There I was, a medium-sized fish in a pretty big pond. There was nothing wrong with that, but I found myself disinterested in fish size or pond size: I wanted to create a new pond. It was 2007, and I left my job at LinkedIn because I wanted to start a company.
At the time, my goals focused on the pond creation above all others. The company I’d start wouldn’t need to be anything specific; building a business was an end in itself. Of course, there were some restrictions: I had no desire to build office chairs or games, and I wanted to use at least some of my more prominent skills in social network data, ranking systems, and predictive modeling.
A friend of mine — who’d already built a large company — told me he was only interested in starting something that could be huge and world-changing, and couldn’t conceive of doing anything less than that. By contrast, I just wanted to achieve some success as an entrepreneur working on an interesting problem. I was excited to venture out on my own and test my skills as a founder.
After I left LinkedIn, I co-founded a company that allowed me to achieve much of what I set out to do. Ephraim (my co-founder) and I led a team that built out one of the world’s top few mom-focused websites, Circle of Moms. Our list of accomplishments is substantial: we built a product that helps millions of moms, a profitable business, a positive team culture, and a bunch of cool technology. And all of those things were attractive to Sugar, Inc., which acquired Circle of Moms this past February after 4.5 years as an independent company.
I left when the Circle of Moms acquisition closed, and have since been (among other things) thinking about my next big move. One option would be to spread my time across companies, as VC’s and a handful of others do.
This is what I’ve largely done over the past six months, albeit in a more scattered form. I’ve spent time working with many founders: some in my role with 500 Startups, others who started companies I individually invested in or advise. That’s been fun and educational. It’s highlighted areas where I feel investor/adviser types can add real value, by allocating resources effectively and then spreading expertise across a number of companies.
But that experience also reinforced my initial leanings: I want to start another company.
My second time through, I’m approaching things differently. I’m less excited about just starting a company; I’m being more deliberate about what it is that I start. I also recognize that many of the first decisions you make — from business model to company vacation policy — can have long ranging implications. And perhaps more than anything else, I know myself a little better, understanding both what really gets me excited and where my strengths and weaknesses are.
As part of that, I’m asking myself to think through and answer a handful of questions fundamental to the founder’s existence. Though these questions are hugely important, they’re difficult to answer when you’re actually running a startup: preparing that investor pitch, pushing out that next feature, and wooing that candidate all seem like better uses of time today.
Though it may be more individual detail than some want to see, I’ve decided to write up my answers as blog posts. There are a few reasons for this.
First, it makes me accountable: writing up my thoughts for an audience will force me to be crisper than notes I jot down for myself only.
Second, I feel this is a process all founders should go through in some form: a weekend spent thinking about these questions can lead to good decisions that will pay off for years to come. I’m currently in the fortunate position where I don’t have any competitors, so I’m happy to share things that can hopefully “raise all ships” without fear of helping the competition.
Finally, this will clearly frame my view of the world for potential collaborators; perhaps through this blog, I’ll connect with one or two readers who see the world similarly.
Here are some of those questions. I’ll answer the first in this post, and others in posts over the next few weeks.
1) What matters most as you evaluate a startup idea?
2) What are you good at, and who complements you well?
3) What kind of company culture do you want to encourage?
4) What are some areas that have room for significant innovation?
What matters most as you evaluate a startup idea?
Several experienced entrepreneurs I respect have asked me this question.
To do this properly, a founder must choose between priorities. “I want to save the world and make billions of dollars and design the most beautiful product ever and build the coolest technology ever and become famous and …” may sound ideal, but it’s not realistic and it doesn’t inform choices. Do you take the quick, safe route because you want to sell your company to Facebook in a year, or do you take a bigger chance to make more of an impact?
Here are some common traits a founder might value in a potential company:
- Is disruptive: makes a market more efficient, by stamping out longstanding un-innovative types (US Postal Service, realtors, the taxi medallion system, etc.)
- Affects the lives of many people
- Significantly improves the world
- Builds a product people love
- Gives the founder a shot at a huge financial payout
- Sets the founder up for an acquihire-level financial payout
- Could lead to the respect of ______ (peers, mentors, parents, etc.)
- Allows the founder to do better (in terms of fame, finances, etc.) than a personal rival
- Has a natural strategy for growth/distribution
- Has a natural strategy for profitability
- Is technology-focused
- Is design-focused
- Is sales-focused
- Is brand-focused
- Is timely with respect to available technologies
- Fits the skills of the founder
- Is intellectually interesting to the founder
- Fits in with the founder’s world view
As you can tell, this list encompasses a wide range of characteristics. Some are in opposition to one another: I’d run away from a startup that told the world it wanted to be technology-focused AND design-focused AND sales-focused AND brand-focused. Others are independent: it’s easy to imagine design-focused startups that have natural strategies for distribution and/or profitability, and others that don’t have such strategies.
There’s of course no right answer to which traits the global set of startups should prioritize, but there may well be a right answer to which traits YOUR startup should prioritize. If you’re going to spend three, five, ten, fifteen years building a company, it should be something that’s going to get you excited every day.
Having a list this long forces one to choose. Here’s how I think of each of the above; everyone will be different.
Is disruptive: makes a market more efficient, by stamping out longstanding un-innovative types (US Postal Service, realtors, the taxi medallion system, etc.)
I like the idea of building a disruptive startup, but it’s hard to imagine the idea of disruption being the central one that gets me out of bed in the morning. For other people, beating the crap out of a privileged, ossified sector of the economy would be a laudable goal. For me, it might be fun, but is not something to which I aspire.
Affects the lives of many people
Affecting people’s lives — without regard to whether the effect is good or bad — doesn’t rate for me as a criterion. I’d say that Facebook and YouTube have both clearly had big effects on the world, by allowing people to find and share videos and photos online. But I’m not completely convinced that either makes the world a better place, and it would be difficult to make a strong argument either way.
Significantly improves the world
On the other hand, a startup that has a positive impact on the world — and for me, the magnitude is key — is one of the central drivers of what I choose to work on. Being an introverted nerdy type, I’m happy and comfortable to abstract this out a couple of levels: I don’t need to physically see that I’m solving someone’s hunger problems. I’d give LinkedIn high marks on this for its role in facilitating professional relationship building, which allows the economy to grow more quickly. Likewise, Wikipedia propagates free, generally high-quality information, which is useful in many respects for everyone who’s online. This was also one of the appeals of building a product to help moms.
Builds a product people love
Building a product people love — and getting positive feedback — is nice, but it’s not ultimately what drives me. I’m just as happy to do something that helps people’s lives without them directly realizing it.
Gives the founder a shot at a huge financial payout / Sets the founder up for an acquihire-level financial payout
I wouldn’t turn down a large financial payout, but it’s not why I’m playing the startup game. Having been at least a small part of three financial successes (PayPal, LinkedIn, Circle of Moms), I’m financially comfortable, if not super wealthy. So an acquihire-type startup outcome wouldn’t be financially life-changing for me. And though it would be great to build a very valuable company, I’d much, much rather go to my deathbed having built Wikipedia than Zynga, even if Zynga would be much more lucrative.
Could lead to the respect of ______ (peers, mentors, parents, etc.) / Allows the founder to do better (in terms of fame, finances, etc.) than a personal rival
Respect from others and competition with rivals are emotions that drive me on short-term projects, but don’t underlie my long term motivations. At times, I’ve worked harder and smarter to impress someone I look up to; at others I worked my tail off to do better than someone I didn’t want to beat me. But both were over the course of a month or three: year to year, I’m not really driven by the mentorship of others, the desire to have someone’s approval, or long term competition. It’s hard to imagine consistently waking up in the morning and jumping out of bed to get to work because I want to beat or impress someone: it’s just not who I am.
Has a natural strategy for growth/distribution
As is likely obvious from my background, I think a lot about distribution and the creation of strong and sustainable online ecosystems. Thus while I wouldn’t place distribution and ecosystem at the very top of my “must have for my next startup” list, it’s one of the top things I think about. If I’m considering a consumer product, and don’t believe there’s a cost effective way to scale it, I’ll probably pass.
Has a natural strategy for profitability
The same isn’t true for profitability: I’m comfortable with short-term ambiguity around the monetization of a product, as long as my intuition tells me there’s a way to bring in revenue. Circle of Moms and LinkedIn both fell into this bucket, as neither had a clear early revenue model. Others gravitate more toward ideas with clarity around business model.
Is technology-focused /
Is design-focused / Is sales-focused / Is brand-focused
I’m less particular about whether a company is technology-, design-, brand-, or sales-focused than many are. I like technology hurdles and intellectual challenges (more on that soon), but was excited to work for a company like LinkedIn which (in the early days at least) never really felt like a pure technology company.
Is timely with respect to available technologies
Timeliness is, in my opinion, a very valuable tool in finding large businesses. Most of the largest technology businesses around today couldn’t have been formed two years earlier, because something — technology, infrastructure, culture shift — hadn’t existed. To that end, it’s an important part of brainstorming, and something I consider in evaluating a business’ viability, but it’s not a core part of my checklist telling me what I’d be happy working on.
Fits the skills of the founder
Matching a company with the skills I have is something that’s high on my list. I’m not a top notch developer, I’m certainly not a sales person, I’m not going to be a talking head on TV, and I doubt I’d be strong as a dealmaker. But I’m skilled with data, am not completely full of crap (I hope!), can understand product ecosystems better than most, and can pull together marketing, technology, and product skills in ways many others cannot. If you’ve gotten this far, it’s perhaps an indication that I can write competently. Since I get A’s on parts of my self-evaluation and D’s and F’s on others (more on this in a future post), I place a high priority on making sure that the good stuff comes out. That doesn’t mean that I don’t want to push myself — I do — but I want my company to use the unfair advantages that I have.
Is intellectually interesting to the founder
One of my not-so-good traits is a tendency to get bored. Without challenges, particularly intellectual ones, I get antsy. When I’m bored, I tend to search for difficult solutions to simple problems, because they keep me entertained. That’s not a great characteristic, but it’s who I am. So it’s better for me to work on problems I find intellectually captivating. That way, I won’t get bored and can focused on the best, simplest solutions rather than the most interesting ones.
Fits in with the founder’s world view
Fitting in with the founder’s world view is valuable to founders who have a very specific view of where the world is going. At PayPal, Peter Thiel would speak at company meeting about PayPal supplanting government-controlled currencies; that fit into his libertarian view of the world. I am passionate about moving toward a world where better decisions are made with the help of data and I’m passionate about the notion that the standard rhetoric of both the left and the right oversimplify in unfortunate ways. However, though these help inform my direction, they won’t drive it.
As you can tell, there’s a lot involved in going through that exercise.
My Top Four
Ordering my selections above, I get the following as my foremost concerns as I think about my next startup:
1) Intellectually interesting to me
2) Significantly improves the world
3) Fits my skillset
4) Can create a strong and sustainable ecosystem
This is a reflection of a good balance for me: what would keep me engaged, what would I look back upon with pride, what’s a good use of my skills, and what can really work.
When evaluating a startup idea, I measure the concept against each of my top four characteristics to gauge its appeal; I expect my next (TBD) startup to rate highly on at least three of the four. Of course, the people I might work with on a new project factor in considerably; I’ll address that in a future post.
As you’ll likely see, going through this exercise is both fun and insightful. What’s most important to you?