuzzy feeling of having had an idea.
The CEO is the person who you agree has the ultimate responsibility, the person who is making the final decision. That’s not something that should be taken lightly. It should be clear within your team who is best suited for that role. People like the title of CEO, and they like the perks, and they like the idea that everything that goes well for the company will be attributed to them. And that’s necessary in a good company. You want your CEO to stand out in a way that strikes fear in your competitors, you want them to say, “Dammit, how does she keeping doing it?”
But there are downsides to being CEO as well. You have to be an excellent manager, and that’s hard. It’s hard to nourish all of the relationships within the company, to have open conversations when things aren’t going well, to personally handle the most difficult times in the life of a startup. That’s why my advice is to always make the most sensible person on your team the CEO. The most sensible person is the one who will be best able to clearly understand what is going on within your team, and that’s what makes a great manager.
The reason it’s so hard to be the CEO is because a startup isn’t a democracy.
You can go online and find articles about alternative management structures, no managers, flattened hierarchies, all of that. And maybe those are good things in a big, established company that needs to shake itself awake. But in a startup, which is a small group of people working on a problem, the downside of democracy is huge. All good startups are tyrannical. You can quickly identify good startups when you see that one person can make a decision, going against everyone else’s opinion, and the startup survives and keeps growing. Startups aren’t the place to be if you want to listen to everyone’s opinion. Startups are a place for execution and focus.
That doesn’t mean that the CEO manages every detail or decision. But if your startup is constantly having debates, if there are questions about strategy or culture or fundraising, you’re screwed. Incredible design, strategy and problem-solving come from one person having the courage to impose something on their company over the long term.
There’s an ability for escalation amongst a founding team that can go very bad, very fast.
Cofounding a company with someone is even more intense than living with them. You’re with them 24 hours a day. When something happens in the middle of the night, you deal with it together, when you travel, you travel together. You cannot imagine the amount of time that you spend with your cofounder. And if it goes wrong, it’s as bad — if not worse — as a divorce.
I’ve actually talked to divorce lawyers to try to understand how things can go so badly sometimes. And once, one of them told me something that stuck. He said, “If you want to understand human nature, you have to understand how two people, who saw each other naked for 15 years, can one day decide to never speak to each other again.” Understanding that comes down to an idea that we could call “emotional debt.” We train ourselves to accept certain things from the people who are closest to us. We use our debt with them, they use theirs with us, it goes up, it goes down, there’s a give-and-take. But sometimes, with some people, we reach a point where our emotional debt is used up. We’re emotionally bankrupt. And the only way out is to file for Chapter 11 and never talk about that debt ever again.
That situation should never happen with your cofounders. If you have an emotional debt with your cofounder, it needs to be immediately dealt with and in the open. Bad things will happen. Sometimes you’ll make a mistake, sometimes you’ll make a bad decision. Those issues have to be solved as quickly as possible, and most importantly, you have to be ok with the fact that they happened. A cofounding team needs to understand that they make mistakes together, that mistakes aren’t just on one individual. That doesn’t mean that everyone can just do whatever and there are no consequences. It means that you have to be able to evaluate mistakes, determine how important they are (and sometimes unimportant mistakes can cost a lot of money), and deal with them immediately, without using up all of your emotional debt.
(And a quick piece of advice: if you do get to the point of a cofounder divorce, just run away. The amount of time and emotional effort that you will spend in fighting about what happened, who is to blame, who is right and who is wrong, is so much more than if you simply decided to run away and start building something new. Write a check if you have to, but run away. Don’t drown yourself in that fight. It won’t bring anything positive to your life.)
Choosing a cofounder is the most important decision that you make when starting your company.
It’s even more important than choosing the project — just look at all of the projects people go through before finding the right one. Projects can change, but people don’t, not really. So don’t rush it — wait until you find the right person or people. Don’t go to a conference, meet someone at a cocktail hour and become convinced ten minutes later that you’ve found your cofounder. Work with as many people as you can, build your friendships and relationships, and honestly evaluate your strengths and weaknesses. And then one day, when it becomes clear that you have found the right cofounder, don’t take that relationship for granted. Keep developing your trust in them, keep your communication transparent, and keep your goals aligned.
The very definition of a startup at the beginning is a company that lives only by its founders’ will.
Be DeterminedIt’s your intensity that makes you different from the others. Being determined means never taking a “no” for anything other than a “maybe”. Pursue what you are doing at whatever cost. But do not confuse determination with being obstinate: obstinacy consists in endlessly doing the same thing, thinking you will succeed one day - but that never works. That’s why determination is closely linked with flexibility.
Be FlexibleJeff Bezos said: “As someone smart, I change my mind ten times a day, because ten times a day I have a new data”. You must be able to tell yourself, “I was sure that A was the best option, but now I have data showing that B is better, so let’s go for B”. That’s what learning is about. That kind of flexibility will help you figure out what works, evolving along the way.
Be braveYour goal must be to maximize the upside you can get, not to minimize the downside. Most of the things you do will fail and it will hurt, and you have to be ok with that. Courage helps you to never give up. Everything in your life should be driven by what you think and not by what the others think of you: do not run after social status and recognition.
Be creativeDivergent thinking is the capacity to imagine the usage of something for something else. What makes an entrepreneur exceptional always comes down to the ability to think that something impossible may be possible. Imagination, like courage, is something you can train.
Be a good friendFriendship is the core element that makes a co-founding team. It’s a relay race, and you alone cannot always be at the top of all of these qualities. Building a team is not about skills nor about being complementary, it is about human qualities and mental comfort. PS: trust people, since nothing can fully protect you, anyway :simple_smile:
Be naughtyYou cannot play 100% by the rules. You must know which rules are important and which are not. Take spam, for example. Do not hesitate to spam but do it the right way: spam is unsolicited emailing, but you should target people who will be happy to receive it, and be ready to answer any reply and apologize sincerely if needed.
Be smart... or notBeing stupid or smart has no impact on your capacity to be a good founder. Being smart has become a commodity: anyone can learn anything at anytime with hard work and the Internet. Advice for smart people: always be stupider than the market you want to conquer. That way you’ll never be bored.
Focus on the presentPeople plan because they worry, thinking they need a plan to feel comfortable about what they’re doing. But that’s all an illusion. Don’t overplan, and reduce your timeline.
Beware of golden rulesNo one can be the best at all of the 6 qualities above, so build a team that complements itself. Build your own story. Find someone you genuinely trust and admire.
Do not let yourself think you are a democracyDemocracy cannot work for startups because startups need execution more than anything else and execution dies with debates. A startup needs someone who can make a very bold decision when no one else agrees. That doesn’t mean that the team should not have strong opinions and push back. But there is only one person who has the last word and makes the decision.
Be comfortable with chaosBe fine with the fact that you are totally late with whatever is happening.
Do not forget that cash is kingForgetting that cash is king is a startup killer. It is your job as a founder to always look after your cash position and make it increase. Cash is the only metric that makes a startup alive, especially in Europe where there is less VC money available.
Beware of founders’ fightsFights between founders are deadly. Most startups cannot survive an early divorce between founders. If needed, divorce clean and quick, do not look back, put your ego aside and focus your energy on building something new instead of fighting about the past.
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Black Swan Farming
Bootstrapping Like a Boss
As a founder, your lack of means, recognition and money can actually boost your creativity.
So rather than losing your time in the quest for investors, start hustling your way up and bootstrap. You don’t need money to show off your idea, test the first version of your product and talk to your community of users. Cherish the mistakes you make.
Let’s establish a simple definition of what bootstrapping is: it’s a way of using one’s own means and revenues to grow the company before seeking any outside funding.
You know companies that did this, even if you aren’t aware of it.
GitHub, AppSumo, MailChimp, and others all developed and grew for a long time through bootstrapping. I’m not talking here about companies that developed a product while making money through consulting or that sort of thing. Rather, I’m thinking about the pure sense of developing a product and selling it to customers from day one.
That kind of bootstrapping is absolutely difficult. But as hard as it is, it’s also very rewarding, mentally and financially. There’s no pleasure for an entrepreneur like having a satisfied customer. In terms of development, having a company that shows growing revenues makes everyone happy. It gives you leverage when the day comes to fundraise, and you’ve put the power on your side.
That’s why every single article and tip about fundraising should come with a disclaimer, pointing out just how little leverage those tips will give you vs. how much leverage you’ll get by growing your revenues. There’s a reason why we say that money talks. If you’ve got money on your side, you’ve got the upper hand in a negotiation. If the other side is the only one with money, they’ve got all of the power. Whoever is more willing to walk away from the table is usually going to end up winning.
Those articles are also why we get the same question, over and over. An entrepreneur wants to come into The Family, and they say, “We need to fundraise, how can you help us with that?” And the response is always the same: “We can’t. We’re not a fundraiser, it’s not what we do, sorry.”
There’s two sides to that. Why do entrepreneurs ask that question? It’s because in today’s world of tech journalism and blogs, there’s a story that keeps being repeated. Someone has an idea, they fundraise, they use that money to become a successful company. Every day there’s a new article with that formula, because it’s easy to write, it gets a lot of clicks and it gets a lot of shares.
Good companies lets fundraising come to them.
The Family is there to help our startups grow, because that’s how they can keep getting larger and live forever. We’re not there to fundraise and then hope for the best. We know that virtually every successful company arrives at the point where fundraising makes sense. We also know that good companies raise funds with leverage on their side, leverage that comes from real growth and actual customers.
Good companies come from good entrepreneurs. Good entrepreneurs can start with nothing, and build something incredible. What can you do to be a good entrepreneur?
Be creatively cheap.
When your business is still looking for product-market fit, still looking for that tipping point that shows you that things are working, be as cheap as possible. Even if you have a little bit of money, don’t use it. Or at the very least, forget that you have it. Every young entrepreneur is going to make mistakes, and you can either pay to make mistakes, or you can make them for free.
Not having money forces you to use your imagination to solve problems. You will find hacks and tricks that, if you had money, you would not even look for. Entrepreneurs can’t have the mindset of throwing money at a problem.
No one needs money to start. Money should be a tool, not a necessity. One day you might need it to grow, or you might need it to speed up your timeline. But money shouldn’t block you from getting started.
Not having money can even help you at the beginning. When you’re trying to convince your first employees to come on board, and you have no money, you might not even be able to pay them. But those people who agree to come and help you are so convinced by you and your project that that energy brings the project forward in ways that are impossible to quantify. Once you’ve fundraised, all of a sudden you have tons of people coming around and wanting a job — and how can you quickly find the ones who are really dedicated vs. the ones who are just looking for a paycheck? That’s not to say that you can’t do it — of course you can. But it’s one of the ways in which money can be a double-edged sword, especially for a first-time entrepreneur.
So a double-edged sword, yes, but it’s also inevitably part of the equation. When you’re bootstrapping, and the revenue that you bring in what you have available for growth, financial questions are even more important than if you were to fundraise. And there are some principles of finance that can help you.
Cash now is more precious than cash later.
That being the case, pay with risk. If you can save $100 today, and that $100 today is going to cost you $1000 in five years, do it. That’s a savings that you can use to make sure that you’re still alive and growing.
A concrete example: let’s say that you’re in an industry where design and branding are critical. You have $30,000 to spend, and you find one designer who is perfect. The only problem is that it’s going to cost you $75,000. You have two choices: you can take a lesser design, which won’t help your company but it fits in your budget today. Or you can get creative. What if you offer the perfect designer $30,000 now, with the promise that when you reach a certain milestone (say, 20,000 units sold), you’ll pay not the additional $45,000, but $90,000. You’re making an offer that recognizes the relative value of cash both today and into the future.
And the important thing is that in a deal like that, neither side is doing the other a favor. It’s an opportunity for each side, assuming that everyone happily agrees to the deal.
But a word of caution: don’t do this with equity. Equity is forever. Just because something isn’t in cash doesn’t mean it’s not a real price. So be generous in making a deal that is good for both sides, but don’t be an idiot, either.
In bootstrapping, managing your cash flow can become critical.
And here’s the industry standard: collect early, pay late, sell high, buy low. If you can delay paying a bill, that’s another day of cash in your pocket that you can use for growth. This may seem a bit shady, but I promise you, everyone else is going to be paying you late as well. If you pay early and collect late, you’re going to be the bank for everyone around you. You have to understand early on exactly how your cash flow management is affecting your company, not just today and tomorrow, but over the long run in terms of growth.
Of course, there are people who you need to pay on time, always. Your employees are on that list, which means that you need to be very careful about hiring. I’ve said it before, I’ll say it again: bad companies try to solve problems by hiring. Good companies recognize that making a mistake in hiring will only create more problems. You should only be hiring people you trust, and who are doing something that you understand.
Once you do hire, make sure that you’re delegating the things that you know best.
Most of the time, people do the opposite: they do what they know best, and delegate the things they don’t really know. But that’s the worst management strategy, because it’s easier to control the quality of things that you know well. If you delegate only the things that you’re good at, you’re able to dedicate your time to learning how to do other things better, you get stronger with them, and then you can delegate them as well. Don’t forget that the endgame is to delegate everything — and to do that, you need to know how to do everything within the company so that you can keep watch over it.
(And watch out for interns. Interns are great in a growing business, post-market fit. Pre-market fit, interns will kill you. Because you don’t know what you’re doing, and you’re asking someone who knows nothing to do it on your behalf. Stop having fun by interviewing interns, and start building something that actually works.)
Once you’ve installed that mindset, remember to sell it all. Your network and personal connections should be the first place that you’re selling. One of our companies, MenuNextDoor, has incredible organic growth now. They’re doing thousands of meals per week, a few months after starting. Why? Because when it was first launched, the founders sold so hard to their personal networks, they were going around, taking meals to people, collecting and distributing money directly, having customers take pictures and post them on their social networks, anything that they could personally do to increase their reach. That’s how you get traction — go strong and get your friends on board. If you can’t sell to your personal network, you’re not going to sell outside of it.
If you can put these ideas in motion, if you’re being cheap, smartly managing your company and your cash, and selling to everyone around, you’re going to have a big advantage in a toxic environment. You’ll get investors who start to chase after you, rather than the other way around. And one huge benefit that that can come of out that is the ability to skip the seed round and go directly to a Series A.
Skipping the seed has big implications over the life of your company.
By doing that you’ll have an exponentially higher level of ownership in your later funding rounds. That’s because in Europe, a seed round is going to cost you around 20–30% of your company, even occasionally upwards of 40%. And that’s for a very small amount of money, maybe up to $1M. Bootstrapping and developing revenue can get you to that point. When you then go to Series A, you give up around 20–30%, but at a much higher valuation and without the dilution of the seed round. Instead of giving up 25% twice, you only do it once. That’s a huge deal as the company keeps going.
Not only that, when you’re able to build something from nothing, your level of goodwill when you go into that Series A fundraising mode will be absolutely off the charts. Judging startups in their early days is difficult, and so people are less likely to give you any credit (remember, ideas aren’t worth anything — only businesses are worth something). But when you can show your ability to create, based solely on your own will and desire, it’s easier for people to convince themselves that investing in you will be a good deal for them. And having that in your pocket when you head to the negotiating table is worth its weight in…well, in equity and cash.
You do not necessarily need external funds to grow your startup: another option is using your own cleverness and revenues to grow. That’s what we call bootstrapping.
WHY BOOTSTRAP ?Bootstrapping is hard but rewarding:
- Nothing is more satisfying than people paying for your product because they are happy with it.
- Money talks: successful bootstrapping (real users, real traction, real revenues) puts you in the best position to negotiate with investors later. There is no such a thing as a negotiation if you do not have leverage.
Bootstrapping is not Consulting A very common bootstrap strategy is to begin by selling services to fund the development of the product. The truth is that it is very hard to stay focused when you have clients requiring a lot of customized work: you’ll end up being a service provider. Here the focus is how to build a product company, how to scale, how to become self-sustainable.
Do not believe what you read/see What you read in the press about fantastic fundraising and entrepreneurs is storytelling: the press writes what people want to read, what people will share, stories that sell. Do not believe it, do not benchmark yourself with it, do not compare your inside with the outside of the others. Only losers benchmark - never look at your competitors.
Be creatively cheap At the beginning, your budget is a mistake budget. While you are learning and making all those mistakes, do it for free: having no money means you are forced to use your imagination to solve problems. Having too much of a budget makes you stupid :)
Small savings make big games It is counterintuitive but with no money, you have access to things you will not be able to get after that: your best hires for example, people who come to you because they are in love with the project and not for money or social status.
Do things that do not scale Every entrepreneur wants to start at scale: it is impossible. The first steps require a lot of manual energy, there is no possible shortcut. The right methodology is to be on the market on day 1: find a cheap, unscalable solution, fake it if needed, but go to market.
Use your network to prove satisfaction Do not try to convince strangers before you convince your friends. So before buying Facebook ads, convince each and every friend that you have. This is true as well with B2B and old colleagues.
Be aggressive The only way to bootstrap a company is the collision methodology: do not wait for people to come to you, force them. Focus on people you know to get your early traction.
Follow your KPIs weekly You need a KPI dashboard to know if you are on track, if what you’re doing is working or not.
Pay with risk - cash now is more precious than cash later Right now you do not have cash, so pay with agreements / promises on the future, conditioned by milestones: if you are successful, it was an investment; if you are dead, you don’t owe anything. Plus that way the service provider is aligned with your interests. And never pay people with equity because equity is forever.
Pay late, collect early, sell high, buy low Startups are afraid to pay late - they always pay their bills first because they are nice and inexperienced people. Be shameless. By the way, be hardcore with your bank. The only limit is to never put yourself at personal risk and to never accept any personal loan.
Skip the seed - better valuation, more time saved
- Seed rounds cost a lot, especially in Europe: around 20-30% of your company for a very small amount of money. That money can be built from revenues. So skip the seed, go directly to a 5-10M first round for the same 20-30%. This completely changes the final ownership you can get.
- The next problem with seed is that anyone can be a seed investor, because by definition you don’t need a lot of money. That means you never know who is good or bad. Skipping seed prevents you from committing to toxic investors.
- And last, by skipping the seed you will reach a much higher valuation because you will have a very high amount of goodwill: valuations are made on the ratio between the resources you had and what you did with them.
Hire only who you can trust. Hire to do something you understand You must know every function before thinking about delegating it; then when you are comfortable with the work, you can hire someone who is better than you.
Delegate what you know best This way you know exactly whether or not your employee is any good.
Focus your attention on what you are not good at, find a solution, then delegate it. Your ultimate goal is to delegate everything: do not keep the most important things for yourself just because you are good at it, or you will become the bottleneck of your company.
Beware of interns Interns are great in a growing environment but they are dangerous before product-market fit: you do not know what you are doing and you’re delegating to people who are even worse. Remember: if you bootstrap, you cannot make any management mistakes, they cost too much.
Do not do stupid things - outsource Outsource repetitive tasks, optimize every process.
How to end the bootstrap?You have to understand that you do not decide when to fundraise. No one is waiting for you. The good moment to end bootstrapping is the moment the bootstrap ends :) Just put yourself in a position where fundraising becomes obvious, where you are getting chased by investors.
Don’t You Care?
That big difference between you and the big players on the market is that you’re free. You have nothing to lose. Starting from scratch means no politics, no bureaucracy, no inertia. You can just talk to your users, give out your personal phone number, share your feelings, listen to their needs. You can offer a quality of service that they’ve never experienced before. Spend all of your time pleasing your users. This might not be scalable in the long run, but this is your main asset in getting to the point where you’ll scale. Learn what really matters: caring for people.
We all know the meaning of the word “care.” We try to apply it in our everyday lives, to our friends, our loved ones, even strangers. Nobody wakes up and says, “I really want to be a jerk to everybody,” — at least, there’s not too many people who do that. We all say, “I want the people around me to know that I care.”
The real problem comes in when you have to scale that care.
When you’re just starting out, and you’re finding your first clients, it’s easy to care for them. Or, I should say, it’s a matter of deciding to care and really meaning it. You respond to problems personally, you communicate directly with them, and you build a strong relationship. At scale, that’s hard. It’s so hard that one of the biggest clichés that we hear about a company is that, “They don’t care.”
Think of a multinational corporation, a telephone company for example. If you have, as a client, to interact with the customer support, you’re already in a bad mood. You know it’s gonna be a nightmare. You know that they’ve gotten into the mindset where every customer isn’t an individual, but just a tiny part of a mass of obligations that they need to maintain.
As a startup, you know exactly what each of your customers means.
You know exactly how hard it is to find and keep those individuals who support you at the beginning. And on the other side, your customers like the feeling of knowing that there’s a real person behind the website. They like to know who is running things, they like to feel close to the product that they’re using. And so there’s a mutual sense of caring that is created in those early times.
Heetch was a great example of this. It’s a car-sharing app that only runs in the evening and night, it’s great for people who go out to the bars and then need to get home. So their founders, for years, were going out to party with people and then, at the end of the night, they made sure to get them a Heetch ride home. They were literally out there creating their community of users, demonstrating value and care for their customers.
As a startup, that level of extreme care can make you into something truly special. Making those connections can change the minds of even the most skeptical people. Real care has a magical effect, whether it’s in your personal life or in the business world. People remember it when the CEO reaches out to them to fix a problem. That type of care can absolutely save a startup in its early days. That’s why you need processes in place that place the user at the center and emphasizes the kindness with which you’re going to interact with them.
You don’t need perfection in a startup.
Why is nothing perfect in this world? Because all the perfect products are trapped on the hard drives of entrepreneurs who never launched. So everything out there has its problems. But caring is outside of your product: you can be as perfect as possible in your caring. You can hit the magical trio of being a caring entrepreneur: be personal, be sincere, be authentic. That’s how you can win. Not by being perfect, but by being the ideal entrepreneur for a small and intense community of users.
Of course, that takes time. Exceptional care means an entrepreneur has to be available: ready to respond, fast to respond, and responding at any time. It means adapting your tone to the individual customer. When I send an email to a startup’s customer service, too many of them respond in a bland, corporate tone that doesn’t let me feel a connection to the company. If someone writes to you in a formal tone, reply to them in a formal tone. If someone writes to you in an informal tone, or in a funny tone, respond in the way that you find natural. See every customer as a potential friend. Don’t see them as a number on a screen.
You cannot delegate customer relationships when you’re starting your business.
Until it becomes literally impossible to handle, an entrepreneur needs to be dealing directly with every client who contacts the company. But if it takes you an hour every day to respond to the emails that clients are sending you, that’s one of the best hours that you can spend. That hour will never be a waste of time. And when there’s a problem, do whatever it takes to fix it. Commit yourself to finding a solution, and you’ll be taking advantage of one of the biggest benefits to being a startup.
You can (and should) even go one step further at the beginning — go ahead and give out your personal phone number. That’s the level of commitment that makes great entrepreneurs. And don’t be afraid, don’t tell me, “Oh, but then I’m going to have people calling me all the time.” Look, if people are calling you, it’s because they know your service and what you’re doing. That’s your entire goal. If you can get to the point where your phone is ringing all the time and it’s impossible to keep your phone number out there, great — you’ve managed to find success as an entrepreneur.
When you’re fixing problems, get used to being generous, and be glad for the opportunity. Putting customers first can’t be looked at in terms of saving money. Over the long term, it’s one of the best ways that you can market yourself. Whatever it costs to create a customer who is happy with you for life, that’s money well spent.
We at The Family sometimes come upon a problem, where people mishear what we say. Because we are the first ones to tell you that you have to go out and be violent to have success as an entrepreneur. But being violent is a state of mind and ambition. Being aggressive doesn’t mean that you don’t treat people with respect. We say that it’s better to ask forgiveness than permission, but part of that is…actually asking for forgiveness! If (when) you do something wrong, you better be ready to apologize. And to apologize sincerely.
Emails from your company need to be coming from a real person.
That’s why you need to reply to everyone (and do it fast). That’s why you need to unsubscribe people yourself — don’t send them a link and ask them to unsubscribe themselves. That’s why you don’t ignore anyone, not even the trolls. That’s why you never refer people to someone else, but you handle it and fix the problem yourself.
If you take on that role, where fixing problems is personal, it filters down into the rest of your company. Everyone in your company will see exactly how important it is to fix problems without hesitation. That’s the company culture you want.
When it comes to needing to scale up customer support, there are tons of tools out there.
You should incorporate them into your processes as soon as possible, as it will make that scaling process much easier. Crisp, Slack, Front, they can all give you not only vital information about your users, but also allow you to maximize the personal interactions that you have with clients.
That doesn’t mean it’s easy, and it doesn’t mean it’s low cost. It’s difficult and expensive. But it’s one of the most important things that you can invest in.
Captain Train is one of the best examples in the last few years of this level of personal care and scaling. During its first years, if you dealt with Captain Train, you were dealing with the CEO. Their commitment was to have the most incredible level of customer service — it was the highest priority in the company. They wanted to make sure that whoever they spoke to went away absolutely amazed at how much they cared.
That filtered throughout the company as they scaled. Go to their Facebook page and watch what happens. Captain Train is involved in that page. They are responding to everything. And they’re doing it authentically. People respond to that authenticity in a way that is incredible, to the point where Captain Train now has millions of users across Europe. And their customer support is still the absolute best that you can find.
Finding ways to connect with people doesn’t have to stay online.
People might wonder why we have so many events at The Family, but it’s because they’re the best way to get people involved in the community and create a real bond with them. People will come to an event because there’s free food and drink. But people will come back to the next event because they found a connection there that spoke to them. Those are users that you can recruit and use, while having a great time.
Events also let you really learn about your users. Events show you how to best adapt what you’re doing to their needs. It’s how you can connect them to each other, and how you can get real feedback on what you’re doing. People in a crowd will always give you more useful feedback than they will one-on-one. Why? Basic human psychology, really. But an event can give you a space where people feel comfortable with you and they see that you are listening to their concerns.
And don’t leave your events to chance. Plan them out, know what is going to happen when. There’s nothing worse than showing up somewhere and it becoming clear that there is no plan. Be there yourself, get up on stage and give an introduction, meet the people who came out to see you.
The only thing that matters in a startup is the result. Care at the beginning of a startup is what gives way to a caring culture as you grow. You can make different strategic decisions in order to get there, in order to push it into your team, in order to scale up. But in the end, it’s a mindset: JUST CARE.
Care (noun): serious attention; inclination; liking; fondness; affection.
Care is a huge competitive advantage Big Companies don’t care: established companies are so big that they treat individual clients as liabilities to be managed en masse. Additionally, there is no customer service culture in Europe, as care is considered a luxury feature. But clients care: people want to feel that there are real humans behind a website, that they are close to the company and the product they’re using. At the beginning, your luck as a startup is that you have few clients and so you can do things for them that no one else can. Caring makes you special. Extreme care can be the reason why people talk about your startup and even a way to transform haters or disappointed people into fans. People always remember care.
Care or die Care about your customers at a level they don’t deserve or you will die because you will never stir up any feelings in them or give them the urge to fight for you. Care not only for your clients but for any person in your community: employees, investors, partners, suppliers… you’ll create a virtuous circle of positive vibes.
Be authentic The winning trio for successful entrepreneurs: personal, sincere, honest.
Be available Be ready to reply, quickly, anytime.
Be committed Never delegate customer support and customer relationships. Everyone in the team, all departments, should receive every customer support email and read it, so that no one forgets along the way that the company exists only because real people on the outside are using your solution.
Be generous Make gifts a habit: gifts are the best marketing expenses you can have. Make your clients happy, whatever it takes.
Scale the acquisition along with the careYou have to be aggressive, violent in your sales campaigns, but never mean or disrespectful.
Treat people with respect Ask for forgiveness rather than permission. Spam, but with fine-tuned emails and apologize sincerely if needed.
Reply to everyone Emails should be sent by a real person. Email addresses in “no-reply” are forbidden. Always use the tone your customer used to write to you. Consider every customer writing to you as a potential friend. As soon as you have a little traction, you’ll have haters / Internet trollers / crazy people writing to you. Just ignore them: the upsides of a close dialogue with users are more important than the downsides. But don’t hesitate to reply harshly to false accusations and jerks. Care is not about being nice with everyone.
Unsubscribe people yourself Never ask a user to do something you can do yourself.
Care is not just to enroll new usersYou also need to care to keep them: retention is as crucial as acquisition.
Email is your friend Email is a very simple way to keep in touch with everyone. Keep replying and make it quick
Support is everyone’s job People cannot be kept waiting. Never refer a problem to someone else, everyone is responsible for fixing problems. The only possible answer to a problem is, “We screwed up as a team and we will fix it”. Don’t find excuses or scapegoats. And as usual, it begins with founders. Lead by example.
Take advantage of existing tools There are thousands of tools that exist to scale customer support: learn how to use them. The golden rule: make it look human. Care has a necessarily high cost.
Give them your own number Answering your phone is a part of your job. It can sound impossible but being a great entrepreneur cannot come without a great level of commitment.
Check Twitter and Facebook constantly Do not leave that to a community manager.
Discover who your users are Events are another way to create proximity and sincere relationships with your customers, to understand what they want and make them understand who you are and how you define yourself.
Don’t leave anything to chance A good event is prepared: it has an agenda, it starts on time, everything feels right and people are happy to be there.
Be present Do not send anyone other than the core team to events. Be present even if you don’t speak on stage, do at least the introduction or the conclusion, show that you are there and you care.
Be cool Make people feel comfortable: offer nice food and goodies, for instance.
Help them connect Be sure to help the attendees get value from your events.
Get real feedback People feel more comfortable saying tough truths in a group.
Adapt to your crowd Gathered feedback is an opportunity to learn and evolve.
Execute to earn respect Show how to do it instead of just explaining what to do. Once again, lead by example.
Results are all that matters Care is not about making people feel better when they fail. Accept it and move on.
Love your users It is a collective responsibility and you must show the way.
Build your culture Caring for your users and your internal team results in your culture. If you care for your team, your team will care for your customers. Your inside is a reference for the outside. By the way, your employees and you yourself should be deep users of your solution.
Just care :)
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Every ambitious founder has that fear deep inside: their growing company could very well die. Not in a year - it could die tomorrow. Use that fear, that sense that it could all disappear. Keep pushing forward and riding the wave. Don’t overthink things or try to plan perfectly.Growth may start artificially, with your friends and close contacts, but your goal is to make your startup grow organically. And the only way to grow fast is to push so much and so hard that it feels almost impossible to keep up.
The founders I work with start to eventually hate me because I repeat it so much: a startup is entirely defined by its growth. A startup isn’t defined by being on the internet. A startup isn’t defined by concentrating on technology. The easiest definition of a startup is simply the one given by Paul Graham a few years ago: startup = growth.
A startup is impressive because it achieves a level of growth that is practically impossible to believe.
If you look at Uber, you aren’t impressed by its technology. You’re impressed because they’re doubling their number of drivers every six months. You’re impressed because their revenue growth is hitting percentages that you wouldn’t think possible. The amount of growth that you see in a successful startup over a short period of time is completely outside of the norm.
That’s why entrepreneurs have to be obsessed with growth. Ask yourself, “Is what I’m doing helping my growth?” If yes, keep doing it. If it’s not, stop and find something that will help growth.
That’s not a comfortable situation to be in. Growth hurts. It can’t be planned, it doesn’t follow a roadmap. You’re dreaming if you think that you can control it.
That’s why you shouldn’t evaluate a startup based upon how it looks from the outside. If you really want to see how a startup is doing, go take a look at its founders. If they’re completely stressed, late all the time, and seem to be just barely keeping their heads above water? That’s a good startup. All founders struggle when they’re growing at a pace that breaks all the rules.
Growth can work in two directions.
Because it’s so powerful, it will have oversized effects no matter what direction it is going. If you’re growing, it can magically make all the other problems in your company disappear. No investor is bothering an entrepreneur who is demonstrating strong growth. But if that growth starts to slow down…if six months later you miss a milestone…well, just go look at what’s been going on lately at Zenefits. People get fired, heads roll, and everyone starts grasping for solutions. All of a sudden, everything in your company is wrong, there are problems in every department, and it’s like watching a train wreck. When growth stops, there is no one around to protect you.
But in startups, you have to accept this situation, because growth is the only way to create real value. That value is the ultimate validation of everything that you’re doing.
No matter what, there will come a day when the growth stops.
If you have a lot of early success, you can think it will go on forever. But growth comes in a series of levels. We like to think about that perfect exponential graph of growth, curving upward to infinity and beyond! But the reality is that there are periods of growth and there are plateaus. Those plateaus are when you’re going to be really evaluated on the inner workings of the company. You have to be prepared for that, and for the scrutiny that comes with slowing growth.
To properly manage growth, you need to keep looking forward and realize that growth is created. It’s not something that just happens. You don’t just put together a perfect product, give it to two people, and then wait for the exponential growth to roll in. After all, people are lazy. Think about how many products you use, but that you never tell anyone about. And think about everything that you love and tell people about, but that no one uses. That’s exactly why you have to go out and chase down growth.
You can have different strategies for chasing down growth at the beginning and then managing it when you’ve reached the tipping point.
When I look at some of our best companies at The Family, the ones who are growing quickly, I can find very different strategies that are dictated by the product. Save, Trusk, Agricool, these are all companies that are growing quickly but that have to adapt to different realities based upon their industries and their goals.
But what they have in common is the capacity to dream. Why has Apple grown into the largest company on the planet? It’s because they see themselves as fueled by dreams. When you talk to Agricool, what is their goal? To change the way everyone eats. If you ask Damien Morin at Save about their mission, it’s not to replace cracked screens on smartphones — he wants to save every device that exists. That mindset is what allows you to run along with your growth as things take off. If that’s not your ambition, then growth will only be scary for you — it will never be scary fun.
The only way to grow fast is to push so much and so hard that it seems to be literally impossible.
No one will tell you this, but every founder has that fear deep inside when they realize that their growing company could very well die. And not in five years or in a year. The company could die tomorrow. Great founders use that fear and that knowledge that it could all disappear to keep pushing and ride the wave.
That’s why you can’t overthink things or try to plan them perfectly. If you say that something is going to take six months, it’ll take longer than that. And maybe it could have happened faster if you had simply said, “This is what we’re going to do,” without putting a timeframe on it. Growing fast can’t happen on a timeline, it can only happen in terms of milestones. Those milestones should be KPI-based, with no calendar for when it will happen.
If you say, “We’re going to get out of beta in 3 months,” how does that help you? It makes much more sense to simply say, “We’re going to get out of beta as soon as we hit 10,000 users.” And then you try to reach 10,000 users as quickly as possible. That’s a mindset and a milestone that can adapt to growth.
Besides you as the entrepreneur, who is scared of growth? In Europe, investors.
Investors in Europe are horrified with the idea of spending and losing money. So you need to learn to ignore them, and only listen to those few people who have proven to be knowledgeable enough to encourage rapid growth.
Understanding your growth and your internal milestones is what lets you know when you’re in a position to ignore those investors who start to worry. Being an entrepreneur is about correctly evaluating what’s going on today and how that is taking your growth forward.
This situation is driven by the fact that the biggest problem in startups is a misalignment between each stakeholder’s level of risk. Your banker’s looking for a risk level of zero, your intern’s risk level is infinite (because they don’t care), your investor’s risk level is a bit higher than your banker’s but not by much, and your risk level as an entrepreneur is based upon your fear of death. And having that fear of death is a good thing, because it pushes you to do things that people would otherwise think impossible, those things that their own risk levels won’t allow them to do.
Growth is hard but short-term growth is more obvious.
There are tons of growth hacking tips out there, they all need to be taken with a grain of salt. Growth hacking is like a chemical reaction — if you’re doing it without having traction and organic growth already, it won’t really help you. You need the combination of elements to really make things heat up.
Manual growth has its limits. When you’ve got all of your friends on board, when your Facebook friends are all in, when you’ve got to reach further and scale outwards, that’s when you move toward growth hacking, automating processes, marketing, that sort of thing. And the only way to know when you’ve gotten to that level is by tracking your metrics.
All of your metric goals should be absolute.
Don’t compare yourself to anyone else. If you have 1.5% conversion, and everyone else in the industry has 0.75% conversion, you shouldn’t think that you’re better than the rest, so things are good. You should be asking yourself how you can raise your 1.5% to 1.6%, and then to 1.7%, and so on.
Absolute metrics are what allow you to push through to the impossible. If you relativize your goals and start comparing yourself to others, you either become depressed (because you aren’t doing as well as they are) or you become complacent (because you’re doing better than them, so it’s all good).
Do the “up or out”.
Your first week, you launch, and you look at your users, your conversation rate, whatever metrics are most important for you. And you try to push those metrics, week over week, just a little bit higher. You know what happens: those small but absolute numbers, growing steadily each week, end up becoming very large numbers.
And don’t forget that your ultimate life metric is revenue: whatever you’re tracking to measure your growth, revenue is the most important one. Forget the idea that you’re concentrating on growing your user base, and you’ll worry about revenue later. It doesn’t make sense. Stop it.
In the end, deciding whether you want to found a startup comes down to a question of whether or not you’re excited by the insanity aspect of growth.
And one way that you can decide if it’s right for you is by giving yourself the Achilles test. When Achilles was a child, his mother saw that he would either live in obscure happiness, or he would die young with glory. When the time came to decide whether or not to go off to the Trojan War, Achilles had to decide between those two fates. He could live at home, have children and grandchildren and then fade into obscurity. But he went the opposite way: he chose glory, died young, but his name has lived on for thousands of years.
Today, we know that there are a lot of ways in this world to be happy and make money that don’t involve trying to find success as a startup. You have a choice between two paths. You have to recognize those paths and make the choice willingly. It’s not necessarily forever — you can choose glory now and then change your mind in five years. But know this: launching a startup is on the path to glory. It’s hard, it’s difficult, it’s dangerous, and it’s not for everyone. You’re the only one who decides if it’s right for you.
In a startup, growing is about doing things that seem impossible, discovering secrets about your market that no one else knows about because no one has pushed so hard.
Growth should be your obsessionStartup equals growth. For everything you do, wonder first “Will it make me grow?” If yes, push harder; if no, stop it - now. You have to build your growth, it won’t be handed to you on a golden platter.
It’s not comfortableGrowth hurts: it cannot be planned, decisions cannot be made in advance, you’ll always be late and have no choice but to work harder and harder. Growth has a very personal cost: it costs your time, your mental and physical health. Do not expect anything other than chaos.
Growth creates valueGrowth is the only way to build value and the only thing that can solve any problem in your company.
Growth gives you controlWho runs a startup? If it’s growing, it’s the entrepreneur; if it’s not, it’s the investors. If you don’t grow, there is no one to protect you - that’s the deal. The more you understand your growth, the more you will be in charge of your company because no one will want to stop the train.
Don’t make plansPlans kill growth, because people always believe their plan. If you plan to do something within 6 months, you’ll actually do it in 6 months or more. Never think in terms of timeline, think in terms of milestones, with KPI-based objectives, not time-based objectives. Your only obsession about a timeline should be to reduce it.
Learn to ignore your investorsInvestors are afraid of growth because it costs money: European funds are small, they have little money and they are not used to losing a lot very fast in a growth situation.
Don’t be afraid of deathStartups’ biggest problem is the difference between stakeholders when it comes to their risk tolerance level. The fear of death is a great danger: it keeps you from being bold. You’ll recognize it when you’ll begin to think twice before doing something. Go against that. It is part of the job to fail or go bankrupt.
Go for the obviousForget any big plan for the first 1000 customers and focus on doing things manually in order to learn. Short-term growth is manual. Leverage your friends and your entire community as a beginning. Be dead simple and be good at it. Repetition is key - it is very hard to get something into people’s minds. Then you’ll find the limits of manual growth and start using automation and growth hacking solutions, developing softwares and marketing.
Think MetricsBenchmarking is for losers. Do not compare yourself to others, compare to yourself one week before. Use the “Up or Out” methodology: look at your “natural” metrics on the first week and then make each of them grow, pushing up from whatever the starting level. Never add metric goals that are not relative.
There are 3 kinds of metrics:
- Life metric: it is the very metric that tells if you are alive or not. In 99% of cases, the life metric is revenue. Growth obviously means growing revenues and more revenues equal more means for growth.
- Optimization metrics: they are key metrics that fuel the Life metric.
- Vanity metrics: they are useless as they have no impact on your life metric.
For a social network for instance, the number of subscribers is a vanity metric: what counts for this kind of project is not the acquisition but the retention rate, so the number of daily active users is an important optimization metric.
Measure by weekIf you keep doing small things in a tight timeframe, you’ll have big effects on the long run. If you try to do big things on a large timeframe, you’ll get depressed, because you’ll never know if what you did worked (or not) and if you are successful (or not).
And please: growth rates must be calculated week over week in absolute numbers, not cumulative numbers.
Be ambitious as a teamEveryone in the team must be aware of the goals and feel concerned about reaching them. Celebrate the right things and similarly, share desperation: communicate internally about every piece of news, be it good or bad. Create an automatic email sending the numbers to everyone in the team. Be harsh. Be clear about what success means and what failure means, on the basis of your KPI.
Choose your sideApply the Achilles dilemma to yourself: happiness or glory. Glory means doing something that matters, not being mainstream famous. The glory path is hard: everything you’ll do can fail at any moment. At the same time, the happiness path would be boring for a lot of entrepreneurs. There are as many kinds of entrepreneurs as there are ways of life and ambitions. Make a true decision, choose which kind of entrepreneur you want to be. It is a one-way ticket.
Grow or dieAt every step, you must find a new solution to reach the next level of growth. And if at every step you take you are not at risk of dying, it means that you are not growing fast enough.
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Turn your Flame into a Big Fire
Ambition is like a flame burning inside your mind. Your responsibility is to turn it into a big fire. Ambitious entrepreneurs polarize. They’re not here to please everyone. You can learn how to become more ambitious. It starts with your environment, the people you spend your time with and every choice you make.
If anyone ever tries to tell you that ambition only comes from within, and that it’s something you’re born with, don’t believe them. It’s absolutely not true.
Ambition is something you can learn.
Sure, some people may pick it up easier, or in a more natural way, and that makes it seem like it’s just normal for them. But anyone who is motivated can increase their ambition. Ambition is like a muscle: if you exercise it, it will grow stronger. And for an entrepreneur, it’s one of the most important muscles that you can exercise.
Most of the time, your ambition is going to be provoked by your environment. If you are in a group or you’re watching the people around you, and those people are ambitious and pushing for bigger and better things, you’ll do the same. We are chameleons. And of course, if everyone around you just settles for what they have, or doesn’t really care about making things better, then you’re less likely to keep your ambition high as well.
So keep an eye on who you hang around.
That means your friends, your family, your cofounders, and definitely your investors. Regarding your friends, I’m not here to tell you who you should hang out with, but the best founders I’ve met spend most of their time with inspiring people. Ambition is like that crazy flame you’re trying to keep lit as the wind blows. If you’re always having to justify your choices, it means that you’re surrounded by people who could kill that flame, whereas it’s your responsibility to turn it into a big burning fire. Think of all the excitement you can feel when you’re challenged by someone who care about making an impact. That’s who you should spend most of your time with. If your investors are ambitious, then you’ll have a much easier time in growing your company into something important. If you have weak investors who are afraid and pulling you back, then it will be very difficult to turn your company into a star.
Being ambitious doesn’t mean that you’re protected against all the things that are waiting to kill your company. Being ambitious doesn’t mean that you always make the right decisions. You can still die if you’re ambitious, because it really means exposing yourself to risk and never doing things that are just average. But that also means that you don’t waste your time, and when you do succeed, it makes it all worth it.
No one remembers average. All of us have our resumés, our CVs, what we’ve done — and the only thing that people remember are those extraordinary, striking moments.
Go ahead and polarize people with what you’re doing.
If no one reacts to what you’re doing, you aren’t being ambitious enough. When people are completely against what you’re doing, that’s when you’re probably doing something ambitious.
You are an entrepreneur — you aren’t a politician.
You don’t have to please or to try to bring everyone together. You don’t need a large consensus. You need to concentrate on trying to make the right decision and knowing why you believe it’s right. Sometimes that goes wrong, and that risk is on you. But if you accept that risk, and make sure that everyone knows that you’re accepting it, you have the freedom to do something really interesting.
At the beginning of every startup, ambition doesn’t look big.
In fact, at the beginning it looks very, very small. It’s not about the impossible, it’s about doing your best today. For example, if you’re starting a food company, fake ambition would be saying that you’re going to open 10 kitchens that deliver 5,000 meals. That’s just a dream. There’s no real way of achieving it today. Real ambition would be looking at your capabilities, deciding that you can make 50 meals today — yourself — and sell them all, door-to-door — yourself again — until they’re gone. That’s ambitious, for a beginning.
Maintaining your ambition comes down to feelings.
Communicate your enthusiasm to others and also manage your own psychology. One of the first steps in doing that is recognizing that feelings are real and finding a way to communicate about them. Joy, satisfaction, but also anger, fear… Many entrepreneurs fall into the trap of not talking, of not acknowledging their feelings. They’ll lie all the time about how they feel, they start to confuse storytelling with feelings, and that always has a horrible ending.
We sometimes watch this happen at The Family’s dinners. Every good founder will come to dinner and be very open about their struggles, what’s going well, what’s going horribly, and how they’re feeling. Bad founders come to dinner and just plain lie to other founders. Why does that happen? Well, people who are bad entrepreneurs know that they need help, but will never ask for it. No one can help you if they don’t know what you’re feeling and what you’re going through. And getting help starts with a simple statement and a simple question: “I have a problem. How can you help me?”
That doesn’t mean that you need to share your struggles with the press, or your customers, or your mom, or whoever else comes along. But you need to have someone that you can share them with. Otherwise, your ambition will just run away down the drain.
Once you’re taking care of your personal level of ambition, you need to build an army.
Every person that comes onto your team needs to have the same level of ambition as you. Just because someone is highly skilled doesn’t mean that they have the same ambition as you do. And putting them on your team is the perfect way to lower the collective ambition of what you’re doing.
That’s also why you shouldn’t be afraid to talk about your ambition and what you’re trying to do. Whether it’s with your employees, your investors, your customers, you want those people to become part of your army that is helping you. If you aren’t open about where you’re going, you can’t add those people who will be with you no matter what. You don’t just need fans of what you’re doing, you need superfans. And users become superfans when they’re amazed by not only what you’re doing today, but also just how far you’re going to go tomorrow.
Any time you can create a group of superfans, you’ll also create a group of haters.
It’s a necessary part of things. If you can generate true feelings, your startup has a chance. If you’re not destroying anything, if no one complains about you, then you’re having no impact on the world. Just make sure you do really believe that those haters are wrong :)
None of this means that you need to create “buzz.” Too many people think that “buzz” is some magic thing that you just decide on. Let’s say it once and for all: you don’t decide when you go viral, you don’t decide when “buzz” happens. You can’t predict that future.
What you can do is push hard and be crystal clear about what you’re doing as a company. As soon as something in your business isn’t clear, it means that something in the business is weak. And you need to be aware of that, and you need to fix it — fast. Apply a radical mindset. Find the message that everyone who comes in contact with you will understand.
Yes, that means that sometimes you’ll be wrong. That’s ok. Being wrong is the only way to learn fast. It’s better to be wrong fast than to be average. You’ll get answers, and you’ll use them to grow. And growth is the only goal. It’s not always easy, but it’s necessary.
At The Family, we’ve been going through this personally with our expansion and switch to English. Opening offices in London and Barcelona with others coming, switching all content into English… These decisions created short-term headaches. Some of our fans were disappointed — especially in France, where speaking English will get people to look at you strangely. But the positive results of that switch have been much larger, and will continue to exponentially increase, as opposed to if we had stayed in France.
When Netflix switched from being a mail-order DVD company to a streaming company, it was the ambitious choice. But Netflix already had a huge presence based on physical DVDs. The rollout of the change resulted in serious decreases in revenue at Netflix, which was already a publicly listed company, for months. The press was a nightmare. Their customers were angry. It was painful. They did it because it was that kind of ambition that allowed them to now be present in 190 countries worldwide. So keep ambition high despite your opponents.
Being ambitious means that you sometimes drop down on the graph of success.
And when that happens, take a deep breath, and remember what you’re doing. Remember that it’s a blip, not a permanent signal.
Stop worrying about your reputation. When you’re starting out, you don’t have a reputation. Reputation is for companies that everyone’s paying attention to. Attention only comes with success.
So keep on sending out pushy messages to everyone whose email address you can get your hands on. Have fun. Enjoy the ride. Let your soul run free. Be weird. Stay ambitious.
Ambition (noun): strong desire for success, achievement, or distinction.
Muscle yourselfAmbition is not an innate gift. It is like a muscle, you can train it. It means that anyone can become ambitious.
Muscle your environmentAmbition is deeply linked to your environment. Surround yourself with ambitious people, it will raise your expectations. Maybe you’ll fake it first, then you’ll end up being truly ambitious. Your investors are a good indicator: if they are ambitious, they’ll push you to do more, but if they are weak, they’ll drag you down.
Be radicalAmbition is not about making good decisions. Ambition means that sometimes you’ll fail or even die. That’s part of the game. In addition, being remembered should be your secondary goal as an entrepreneur. No one remembers average. Everyone has a CV (in Greek “path of life”), even entrepreneurs: you should build yours. Ambition is like a secondary money that applies to entrepreneurs: you trade it against memory.
Polarize to winIf you want to check if something is ambitious or not, just look at how people react. Ambitious ideas/moves always have hard supporters and hard opponents. You are not a politician: your goal is not to create consensus. Searching for consensus is a total waste of time for entrepreneurs. It is your decision and anyway you’ll be the only one to pay for the consequences. Be clear with your team and investors: you aim at making the right decision, not at pleasing anyone.
Choose your campThe lack of ambition can be much more damaging than the excess of it. The safe and secure path can be hell, even if your decisions seem rational. Do not try to avoid bad things, it will get worse anyway ;), and you’ll end up doing nothing. So be 100% optimistic. Things will always go wrong but you’ll always find a path: jump, swim and keep moving.
Do not fall into a caricature of ambitionAmbition is about acting, not just selling yourself. Ambition often looks small: it is hard, it is slow, it is a step-by-step journey.
Manage your own psychologyEmotions are real, deal with it. The most important thing is to talk and to share your feelings. Find a partner who will be your rock. Do not confuse storytelling and sharing your feelings: do not lie, do not fear being transparent about your struggles with trustworthy people that surround you.
Build an armyYou’ll never build ambition alone. Each and every hire must share the same level of ambition as yours. Any teammate that is not in the right mindset is a threat for the others. Personal behavior and courage are as important as skills when recruiting. Build an army: not a team, an army.
Go viralAmbition is also key in your communication: it creates a bond with your clients. Showing ambition will allow you to create a tribe that will become viral if the message is strong enough: people will find it crazy and share it. Be careful: It’s not about making buzz. Buzz is not a goal nor something you can decide or plan. Work hard and do not expect it, since that’s the best way to achieve it.
You need superfansAt the beginning, when your product is not yet fancy, the only way to gather superfans is to spend a lot of time with your users. Make friends with your first users, organize parties, take that relationship to the next level. Be ambitious about the bond you build with your users.
You also need hatersEach and every time you increase the level of ambition, you’ll be hated. Celebrate it. Your haters’ level of intensity is an incredible indicator of success. Gustave Flaubert said: “You can calculate the worth of a man by the number of his enemies”. Same applies to startups.
Be crystal clearIf you are confused about anything in your business, if your communication is not clear, you have a problem: it means your product / offer is not radical enough, which means you failed to make a decision.
Be wrongBeing wrong is the only way to get answers and learn fast.
Don’t worry about your reputationDo not be afraid to ruin your reputation: you do not have one. And by the way, nobody is waiting for you and you are not the center of the universe. Do not be childish. However, there are some things you can do as a very young company that you won’t be able to do as a more mature firm: being spammy for instance. So don’t hesitate ;)
Have funBeing an entrepreneur is a luck. You are outstandingly free. Do not forget to enjoy.
Let your soul outBe honest and true to yourself.
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Do You Know Why?
You can explain what you do in a 10 second pitch. You can show how you do it through an amazing demonstration. But can you clearly define the reasons why you do it? If you can, you’ll attract the most motivated people, the ones who share the exact same purpose. If it’s true that startups’ missions are deeply rooted in the founders’ personal stories, they still need to be expressed and obvious for the rest of the team, the users and all the people you’re enrolling.
The decision to become an entrepreneur can be motivated by wanting to make money. In France, we have a real problem with that idea, but it’s true. It’s ok to make money. But truly great companies are motivated by a mission and a cultural vision.
Having a mission helps you achieve goals that ‘regular’ companies aren’t able to do.
First, it lets you attract the best talent. When the money is equal, the best people are attracted to companies that are pursuing the best mission. Remember that building a company isn’t just a question of business models, markets, strategy, whatever. At the end of the day, you need a pitch that brings talented people along with you. Otherwise, you’re alone and you can’t build anything.
Next, a mission helps you to manage the tough moments. You’ll have moments when you wonder if you can keep going. At those times, rational arguments can fail. But having a strong mission that you believe in will push you through it.
And lastly, your mission helps you to make fast decisions. Clear missions render debates obvious. They make it so that everyone in the company sees why you’re doing what you’re doing.
So you need a mission from the beginning.
That doesn’t mean that you have the perfect mission. Like most other things in entrepreneurship, as you move on, things change. If you’re lucky, you get into a virtuous circle where your mission brings you some success, that success brings you more confidence, that confidence leads you to a grander mission, and so on.
One way that your mission becomes real is in your company culture. The everyday culture that you promote should be taken very seriously. There’s a lot of confusion about what a company culture is. It has nothing to do with company perks, or office design, or vacation, or what you say, or what you write down. Google isn’t innovative because it doesn’t have a dress code and people come to work in shorts — it’s innovative, period — and as a consequence, nobody ever cared what people were wearing to work. Culture isn’t built on these surface features — it’s built on who you hire, who you promote, and who you pay well.
For example, it’s easy to say, “We believe in gender equality and equal pay between men and women.” But the only question is whether or not your actual payroll demonstrates that. If it does, then your culture takes the gender salary divide seriously. If it doesn’t, then you’re just like every other company on the planet.
You can’t fake your culture.
There needs to be a perfect alignment between what you think, what you say and what you do. And that’s just not the case for the majority of companies. By the way, your company culture can be honest and real without being good. If you’re a bank that fires the bottom 20% of your workforce every year, that might not be good, but if that’s what you believe, and you’re open about it, and you do it, it’s at least honest and real. So if you’re ruthless, be ruthless. If you’re collaborative, be collaborative. But remember that the culture at the heart of your company becomes a part of you. It’s like DNA, you can’t just change it from one day to another.
Your culture will ideally be expressed rather than created. It should exist naturally within you, your cofounders, your early team. Its expression should also be natural and selective. A badly defined culture will let anyone in, it will adapt itself to whoever you hire. But a good culture will reject as many people as it lets in. If your culture expresses a value, make sure that it’s not a bullshit value that everyone agrees with. “Innovation” isn’t a culture, because who’s on the other side? Who is going to put up a sign in their company, “We don’t innovate.” It’s not a value, it’s just a buzzword.
Real values are ones that have an opposite.
Those opposites are strong values as well. Take Facebook’s commitment to openness. That’s a real value, because there are people who are fundamentally opposed to it. In fact, there are even other companies that launched as an opposite value — just look at Snapchat. Facebook is based on openness and perpetual sharing, Snapchat is aimed at forgetting and closing the records. Both of them have a value and therefore a culture that becomes part of their company, and that’s an advantage that has turned them into billion-dollar companies (one more than the other, of course).
A value expresses a choice that you can fight for. And others can fight against it. That kind of value makes a lot of the choices that you face easier. And that’s the kind of culture that strengthens your company. Do it from day one. It might change over time, and that’s ok — but install culture from day one.
That’s why you don’t recruit just for competence. People in Europe are generally bad at really installing a culture in their company, and so they think that competence is the most important thing to find. But a person’s competences can change and improve; it’s hard to change someone’s culture.
What belongs together comes together.
We talk a lot about diversity in the business world, and how it needs to increase. But your company culture needs to be homogeneous. This doesn’t mean anything about race, gender, what school people went to, what nationality they are. This means that the people who come in need to share a homogeneous culture and mindset.
No one likes to say this, but a big part of being able to do that is age. If you look at founding teams, there’s a data point that’s very important: founders who don’t share a generation are in a much more difficult position than those who are close in age. It’s hard to make things work when there’s a generational gap, even a small one. This gap is getting to be harder and harder as time goes on — and if you don’t think so, and you’re over the age of, say, 25, go try to understand Snapchat’s active users and the per day usage numbers of those users.
Once you’ve created a homogenous culture at the beginning, it’s a question of how you can apply it at scale. If we look at Google, they’ve got the famous culture of “Don’t be evil.” It’s a real value, but good luck trying to define it. What is “evil”? Is collecting data on everyone everywhere “evil”? It can be debated. But at the same time, “Don’t be evil” has a huge emotional component to it that places that value above other traditional business concerns. Not only that, it allows Google to debate the future and what they want to be as a company, while also giving them a great deal of clarity for the present. That’s the mark of a good value: one that makes today’s decisions easy and that informs tomorrow’s possible decisions.
Amazon had an even more concrete example with the question of “What’s with all the doors?” Because doors were much cheaper than desks, Amazon’s office desks were just doors. And every time someone came through the office, and every time an employee sat down, they were reminded of one thing: Amazon is in a retail business where every penny counts. You could put that up on the wall, “Every penny counts.” But what company wouldn’t say that? At Amazon, the idea became much more powerful as a symbol that immediately shows exactly what the company is about.
Don’t try to imitate the culture of others.
You can read about other people’s culture all day. If you’re wondering “What’s the best culture I can implement?”, you haven’t understood the most important point.
Your culture needs to be natural to you. If you try to imitate others you’ll end up making bad decisions. You need to know what you’re fighting for, who your enemies are. Every startup is fighting against something or someone. Your individual enemy should push forward your individual culture.
One company’s successful culture isn’t “better” than any other one. A bad culture is just one that doesn’t make a choice. The traditional corporate world is full of this, companies that try to have it all and never make a choice. That’s why they’re in so much trouble and why no one believes what they say anymore. The thing you can say about a “better” culture is that it will be coherent, visible and shared.
It’s not about putting quotes on the wall.
You can put up all the posters you want, but if no one sees the details of how that saying exists at the heart of your company, it’s just bullshit. That’s why you have to hire only stars and only those stars who feel like they’ve finally found the job they’ve been looking for all this time, the one where all the members of the team are pushing toward the same goal. Sure, that’s hard to find — but it’s worth waiting for.
Concentrate on the “why.” What you’re doing, that’s easy. How you’re doing it, that’s easy. Even more, both the “what” and the “how” will change over the company’s life. But the “why,” specifically a “why” that isn’t fake, that’s hard. The “why” gives you structure. The “why” gives you a team that can achieve things that outsiders thought were impossible.
This entire discussion on your company’s mission and culture comes down to mechanism design.
Mechanism design is how you create incentives to encourage the actions and the culture that you’re aiming at. Every time that you implement a process or a rule, it will have an impact on your employees and your company. That’s why you shouldn’t implement anything too early in the life of your company. Carefully consider the impact of each of process when you do get to that point. Think about what you’re trying to achieve, think about the possible side effects, think about how the people around you are going to actually react, not just how you would react or how you hope they react.
One of the first processes at The Family wasn’t something having to do with sales or programming. It was the idea that we eat together on a regular basis. Food and drink are still today one of our biggest expenses. Why? Because we believe in the importance of sharing meals together as a critical part of our job. Eating together creates a bond, a community. Eating well (and drinking well) together creates a caring community. Does that seem simple? Sure. But think about what other companies actually put the effort — and the budget — into that kind of mechanism design. There aren’t many. And we believe that’s one of the reasons why we’ll still be toasting the successes of our startups for a long time — and loving every drop.
Your Mission equals your Why and embodies in your Culture.
Start on day 1Mission is not something you can just decide, you have to build it. You do not need to have a mission on day 1, it works like a virtuous circle: success brings confidence, confidence brings a more ambitious mission, that brings success… Mission grows in ambition with time but culture should be clear and strong on day 1: be crystal clear about who you are and how you want to work. You can pivot, iterate, change your name, your processes, etc: your What and your How can change, but your Why cannot change.
Do not recruit on skillsBe with people that look like you. At the beginning, diversity in terms of age, family situation, etc never really works. It is not about age in itself, it is about mindset. Hire only stars: stars are not the persons with the best CVs, they are the persons who feel that your company is where they truly belong. Remember that the awesomeness of a company is proportional to the number of employees who work there for the Why more than for their salary.
Align your words and actionsCulture is not what you say or what you write: it reflects in who you hire, who you promote, how you pay your employees. Your culture is strong when there is a perfect alignment between what you think, what you say and what you do.
Do not try to look goodCulture does not necessarily look good. A good culture rejects as much as it adopts. Every culture relies on a set of values. Beware of bullshit values: these are values that no one can be against such as being innovative or honest. Real values are easily recognizable because their opposites are also acceptable values such as Facebook’s openness vs Snapchat’s secrecy.
Do not try to imitate or to compareCulture is about expressing something very intimate. If you try to copy the culture of others without sharing their goals, you’ll hurt your company badly. Besides, there is not a culture that is better than the others. Culture is a choice that is not good nor bad, what is bad is when you do not make a choice.
Do not confuse building culture with establishing perks and sticking cute postersDo not confuse symbols with real management actions. Bermudas, babyfoots, cats etc are only nice-to-haves, they are the consequences of your culture, not its foundations. Posters are nice, they convey what you want to say, but writing things is not enough.
Define your enemyEvery good culture has an enemy. Who is yours? Knowing what you fight for will create a sacred unity. It is a very old political trick: create a war to focus people on it instead of internal politics. Same applies to startups. The enemy is outside.
Do not implement processes too earlyEvery time a process is implemented, your employees’ behaviour is impacted. It is called mechanism design: it is how people act when incentivised to do something. Mechanism design is the architecture of culture. For instance, Facebook implemented the “one mile rule”: FB employees earn 2 000$ less on their salary if they live farer than one mile from the office. Beware: rules take over people’s brains, every process has a side effect. Budget allocations for instance, with new budget being increased only if the previous one were totally spent, can kill a company.
Follow the threefold code of Culture: coherent, visible and sharedHaving a strong culture will allow you to attract the best talents, because at equal salaries, people look for a meaning in their job, to manage your downs, because at the very moment when everything seems wrong, deeply believing in your mission is the only way to survive, and to take quick decisions, because if your mission is crystal clear, your strategy will be obvious.
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Money. Power. Respect.
Anyone asking you to work on a business plan while you’re still searching for a virtuous business model isn’t an investor you want. Who you raise money from is a key question - not every dollar is the same. Good money comes when you can reverse the balance of power. Raising funds is like a mix between playing poker and buying a house. You need to go all in with your own cards. But you can’t keep a poker face in front of the landlord, because it could be a long-term relationship and it should be based on honesty. Learn how to do this, player!
Money. Power. Respect.
The question that we have to knock down all the time at The Family is “Can you help me with fundraising?” The answer is “No.” And that’s not for the reasons that you might think. Essentially, it’s the wrong question and it comes out of a misunderstanding of how startups and investments work.
Instead, what you should be asking about investors is exactly why you, as an entrepreneur, need them. To answer that, you need to know who investors are, and why they would give you money. If you don’t understand both sides of the table, then you’ve got much less power than you could have.
When does a startup need money? Usually, it’s not at the beginning. Startups need money when they need to grow. At a certain point in the life of your company, if you limit yourself to only the revenues that you have coming in, your growth rate is also going to be limited. Accelerating that growth rate comes down to asking for money from investors.
Investing boils down to a relationship based on power.
Raise money when you don’t need it to survive. A business struggling to survive is risky; and even though they live in a world built on risk, investors don’t like to put money in risky businesses. Some might do it more than others, but given the number of opportunities that they have, they are going to put their money into companies that are demonstrating real returns and real growth that can accelerate thanks to their cash.
You’re not the only one talking to investors. You must realize that you aren’t the only person pitching any one investor. Good entrepreneurs live their company 24/7. And so many forget that theirs is just one of many. You’re in an invisible competition, with a lot of good projects. So the pitch can’t be, “I have a good project, please invest.” It has to be, “This is why my project is better than all of those other ones you could invest in.”
Investors aren’t omnipotent either. There are all kinds of reasons why an investor will pass on a project. Maybe they’ve already put a lot of money into different projects lately, and they need to restrict their new investments until they raise a new fund. Maybe they’re looking for a certain type of project, or a certain type of founder. There’s a game being played, and having as much information as possible on each player will help put you in a better position.
Investors pay what it costs.
One of the stories that you’ll hear a lot in Europe is that there’s less money, and so there’s less opportunity. But that’s not really true. As an absolute value, sure, there is less money being invested in Europe than in the US. However, there are also fewer projects in Europe, and in general less pressure at those early stages. In the very early stages, most investments in Europe are still local. As you get bigger, though, you’ll have access to a global capital market. Remember that whenever you hear about a European startup raising money globally, in the US, Asia, wherever, it’s not just luck. It happened either because someone knew someone who could put a deal together, or — more likely — it’s because the company has grown to a point where its importance is undeniable.
In Europe when it comes to money invested, $1 ≠ €1. This isn’t a question of exchange rates. It’s the fact that everything in the US, and particularly in Silicon Valley, is going to cost you three times the amount it costs in Europe. Starting a company and getting it into a growth stage in Europe is cheaper than it is in the US (and that’s even with the fact that starting a company has gotten cheaper for everyone over the last 10 years). So if you hear that someone raised $1 million in the US, you can figure that’s roughly the same as a European company raising €300K. A European company with €3 million in the bank is going to have about the same means as a US company that raised $10 million.
And don’t think that Silicon Valley is expensive because it’s inefficient — it’s actually the most efficient place in the world. But it’s like living in the center of a major city: because everything is concentrated there, it’s more expensive than living in the suburbs. Of course, that doesn’t mean that you can’t build a really nice house in the suburbs ;)
Because of the changing importance of money, in today’s overall investment world there’s a race to bet early. Investors are seeing more efficient returns going to those who invested early, so they’re trying to get upstream faster and get the best possible value for their money.
Winner-takes-all! Maximizing that value is important because we’re in an investment world where winner-takes-all. Good deals are very competitive, and it makes the negotiating process fluid. Don’t see fundraising as a static thing — if you have traction, and you have interested investors, your valuation and the money available can change.
That’s because that pressure to get in early and the relatively restricted environment create a butterfly effect with a good fundraising. Entrepreneurs will always start out wanting to control everything: who sees the pitch, who they talk to, etc. But optimizing your fundraising means that you can’t control everything: there will be small moments, brief meetings and unexpected details that have outsized effects on the final deal.
They’re not omnipotent: investors ultimately just have a feeling if something is a good deal or a bad deal. A final judgement is possible only with time. But the feeling is there from the beginning. And creating that feeling is an art, which is why seemingly small things can have huge repercussions. All of the numbers, all of the due diligence, it’s simply there to uphold that feeling: good deal or bad deal?
The truth always comes out.
For the entrepreneur, “good deal/bad deal” rotates around four questions: what, who, how and why. What money are you taking in, how much? What’s on the check? This is the easy part. Next, who is giving it to you? That’s harder, because again, not every dollar is the same. There’s a difference between a good dollar (from a smart investor that will lead you towards more dollars, etc.) and a bad dollar (from toxic investors that will end up killing your company). Then, how are you getting it? In startups, it’s strange but conditions are always negotiated after the “what,” which can lead to situations with horrible legal conditions. Some of them are so horrible that it’s better to not take the money. Bad investors make things complicated in terms of conditions. Good investors make things simple.
And finally, why? “Why” is the biggest source of misalignment between entrepreneurs and investors, because investors aren’t always upfront about their intentions, and entrepreneurs lie to themselves, largely because they’re afraid of losing the deal.
But those lies have a real cost. It’s like when someone lies to someone else just to get them into bed. That might work on a short-term basis, but over the long term it’s impossible to maintain. As an entrepreneur, you need to be honest with yourself and any potential investors, because it’s better to lose a deal than to make a deal where no one is honest about their ambitions for the company. The truth always comes out.
In most deals entrepreneurs only optimize the “what.” And really you should be trying to optimize the “who” and the “why.” As a young entrepreneur, those two factors can make such a difference, because at the very least you’ll be trying to grow your company with people who are fundamentally good and interested in helping you. They can generate a great relationship with your investor that’s beneficial for both sides over the (hopefully long) life of your company.
You raise money when you can.
“How do I know when to raise it?” It might seem a bit paradoxical, but the answer is simple: you raise money when you can. This is why it’s so important to do everything you can to have organic growth and traction, because it opens up the possibilities. Whenever you have more money in the bank, that means there’s less risk to your company. Of course, that also means that it doesn’t just depend on you.
So you raise to go faster, you raise when you can…what should your valuation be? It’s the most popular topic in the startup world, so how do you figure it out? Well, actually, you have two valuations: the fake valuation and the real valuation.
A real valuation is based on only one thing: predictable revenue. Over an infinite amount of time, your valuation is always going to be a multiple of your revenue. There’s nothing else that goes into it, because someone who tries to invest in you today is paying a certain premium in order to guarantee themselves the company’s cash flow in the future.
But until you can provide that kind of realistic projection into the future, you’re dealing with a fake valuation. And that’s where the problem is, since you as an entrepreneur will be optimistic, your potential investors are more pessimistic, and the goal is to find the equilibrium between your two positions. In Europe, the biggest problem is that early rounds are so tilted toward the pessimistic side that there’s no real benefit to them. You can see European deals where someone is putting in $150K for 30% of the company. Let me be clear, that kind of deal needs to be unacceptable for any entrepreneur.
The first valuation for fundraising should be somewhere in the $1.5–2M range. If we were in Silicon Valley, that could be upwards of $5M. But in Europe, you should be aiming for at least $1.5M, and never less. People will then ask, “Well, but how can we fundraise at that valuation?” You need to reverse the question — why are you fundraising if you can’t do it at that valuation? Keep building your company’s numbers until you get to the point where investors are happy to do a deal at that valuation. You can do that because cash flow in a startup is, by its nature, unpredictable. Push as hard as you can to make your sales and cash flow increase. That’s how you get the strength to negotiate for that higher valuation.
Forget your business plan.
Don’t bother with putting together a business plan and a projection model. A business plan doesn’t mean anything in an early-stage startup. And by the way, any investor who says that they only invest with companies who have a business plan is lying. If you say to an investor, “This is my budget and this is what I want to do with the money. I’m not putting together a business plan because I have no idea what my revenues will be, but the goal of this round is to establish a model that I can believe in,” they’ll either invest or they won’t. But if they don’t, it’s not because you didn’t give them a business plan — it’s just because they didn’t want to invest. Period.
Entrepreneurs see fundraising as a necessary early step in the life of their company. That’s a problem. That puts them in a position where they cannot say, “No”, to anyone. Anything that anyone asks them, they do it, because they don’t have the right outlook on what they’re doing. I promise that you’ll get more from spending two weeks building revenue than two weeks putting together a business plan.
When you have a real company, and you’re looking at a Series B fundraising round, that’s when a business plan is important. And it’s important because you have data. But before that, when you’re looking at an early round and you’re testing your hypothesis and you’re trying to see if anyone will pay you for your solution, none of that exists.
Your goal as an entrepreneur should be giving yourself the power to practice one key point: no money is better than bad money, and no company is better than a bad company.
Within the investment world, VCs are a particular breed.
One reason for that is because VCs are getting paid anyway. Investing is their job, and it’s a well-paid job, which means that their concerns aren’t the same as yours as an entrepreneur. Don’t feel bad about taking their money, because their entire purpose is to put capital at risk. If it works, it works out big time. If it doesn’t work, it’s ok, they move on and you’re the one who has to figure out what to do next.
They have their own rules. Because of how their job works, VCs are entrepreneurs as well. Their market has certain rules. That’s what leads to questions about exits. Any VC that gives you a check expects to get a bigger check back one day.
There are a lot of politics that go into targeting VC money. There are complicated economics within a fund, and not every moment is the right moment for a VC to invest in any company, let alone your company.
VCs are not the only way. The vast majority of companies never take VC money. At the same time, in the startup world VCs do have an outsized impact. So while they’re not the only way forward, they’re an important way that many leading companies take advantage of at some point.
There is no middle ground with VC money. Taking advantage of it does means that your outcome will be either 1 or 0. You have to perform, you have to report to your new bosses, and you have to justify what’s going on within your company. And at the end of the day, going down the VC path means that either you become huge, or you die.
Let them find you.
Ultimately, the best entrepreneurs know that building their company is the best way to find investors. If you build something real, something that people want, the investors will come to you. And having that negotiating power is the best way to push your company towards the holy grail of exponential growth.
The power is in the investors’ hands: if you want to reverse it, the first thing is to know them and to think like them by putting yourself in their shoes.
Begin local We are used to hearing that it is more difficult to raise money in Europe. The truth is that there is less money available for startups in Europe but there is also less competition and less pressure. Moreover, everything in the Silicon Valley costs 3 times what it costs in Europe: raising $1M there equals €250k in France in terms of means. Salaries, rents, everything is cheaper. Don’t take it wrong: Silicon Valley is expensive because it is the most efficient place on earth. It is like living in the center of Paris vs the suburbs. But the more early-stage, the more local your investors. The more successful, the more international.
Do not hesitate to take love moneyLove money is money that comes from people who do not care about what happens next and above all it is money that comes without any constraint. If your family and friends can give you money, take it - don’t feel ashamed or guilty.
Focus on the Who For your first fundraising, “Who” gives you the money is as important as how much they give you: 1€ does not equal another, depending on who it comes from. Every investor has an impact, especially in Europe where everybody needs to sign everything before proceeding. No money is better than bad money. Beware of big names. An easy due diligence is to call someone from their portfolio, to talk with people who actually work with the investor. If it is your first company, play it simple: avoid non-traditional investors such as hedge funds, business people, industrial figures...
Be clear on the What “What” is how much and which kind of money (capital, loan,...) you want to get. First round valuations are very low in Europe, or even unacceptable, such as 150k€ for 30% shares. First round valuation should be between 1.5 and €2M, never less. The first valuation is totally artificial so you have to put a high level. Do not wonder how to reach that valuation: reverse the problem. You should fundraise only if you reach that valuation. Try again and again until investors are ready to pay that valuation. Fundraising is an auction. A good strategy is called the “double divide”: divide by 2 the amount you want to raise and divide by 50% the valuation you are looking for. This way investors have the feeling it is cheap, you end up having more term sheets, you then double it all and you finally raise at a higher valuation than you expected, and for more money.
Do not do a business plan Playing with numbers is useless. Cash flows are unpredictable, especially for startups. A BP consists in building forecasts based on the past: as an early-stage startup, you don’t have a past, so making a BP makes no sense. Plus, it is your job to be optimistic, so of course you’ll come up with exponential forecasts, but it is really rare to reach them. So give your budget, show how you plan to spend the money and explain that the goal of this 1st fundraising is to establish a model you can believe in. If an investor in the first round puts a BP as a condition, they are not the right Who.
Beware of the How “How” is about the legal terms. What’s dangerous is that the conditions negotiation always comes after the money negotiation. The simpler the conditions offered, the better the investor. Do not search for equality with your investors, search for risk alignment.
Be true about the Why Investors are not sincere about the “Why” and entrepreneurs lie to themselves: it cannot work on the long run. If you are ready to sell at some point, say it, if not, say it. No one cares about the “Why,” but this is the true parameter that will make your relationship with your investors work.
Celebrate A successful fundraising is a nice milestone. Of course it doesn’t mean anything about your future, of course it is just a beginning and not an achievement, but still it is social proof, it boosts morale - enjoy it.
Use the money smartly Every investor knows that when they invest in a company, the following month is always the worst month ever in terms of performance. The pressure goes down and the entrepreneurs need a few weeks to get back on track (and some of them never do). A successful fundraising is a hard test for founders: the only way to know if they are capital-efficient is to give them capital. Remember that raised money makes you go faster only if it is well spent.
Become a star at reporting Reporting is not just about tracking data: you have to make that data understandable for people who have one hour to dedicate to you per month. Data reporting is key to your investor relationships and the future of your business. Your goal is to instill confidence with your performance.
Protect yourself by building your own insurance Whatever happens to you, your VCs get paid. So do not feel too uncomfortable losing their money: put it to work, if it pays off it will pay big for you and for them. Also, realize that anyone can be fired, including founders, so be comfortable with that. Our opinion at The Family is that you should build personal wealth from serie-A to secure yourself and your family. A basic way to do it is through secondary: secondary money is money that goes in the pocket of the one who sells its shares, vs primary money which goes into your company through new issued shares bought by external people. To do secondary, when you fundraise, you sell shares that you own with a 20 to 30% discount (never more). The discount comes from the fact that the money going in your company generates value, not the money going in your pocket.
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Startups are going to save the world
Making money? That’s cool if you do. But it’s a means, not a goal. Your goal is to change the game, to concentrate on a problem that matters and to make a difference. Seize today’s opportunities - now is when individuals can finally hustle their way beyond all expectations. You can learn anything, you can start a business without anyone’s permission, you can be a pioneer. All the barriers are breaking down. But more openness also means more competition and more judges. Against the odds, you’ll have no other choice but to be honest and constantly questioning yourself about WHY you’re doing your startup - because that’s what it means to be brave.
People are going to read that and think that I’m exaggerating, but I actually believe it, and I have serious reasons. Startups create value. Sure, part of that is generating money and returns. But it’s also value that recognizes that some startups are more important to the world than others. Now, I’m not saying that we won’t work with a startup that is purely entertainment; it’s simply to say that our core focus is on finding startups that change the world for the better. That’s why my cofounder Nicolas Colin started promoting the idea of entrepreneurship as the new politics. And all of us believe in our hearts that it’s true: if you want to change the world in the 21st century, don’t go into politics — become an entrepreneur.
You can’t change the world unless you’re at a high level of risk.
At The Family, we are looking for people who are willing to take serious risks. The reward for that risk is the joy that comes with participating in a project aimed at something spectacular. Not everyone is comfortable with that type of risk, and that’s ok — we’ve always said that there are a lot of ways to make a living in this world. But for us, those risks and rewards are what push us through each day and make us look forward to tomorrow.
Because we want projects that change the world, we work hard to reduce the risk of time. We want to know as soon as possible if there’s a huge opportunity in any given project. Every feature that we design, everything that our team does to help startups grow, it’s all designed to optimize the time that entrepreneurs are risking. We aren’t optimizing cost, because being cheap doesn’t guarantee success. But optimizing time is always a good idea.
We’ve always been upfront that as a company, we’re a startup, too. That’s why we aren’t just looking for good investment opportunities, because there are tons of those. We have to spend our time on the best opportunities that fit what we’re aiming to do as a company. That’s why we look for good entrepreneurs, not just good ideas; that’s why we look at the problem, and not just the solution. Any idea is just a small example of what you can do as an entrepreneur, and ultimately it’s your capacities as an entrepreneur that we’re trying to evaluate.
You can make money with a business that doesn’t matter, but you can’t change the world with it. Because it doesn’t just take an idea to change the world — it takes incredible entrepreneurs. And those entrepreneurs understand that in order to have a real impact on the world, you have to create a business that actually matters.
You can make an impact.
Individuals can make a difference. That’s one of the most beautiful things in the world right now. In politics, you have an impact that is based, for better or worse, on a majority. But in entrepreneurship, an individual can start something, and they can then put together a small tribe of people who come together for a real purpose, without needing to conquer a majority.
Take education, for example. In France, if you wanted to change education, you would need to have a majority of political power, you have to change every school and every teacher before you can have any impact on a student. Today, though, you can start a company that finds its first users, and then maybe it will impact 10,000 students, and then maybe it will impact 100,000 and then 1,000,000. That’s a huge new opportunity in the world, one that didn’t exist 25 years ago.
Or as another example, look at Airbnb. Airbnb doesn’t need to kill off hotels to have a huge impact on real people. They don’t even need a majority of people to use their service. They’ve conquered a minority, and used those fans and customers to build an incredible company. And by doing that they’ve changed the way that people around the world travel and interact with others.
Ask yourself, “Why am I doing this,” and as you answer you have to remember that not every idea needs to exist. That’s why I advise people to work on a project as long as possible before it becomes a company. People will keep working on a stupid company for far longer than they will work on a stupid project. Of course, the problem here is that people will hear me say that, or they’ll see a TED talk saying to focus on the why, or whatever, and then they think that’s the entire key. But it’s not — a true, honest “why” needs a good project and a good idea. Go work for someone who has one if you don’t, that’s ok, too. Every entrepreneur needs good people helping them, and it’s perfectly ok to be part of those teams that are having an impact.
Seize that opportunity.
Today’s world is built on an opportunity that was never there before. I feel sorry for people who don’t realize that. What you do today is much more important than who you are, who your family is or where you went to school. That’s a huge generational change, especially in Europe. At the same time, that means that the world is only becoming harsher as it judges what you’re doing. That’s why it’s so important to be driven in what you’re doing and to be honest with yourself. You can’t just say that you want to be a hacker and then not do the hard work that goes into it. You have to take on the weight of learning new things, applying yourself, pushing boundaries, doing what others say is impossible. Today, it’s still possible for anyone to be a pioneer — but not everyone will be one.
The suits are out and the hoodies are in. But just putting on the hoodie isn’t enough. You have to go out there and start learning on your own. Coursera exists, YouTube exists, Quora exists. Information is now a commodity that you can access. Stop acting as if you need anyone’s permission. Stop asking about how to fundraise and start asking about how to build a business where fundraising will just be a step along the way. Stop thinking that learning is something that you do as a child, and start seeing it as a continuous process that you practice for your whole life. Those are the differences between good entrepreneurs and everyone else.
What entrepreneurship is about.
In the future, value will be created in our capacities that machines won’t conquer for a long time: dealmaking, emotions, arts, and all of those things that need a slightly weird outlook on life.
It’s about collecting information from everywhere. It’s about reaching out and participating in the community of people who are smart and interested in the world. In the history of the world, that was never possible: Descartes could spend years without ever interacting with people as smart as he was. And you can just email Mark Zuckerberg, and if what you say is smart and interesting, you could have a reply back in just a few minutes.
All of the barriers are coming down. But that means that you need to be flexible and understand the necessity of selection. You have to be ok with missing out on some good things because you’re involved with other good things. People can become trapped by that fear, they can become simply ‘wishers,’ not ‘doers.’ And that’s the best way to make sure that you miss out on doing something great.
That can start out just by copying what you like. Every great artist and writer passes through a period of copying, before they find their style. Entrepreneurs are the same way, and it’s how you learn. As you do that, you’ll find something that you’re passionate about. Whatever that is, don’t be afraid of it. We Europeans are so afraid of being passionate about our job, we have to get over that. Being passionate helps you to overcome all of the pain that comes with truly dedicating yourself to a project, an idea, a company.
And I’ll say it over and over: being an entrepreneur isn’t for everyone. What’s more, even for those who love it and are good at it, it’s not always the right time to be an entrepreneur. I had a period of time in my life when I honestly thought I’d never want to do it again. I was happy being a consultant, working a certain number of hours per week, and making pretty slides. I was tired. But then I found the right idea, and the right project, and the right people. That changes everything: it gives you the energy that you need, it lets you be comfortable with the idea that not everyone will love what you’re doing. It lets you love taking the risk.
Risk today isn’t the same as entrepreneurs were taking 40 years ago.
People were selling their house. They were putting everything they owned into an idea, they were taking out personal loans at the bank: that was a risk. Today, the only real risk is waking up one day and having to admit that the idea wasn’t that great. But that’s easy to get over. Once you stop being driven by what other people think, you’re fine. Do that, and the greatest risk disappears.
You can then build upon a niche. You can find a small market and move from there. You don’t need to build a factory or guarantee delivery of thousands of units on day one. Nothing has to be in its final form, you don’t need the “what,” “how,” “why” immediately.
Just focus on your vision and share it, communicate with the world.
Be brave. Be an entrepreneur.
At The Family we are thesis-driven, meaning that our main selection criteria is not the financial return but the meaning. We think that startups are meant to change the world.
Create valueValue creation comes from money generation of course, money that can be reinvested, money as a means and not an end. But you also create value by changing the way we live, by making the world a better place. Entrepreneurship is the new politics because startups have a new kind of impact: while democracy sees a majority choosing a minority that will decide for everyone, a startup is a tribe that impacts a small group that chose it directly, a tribe that can grow each week. Several products/services can live next to each other. It is a smoother process of political change.
Take risksRemember that the voyage is much more important than the destination: enjoy every moment of doing something that really matters. At The Family, we know that most of the startups we select will fail, which is why we built a whole infrastructure to reduce your greatest risk (even greater than financial risk): the time risk. Everything we do aims at optimizing your time, helping you make mistakes or even fail faster, so that you can iterate faster and find your way to success.
Ask yourself whyWhat is driving you? Money, glory, passion...? The Why can come later in the process. Start with the What, discover the How, build the Why at scale. Do not do it for the money: entrepreneurship is way too hard to not make money from it, but that cannot be the final goal. Do things that matter.
Understand the opportunity of our generationThe old world was based on the idea that who you were (your social background, your studies) was more important than what you did. That’s not true anymore. There has been a war between hackers and suits, and the hackers won. Suits are out.
Decide what you want to learn and learn itYou have no excuses. Everything you could want to learn is available thanks to resources such as Coursera. You can talk to anyone on Earth, have access to any brain. Do you feel this sense of power? The entrepreneurial age is putting learning back at the center of the industry, because the workforce is becoming a commodity. Jobs are not our collective future, nor the way that future value will be created. The future is in the capacities we have that machines do not: deal making, emotion, art, strategy...
Be a doerUnlimited access to resources can be a trap. Be selective: do not try to do everything or you will end up doing nothing. Choose your side: doer or wisher.
Find your passionThe best way to get passionate about something is to do it again and again. A passion is not defined by the level of pleasure you take but by the level of pain you are ready to accept from a particular activity/field.
Do not leave your life in the hands of othersYou are unique and you cannot build your path based on advice from others or on predetermined ideas about what is right. Ignore peer pressure. People are too worried today about the reputation risk, that one day you have to explain to everyone why your great idea failed. The switch happens when you do not fear judgement anymore.
It’s not for everyoneIt is all about you, a particular timing in your life and your risk tolerance. Ask yourself: what am I ready to do now and how can I do it at 100%?
Do more everyday“Excelsior” was the motto of the Roman army: “always more”. It gave us the word “excellence,” and it is not a static state - it means getting better every day.
Start small, think bigIn the industrial age, the only way to pay back the cost of capital (i.e., the initial investment to launch) was to be a mass-market product on day 1, through large-scale production. Cost of capital is not that high anymore, even for physical products: you can start small, while thinking big, winning one niche after another.
Focus on your visionPlay with it, blog it, share it, communicate as much as possible.
Ask forgiveness, not permission ;)
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