The Equity Kicker

It’s well understood now that at many of the best startups the founder remains at the helm until the company is very large – Facebook, Google, Microsoft and Oracle are four great examples. It’s also pretty well understood that founders have to be incredibly adaptive to stay effective as their companies scale. This description of changing requirements from CEOs is a helpful guide to anyone involved with fast growth startups (credit Venturebeat):

1. Innovator – at the beginning the CEO should be great at generating ideas and acting on them
2. Entrepreneur - then the CEO must be great at marshalling resources, raising money, staying resilient, and getting stuff done at pace
3. Builder - as revenues start to grow the CEO has to build a team and processes so sales can be repeated and the business can grow
4. Operator - then as the business achieves scale the role of the CEO shifts to being an operator (careful not to lose the innovation though..)
5. Enabler – finally, once the business becomes very large with stable and growing profits the focus of the CEO shifts to enabling the organisation to keep humming all around them

We invest at the very early stages and look for our founders to excel as innovators and entrepreneurs first with the potential to be great builders. We hope they will go on to become great operators and enablers but it doesn’t make sense to think too much about that when the companies are still tiny. For a long time now I’ve thought that the biggest challenge founders face in adapting is the need to ditch the stubborn-ness that served them so well in the early stages. Gail Goodman, the founder and CEO of Constant Contact, which provides online marketing services to small businesses and has grown to some $285 million in annual revenue since it was founded in 1998 put it like this:

being relentless in your perseverance can eventually become an obstacle to change … Every founder [eventually] needs to face two ugly truths. The first is that you’re doing something wrong all the time. The second is that your flaws are harming the team.

The trick is to maintain self-belief through this realisation.

This Tweet from my friend Nicholas Lovell got me thinking about the changing dynamics of starting companies generally:

RT @LewieP: It is easier to make a game so more people make a game so it is harder to sell a game. <- this is something many miss.

— Nicholas Lovell (@nicholaslovell) April 9, 2014

Just as it is getting easier to make games so it is getting easier to start companies. Both the amount of money required and the depth of skills required have fallen precipitously, the first driven by open source software and cloud computing and the second by the improving quality of tools, services and advice available to entrepreneurs. (Note building a successful company is still very difficult, it is just the starting that is getting easier.)

As with games the result is that increasing numbers of companies are started each year.

As with games that makes it harder to stand out from the crowd.

The keys to standing out from the crowd are to have a great idea, to execute well and to generate momentum. Early adopters, investors, and the press are always looking for hot new companies that exhibit these characteristics and they have good systems to find them. However, because the number of startups is increasing the bandwidth available to look at each one is declining making it harder for companies to get anyone to take a second look if their execution and/or momentum falters.

Hence it is increasingly important to execute right first time.

(Side note: experimentation and failure are part of good execution in a modern startup so long as the experiments are thoughtful and learning driven.)

At a recent XOXO conference Ev Williams, founder of Twitter and Medium, gave his formula for a billion dollar business (as reported in Wired):

Here’s the formula if you want to build a billion-dollar internet company. Take a human desire, preferably one that has been around for a really long time…Identify that desire and use modern technology to take out steps

He gave Uber as his example. People have wanted to get from A to B since the beginning of time and Uber has just taken some steps out of the process.

The lesson here is that at the end of the day there is nothing new under the sun. We all still have the same basic needs and high potential consumer startups should be able to make a link between one of those needs and what they do. For my money Maslow’s Hierarchy of Needs is the best framework for understanding those needs. Whilst our basic human needs haven’t changed the extent to which they are sated is definitely evolving. That’s where Maslow’s Hierarchy is powerful. By listing our needs in the order in which we need them to be satisfied it makes it easier to see where the gaps are.

The dominant meme in this area is that our physiological and safety at the bottom of the hierarchy are largely taken care of, and that the opportunities now are in helping people with their needs for ‘love/belonging’, ‘self-esteem’ and, particularly ‘self-actualisation’. What’s interesting about Ev’s formula for a billion dollar business is that it shows how to look for opportunities anywhere in the hierarchy – there are opportunities in needs at the bottom of the pyramid if they can be satisfied with fewer steps. The more efficient delivery of health is one such area that a number of entrepreneurs are working on now.

If content marketing is your game then Buffer just published some great data for you: The ideal length of everything online. Here’s the short version

• Tweets: 100 characters
• Blog post headlines: 6 words (I just chopped three words of the title of this post…)
• Email subject line: 28-39 characters
• URLs: 8 characters
• Youtube videos: 3 minutes
• Presentation videos: 18 minutes

They also say that blog posts should be 1,600 words/7 minutes, but they draw on data from Medium which has made great long form articles a feature of the site. I suspect that on blogs like this one shorter is better. That’s certainly the feedback I get. I aim for around 400 words (shorter today because no time….).

If you are interested in the ‘why’s’ and ‘wherefore’s’ then check the original post which quotes lots of supporting research.

Here’s a graphic to illustrate, including a few items that didn’t make my summary.

One of the hardest things for entrepreneurs can be knowing whether to pay more or less attention to the short or the long term. It’s easy to go wrong doing either. I’m thinking about this today following a discussion I had with a portfolio company yesterday and after reading this quote from Index Ventures partner Mike Volpi in his post about why Criteo succeeded (it was the team):

I always say startups shouldn’t think too long term, and just concentrate on the next milestone instead. A little like mountaineering, what you will see at 1,000 metres is very different to what you will see at 3,000 metres, 5,000 and so on. While you need to know the direction of travel, it’s only when you reach the next milestone that you will see how best to take the next step.

I think the key point in here is that so long as  you “know the direction of travel” you should “just concentrate on the next milestone”. The question then is on which to focus at any given moment. At the highest level I would say that if you can talk convincingly to both these points then you probably have the balance about right. Not many startups can though.

If you struggle convincing investors about the size of your market opportunity I would spend more time on “the direction of travel” (and the destination) whilst if you find that people buy into your vision but conversations fall over after that then take a look at the strength of your short term plans.

If you’re still struggling then just make sure you reach your next milestone. Much better to do that and be vague about the long term than to fail to reach that milestone…

I’m a big fan of Jason Silva. He’s a modern day beat poet with a keen interest in the singularity - the point in the future when the human species transcends it’s biological form by merging with technology. Video is his medium and I’ve posted some of his work here before. His latest short video, embedded below, doesn’t disappoint. It’s titled ‘Shots of Awe’ and describes how to be human is already to be transhuman.

In it he quotes Eduardo da Silva making the great point that the period of natural selection has finished for the human race and that we now control our own evolution. That makes us the species that transforms and transcends itself, i.e. that is transhuman.

Enjoy