Note: A version of this post appeared in my semi-regular column on AlleyWatch.
“You need to sell painkillers, not vitamins.”
I’m sure you’ve heard that one before. Vitamins are nice-to-have; painkillers are must-haves. Vitamins are hard to sell; painkillers are (relatively) easy to sell.
But have you ever really stopped to consider what pain is? It’s not as simple as it sounds. In fact, there are at least three dimensions of pain you should understand.
The first dimension is intensity. Is it a hangnail or did you just smash your thumb with the hammer? Because fixing a hangnail is never going to make your customers’ top 5 priority list. And given how time-starved we all are and how many excruciating problems we might have, most of us will never make it to item #6.
Most home automation solutions I see fall into this bucket. Turning your bedroom lights off from your office just isn’t a pain point for most people. The same goes for adaptive lighting solutions that vary brightness and color to fit our circadian rhythms better. While the health benefits are real, for most of us, a cup of coffee in the morning and manually turning down the dimmer at night seem to do the trick just fine.
One of the reasons Twist is so compelling is that it hijacks a real pain point with its wireless speaker embedded light bulbs. Wireless speakers rarely are genuinely wireless – you still need electricity – but Twist solves that problem by screwing right into a light fixture and gives you healthy lightning and the backbone of a home automation system as the cherry on top.
The second dimension of pain is prevalence. How widespread is this pain point? Many founders I meet are passionate about the problems they solve because they lived it themselves. This means they are intimately close to their customers… except when they are the outlier. If the pain isn’t shared widely, your market size deflates like a leaky balloon.
Find-a-roommate apps generally fall into this bucket. For young founders in cities like New York & San Francisco, this can be a real problem but it’s irrelevant to married couples and in most cities where the cost of living makes renting your own place affordable. Plus, most singles have friends so finding a compatible stranger isn’t necessary. ** It is a testament to how valuable intent to move data is that these apps get any attention despite the limited prevalence of the pain point.
** I wonder if founders who gravitate to these kinds of apps tend to be less socially connected?
Most of the civic engagement solutions I see also fall short on this axis. The founders are often very engaged in their local communities and don’t want to miss out on pubic hearings about zoning, municipal services, etc. Most of us just don’t care. The vast majority of citizens cannot even be bothered to vote in local elections.
What made PublicStuff and New York City’s 311 call-in service (now an app as well) successful was that they found local issuers that we all actually care about – fixing the pothole on my block, seeing if I can leave my car where it is because alternate side of the street parking is suspended due to some holiday I’d never heard of (but now suddenly love). These are prevalent civic problems.
The third dimension of pain is frequency. The classic edtech example is finding the right college. A near universal, massively intense pain point with lifelong repercussions… but it only happens once in a lifetime.
In real estate, the equivalent is services that make buying or selling your home more efficient or that help you get a better price. Selling a home is incredibly stressful and one of the largest financial transactions in most people’s lives, this is an 8 or 9 on prevalence and takes intensity to 11 but it only happens a few times in your life. The implication is that finding the customer will either be difficult, expensive, or both. This is why real estate brokers can pay over $100 per click to Zillow for leads on clients in prime zip codes.
So if your startup fails on frequency, you’d better have creative, scalable ways to acquire customers or ways to monetize those customers so much better than your competition that you can afford to outbid them.
Ideally, your startup scores high on all three dimensions. At worst, you score very high on two and have a sound plan to get around the headwinds caused by the one you are missing. But if you don’t, please do yourself a favor and go back to the drawing board. You’ll be saving yourself a world of hurt.
Note: A version of this post appeared in my semi-regular column on AlleyWatch.
Like most entrepreneurs, I wasn’t CEO of my first startup. While I had a fair share of the company, I owned far less than the CEO who, in addition to having had the concept, also initially bankrolled us.
For the most part, this didn’t matter. Like most good founding teams, we had complimentary skill sets and mutual respect so decisions were by consensus. This worked fine until one of us wanted to sell.
For context, the company effectively started in early 2000. We were hit hard by the dot com crash and one of the lesser casualties of September 11 was our term sheet. So we stopped taking even meager salaries and bootstrapped to profitability in 2002.
The next few years, we lived the dream. Ridiculously high growth, increasing revenue per customer as we upsold new modules, competitors folding. Fun times.
Nevertheless, by 2006 I wanted to sell. Six years was a long time but my decision was mostly about the trends. Our growth rate, while still high, had started to come down and the vibe at trade shows was that we were past the early adopters; still plenty of prospects but slower to sign. At the same time, our competition was trying to lure our best customers away by undercutting us. We were doing the same, of course, but once a steal becomes an attractive trade off relative to greenfield prospects, something fundamental has changed.
That said, our growth was still really, really good and the market was *hot*. On the numbers, we could have got 6-8x times earnings. Plus, we had a good chance to attract strategic buyers and their valuations can get crazy (in a good way).
The CEO wasn’t interested. He believed that our new products would fix growth so we could get the same multiples on a higher base in another year or two. Knowing what we knew then, he might have been right.
But he wasn’t. Next year growth was a bit lower. Still really high but now we had two years declining growth. Uh oh.
So he agreed to shop the company. Unfortunately, the banker we brought in now thought we could get 4-6x earnings from a financial buyer but there were still strategics….
After a year leaving no stone unturned, the best offer we got was… 5.5x. No strategics. Between the market cooling, taking time to digest their previous acquisitions, and our growth slipping, they didn’t bite.
The CEO didn’t want to sell. I knew it would be years before he shopped the company again and, even when he did, the odds of getting a better offer hinged on an increasingly unlikely turnaround so I still wanted out. But I didn’t have a large enough equity stake to force it.
So I told the CEO that, if the prior offer was too low, he should be thrilled to buy me out at that price. I also told him that I was ready to move on even regardless. Ultimately, he agreed to buy me out in exchange for my finding and gradually training a replacement.
I got my final check on Jan 2, 2009. He looked me in the eye and said, “Maybe I should have sold.” Fast forward seven years, still no sale.
This clearly wouldn’t have been possible without the cash. Plus, were I not a core team member, he might simply have wished me well. Ironically, it wouldn’t have worked had I had more shares – another cofounder with more shares couldn’t exit for this very reason! Not enough cash to buy out his stake.
- For your first startup, a solid double or triple in a few years often beats holding out for the home run that may never happen. Life is a lot easier with a win under your belt.
- Use inside information. If you’re seeing the road getting bumpy, act on it.
- Don’t fill an inside straight. The irrational optimism that got you this far has no place here.
- Respect the market. It may be hot now but it can change at any time. You wait on it; it does not wait on you.
- Respect the market. (Yeah, I know…) Barring #2 above and filtering any of that through #3, if you ran a good process, the price you get is likely fair.
- Governance matters. Understand who can stop or force a sale under various scenarios. You may not be able to change this, but you don’t want to be surprised.
- Be creative. Not all exit doors are clearly marked.
- Recognize your leverage – in some cases, weakness can be strength – and be willing to use it.
Now go be awesome.
Note: A version of this post appeared in Fortune Magazine
You want to know the best way to tell an investor that they should not, under any circumstances, invest in your startup? Here are the magic words:
“We have no competition.”
There are many ways that sentence can backfire on you:
There are large competitors that you are unaware of
If this happens, shame on you. We see a lot of startups at Dreamit, many of which are tiny and under the radar. So I’m fine if an entrepreneur misses a small startup or two, but when they miss a major competitor, the founder has lost all credibility with me and probably has no business building a startup in this space.
You are defining the space far too narrowly
So you’re the only marketplace for left-handed stirring straws. Who cares? What’s wrong with using a right-handed stirring straw? You have just shown the investor that you don’t understand the customer. After all, when it comes to making a purchase, it’s the customer’s decision that matters, not what you have in mind.
You don’t understand the baseline
This one is more subtle. There are, from time to time, concepts that are revolutionary enough that the startup truly doesn’t have any direct competitors, but that doesn’t mean that people aren’t somehow meeting the underlying need. Before Uber came along, people didn’t just sit outside their caves moaning, “Gee, I wish there were some way I could get to the mammoth hunt.” We drove, took taxis or buses, or just plain walked. We found a way.
Whatever unmet need you are addressing, people are somehow dealing with it right now. They might be using telephones, Microsoft Excel, Post-it notes, walking down to the corner store—somehow, life goes on. As an investor, I want to know how they currently cope so I can assess whether your solution is a quantum leap forward or an incremental improvement—and I don’t invest in incremental improvements.
And if you truly have a startup that has no direct competitors, no indirect competitors, and your potential customers do not have workarounds in place, then your startup is likely addressing a problem that is so trivial, no one cares.
Note: A version of this post appeared in my semi-regular column on AlleyWatch.
Since first launching in 2008, Dreamit has received thousands of applications – heck, I’ve personally reviewed thousands of applications in the not quite three years since joining Dreamit. I’ve had the pleasure to read some really excellent applications that crisply and concisely showcased what made that startup shine.
And then there were those other applications. Applications so bad that I threw up a little in my mouth. Applications so awful that I still have nightmares. Admittedly, that last part is an exaggeration but they were bad enough that I am writing this essay in the hopes that you will read it and not make these mistakes.
Consider this a self-defense essay. 🙂
We respect enthusiasm but we treasure brevity.
After the first few hundred applications, every word on the page is like Velcro across our eyeballs (which, btw, is why you should never wait until the last minute to apply to a popular accelerator program). So when we come across an entrepreneur who cannot resist using 20 words when 10 would suffice, it’s painful, really painful. We start skimming, skipping, and then bailing on the application altogether. We once received an application that ran 22 pages – of text, no graphics! One reviewer flat out refused to read it. Needless to say, that startup didn’t get an interview.
But it’s not just us being prima donnas. If this was the startup’s application, can you imagine how painful their investor pitch will be? Or their sales pitch?! It’s communications 101: listener attention spans are severely limited. Knowing what to stress and what not to say is crucial.
Thanks to this applicant, we now have a character limit on all application questions. But just because you have a 400 word limit does not mean you need to use at least 390 of them. If you can answer a question in 50 words, that’s awesome. You will have our respect… and gratitude.
(a.k.a. “The Repeater”)
Dude, we heard you the first time.
Sometimes repetition drives length. An applicant will cover the same material and cite the same facts in response to multiple questions. As sleep deprived as we are, I guarantee that we did not forget your answer to the question immediately above. For instance, we ask what makes your solution special and, in another question, ask you to specifically drill down into your competition and how you are better. You don’t need to list your competition in both places. If you find yourself saying the same thing twice, stop, think about the questions, and put that material in the one place where it fits best.
Tip: take 2 minutes to read over the entire application before answering any questions. You can even copy the questions into a Word file and work on them offline.
As much as we loath long-winded answers, I’ll take a long response that actually answers the question over a short one that doesn’t.
Sometimes I wonder what question the applicant thought he was answering. Check out these examples:
Q: What is your solution? What’s unique about your solution?
A: My mission is to right the wrong, which is just putting United States back on the ideology that built our country…
Q: Tell us about your customers/users …
A: We are using a combination of all the most successful solutions around the world
Tip: After writing you answer, re-read the question and ask yourself, “Is there anything in what I wrote that is not actually answering that question?”
(a.k.a. “The Hand Waver”)
We can’t evaluate an application without specifics. We want hard data and metrics – we want proof. What we don’t want is this:
Q: How big is the problem / how much “pain” does it cause?
A: Huge problem causing lots of pain for customers
Q: How big is your market?
A: Huge / Billions
Tip: If you can answer the question with actual, relevant numbers, do it.
The flip side to the hand wavers are the compulsive footnoters who provide every statistic available or lengthy background information. We review enough applications that we have a working knowledge of the key issues in most industries and know the basic numbers by heart.
This is especially true when you are applying to a specialized program. For instance, if you are applying to Dreamit’s Edtech program and we ask you about the problem, I don’t need you to explain the failings of our K-12 school system in detail and you don’t need to footnote basic statistics like the number of students in K-12 grade in the US. Just say, “We are improving retention for the 20M university students in the US.”
If something is obvious, we don’t need it explained to us. But anything more detailed, surprising, or controversial should be sourced. For instance, one applicant claimed that 8 year olds consumed over 8 hours of digital media per day. My gut response was “no way” and there was no footnote pointing me to his source. I Googled that claim and didn’t find anything. Even if he could support the claim, his credibility was shot.
Tip: if a quick Google search confirms your claim within the top 5 results – sometimes even within the descriptive snippets shown on the search results page itself – it’s obvious enough not to source or explain in detail.
(a.k.a. The “You find it”)
Can’t I just send you my pitch deck? It’s all in there.
I get that question from time to time and it’s a fair question. The entrepreneur has put a lot of time into crafting his deck and making it look pretty. Why fill out an application if the data are in the deck?
In many cases, the data are not all there. Our application questions represent the minimum amount of info we need to feel comfortable inviting a startup to the next stage of the process. I would guestimate that well over 80% of the investor decks we see are missing the answer to at least one of our questions. These aren’t bad decks. Many are likely very effective in getting the startup a meeting with potential investors. They just don’t have all the info we want to see.
The other answer is a bit more subtle. As I mentioned, every Dreamit reviewer sees hundreds of applications over the course of a few short weeks. Even if a deck is ‘complete’, each deck would still present the information in its own way and in its own order. We would have to hunt through the deck to find where the answer to a specific question is while mentally checking off the boxes to make sure all the bases were covered. That adds time and mental load to a process that already consumes massive amounts of both of these scarce resources.
Tip: don’t respond to an application question with “Please see my deck/website/video (link here).”
(a.k.a. The “Face Palm”)
I will forgive you the occasional typo but the whoppers will cost you.
Dreamit allows applicants to link to optional video. It can be the 90 second product overview video from your website, a product demo, whatever you feel will advance your application.
I especially like the short clips taken on your cell phone, where you just talk to us and tell us why you are so passionate about the problem you are solving and why you are excited about the opportunity to be a part of the Dreamit community. I urge you to take advantage of the video. If nothing else, it gives us a sense of who you are as a person and what it might be like to work with you.
But for God’s sake, if you are applying to Dreamit, the first words out of your mouth on that video should not be “Hello Techstars!” (Yes, true story)
We get that you are likely applying to other top accelerators – it’s the smart thing to do – and we get that the applications are time consuming and that you’d like to reuse material from one application to another. But if you muck up that badly on your application, you will eventually slip up on sales or investor pitches. Attention to detail matters.
Tip: We can see filenames too. We know what “YC_vid” means. 🙂
Accelerator Application Best Practices:
- Read the entire application before starting to answer the questions
- Copy the questions to Word and compose your answers offline.
- Don’t make us look outside the application.
- Review your answers to make sure that you are actually answering the question…
- … with actual data and metrics …
- … citing sources where needed …
- … but without wasting time on the obvious (to us) …
- … nor repeating yourself.
- Then edit down your answers to make them as concise as possible.
- Sleep on it and then review your entire application with all attached material from start to finish to make sure it flows and that you haven’t missed anything big.
Note: A version of this post appeared in my semi-regular column on AlleyWatch.
Between applications to Dreamit and the many startups who approach me directly, I speak to a lot of entrepreneurs. And, while I love that part of my job, one of the least pleasant things I have to do as a mentor is tell entrepreneurs when, IMHO, they are wasting their time and need to move on. It’s so unpleasant, that I know many mentors who simply don’t do it. They gently point out “difficulties” but just don’t want to take a chance that they might offend the founder because he might badmouth them so they praise his “hard work” and urge him to keep fighting the good fight.
I don’t do that.
Your time is too precious to waste so if I think you are going down a dead end, I will be bluntly and brutally (albeit politely) honest with you.
Sometimes, that backfires.
The following is an exchange between me and a Dreamit applicant. As background, I had already seen the applicant pitch at other events and knew even before seeing his application that his startup was “not a fit” for Dreamit. His actual application blew past all prior Dreamit records for answer length. I would call his answers “epic novels” except that that implies a logical and narrative structure that was entirely missing. Suffice it to say that, because of this applicant, all Dreamit application questions now have character limits.
It started with this DM:
Why didn’t my company get into Dreamit? I don’t like getting rejecting from accelerators, but they keep telling us to apply again.
Per your dm on Twitter, you asked for some feedback on why [COMPANY] was not selected for Dreamit this cycle.
You are attempting to create a new social network, something that is brutally difficult in the best of circumstances. In the absence of significant traction (>5000 MAU, and rising fast), there is simply no evidence in the market that you are solving a real problem for a meaningful number of people.
I could probably stop there and end with encouragement to apply again when you have made more progress (as you pointed out that most accelerators do) but I won’t.
I’ve seen you working on this concept for a fair amount of time and, while I respect the hustle and hard work, I respectfully suggest that it’s time to move on to the next venture. You have given [COMPANY] enough time and put in more than enough effort that, if this were going to catch fire, it would have already.
You are clearly passionate about this idea and I know it will be hard to move on – I’ve been there myself and know it first hand – but the longer you continue down what is increasingly looking like a dead end, the longer you are putting off the next idea which might actually be the one to go the distance….
Regardless of what you decide, I wish you the best of luck.
Thanks, but I beg to differ and [COMPANY] is much different than any other social network and nobody does things just like [COMPANY]. People may have called Elon Musk crazy to create a new car brand.
Side comment: No one called Elon Musk crazy. By the time he’d started Tesla he’d more than earned his chops. As a general rule, if you are unknown and propose something really out there, you are “crazy” but if you are a hugely successful entrepreneur doing the same thing, you are “bold.”
I believe it’s catching on, and my 13,000 followers on LinkedIn and over 10,000 members is reason to believe. We’re more of a niche network, and there’s no way to move onto something else with all of the effort I put into this. There needs to be a new social networking site as the others do not do a good job. It solves many problems, such as we don’t comment on the photos, less inclined to have bullying. We don’t have people’s information exposed all over search engines like anyone else does. Likewise, our concept brings communities of people together at schools through networks and communities. We have a patent on our tagging and other bigger ideas, so that people can be who they are in photos, which could potentially lead to future job opportunities. We categorize the photos into teams, and we’re building AI technologies to recognize a photo team photo, etc.
I thought we would’ve been great with your partnership with [DREAMIT EDTECH PARTNER].
Many people who join [COMPANY] love my idea! You’re just making up an answer, and I challenge you to find another company you accept in your program that has over 13,000 followers on LinkedIn or has put the amount of effort into a site that I have. We have been challenged to do a lot of great things because we need to raise capital to do them. As someone who worked at Bunk 1, I’m shocked you would say something like this because you know how important camp and team photos are.
Side comment: I’d have responded to him but before I could, he sent me this next email.
Your skepticism makes me want to do a better job, not change everything I’m doing. I hope whoever accepts me and [COMPANY] will make you believe in what I’m doing someday. How many accelerator programs are there? You see my point, yours just so happened to get lucky with a few hits, some of which are in social media such as [Dreamit Alumni]. What if someone were to start another accelerator, would you tell them to do something else? You see where I’m headed, the competition is good and fair. There needs to be a new social network and we’re not the only ones doing this. I wish I had no competition, but the way is now there are many upstarts in the social media space.
Side comment: And before I could respond to this, he sent me yet another email….
This is a quote I think is great and sums up a hard working entrepreneur. I’m in this to win it. I’ll do anything to make [COMPANY] succeed because I know it will and I fight every day to get new people to join [COMPANY]. I can’t wait till the day I win!
“First they ignore you, then they ridicule you, then they fight you, and then you win.” – Mahatma Gandhi
Side comment: Wait, I thought he was Elon Musk. Now he’s Gandhi? But wait, he quickly sent me a 4th email….
Instead of just wishing me luck, can you like my update? I don’t want luck, I want mentorship and growth to my company. That’s why I applied to the Dreamit accelerator. I guess I’ll have to apply again or to another accelerator who will believe in my dream because Dreamit doesn’t believe in the dream as I thought. I’m upset, but if you want to cheer me up, please like my update because I believe in [COMPANY] and what we’re doing. We have a lot of great ideas with [COMPANY] and we’re growing really well!
Please like this update:
With respect [APPLICANT], you missed my point entirely.
I could very easily have simply wished you luck but instead I gave you my candid opinion of [COMPANY]’s odds of success (extremely slim) and frank advice for you.
That is mentorship. It’s just not what you had hoped to hear… but often that’s what a real mentor does.
You are welcome to disagree – I’m sure Mark Zuckerberg had many doubters too – but at some point you have to wonder, “Maybe I’m not Mark Zuckerberg.”
Either way, I wish you the best of luck.
Thanks! Every company you bring on has a slim success rate. What you’re saying isn’t new to me. I know with my work ethic and my idea that I’m bound to succeed. You should only see the billboard I just spent thousands of dollars on….
Side comment: a billboard?!
…I just purchased 50,000 flyers to distribute. We need to grow, and I see [several Dreamit alumni] raising millions after being in Dreamit and think you must be doing something right. Feel my pain, but also realize I work really hard to succeed. I’m inside on a Monday night, turned down a dinner offer to be working and recruiting people to join [COMPANY]. There’s nothing more that an entrepreneur dislikes when you compare them to another entrepreneur. We all know we are not the same people, and you’re not the guy from YCombinator, whatever his name is.
Side comment to Paul Graham: If you want this guy, he’s all yours.
Do you know any current business students at [UNIVERSITY]? I’d love to have a new campus representative there who is serious about promoting [COMPANY]. I’m a big fan of [BUSINESSMAN], and know he has a great shot of being the next President of the United States, but figured if I can hire a student from [UNIVERSITY] maybe there could be a possibility his company would be able to sponsor [COMPANY] and this student would be able to succeed as a representative. You see the type of ideas I think about, great things and helping the students succeed in college and their career! I’d also like to make [COMPANY] into a more educational portal over time whereas students can upload the class notes, videos and more for those who want to use it as this. This is more than just a social media platform in its evolution. I wanted to do a lot of this stuff early on, but it’s a lot of work. I think if we can get the next President of the United States, whether it’s [BUSINESSMAN] or someone else behind [HIS COMPANY], we can do some amazing things.
Can you get your [UNIVERSITY] alumni email to join [COMPANY]? I’d love to have some alumni supporters from this school! I’ve been trying to get [UNIVERSITY] on [COMPANY], as I totally believe he’s one of the greatest alumni from [UNIVERSITY]. He’s the guy I believe in, and the guy who I think can make a difference with technology, since he’s been there. A lot of people thought his ideas were not going to work, turned him down at one point, and he was able to break through the rejection and find investors.
I hope you can find us someone at [UNIVERSITY]! That’s the kind of mentorship I need, the connection to the people who can help [COMPANY] grow.
Side comment: No, not Trump. He was referring to someone else.
I’ve been out of [UNIVERSITY] for many years but you may want to try [OTHER COMPANY]. It’s a startup too that specializes in recruiting campus ambassadors.
We are trying to work with [OTHER COMPANY] again. [COMPANY] was one of their first companies and their site was in its early stages, now it’s improved. Are you an investor in [OTHER COMPANY]? I’m also working with [ANOTHER COMPANY] and a Startup with a bunch of [UNIVERSITY] students called [ORGANIZATION]. Looking into another one called [YET ANOTHER COMPANY] which [INVESTOR] from [FUND] invested in I believe. There are a lot of accelerators. Another one emailed me today called [ACCELERATOR]. I don’t think it’s as good as Dreamit though, or they are ranked lower, right? [ACCELERATOR] is also lower ranked than Dreamit, right?
Side comment: I’m redacting a lot of names here but believe me, they are silently thanking me now.
Not invested in [OTHER COMPANY] but did come across them as an applicant to Dreamit
Know [ACCELERATOR] very well. I mentored with them for several years before heading up Dreamit NY. [HEAD OF ACCELERATOR] is a great guy.
I think Dreamit is better but I may be biased.
Side comment: If you think you are the accelerator / great guy I’m referring to, DM or email me with the company that this is about and I’ll buy you a drink to commiserate.
You’re better, you ranked higher up in the rankings. Dreamit ranked 10 and [ACCELERATOR] ranked ##.
Side comment: While I appreciate a good ass-kissing as much as the next guy, by this point I just want this to end. So I don’t respond… but that doesn’t stop this guy.
A high school student messaged me today to invest in his startup. Maybe I should tell him to apply to Dreamit. You might reject him though because he’s trying to build a social networking app. Did Meerkat apply as a social networking app or did you see them as something else and they pivoted into social networking?
I wasn’t here when Meerkat applied but they were originally Yevvo and then Live On Air before becoming Meerkat so, yes, they went through quite a few pivots before becoming what they are.
Also, I believe that they had proprietary, hard to replicate, technology underpinning their original concept as well.
Translation: “I know Meerkat. Meerkat is a friend of mine. You sir are no Meerkat.” (In case you don’t get the reference)
Some parting thoughts
As you probably imagine, there were a lot of points during the above dialog where I wished I’d simply said, “Competition was extremely fierce this year. Better luck next time!” and been done with it.
But I stuck with it – probably a few emails too long – because I truly felt that this entrepreneur was pouring good time and money after bad, pursuing a venture that had slim enough chance of succeeding even in theory (new social networks make lottery tickets look like good retirement investments) and that, after several years, was absolutely not catching fire. He was emotionally attached to a dead end. As one entrepreneur to another, I felt I owed it to him to help him try to move on.
It’s easy to latch onto to a few glimmers and think you see the light at the end of the tunnel. This entrepreneur really thought at 13,000 LinkedIn followers meant he had traction but we all know that there are some people on social media who will follow a half cooked noodle if it reaches out to them. More generally, anyone can pump money into getting registrations or followers but that’s rarely what really matters. For instance, for a startup like his Monthly Active Users are the metric that matters and, despite his years of effort and money invested, he had fairly few of these.
It’s also tempting to point to all the unique features and patents your startup has none of these mean a damn thing if they don’t fuel usage.
When you’ve poured as much of yourself into a startup for a long time, it’s extremely tempting to write off negative feedback as outliers or as people who “don’t get it.” And yes, there are plenty of those so you do need to stick to your guns for a bit. But when someone who has experience in your field takes time out of his (most likely very) busy day to give you specific and candid feedback when there is nothing in it for him – and especially when there is a fair risk of downside to him from your potentially negative reaction to his feedback! – you need to listen carefully.
And for God’s sake, if someone is telling you that he thinks you need to move on to something else, don’t ask him to put his reputation on the line and introduce you to a lot of people. What’s he going to say to the person you want to meet? “I don’t believe in this startup and I think the founder should kill it but please go ahead and waste your time talking to him”?
So did I learn my lesson? Probably not. When I see an entrepreneur trapped in a doomed startup, I’ll still say something.
But then again, I never claimed to be smart, just experienced. J
Coda: the other company that the applicant mentioned actually did end up applying to Dreamit, was accepted into the program, and is close to closing its round. When asked about this applicant, that founder’s only response was a facial expression best described as “Bruh”
Note: A version of this post appeared in Fortune magazine’s Entrepreneur Insider network under the headline “The Difference Between a Great Entrepreneur and a Really Bad One”
Great entrepreneurs are like guided missiles. If you point them in the right direction, nothing is going to stop them from hitting the target.
It starts with passion. At Dreamit, we will always back a missionary over a mercenary. Founders who are in it for the economic opportunity will always quit when the going gets tough. An entrepreneur who is driven by the need — not the desire — to change the way the world currently works will stick with it through thick and thin.
Then it takes empathy — not sympathy. The difference between the two is the difference between feeling bad for someone vs. knowing exactly how that person feels. With empathy, a good founder can look at a feature and intuitively know that it solves a user’s problem. An empathic entrepreneur not only knows that something is a problem in his industry, but he can get so far inside the mind of the specific decision-maker that he knows the buyer will look at the service and think, “This is exactly what I’ve been waiting for.”
A great entrepreneur is neither a weathervane nor an anchor. He has well-reasoned but lightly held opinions. There is so much bull**** out there, with so many people pretending to be mentors who have absolutely no business being one. A good entrepreneur almost never adopts advice without reflection. If somebody gives him feedback that is contrary to his current hypotheses, he digs into the reasoning behind that feedback and, if and only if the logic and evidence are good, he changes his hypotheses.
The best entrepreneurs are quick learners and even quicker doers. You often hear them saying things like, “So I taught myself X,” or, “I’ll figure that out.” They love to learn, but they also know when it’s time to tear themselves away from the books and start doing. You never have to tell them to do anything twice, and sometimes not even once. For instance, a potential customer was talking to one startup in the Dreamit program and suggested that the team look into becoming an approved vendor. When they were done, I mentioned to another startup in the room that they might also want to look into it, whereupon that founder turned to me and said, “I’m already halfway through the application.”
Lastly, the best entrepreneurs have failed before. If you find someone who has never failed, odds are they never really pushed their limits.
Bottom line: When you know what to look for, the best entrepreneurs aren’t hard to find.