I wanted to share everything I know about entrepreneurship on a long form page that I can update regularly. It's very long but you can search it (ctrl-f is your friend ;), and I also hope you enjoy the pictures from the TF archives.
— TABLE OF CONTENTS
Part I: Get the right mentality
- Am I an entrepreneur? A company executive? Or a manager?
- What qualities does an entrepreneur need to have?
- Do you want to be a billionaire?
- Learn to be an entrepreneur
- The CEO
- Not ready for a startup yet? Build a muse
Part II: No Permission Needed
- The responsibilities and freedoms of an entrepreneur
- Ideas aren’t the problem or the solution
- Got cofounders? Yes or no, it’s the team that wins
- Learn to earn (more money)
- The mentality for finding growth
Bonus: The COVID-19 Section
- Surviving a crisis
- Restructuring your business
- Marketing in a time of crisis
- Managing your team in a crisis
Part I: Get the right mentality
Am I an entrepreneur? A company executive? Or a manager?
In the press, you’ll see the terms “entrepreneur”, “company executive”, and even “manager” used interchangeably (it’s even more common to mix those terms up in Europe, because we’ve got so few people who are actually entrepreneurs). But an entrepreneur isn’t those other things, and it’s important to understand why.
An entrepreneur isn’t a company executive for a really simple reason - a startup isn’t a company, and an executive is essentially an employee. When Tim Cook took over at Apple, he wasn’t creating Apple - he was hired to do a job, with a contract laying out his responsibilities and his pay.
Even though there are some entrepreneurs who become great company executives - Larry Page at Google was a good example -, a lot of times you’ll find that the qualities needed to be a great entrepreneur aren’t the same as those needed to head up a big company. That’s why you’ll see lots of entrepreneurs eventually handing the reins over to someone else, because it’s all gotten so big that it’s no longer a startup, it really is a company. (Which shouldn’t be some big trauma - look at Richard Branson, he’s done exactly that over and over, and I don’t think anybody would say his career hasn’t been working out.)
One thing that is true, though: whether you’re a startup or a company, somebody’s gotta be in charge. And it needs to be clear and explicit who that person is. The Navy discovered this a long time ago. Whenever a ranking officer is in command on the bridge, if a higher-ranking officer arrives, the lower-ranking one leaves, because you can never have multiple people in charge. Too many accidents happen that way. Basically, “when multiple people are in charge, nobody’s in charge”: each person will think that the other one saw that giant iceberg, and obviously they’re doing something to fix it, I mean, it’s so big, it’s coming closer and closer... but in reality nobody does anything.
It’s the same in a startup, where the only thing that matters is execution. The stuff you think is important in a business, having ideas, making good decisions, has zero importance in a startup. The only thing that matters is acting and moving forward as quickly as possible. It’s no surprise that the startups that go the fastest get into the most trouble, it’s inevitable. That’s very different from being the head of a company. If you’re a company executive who makes mistakes, you’re a very bad executive. An entrepreneur who makes mistakes is just normal.
This comes down to risk. When you’re a startup, you’re still at 0, and so you have nothing to lose. That’s a very particular moment in your life, because the only thing you can possibly lose is time. It’s a huge advantage, and one that too few people take advantage of. Too many people want to be entrepreneurs but then act like they have something to lose.
I’ll get young entrepreneurs (no matter how old they are), with their 50 users, who come to me and say, “Oh, I don’t want to try that, it could hurt my brand.” You don’t have a brand! When Coke makes a decision, yeah, that has an impact. People are going to know what they did, and they have everything to lose and very little to gain. That’s why a company executive’s job is to reduce risk, making every decision with that in mind.
An entrepreneur’s job is to maximize opportunities. When an entrepreneur does something different, they have nothing to lose and everything to gain. If you’ve got a 1% chance of making a billion dollars, you go after it, because at worst you’ll end up with nothing, which is exactly what you have anyway! An entrepreneur who makes a mistake stays exactly where they were. You can be wrong a million times, as long as you find that one time when you’re right.
An entrepreneur isn’t a manager either. Managers were invented because it’s impossible, once a team grows above a certain size, to efficiently communicate with everyone. So you set up intermediaries - the managers. It’s not because you did anything wrong, it’s mechanical. Once you get too big, it’s extremely hard to communicate well.
In a startup, if you think you need managers, you’re probably not a startup anymore. A startup is an informal realm - if you’re formalizing structures and have people responsible for X and Y, and people coordinating what those others are doing, you’re not a startup, you’re an SMB, or a service company, or whatever your business model is. By definition, a startup is searching for a business model, and when you’re doing that there’s no place for someone whose job is to supervise and make sure the machine keeps turning, because there is no machine!
So just like a manager isn’t an entrepreneur, an entrepreneur isn’t going to be a manager. Managers anticipate, they plan; in a startup, an entrepreneur’s worst enemy is anticipating what’s going to come next. The very raison d’etre for a manager is one that by definition has no place in a startup.
The key to being a startup is that you don’t know exactly how your business model is going to work. A startup isn’t just any new business; just because you start from zero, it doesn’t mean you’re running a startup, it doesn’t mean you’re an entrepreneur. For an entrepreneur, the answer to the question of, “How are we going to make money?” is “I don’t know.”
Now, that doesn’t mean that just because you want to eventually be an entrepreneur, you can’t start a service company right now. You can move back and forth between these roles over time. It’s just that at any given moment, you’re going to be one or the other, and you need to act accordingly.
So if an entrepreneur isn’t an executive or a manager, what are they?
An entrepreneur is someone who’s trying to create a business model that’s repeatable, scalable, and profitable. Doing that means that you’ll end up with fixed costs that are more or less high, while variable costs stay low. Essentially, being repeatable, scalable, and profitable means that your business is eventually able to add more users without really increasing costs.
That doesn’t mean every entrepreneur is pursuing the same goal. In today’s world, entrepreneurs face a choice: happiness or glory.
If you want happiness, you can become a “lifestyle” entrepreneur. This is someone who figures out smart ways to maximize the results of their efforts so they have more free time. They aren’t looking for fame; they’re looking for a way to guarantee the lifestyle they want, without having to work a 9-5 job for the rest of their lives. And most of these entrepreneurs, you never even know they’re out there, you just come across them and hear the incredible things they hacked together to achieve their goal.
But if you want glory as an entrepreneur, you have to do things differently. And there’s nothing worse than listening to people who will tell you how to be happy when what you’re really looking for is glory. (Actually, there is one thing that’s worse: listening to people who say that you should be striving for glory, when all you really want is to be happy :)
So ask yourself the question and answer it honestly: Are you becoming an entrepreneur for the glory or for happiness? The answer will let you filter through all the information that’s out there, it’ll guide all of your decisions, and you’ll move forward faster and stronger. And again, you can always make a choice for a certain amount of time and then change it later; just make sure those are two distinct moments and two distinct choices.
Wanting to make money is a perfectly fine reason to become an entrepreneur. Having other motivations or desires is perfectly fine too. The key is to be doing it for the reason that you want, not one that anybody else has imposed on you; to be driven by your wishes, not the ones other people think are best for you.
Wanting to change the world is fine. Wanting to make money is fine. What’s not fine is mixing the two up, saying that you want to change the world when you really just want to make money. Being honest about that, with yourself and with others, so they know where you stand, is what lets you get the right feedback.
If you are wanting one of those two things, though, which means you want to be something other than a lifestyle entrepreneur, today you’re likely going to need to become a “magician of the multitude”. The “multitude” is a fancy term (that works in French) for “the people”, which my cofounder Nicolas Colin used when he wrote a book called… you guessed it, The Age of the Multitude.
Essentially, the multitude are all those internet users who produce more than they consume. This is what really changed in entrepreneurship in the past 20 years: the digital tools that we have now, and especially with smartphones in our pockets, have turned the multitude into something incredibly powerful and incredibly accessible to entrepreneurs.
Having the right framework isn’t just important for you as an individual. When you’re starting out, you’ll probably look for cofounders, you’ll look for investors, and you need to make sure that they’re all on the same page with you. If you have an investor who really just wants to make a little money, even if that means you’ll turn into a service provider instead of a startup, it’s more than just a misunderstanding. It’s a profound cultural misalignment that can’t be solved.
The same goes for your cofounder(s). If you are looking for glory and they’re looking for money, you’re going to find yourself in situations where there’s no escape, and it’s all going to blow up. You need people with you who share your ambitions.
Finding a cofounder isn’t just a question of matching skills. It’s far better to partner up with someone who knows nothing but shares your ambition than finding someone who is super skilled but has completely different life goals. Skills can be learned (have to be learned!), but goals generally don’t change.
So let’s get back to the definition of a startup. A company’s job is to execute and maintain a business model; a startup is a temporary organization trying to discover a new repeatable, scalable, and profitable business model. A startup must have within it the goal and the ability to scale. That doesn’t mean it has to be scalable immediately; an entrepreneur can be opportunistic and strategic in finding ways to move forward. But the end goal always stays the same: scaling up, adding more and more users without adding more and more costs to the business.
A startup isn’t defined by its size. There are tiny startups and there are enormous startups. A startup isn’t defined by its age. There are new startups, old startups, and there are definitely new companies that aren’t startups. You can’t go into startups because you don’t want to work for a big company - every startup wants to eventually become a giant company; if it doesn’t, it’s not really a startup.
You launch a startup because you want to discover a business model that people haven’t ever seen before. It’s important to understand that because the process of doing it is incredibly taxing. Psychologically, it’s painful. Creating something truly new isn’t natural or obvious, and that takes a huge toll on you.
Because at the beginning, nobody’s going to understand. Nobody. All the good ideas that look good have already been done, and by people with way more resources. If you’re pitching your idea and people say, “Oh, yeah, that sounds good,” there are only two possibilities: either it is a good idea, and there are already a million other people doing the same thing; or it’s a bad idea that sounds good, and a million other people have tried it and failed.
The real opportunity for a great startup always starts with an idea that sounds bad. When Google started, people said, “Why do you need that, you just need a list of sites!” When Facebook started, people said, “Nobody’s ever gonna put their whole life online!” When Airbnb started, people said, “Nobody’ll let total strangers stay in their house!”
An entrepreneur has to be comfortable with the fact that they’re doing things that everybody says are impossible. And you know what? Most entrepreneurs are working on things that are impossible! Because most ideas that sound bad really are bad. This is also why entrepreneurs don’t need to worry about keeping their idea a secret, because nobody’s going to steal your bad idea that’s going to take a ton of work before it becomes an obviously good idea.
This is also why entrepreneurs need to be careful about who they listen to. There are three types of people you can listen to: people who have already done the same kind of business (most importantly, a scalable business); your specific client segment (never listen to people who aren’t part of your segment); and the people you need to convince for whatever reason (investors, other funding sources, your landlord, etc.; this is the most dangerous category, because many times those people don’t fit your client segment and so they can create giant problems).
Again, be so, so careful about who you listen to. Take an example that seems like it would be ok - people who made money in the late ‘90s, during the first internet era. If someone made money with the internet back between 1995-2000, you’d think that they’ve been around, they’ve seen it all. Yet those people are incredibly dangerous for an entrepreneur today. Because what they did back then is literally im-po-ssible today.
That doesn’t mean it was better to do a startup back then. I think it’s much better to be creating a startup today, because there’s such an incredible infrastructure available to an entrepreneur now. So many startups exist with the goal of making things easier for startups - Stripe, Mailchimp, Notion, everything in cloud computing, the list just keeps going.
At the same time, the fact that it’s easier to launch a startup today than ever before also means that more people are doing it, and so the competition is harder than ever before. Since you don’t need much money, since so many tools are free, since you can access more than ever before, you can’t count on any moat or being the only one trying to solve a certain problem.
Because finally, we’re in a world where having money is no longer a guarantee of business success. Just because you have money doesn’t mean you’ll be able to convince people to buy your product, and just because you have no money doesn’t mean you won’t be able to find people who love your product.
If you’re an entrepreneur today, you can’t blame a lack of success on a small marketing budget. People today aren’t convinced to buy something because they see it on TV, they buy it because they see it on social networks and hear that it’s incredible from their friend. People follow recommendations, not advertising budgets. It’s not that advertising can’t help, it’s that advertising alone is no longer enough, and it’s going to keep having less and less influence.
That simplifies things enormously at the beginning. The only thing you need to concentrate on is building an incredible product. That’s the only thing that matters! Everything else will come later, so long as you can do that.
This, by the way, is why entrepreneurship is a great field for people who are discriminated against in other areas. Women and minorities are always being overlooked, ignored, put down in the business world, because so many who are at the top and middle of the ladder are white men. But those men, no matter how brilliant some of them are, are usually solving problems that they know. That leaves a whole set of important, big problems being faced by women or people of color.
And because having an incredible product is the first and most important thing you need, it’s those same women and minorities who can seize the opportunity and build those solutions for themselves. That’s why I believe in entrepreneurship as a real path toward solving problems in our society, because it’s a field where no one needs to give you permission to build a solution, where you can find solutions to problems that others don’t even see.
You don’t need to justify yourself to anyone as an entrepreneur. You don’t need to argue and make people agree with you. It doesn’t matter what people think about you, so long as you end up building something that really works. The only people who matter are the ones that you’re targeting, your users. Having that kind of laser focus is the only way to become a true magician of the multitude.
The one person you do need to keep straight, though, is yourself. By definition, a startup is a failing business, because it doesn’t yet have the healthy business model that will guarantee its success. You can raise millions of dollars, you can have a lot of runway, you can have a big team and a lot of opportunities, but never lie to yourself and think you’re a success before you’ve found that business model, the one that really lets you know what tomorrow will bring.
What qualities does an entrepreneur need to have?
I’ll keep saying it: Entrepreneurship always starts with a great product. No matter what industry you’re in, building a product that works and really solves a problem is the most important thing in any startup.
That brings with it certain requirements for the entrepreneur as a person. First, you need to be obsessed with real things, those tangible somethings that truly serve as a solution. If you’re someone who’s satisfied with ideas and drafts, it won’t work. If you’re someone who’s relatively relaxed in terms of judgement, you aren’t really sure of what you think is great and what’s just ok, it won’t work. You need that inner voice that’s always pushing you to do better and to get there faster.
You can learn this. You need to identify where your bar is, and then do what every great entrepreneur does - put it even higher. It’s not hard to understand: if you want to build a product that gives the “Woooow!” effect, you’ve got to keep pushing the bar higher. You’ve got to be obsessed with details and specifics, seeing where things can get even better.
That also means developing your ability to see what’s important and what isn’t. That’s a hard thing to train, but it’s absolutely necessary. And to do it you can’t think of product development as a one-shot moment. Incredible products don’t come out of spending months and months in your office, far from any real user feedback, and then having a big launch party.
Market feedback is the only legitimate feedback. You have to be willing to put your product out there, not with your friends or family (or us at The Family!) who are nothing like your target audience. You’ve got to give it to real people who have the real problem you’re aiming at. The only real validation you can get is from the market, so don’t look for it anywhere else.
Finding the details in your product that are critical - the ones that let you have tons of engagement, the ones that change the game - is practically impossible without tons of iterations sent out to real users. You have to experiment and A/B test and watch the data. Every great entrepreneur can tell you about some small change that they made, among hundreds of others, that immediately had a huge impact. It wasn’t because they knew that would be the case; it’s that they gave themselves tons of opportunities to see how users reacted.
In a startup, nobody can tell you that something’s gonna work. No one in the world can look at an app, one of thousands that are coming out all the time, for a use case where people know a problem exists, and say, “Yes, this one is the one that’s gonna take off.” The market is the only thing that can give that kind of validation. And the only way to do what it takes to iterate thousands of times with your app, listening live to what users are saying, is by working hard.
This means you’re going to get things wrong, and often. An entrepreneur has to be comfortable with failing and having people yell at them. Because one thing we’ve seen at The Family is that there’s a real correlation between how intense the negative feedback is when an app is launched and how successful the company will ultimately be.
Why? Because a huge backlash means that people get it. They feel so intensely about the problem and what you’re proposing that they feel the need to write an email to complain about it. That’s a pretty great way to validate your problem and know that if you have a good solution, people will use it.
Negative feedback also creates an amount of pressure that’s way heavier than anything you can feel in “stealth mode” or whatever. We had an app at The Family that launched and that same day received 900 emails telling them how bad the product was. It had taken them a year to build that first version, and there were so many features that were missing, it was incredible. But how long did it take to put out the second version? 3 months. And it had 10 times as many features, all those things people were complaining about it needing in their emails.
Why did it take so much less time for a second version that had so many more features? Because those entrepreneurs went from working 8 hours a day to working 16. Because they knew exactly what they needed to include. Because that outside pressure from all those people yelling at them pushed them to keep setting the bar higher and higher.
Being able to do that, though, presupposes one thing: that you really love your product. If you don’t, if you don’t feel a burning passion to solve the problem, you either won’t want to face that kind of outside pressure (so you never release anything) or you won’t be able to stand it once it starts (so you give up before all that negative feedback can turn into giant doses of love).
If you feel like that’s not you, don’t worry! Like so many things in entrepreneurship, that kind of attitude can be learned. If you understand what’s needed, you can just start doing it, even if it feels uncomfortable, even if it feels awful. I promise, as you do it more and more, it’ll become more natural. People can change, they learn, they grow - and entrepreneurs are nothing more than people who have trained their skills in that direction.
So as an entrepreneur, the product is your guiding light. To make it as incredible as possible, you’re going to need an incredible team around you. And that brings us to another characteristic of a great entrepreneur, namely that they have the clarity to understand that everyone brought into the team should be better than they are. It’s very hard to have the humility to say that each person you hire for your team should be better than you. But that’s the level of obsession you need when it comes to finding talent.
Personally, I evaluate this in terms of how an entrepreneur pays their team and how long it takes them to pay people well. If you’re easygoing in your negotiations and are willing to pay talented people who are better than you are at whatever they do, that means you can recognize value. If you’re super tough in negotiations, haggling over the little details and not wanting to give anything, it means you aren’t recognizing people with real value (or you actually do, and you’re in the middle of hiring the wrong person).
Again, this is something you learn. An entrepreneur who’s great at hiring is an entrepreneur who’s made lots of hiring mistakes. I should know, because for a really long time I was completely incapable of recruiting the right people. I was so concentrated on finding the good in everyone that I couldn’t see any of their obvious flaws.
For me, that wasn’t even necessarily a problem, because even when working with them I just kept on only seeing their qualities, I didn’t realize that they were crazy and impossible to deal with. The problem, though, was that I wasn’t alone - the rest of the team is there, too. When you hire, that person won’t only be dealing with you, they’re dealing with the whole team, and so you need to have an idea of how the group can function with that new person.
Skills aren’t the key to recruiting. Namely, because they aren’t clear and objective; if you sit down around a table and start talking about what “skills” are, it’s like debating what gender angels are, you’ll just sit there forever and your startup will die. But there are other things that can be determined and that are much more important: people’s life philosophy, their ambitions for the company, what’s driving their desire to work there. That’s how you build a real company culture that can thrive and focus on building the best product possible.
(By the way, this is related to why no startup should be in a coworking space - with coworking, you’re not developing your startup’s culture, you’re adapting to the culture of the coworking space itself, and that culture is forcibly going to be average and dull. Isolation is necessary to build something strong, and it acts as both a beacon for those who see themselves in what you’re doing and a barrier for those who should stay far, far away.)
Take responsibility for the culture you’re building, and be happy when people don’t like it. Every entrepreneur needs to be impervious to outside criticism coming from people who don’t match with what they’re doing. Don’t be afraid of people criticizing you, because the more successful you are, the more criticism you’re going to get.
That doesn’t mean you can just ignore how people see you. An entrepreneur needs to constantly be working on their message and communication, to make sure that the people who you’re aiming at immediately understand what you’re offering.
You can’t do that alone - your pitch isn’t going to get any better by sitting on the couch mouthing it to yourself or repeating it in front of the mirror. The only way to actually develop your pitch is by giving it in public and seeing what works.
I remember the first time Alice and I were interviewed about The Family back in 2013. At some point, we said, “The Family is a two-headed monster.” That was… not a good way of describing it. (In our defense, that was partly because we weren’t at all sure of what we were doing.) But by continually talking about The Family and pitching it to real people, testing different metaphors, different stories, etc., we got better and better at it.
So yes, you’ll look back later and (hopefully) be like, “Wow, that was really dumb, I can’t believe I said that!” It’s fine, no one cares. Want to know a secret? The world is very large, there are a ton of people in it, and the vast majority have yet to discover you. You can always start over, you can always try again - remember, as an entrepreneur starting out with nothing, there’s zero risk in trying. Don’t stay in your comfortable little bubble, no entrepreneur has ever succeeded there.
As an entrepreneur, you should recognize how hard all of this is. And that’s why there’s a pretty simple ethical rule that an entrepreneur should go by with their fellow entrepreneurs, namely to always be positive and not just gratuitously bitchy. This goes, of course, with another ethical rule of always saying what you think - and so long as you have the necessary humility, that’ll be fine.
Because if a fellow entrepreneur asks you something about their startup, and you think that they’re going in a completely wrong direction, say that and explain why. And then either you’ll convince them, and maybe you’ll have helped them; or they’ll not be convinced and maybe you’ll learn something new that you didn’t know before.
The only way to prepare to launch a company is to launch it. The only way to improve your communication is to communicate with as many people as possible. And the only way to make money is to take the concrete steps needed to make it.
That might sound circular, but the best entrepreneurs are always able to get more money. Either they find ways to make it or they’re able to raise it.
At the beginning, your startup probably won’t be in a position to raise money, and until you get there, you’ve got to survive - which means making money. The best entrepreneurs I’ve ever met always have an almost disconcerting ability to make money opportunistically. You don’t need much, especially when it’s just you and your cofounders, to keep a roof over your heads and food on the table.
Money is only a barrier if you think you need too much of it. A good entrepreneur knows that they don’t need $500K to build their product, they just need $25K so that they and their cofounder can build it full-time over the next 6 months. And $25K is definitely in the range of money that you can make opportunistically.
An entrepreneur needs to see money as a flow, not a stock. It’s not about hoarding it and needing to have X before you do Y. Money flows in, it flows out, and you keep pushing to grow as fast as you can so that when it flows back in there will be more of it and you can do more with it. This is necessary because there simply isn’t any other way to do it at the beginning. You can’t look for security as an entrepreneur launching a startup, you can only look for opportunities that fit your vision.
The goal of entrepreneurship isn’t to avoid taking the blow; entrepreneurship is about becoming impervious to the blow. The only way to do that is by taking blows and realizing that you’re fine, and even better than fine because you learned something.
This doesn’t mean that failure doesn’t hurt. No matter what anyone tells you, it hurts to fail, it’s horrible. But it’s also the only way to find your way toward success. Becoming a great entrepreneur means understanding how all of the following is true: Failure is the worst; failure is an incredible driver in our lives; failure is how you learn and move forward.
The name of the game in entrepreneurship isn’t avoiding failure, it’s winning. We don’t want to celebrate failure, we want to celebrate the fact that when people fail, they can get back up and try again, and again, and again until they win.
Entrepreneurship is like roulette in that way. Roulette’s the only game at the casino that can be seen as a metaphor for an entrepreneur. Because while it’s statistically impossible to win, there are still lots of people who do win, and win big - especially if they keep betting more and more. Why? They put down the right bet at the right time and they get lucky. But the only way to have that big moment happen is to lose, and to lose often - just like in entrepreneurship.
An entrepreneur needs to stay calm, and that’s something you work at. Write it on your mirror, nothing’s that big of a deal. Entrepreneurs have to work on their mental health and make sure that you’re getting past any hangups or emotional issues you could be carrying around.
Look at professional athletes and see how many of the best aren’t just helped by coaches working on physical aspects of their discipline - they’re also surrounded by mental coaches. It shouldn’t be a taboo to get help for your mental state of being, if you want to be the best it’s necessary.
Whatever that means for you, whatever it takes to find a good mental state and stay there, do it. Your startup isn’t going to go very far if you aren’t able to stay calm when faced with dangers or challenges.
Don’t worry about where you are today. As an entrepreneur you have to believe (and not be ashamed!) of your ability to make your learning curve go up as quickly as possible. That’s one constant that you’ll see in great entrepreneurs - they learn, all the time, fast.
(By the way, one last piece of advice on that - learn how to prioritize what’s important and what isn’t. But again, the only way to learn is by failing. So every week, keep a record of what you did, all your appointments, all your time checking email, all your time working on your product, whatever it is. At the end of the week, look back and figure out what added value and what sucked away your time. If you do that consistently, you’re going to learn where you need to do more, where you need to do less, what you need to add, etc.)
Do you want to be a billionaire?
Why is money so important to our society?
To put it simply, because money stands at the center of every business. And the difference between a passion and a business is specifically that a business makes money.
You have to make money, because money is what lets you live, it’s what pays your employees, it’s what pays your bills, it’s what fuels your growth.
A poor society is one that doesn’t have the means to change the world around us. That’s not a value judgement, but simply a fact.
There’s a reason why money has existed for thousands of years without ever being replaced by some other medium. Money is incredibly efficient because it makes exchanges neutral. And as a founder it’s what lets people work for your company - if your only employees were people just as convinced as you are about its importance, you’d have practically no one working there.
That doesn’t mean you want to hire people who are only interested in money. It means that as an entrepreneur, you have to realize that people need money and that money is therefore the lifeblood flowing through every company.
Now, it’s true that the best way to make some money in this world is probably not by being an entrepreneur. After all, among people who have between $1-10M in the bank, 90% of them aren’t entrepreneurs.
But being an entrepreneur is the best way to get wealthy today. Once you get beyond “rich”, of the high-net-worth individuals in this world, those with more than $10M on hand, 50% of them are entrepreneurs. And of the roughly 3,000 billionaires in the world, 80% are entrepreneurs.
But for all those billionaires, there’s one thing they have in common: money is essential to them but it’s not primordial. The underlying drive isn’t simply to have money, that’s not their obsession. Instead they’re driven by a desire for freedom and having the means to do what money allows.
Earning money as an entrepreneur isn’t exploitation, either. Money isn’t a stock, it’s not that there’s a fixed, certain amount. Money is a flow, it can be (and is!) created. An entrepreneur who builds a company creates value, which is added to the big pie that the world can access.
What’s the difference between being rich and being really rich? It’s complicated to define, because everyone comes from different stories and backgrounds. The heir to Porsche who starts Volkswagen has a different response to the question than someone who comes from nothing and ends up with a 10-restaurant chain. It’s all relative, so why worry about it?
This is why one of the first things I look at with startups at The Family is how the founders divide up the shares. You want cofounders (real cofounders, people who are taking the same risk as you, not just people who get partially paid with equity) to be equal, even if equality is more like a 40-30-30 split that lets the math be simple. Because if the startup works and becomes huge, there’s no real difference in that 40-30-30 split (or 35-34-31 or whatever).
Believe me, when you see how equity is split among cofounders, you learn a lot about who they are. I’m not the only one looking, either. Assume that at some point you’re hiring employees; they’ll want to know how things stand in your startup. What are they going to think about one cofounder with 80% while the other two split just 20% between them? They’ll think (rightly!) that it’s a situation where one person doesn’t understand the value of the people around them. So why would they come work for you?
In bad ecosystems, you’ll hear people saying, “Oh, you shouldn’t do 50-50, that’s not really fair.” But that’s because practically nobody in those ecosystems has ever built a startup! They’ve built service companies, or restaurants, or whatever else, but they haven’t built a startup. And a startup is always in a war, and you better go to war with people who you see and value as equals.
I’ve had so many conversations with founders where they want to bring in a new cofounder and they tell me, “Oh, but I’ve already got the first few dozen users, things are going well, this person’s awesome, but they’re asking for 15%, I’ve been working on this for a year already, I’m thinking more like 5%!” Honestly, get over yourself - if this person is going to change your startup’s fate, if you value them for real, they should be getting 50%. (And you should really think hard about whether they can/want to do that if they’re only asking for 15%.)
Value in startups isn’t defined by time or effort. Value and wealth are created in startups in a way that’s completely uncorrelated with the work itself. You can never try to put a value on that work, not really. The one thing you can do is evaluate whether or not your startup has a real value in and of itself. If you have a million users, sure, at that point you won’t bring someone in for 50%. But if things haven’t really taken off yet, and you can get someone incredible to join you, don’t screw it up by haggling over the price of something that doesn’t have one.
This is why it’s important for founders to reason in absolute terms, not relative terms. If you have a cofounder and you both start out with 50% of the company, don’t think about that 50%. Think in absolute terms, namely that you have 50% of nothing right now. If you fixate on the 50%, each time you have to give up shares to expand your business, you’ll see it as a kind of failure.
Instead, think about what your share really is. If you end up with 10% of a company worth $1B, that’s so, so much better than 50% of a company worth $1M. There’s no upside to worrying about the percentage you own; if you’re worried about that, you’re lost in your ego. The only thing that matters is what your shares are really worth.
Salaries are the same in this sense. A startup should always pay its employees more than market rate. Only big companies that are already established can pay market rate or below. Because a startup is a giant risk, paying your employees well is the one way to overcome that level of risk. Obviously I’m not talking about entry-level positions; I’m talking about when you’re recruiting someone with lots of skills, a progressing career, and a promising future.
Again, this isn’t to say you shouldn’t be finding employees who are motivated by something other than the money. But don’t fall into the trap of thinking you’re the only startup out there with a mission, where people will be super excited to work. For those people who can really make a difference, a big part of the picture is the salary.
(This means you have to take responsibility for the fact that there will be big differences between how people are paid within your startup. Because some positions can earn more than others on the market, by paying above market you’ll forcibly create bigger differences in absolute dollar terms. That’s fine!)
Sometimes as an entrepreneur you’ll think that you can’t afford to pay well. But here’s where you need to learn a certain skill, namely to live the future in the present. Now, what exactly does that mean…
Say you have $15,000 in the bank and you find a new office that’ll cost you $50,000. Most people would say you can’t afford it - but that’s simply letting your past determine both your present and your future (namely, whatever past you’ve experienced that has left you with $15K in the bank).
The question you have to ask is, “Will having this office change our ability to generate revenue and thus change our relationship with the world?” If the answer is yes, do whatever it takes to get the office because you will be able to afford it - as long as you grab onto that future ability to pay and act accordingly right now. Don’t get sucked into thinking about everything in terms of your budget. You’ll never grow if you’re always trying to get everything as cheaply as possible, specifically trying not to outstretch your limits.
It’s very important to be generous with others and pay super well because building a startup from zero isn’t a place where you can really talk much about “work-life balance”. A startup is a bet that people take, believing they can accelerate the value they create and earn, instead of waiting an entire career for it to slowly build up. You’re trying to make an entire 30, 40 years worth of value in 5 years. But the effort required to do that, to accelerate your earning curve that much, has a giant price.
That’s why so many entrepreneurs are unhealthy, why they lose friends and family, why they have a life that really doesn’t seem that attractive. If you’re going to be a founder, you have to be extremely clear on the fact that you aren’t going to have success without working at a level that seems inhuman.
If that doesn’t seem ok to you, don’t become a founder - there are a million other great things you can do with your life! Just because anyone can become an entrepreneur, it doesn’t mean that everyone should become one. And do realize that entrepreneurship is often a one-way street: once you start, you just have to keep increasing your bet until you succeed. Otherwise, if you try to stop, your losses are too heavy, you’ve already given up too much time and effort.
If you do move forward as an entrepreneur, I’ve got good news: success takes some luck along the way, but luck isn’t the only way to succeed. In fact, it’s not even a big part of the story for most people who become successful entrepreneurs.
We have a bias around what it takes to get rich, because the stories we read in the press are always about people who can frame their story as “And then something extraordinary happened”. But that’s not the story for 99% of people who build a successful business. For that 99%, you’d never read an article about them - it’s boring, it’s someone who kept getting up, working hard, eventually finding a concept that worked, building up a company you’ve never heard of and a product that you don’t understand.
Maybe you’ll end up getting lucky. But more likely you’ll need to work very, very hard to find success. That second option is the only one you can actually control, and so it’s the only one you should concentrate on. You can’t wake up every day hoping to win the lottery, but that doesn’t mean people don’t win it. In terms of strategy, though, you have to accept the risks and rewards of entrepreneurship as a career, concentrating on things you can control: meeting people, listening to users, treating your employees well, being honest with those around you, etc.
As you work hard, the most important attitude for an entrepreneur is seeing your company as a flow, not as a stock. If you look at it like a stock, you don’t have anything. When you need to hire someone you’ll only see it in terms of a new cost. That’s the wrong attitude for an entrepreneur.
Entrepreneurs have to see the flow, how things can change if you do X, what Y will bring in that really changes the game. Look at people in terms of what they’ll bring to you and how that positively impacts your growth. That’s why it’s always better to have one extraordinary person who joins the team than two average ones. That extraordinary person will have a much bigger impact on the flow, whereas two average ones just cause your headcount to go up.
Obviously you’ll make mistakes! You’ll think this person is incredible and will bring your startup to the next level, and in reality you were just taken in by a great CV and a smile. That’s fine, it’s part of becoming an entrepreneur - those mistakes help develop your intuition for what will have a real impact and what won’t.
An entrepreneur needs to be a good buyer. You need to know that what you’re buying really is worth it, and then some. It’s one thing to be a good salesperson, there are lots of them (and the best really are great). But it’s another thing to be a good buyer, and the only way to get there is by understanding value as a flow, not a stock.
A startup can only live as a flow, because the whole point is building something and having it accumulate value that - you hope! - will one day in the future become liquid (meaning, it turns into cash). But liquid values are much more uncertain than virtual ones, which can one day be a very good thing (like WhatsApp being bought by Facebook for $19B) or a very bad thing (take your pick from the unicorns whose liquid values never got close to their virtual values).
But just because an entrepreneur always has to live in the future, believing their startup is worth more than it could be liquidated for right now, that doesn’t mean you should raise money at the highest valuation possible. Optimizing for the highest valuation, especially in the earliest rounds, is actually a great way to kill your company. A smart entrepreneur knows that the game is played at multiple points of time; they know how to optimize for things that aren’t just money, and especially not short-term money.
If you always take the highest valuation possible, you’re not leaving yourself any room to grow - you’re going to be stretched, finding yourself in a massive debt trap where any growth is just what’s necessary to catch up with your previous valuation. That’s not a great situation for then raising more money, when lots of things might have changed and when you’ll likely find yourself unable to raise, which will mean your startup dies.
And you don’t want your startup to die. You want to take it as far as possible, which actually makes the answer to one particular question, “When should I think about selling my company?”, pretty simple.
The answer is, “If you look at what you’re building and you have doubts about your future growth, sell.” This isn’t a decision made in terms of stock (where you are today), it’s made in terms of flow (where you’ll be tomorrow). And it doesn’t mean the end of the company. Maybe you’ll end up merging with someone else, someone who brings something new that changes the future of the company in a way that was impossible for you on your own. Selling because you doubt your ability to grow isn’t a failure, it’s just a new step in the entrepreneurial journey.
Learn to be an entrepreneur
One of the things I always tell first-time entrepreneurs is to launch something short-term that can earn a lot of money as quickly as possible. Why? Because it’s an incredible way to start understanding how to build a company that actually works, and you can then keep pushing your ambitions up as your career as an entrepreneur advances.
Because yes, you can learn to be a great entrepreneur - all of the great ones have.
In our years at The Family, we’ve seen that the real things that separate good entrepreneurs from bad ones isn’t a question of skills or knowledge or talent - it’s psychological, it’s about your mindset.
That doesn’t mean everyone can learn it. You can have a step-by-step guide to building a company and follow it perfectly and yet… you still might not really become an entrepreneur, let alone a great one.
No one can really teach you how to succeed as an entrepreneur. At The Family, we try to show you how to avoid failing for stupid reasons, whether they’re obvious or not. Everything’s in that word “stupid,”, by the way - there are things that will always lead to failure and other things that are obvious problems once you’ve had a bit of experience. But then there are reasons for failure that you can only find out on your own, because they’re unique to the story of a certain startup.
All of this doesn’t mean there aren’t some people who are pretty much born genius entrepreneurs, or who become so very quickly because something inside of them gives that spark. Genius happens in all kinds of fields, Mozart writing his first symphony at 8 years old, Usain Bolt being just plain fast, that kind of thing.
Nonetheless, at the base of entrepreneurship, there’s a certain mindset, and a certain number of characteristics within that mindset, that’ll have long-term impacts on what you do.
A startup is a living organism. It has its own DNA, which comes from its founders. It’s like having a child - some things are innate, coming from the parents, and some things are learned. A startup does the same, taking fundamental characteristics from its founders (however many there are) and then learning and developing from there.
That’s why it’s so, so important for cofounders to be aligned on what they want and the vision they have for the startup. Misalignment among cofounders is one of the most common reasons startups fail. Which is actually kind of obvious, when you see how lots of people end up with their cofounder because they met one day, said, “Hey, you wanna launch a startup, too? That’s cool, you’re cool, let’s do it together!” It’s amazing when you think about the multiple interviews and processes that entrepreneurs will set up when hiring someone, and then think about how quickly they’ll select their cofounders.
At any rate, there are lots of different ways to select a cofounder, but the bottom line is that in all of them you need to ensure you’ve got a shared mindset. You don’t need to select a cofounder because they’re brilliant, or super strong technically, or because they’re available. You need to select them for the spirit they’re bringing to the startup, because that’s the only thing that can make a startup live. Startups don’t survive because they’re founded by the best people; they survive because they’re founded by people aiming at the same goal and who don’t let anything stop them.
I’ve lived this - I didn’t create The Family because I wanted to build what we have now, or even what we’re going to be; I did it because I met Alice Zagury.
And then the two of us were talking with Nicolas Colin, who I’d known for five years. You should create a startup because you find your cofounders, not go looking for cofounders for your startup. When you find people who share your mindset and ambitions, you can start all kinds of companies with them, there’s no limit.
The right cofounders are people you profoundly admire. If someone asks you about your cofounder, you shouldn’t start going down their CV; you should be gushing about them because you really, honestly love them. Admiration is an irrational, real thing that you can’t fake - which means that if you’re really honest with yourself, you know immediately if you feel it.
That irrationality is key because the reality of founding a startup with someone is profoundly irrational. You can’t approach it like a normal career move, as “let’s evaluate the pros and cons”. You have to understand that at its heart there will be something very irrational - and very real - motivating it all. Just accept it.
And if you look at it in the right way, maybe it’s not so irrational after all. We’ve been training our whole lives to evaluate people based on how they make us feel, from the moment we first went off to school as little kids. You started understanding back then, playing in the schoolyard, who you wanted to hang out with and who you didn’t. You’ve been building up that instinct - which isn’t really an instinct at all, but more of an intuition - ever since.
So when you’re looking for a cofounder, listen to that feeling, because it’s the most important thing. Everyone can learn skills, everyone can develop new talents, everyone has to learn as an entrepreneur, both you and your cofounder. But that element of “I love spending time with them” isn’t learned, it’s something you feel immediately.
That kind of alignment is what lets a founding team do things that seem not just improbable but impossible. When you’re trying to find a business model and you’re holding everything together by sheer force of will, you can’t have someone around just because they’re really strong in Python. You need the singularity produced by that one-of-a-kind mixture of a perfectly aligned founding team.
Success in startups is all about mentality. Everything else can be learned.
And too many people lie to themselves about what they’re doing. I know, because one of the meetings I’ve had over and over at The Family is meeting a founding team for the first time and within a few minutes convincing them to give up. If I recall correctly, my record was 90 seconds - 90 seconds, and they threw two years of work out the window.
Why? Because people have an incredible capacity to lie to themselves. And I’ve found that there are really three key issues that cause those teams to give up almost without a fight:
- Lack of confidence between cofounders. Here’s a quick test: if you aren’t willing to give your house keys, car keys, and credit card to your cofounder and still sleep peacefully at night, that’s not your cofounder. You should trust your cofounder just as much as you trust yourself.
- Doing their startup not because they want to, but because it seemed like the right thing to do. Don’t put off until tomorrow the thing you really want to do today. A startup’s too hard to not be truly driven by it all the time.
- Having built a product and working to get it to take off, nothing’s working, and they simply don’t want to look in the mirror and admit, “This doesn’t work.” But if you’ve done everything you can, you’ve pushed and pulled, you’ve really tried, sometimes it just doesn’t work. An entrepreneur should never privilege the company’s survival over the company’s ability to thrive; if real, explosive growth isn’t possible, it’s time to move on.
There’s one more reason why it’s so easy sometimes to say a few words that make a founding team give up: Because so many people who want to be in startups, who want to think of themselves as entrepreneurs, simply aren’t right for it. There’s probably 80% of people who call themselves entrepreneurs who just aren’t.
An entrepreneur needs their life objective to line up with a certain problem they want to solve in a real market. If that’s not you, if you want to have work-life balance, if you want to work on problems where there really isn’t a market for a solution, that’s fine - you can be an early employee in a startup, you can go work for an NGO, you can do a million different things that match your ambitions. But a founder’s life is their startup, it’s the only way that it can ever work.
And that life is hard. It’s really easy to have a business that earns $10K/month. It’s much harder to have one that earns $100K/month, and turning that into $1M/month is much, much harder still. Arriving at $10M/month and $100M/month are infinitely harder, and the companies making $1B/month are practically nonexistent. But a startup founder aims at those heights, each step made through pain and problems. Taking that on, and taking responsibility for that choice, is a fundamental part of being a real entrepreneur.
A real entrepreneur is searching for success, not trying to avoid failure. And success is obvious. The day that you find it, when you have a startup that has real traction, you know it. If there’s any doubt in your mind as to whether or not you have traction, it’s simple - you don’t.
That’s a hard thing to understand before you experience it. It’s kind of like if you eat pizza all your life, and you’re like, “Yeah, this is good. I like pizza. Nice.” And then one day you sit down and eat the most incredible pizza in the world. All of a sudden, your entire outlook changes, because you’ve just seen what pizza can be. And you’ll never mistake that old, average pizza for anything more than what it is again.
Success in a startup is like that - all of a sudden you’re eating the best pizza ever and from now on you’ll never be able to go back. You’ve learned, not because you read it somewhere or heard someone explain it really well, but because you’ve lived it. And again, I promise - it’ll be obvious.
If you aren’t having success, you can’t be afraid of starting again from zero. And I really mean zero - a true pivot isn’t just tweaking something in your app, it’s completely reframing everything or even just throwing it all away and moving on to the next project.
Don’t waste your time on something that doesn’t work - remember, if a good startup idea is one that everyone else thinks is bad, that means that most of those ideas really are bad! Optimize for success, not avoiding failure.
You get success by making things perfect. An entrepreneur needs to create a product that is perfect but incomplete, not complete but imperfect. Look at the first iPhone: it wasn’t a complete product, it was missing so many things that today we think it had (like apps!). But even that first iPhone was absolutely perfect for what it was, because Steve Jobs was an incredible entrepreneur who understood the pursuit of perfection. He knew he could keep adding more features to the next iPhones, so long as each version kept making people say “Wooooow!” People don’t mind when there are features missing, they mind when the thing they have doesn’t actually work.
Because when people just want more features, they’re happy to reach out and tell you. An entrepreneur can always know when they’ve found product-market fit and when people love what they’re doing, because that’s the day when they become perpetually late with everything in their company.
A founder who’s just starting out is the master of their calendar. They get to decide what they do and when, they can schedule things as they like. But the entrepreneur who has product-market fit is always running to try to keep pace: they’re not able to answer their phone or clean up their inbox, they feel like they’re in burnout, and they’re never able to catch up because that’s what exponential growth is.
In all of these processes, you have to learn. A great entrepreneur is one who learns fast, who can push their own learning curve up as quickly as they can, trying to keep up with their startup. And nothing that you need to learn is impossible. The only question is whether you’re willing to do what it takes to learn it.
That’s the fundamental question when you want to become an entrepreneur: Am I ready to do whatever it takes? If the answer’s yes, then just get moving, because it’s going to take more work and effort than you ever thought possible.
Every company needs a leader - the CEO. You need one person who has the final word.
It’s not always easy to figure out who that should be, because it’s not a question of technical skill, or whether someone was right about a particular question, or who came up with the name, or whatever. The CEO isn’t the best salesperson, they aren’t the best product person, any of that.
So who is it?
As you try to figure it out, you should keep three topics in mind:
- What the role of CEO actually is
- Why it’s so hard to be CEO
- Why it’s so awesome to be #2
What’s the real role of the CEO?
When you start a company, you need a clear vision of who’s #1. And yes, there has to be one (1) person. It doesn’t have to be written in marble, making the decision at the beginning doesn’t mean it can’t change - but it needs to be made.
Collegiality and democracy don’t work in a startup. Those types of systems are great for making sure that nothing changes too quickly. A democracy is structured to make sure that no one person can impose their radical thinking on the others, the structure slows down the decision-making process.
But in a startup, you need that crazy person who can impose their will on everyone else, changing things fast (because that’s the only way to find out if the decision was the right one or not). You obviously want this to be an enlightened dictatorship, but it’s a dictatorship nonetheless.
If you don’t have that dictatorship in place, you’re going to have the worst thing happen: spending more time talking about what to do than actually doing it. And that’s a death sentence for a startup, because the probability of you figuring out the right answer by talking about it is incredibly low.
A startup makes lots of decisions quickly because that’s the only way to actually learn what doesn’t work (and hopefully, at some point, what works). The entrepreneur’s job isn’t to make all the right decisions (remember, that’s a job for a company executive). The entrepreneur’s job is to make all the wrong decisions as quickly as possible so that they know which decisions are correct.
To move that fast, you need someone who has the last word. Again, this isn’t about being rational, the person who has the last word isn’t the one who’s right the most or who makes the best arguments. And that isn’t to say it doesn’t matter who the CEO is - it does, and you can trace 90% of startups that crash and burn back to the simple fact that whoever had the last word wasn’t the right person. A startup CEO who makes too many bad decisions won’t be CEO very long, because their cofounders will leave. But just because there’s something irrational about it all doesn’t mean the CEO has an excuse to be bad in that role.
Being CEO requires a sense of legitimacy that’s built up every day in a strange, magical mix. That magical element is why it’s very common for founding teams to change roles and switch out who is CEO, because you’re trying to figure out who’s best suited for it.
Let’s get back to that “it” - what the CEO really does.
The CEO is responsible for 3 things: the startup’s culture, vision and being an all-purpose band-aid.
Culture is essential in a startup, and whoever’s #1 needs to be the person who best incarnates that culture. People should look at the CEO, look at the company and say, “Oh, yeah, that makes perfect sense.” This is why the CEO of Google has to be a nerd, it’s why the CEO of Apple has to be a perfectionist, it’s why Alice is CEO of The Family.
Vision is essential as well - and not some “let’s sit on the couch and dream about how things will be in 20 years” vision. It’s a vision of clearly seeing what’s occurring around you, where you want to go, and knowing that X matches what you’re doing and Y doesn’t.
Again, the reason why Alice is CEO makes sense at The Family, because there’s something she understands on a very primal level - that the key to what we do is based around our care for entrepreneurs. I can spend my week bashing entrepreneurs for what they’re doing, telling them they’re moving too slow, being as harsh as is necessary to make them learn faster… and it’s ok because then when they sit down for dinner with us, it’s warm, it’s friendly, they feel the very real love and care that all of us have for them, because Alice makes sure it’s there.
For Alice, the good thing has been that Nicolas and I are completely willing to give her all the power needed to maintain those things. That’s how you build up that #1 person, giving them that magical ability to be legitimate. You don’t have to agree with every decision; but so long as the good percentage of good decisions is there and is keeping you moving forward, you back your #1.
The last responsibility for a CEO is acting as the band-aid for everything in the company. Everything that nobody else knows how to do or nobody else wants to do, it’s the CEO who’s got to figure it out, and to do it with a smile.
This is the other side of being the CEO. Everybody wants to be the decision-maker, the strategist, coming up with ideas and fun things like that. But the CEO is also the one who’s got to finish the sales deck at midnight because it’s got to be done. The CEO’s the one who does the hundredth interview - not just the first or the second, which are fun; but the hundredth, the two hundredth, where it’s just torture to answer the same question again.
Those are the three key functions of the CEO. But it doesn’t end there, obviously, because it’s hard to be CEO.
Why is it so hard to be CEO?
Because the CEO is also the person who is always giving feedback. Always. And that’s an extremely unnatural thing to do. I know it might sound easy, but there’s nothing stranger for us humans than to be constantly giving feedback to everyone around you on everything they do.
Take an easy example: you’re at a party and the host is showing photos of their vacation. Everybody just laughs along, points out funny things, says “Awwwww!” at the right moment. It’s natural, that’s how we fit in and go along.
A CEO’s job is to create an instinct where it’s absolutely normal to say, “I mean, really you’re taking half of our photos with the sun behind you, you can’t see any detail. And in that fourth one, you’re using the wrong angle, it would’ve been better from the left. And seriously, I mean, what are we doing here, this is boring!” Being a great CEO who gives feedback all the time means you risk not being invited to many parties.
We spend our lives not saying what we think, because that’s the normal, polite way to live in a society. And that’s fine, we don’t want to be in a world where everyone’s saying exactly what they think, that would be horrible! As humans, we don’t really know how to take feedback in a way that isn’t personal, that doesn’t affect us.
(There are some cultures where it’s easier, some where it’s harder. In the US, there is a better feedback culture because people have learned to do it constructively and politely. In France, no one has ever gotten feedback that isn’t meant to tell you how bad you are. But even within those two ends of the spectrum, in all the cultures that exist between them, the average reaction to feedback is just that, an average, it doesn’t include every single individual.)
The key to giving feedback is its being authentic and steady. You can’t try to guide your reactions, taking into account people’s strengths and weaknesses, and you can’t let things go sometimes just because it’s a detail. You need to be consistent and truthful, because the competent people who are (hopefully!) working for you have built-in bullshit detectors. They can learn to work in a feedback culture, but it needs to be one that’s clearly put above any feelings or emotions, including yours as the CEO.
A good way to make sure feedback will be given and taken well is by ensuring that you really love everyone you give feedback to, and the ones who you don’t love need to be fired. If someone always needs feedback, to the point where there’s never anything that impresses you and makes you love having them work for you, there’s a fundamental problem. Feedback can’t magically improve people’s underlying skills; it can just make them see things the way they need to be seen in your startup.
Feedback can’t be personal. You can’t expect people to change who they are via feedback. Humiliating someone for some unchangeable part of their personality is never going to be productive. And that goes double when it’s in public. Management via terror doesn’t work. If you have something difficult to say to someone, say it in private.
This doesn’t mean you won’t make a mistake in giving feedback. It happens, you’re human. But when you hear stories like those about Steve Jobs completely destroying someone in public, it’s not something that should be put in their “plus” column. It’s not to your credit to have that happen, and the people like Jobs who do it feel horrible afterwards. You don’t need to quit and go live in a cave because it happens sometimes, but you do need to see that it isn’t a standard to be lived up to.
One last thing about feedback: it shouldn’t be a monologue, but a dialogue. You have to listen when people explain what they were thinking, why they made X mistake, what pushed them to do Y. But there’s a big difference between listening and understanding people’s reasons and accepting any excuse. Your job as CEO is understanding that difference and applying it consistently.
Just don’t mistake the dialogue for a long discussion. The CEO’s feedback is final, and everyone needs to understand that. You need a startup where people spend their time executing, not debating. And when the CEO says “That’s enough, we’re done,” that has to be it.
All of this will take years to truly build into your startup. No founding team starts out at their final cruising speed, it takes time to get the plane moving down the runway, pulling it up into the air, climbing higher and higher. It takes a lot of time to become a CEO. Your own education in that role happens through feedback, through listening, through realizing where you misunderstood something.
It’s through this constant feedback that the CEO becomes the omnipotent one who sees the company in its fullest sense. That’s not to say that you’ll always know what to do; it’s to say that in order to learn and get as close to that ideal as possible, and to do it at scale, you have to be in this constant feedback mode.
A great CEO lives by one term: Excelsior. It was the Romans saying for “Ever higher.” Every day, every month, every year that goes by, you’re infinitely smarter than you were before, so long as you keep that feeling of excelsior and constantly push your learning curve upwards. It means taking a ton of responsibility on yourself, but it also gives you an infinite amount of room to learn and improve.
Every CEO starts out by asking whether or not they’re competent, feeling like an imposter. But the only thing that matters is understanding that no, you’re not competent, that yes, when things go wrong it’s your fault (just don’t take it personally!), and that it’s all ok. Becoming CEO means simply getting better day by day, putting yourself in the flow of learning.
In a startup, everything flows downward from the CEO. Your personality, your mood, your way of doing things will be picked up by everyone around you, because that’s the kind of structure a startup is. It doesn’t matter what kind of mood the CEO of Goldman Sachs is in, the company structure is too big for that. But it absolutely matters, daily, how the CEO of a startup is doing.
So whatever you need to do, take care of yourself - and know that it’s setting an example for everyone. If you’re the kind of person who needs to take a lot of vacations, do that. If you need to go to yoga every morning, do that. But then don’t be surprised when the people in your startup also take a lot of vacations, when they also take time out of their day for yoga. Your way of existing within that little cult you’re building is the number one signal for what the company will be.
And if you as cofounders realize that you’ve made a mistake in your startup with who’s the CEO, make the transition as quickly as possible. Ask the fundamental questions regarding the role and whether or not the person really wants to do it. If a change needs to be made, do it. It’s easy to change when you’re going from 0 to 1; once you’re at 1 and you’re trying to go to X, it gets much more complicated.
And if you’re not cut out for the role, don’t worry.
Being #2 is much simpler.
When you’re in the #2 position, your job is simple: do everything you can to make sure that #1 succeeds.
For a CEO, the only way to get your life back is by selling the company. But if you’re #2, you’ve got lots more options in terms of organizing your life. For a CEO, you’re always responsible for every decision in the company - especially the bad ones. If you’re #2, you’re seen as valuable, someone who needs to be kept around and even incentivized to stay if the CEO has made a bad decision.
I always find it strange how people come up to me all the time, saying, “I’ve got a super idea, and I want to find great people to work for me and turn it into reality.” Because what would really make sense is to have people saying, “I’ve got these super skills, and I want to use them to help someone achieve their vision.” Because in terms of quality of life, making money, feeling fulfilled, all of that, there are far more of those happy #2 positions than there are CEOs (let alone happy CEOs).
The fact that everyone thinks they need to be the leader simply shows that so many people have never overcome their egos. Because all the evidence points to how, for most people, it makes so much more sense to be #2.
Learning how to properly be of service to someone else, helping them to do all the things that they can’t, isn’t in any way a failure - it’s a very noble way of living. And really reflecting on that can be a huge help in your life. It can free you from needing to be “the guy”, from being “the one with the idea”, it can open up a whole world of possibilities where you’re not being held back by your own ego.
Not ready for a startup yet? Build a muse
Tim Ferriss popularized the term “muse” for a business that you can build up in a few months, and that then can be kept running with very little work.
In terms of marketing, “muse” is great - it’s got that classical reference, it’s elegant. You can also find lots of information about the same idea under the term “passive income”, but that’s more technical (it’s kinda like Linux vs. Mac people - to the point where “muses” are typically associated with people who don’t know how to code and “passive income” is for people who do). In the end, it’s all pretty much the same.
A muse can be extremely interesting for an entrepreneur, and I want to explain why. But one thing you have to know is that it’s not a magical formula - it’s a LOT of work. Tim Ferriss did a great job with terms like “muse” and “4-Hour Work Week”, but those terms also hide just how much effort goes into a functioning end result (and for Tim most of all - anytime I’ve seen him, he’s been working, the guy never stops).
But the point of a muse isn’t to let you stop working. It’s simply to say that if you are willing to put in a few months of work, aimed in the right direction and driving hard to reach your goal, you can create a revenue stream that will let you survive. A muse isn’t there to make you rich; it’s to let you earn a living. That’s a big difference from a startup, where the goal really is to make you rich (because if you have a real startup and it works, you forcibly become rich - anyone who creates anything that so many people love and use becomes rich, it’s a direct relationship).
A muse is simply there to provide what you need to live. So you have to calculate how much it will cost to live the life you want each month, and that’s the goal of your muse. You can then take that amount and divide it by 30, and you’ll see how much revenue you need to generate per day. That’s where the magic happens, because usually, unless you’re really crazy, you’ll find that the per day revenue needed is actually quite achievable.
Do the math: Let’s say you want to live really well in a big apartment with a view in a major city, you want to go out to restaurants, and you want to be able to pay your taxes. So you need $15k/month, which is really $30k/month with taxes. That means you need to make $1k each day, which, in the Internet Era, is very, very achievable.
The incentives in a muse are very different than in a startup. The goal in a muse isn’t to grow fast, it’s simply to keep accessing a large market on a regular basis, reaching a certain revenue stream and staying there. Sure, sometimes it’ll be a bit higher or lower, but the goal is never to double your revenues every week.
And that makes a lot of the calculations much simpler. If you’ve got a product where you’re making a 70% margin, you’ve got a lot of room to give part of that margin to people who can take care of customer service, or marketing, or whatever. Because you only need maybe 30% of that margin, you can build something where everyone’s winning and happy. It won’t become an empire, but that’s not the point.
99% of muses are going to generate a few thousand dollars per month. But those are still very hard to actually build. And that’s why I recommend it for people who want to be entrepreneurs.
Building a muse is kind of like someone who wants to be a painter copying great works from the masters, or a musician practicing on pieces that someone else wrote. Entrepreneurship is learned, and so if you want to learn a whole lot real fast, you can start with a muse.
A muse concentrates all the steps of building a startup into a very short time period, with very little at stake. In just a few days, you can have a business that really is up and running online. A muse shouldn’t take more than five days to launch (note: I didn’t say the work would be done after five days - but just to build and launch it, that should be enough).
That means that you’re learning how to use prototyping tools, website builders, email automators, all very quickly. That’s a super learning experience for an entrepreneur - finding solutions and putting them in place fast, not spending months benchmarking them and comparing features. If one tool doesn’t work, get another one.
This is why you can pretty much follow a checklist to create a muse. A startup is complex, far too complex to follow any list. In a startup, trying to follow a list either gets you nowhere or to a really bad place, because by definition nobody knows exactly how a startup is going to be able to succeed.
But a muse is simple. It’s a business where you understand what needs to be built, so you can just keep knocking things off the list: create a simple product, distribute it, get your commission. That’s it. Muses don’t have multiple pricing levels; they don’t have multiple products; they don’t have features. One product, one price, one sale.
It’s the simplicity of a muse that makes it fit online, hitting a large market with a minimum of maintenance. When you eliminate all the complications that come with trying to grow exponentially, which is a fundamental part of a startup, all of a sudden you can build something that keeps turning pretty easily.
Once you have a muse that’s working, you can spend your time automating everything you can. Whether it’s with a SaaS or finding service providers, you want to externalize as much as possible while maintaining the level of income that you fixed for yourself. The beauty of a muse is found in establishing processes and external services that maintain the quality of the business.
And therein lies the real hard part - making sure that your external providers are doing a good job. You can’t just look online for someone to take over customer service, hire them, and trust that things will be fine. You need to find 10 prospects to take over customer service, test them all, see which one is the best in terms of both quality and price, hire them, and then do a few checks every month to make sure they’re doing the job properly. Externalizing doesn’t mean “set it and forget it”, it just means that you are spending way less time on the task yourself.
A muse can be a great way to train yourself before you move on to a startup. It can keep food on the table when you’re not paying yourself in the first days of being a founder. It can bring you into contact with great resources. But remember it’s not a startup - it’s just one product, one price, one sale.
You’ve reached the end of Part I.
Since it was pretty long, let’s do the TL;DR:
- Doing is better than thinking. An entrepreneur who makes 20 decisions in a day will end up in a much better position than an entrepreneur who makes one “correct” decision every day.
- Doing can feel scary. But it’s less scary when you see that it’s much worse to fail. And an entrepreneur who isn’t doing is going to fail.
- Status is a zero-sum game, and you should never play zero-sum games. Entrepreneurship is about creating value, and when you create value there are lots of ways to win and lots of people who can win.
- Work hard. It always pays off.
Time for Part II.
What are you waiting for?
Part II: No Permission Needed
The responsibilities and freedoms of an entrepreneur
Entrepreneurship as we know it today was pretty well defined by a Harvard Business School professor, Howard Stevenson: “the pursuit of opportunity without regard to resources currently controlled”. It’s about not needing anything, whether that’s money or other people’s approval, to decide to build your own solution to a problem. The internet made that true in ways that it never was before.
If you want a really quick history of capitalism, here it is: Back in the 17th century when there were boats sailing around and trading across the whole globe, it cost a lot of money to build a ship and stock it with the goods you wanted to trade. It cost so much money that some people had the good idea of selling off parts of the boat and the goods, so people who were rich (even if not rich enough to own an entire boat) could invest in the voyage and share in the profits. But there was no work involved - it was just a question of having money, putting it at risk, and hoping to get more back. Needing to already have money meant the benefits of the system weren’t open to many people.
Then at the end of the 19th century, things got interesting. People began building businesses that needed much less capital to get started. It still took a lot, but nowhere near as much as two centuries earlier. That meant people could start to have two phases in their lives: one where they worked and saved, and then the next where they could invest in their own business using those savings. The risk was huge, but an individual could decide to take that risk all on their own. And lots of people are still holding onto this vision of entrepreneurship.
But in the past few decades, a new generation arrived and figured out how to be entrepreneurs without having any capital. How did it happen?
The internet came along, and its growth changed the world. Specifically, three things have changed in the past 20 years:
- Everything that used to be a fixed cost became a variable cost. Before you needed to buy things to start your business, now you can rent them. Even back in the ‘90s, if you wanted to start a business on the internet, you needed to buy a server. Today you just hook up to AWS, or Azure, or Digital Ocean, or whatever.
- Everything that you need to know became accessible in just a few clicks. To get an answer to a question, you don’t have to call an expert or ask an institution to let you in; you can just find the information yourself. You don’t need permission to learn anything, you just need the motivation, time, and the courage to actually try.
- Capital became extremely abundant. For most of history there wasn’t much capital in the world and it had a hard time moving from place to place. Today, there’s a ton of money and it flows much more smoothly (not totally smoothly, but still).
Those three things combine to make it so that now there’s really no other choice for people than to be entrepreneurial. That doesn’t mean they’ll all be entrepreneurs, but just that the entrepreneurial spirit is coming for everyone. Just like professional athletes aren’t the only ones who play sports, just like authors aren’t the only ones who can read and write, the skills of entrepreneurship are going to keep diffusing until pretty much everybody does it, to various degrees, at various levels of skill.
For the ones who do become actual entrepreneurs, there are some consequences to all this which don’t make things necessarily “easier”.
First, the competition is harsher than ever before. With practically no barriers to entry, it’s hard to establish a position and it’s even harder to hold onto it - the likelihood of being able to just sit back and keep cashing checks is pretty low. As the saying goes, “Your margin is my opportunity.” And it’s much easier to create an entrepreneurial venture than it is to make drastic shifts once your company is bigger. So today it’s easier than ever to start a company (since you don’t need much of anything to get going), but harder than ever to hold onto it.
Next, not only is the competition harsher, but every new generation is building on a much better foundation than the one before. For the first startups that joined The Family, they had a huge advantage, because very few people in Europe were giving out our brand of ambitious advice. But now, 8 years later, politicians have adopted our reasoning, business schools are teaching what we did with Koudetat, everybody’s starting from a better position. That means it’s harder and harder to be a pirate - when everyone’s adopted the pirate code, there’s no more piracy, it’s just the norm.
Finally, our brains aren’t really made for that kind of change. The human mind doesn’t let us see reality in its entirety, it only lets us see an approximate vision of things. We understand the world through certain paradigms that exist in our mind. We aren’t even aware of most of these paradigms, and we don’t really want to change them even if someone tells us we need to.
And these are important psychological mechanisms, they’re what let us live without getting completely overloaded and going crazy. Our rational minds aren’t infinite - they’re limited by our sensations and feelings, what we’ve known before.
But we’re now in a world where what we’ve known before is incredibly limited compared to what’s happening and what’s going to happen. We went from a world that was stable and confident to a world that’s unstable and extreme. Who has the know-how to maneuver in a world that’s unstable and extreme?
Entrepreneurs. Entrepreneurship is a field where uncertainty, movement, storms, chaos are permanent and normal. That attitude is going to keep extending to more and more people.
And that’s ok, because if we look at it clearly, the industrial world that we all grew up with really wasn’t really in sync with our nature. Take your own DNA, the very thing you’re made of. It’s constantly replicating, but it doesn’t do it perfectly - the process that cuts our DNA in two and reproduces it also keeps coding errors into the new DNA. The errors are random, most of them have no impact, but they’re always there. And they guarantee that nothing stays the same.
Chaos is a feature, not a bug, in the universe. The stability that we humans pretend to create, from astrologers, shamans, and priests telling stories to make sense of random occurrences on to industrial production promising lifelong careers, it’s all just trying to ignore and avoid that chaos.
We misunderstand so much about that. Take the butterfly effect, that when a butterfly flaps its wings in the Southern Hemisphere it can cause a hurricane in the Northern Hemisphere. When they told me that as a kid, I freaked out whenever I saw a butterfly - I’m thinking, “Hey, butterfly, stay cool, maybe don’t flap your wings so hard!”
But the chaos of the butterfly effect isn’t that whenever a butterfly flaps its wings, it causes a giant storm on the other side of the world. It’s that one day, one butterfly flapped its wings, and that set off a chain of events that eventually ended with a hurricane. It’s not systematic, it’s chaotic.
That’s one of the hardest things for people to understand when we try to teach entrepreneurship. It’s not about following a checklist that will let you go from 0 to 1 and then from 1 to X. That would be like thinking it’s possible to teach a butterfly to flap its wings in that special, special way that causes a hurricane. There’s nobody - nobody! - on the planet who can tell you how to flap your entrepreneurial wings and grow a unicorn.
What an entrepreneur can learn are all the techniques and know-how that lets you not fail too badly. If you don’t fail too badly, you can stay in the game and keep trying to succeed.
That’s why an entrepreneur can’t be driven by the destination, but only by the voyage. Everyone who goes into entrepreneurship today for the wrong reasons is going to end up having a very sad life. They’ll be trying to maximize their own success, which is a fool’s errand, instead of maximizing the pleasure they have in going through the process.
Success isn’t in your hands, it’s a matter of luck. Anybody who tells you that luck doesn’t exist, of course it does. Look at who you are, where you were born, what privileges you’ve had. Luck is real, and it has a big impact on what will happen to you.
Today’s world is ruled by chaos and luck. How can you become resistant to that, even use it to your advantage?
Realize that you can’t master everything or control the future. No matter what scale you want to live at - whether you want to build the next Facebook, or become a freelancing digital nomad, or start a restaurant, whatever - you have to live within the entrepreneurial cycle of change. If you don’t, one day you’re going to find that your business has been totally destroyed by someone who is an entrepreneur.
We’ve moved from a closed world where you could choose your career and go happily down its path to an open world where no one has to ask permission from anyone before doing whatever they want to do. Many people still struggle with that. The vast majority of people still struggle with that.
Why? Because all the certainties that we developed in the 19th and 20th centuries are gone. It used to be enough to go to the right school, get a master’s and then have the job you wanted waiting for you. Go to Harvard, go to Oxford, and you’re guaranteed to be on the winning side.
Today it’s not that going to Harvard or Oxford is bad; it’s that following the “right path” simply isn’t enough anymore. The people who are really winning are the ones who figure out their own way, who realize that they don’t need to go through any gatekeepers to do what they want.
The current rupture that we’re going through, the one that leaves behind the industrial age of mediocre, standardized products and pre-determined lives for an entrepreneurial age full of incredible products and chaotic lives isn’t like anything the world’s ever seen before.
And that means the rebellion of being an entrepreneur isn’t like your standard generational rebellion, “No, Mom & Dad, I’m going to do what I want!” It’s the fundamental recognition that people who haven’t yet understood this rupture really don’t have any idea of what the future holds. They’re starting to feel it, which is why there’s so much anxiety in the world today, but they haven’t made the leap. And lots of them probably never will.
An entrepreneur has to take that leap. And they have to be determined in what they do. Determination is all about recognizing that force is more important than talent. Our society has valued being brilliant for far too long, we worry more about appearances than results.
This is also why storytelling is a critical part of entrepreneurship. It’s not about lying, it’s about sorting through the chaos and finding a version of the story that people can quickly understand, a version of the story that respects their time. People don’t want to know all of the scars, mistakes, small successes that never became big, the million things that go along with actually building something from zero. They want the one-liner, the 2-minute read that gives them what they really need to know.
It’s the storytelling that lets you pull together all those things that happened thanks to your determination. Determination is what lets you put in the 5, 10, 20 years (if you’re a really slow learner) of mistakes that you’ll make. It’s what lets you develop and become a different person, one who really knows things that no one could teach you.
That’s why you don’t need to apologize and make excuses for something you’ve done. You should acknowledge mistakes, admit what happened, try to make things right. But don’t apologize and make excuses, because those mistakes go into making you who you are. And you don’t have to apologize for who you are.
On a fundamental level, you have to give yourself room for mistakes because you have to give yourself room to take risks. If you don’t take extreme risks in a world that is extreme, you’ll never really learn anything.
Again, this is true on whatever scale you want to operate on. If you’re freelancing, try to land bigger clients. If you have a restaurant, try to have several. If you have a little factory that makes nails, see if you can’t start producing screws, too. In a world that’s constantly moving, you don’t have any choice other than to keep moving yourself. It used to be that to reduce risk, you should just stay in place; now, the only way to reduce risk is to KEEP. MOVING.
We’ve never been in a world where we’re so free to choose, to learn, to act, to do. Respect that freedom and never give it up, don’t make anyone else responsible for you. You don’t need to go ask someone who built a business 20 years ago what they think about your idea - just try it!
Because if you let other people make a decision for you, there are only two possible outcomes:
- It was the right decision, but you never really understand why and you know that someone else made it for you; this is a great way to develop imposter syndrome.
- It was the wrong decision, and you can say “Oh, it wasn’t my fault, X told me to do it”; if you do that, you’re no longer responsible for your freedom and you’re living experiences because someone else thinks you should.
So don’t create “what if” moments in your life, take the leap on your own. You can take advice! You can - should! - learn from everyone around you. Getting something out of every interaction you have, with users, with clients, with random people on the street as you try to get them to use your product, that’s how an entrepreneur uses their freedom. 100 years ago people used to stretch their horizons by traveling; now it’s all about stretching your horizons by continuing to find out more and more things every day, no matter where you are or who you meet.
But at the end of the day, the decision is yours. That’s how you make sure the responsibility is yours, the mistakes are yours, and the freedom is yours. Build your own staircase, keeping moving up step-by-step. That’s the entrepreneurial spirit.
Ideas aren’t the problem or the solution
Ideas are everywhere.
That’s one giant thing that the internet changed. It used to be that ideas were valuable, because they didn’t really move from one place to another. It was hard to learn things, it was hard to hear about what a company in China or America was doing. It wasn’t enough to just want to know. And so for centuries, we’ve developed the feeling that ideas are really valuable.
The internet made ideas fluid and abundant - basically, commodities. For me, I admit that one of the challenges of my job is to keep acting like the idea a young entrepreneur is working on is exciting and cool. It’s kind of like being an art teacher in an elementary school, you have to be excited about each kid’s painting, even though you’ve seen a million just like it in your career. But if you said to a kid, “That? … That’s meh. Seriously, I’m not impressed”, it’s not really creating a good environment for learning.
People who invest in startups have that same problem, spending every day meeting with entrepreneurs who have ideas, talking to other investors who meet with entrepreneurs with ideas, and benchmarking ideas coming from 5 different continents. The chance of someone coming up with something legitimately new is pretty low.
But that’s fine! An entrepreneur’s job isn’t to come up with an idea, it’s to take an idea and turn it into something concrete and real. The value is in the execution, in how you can turn a dream into something concrete that works in the real world.
The problem for an entrepreneur is that whatever they build in the real world is always so much different than what they dreamed about in their head. There are so many ways for it to go wrong, moments when it’ll seem so much easier to just give up in the middle.
It’s kind of like somebody who decides to take a rowboat across the English Channel. Everybody’s super impressed at the beginning, encouraging you in your weird dream, sending you off onto the water. And if you make it to the other side, you’re celebrated as a hero. But all that time in the middle, that’s the hard part. That’s when you’re trying to get the water out of the boat, the waves are crashing over you, people on their yachts are going by and saying, “C’mon, just climb aboard, what are you doing? You’re only hurting yourself here.” And you have to hold on, digging deep inside yourself to find the resources to keep going.
The idea of making that kind of trip, the dream of crossing the Channel in a rowboat, the dream of building a startup, is always more romantic and beautiful than actually doing it. That long, hard haul where nobody understands what you’re doing, nobody dreams about that. But that’s the everyday reality for an entrepreneur (and for lots of other fields too: everybody wants to see the show, but not what the dancer goes through to get there; to watch the match, but definitely not the hours and hours of repetitive practice the athlete puts in, etc.).
Storytelling covers up all the hard times, it doesn’t eliminate them. But that storytelling can distract people who are just starting out, people who are trying to become entrepreneurs. Don’t fall into that trap.
And so don’t fall into the idea trap either. If an entrepreneur puts too much emphasis on ideas, they’re going to get eaten by the Idea Monsters. There are three of them:
- Skepticism. It’s always easier to be skeptical than optimistic, and everyone who you talk to about your idea will prove it to you. Being skeptical basically has a 1000% return on investment for people, because if they end up being right and it doesn’t work, they say, “See? I told you.” And if they end up being wrong and it does work, they’ll find a way to say, “See, it’s because I helped you to see the big problem, so you did it right.”
- Optimism. Yep, this too. After all, optimists tend to hang out together. And when they’re together, they can keep re-enforcing their optimistic tendencies. If you put a group of optimists together, they’ll end up thinking that anything will work. And that will block reality from reaching you and your project, it will let you avoid any real problems that do exist.
- Dishonesty. Our upbringing, for all of us, doesn’t prepare us for the world of entrepreneurship. We’re simply not trained to actually tell people the truth. We learned that we shouldn’t say things that hurt others, that we should be kind (and thank god for that, it makes life in a society liveable - for the millionth time, we don’t want a world where everyone’s living like a startup entrepreneur all the time).
So if you talk to people about your idea, they’ll be skewed by their own optimism or pessimism, and then that reaction will be skewed even more by our social upbringing. It’s useless.
What’s useful is how you turn an idea into something real. And that’s the entrepreneurial process.
In the entrepreneurial process, there are tons of ideas. And you test them out and see which ones work. A startup isn’t the story of an idea. It’s the story of 400 ideas, of which 100 got tossed out, 300 got turned into something real and tested, 20 of them actually worked, and 1 of them made all the difference.
But OK, I get it, you’re still asking: “How do I find that first idea that starts it all, that lets me start executing?” After 8 years working with entrepreneurs at The Family, I think I’ve understood it a little bit. I’d sum it up like this:
Blessed are the passionate ones.
One of the best sources of ideas is your hobbies. If you have a hobby you love, you’re much more likely to find a startup idea there than anywhere else. Since it’s something you’re doing purely because you enjoy it, you learn more and more, you know everything about how it exists and what the people who also enjoy that hobby like. So if you have a hobby, trust in it and see it for what it is: an area of real expertise that you love. It happened with Wozniak and Jobs with Apple, it happened with the people who got into crypto in 2009, it can happen with you.
If you don’t have a hobby, you can still be pragmatic. Even though an entrepreneur can’t build a startup for the money, no entrepreneur would do it if money wasn’t part of the equation. And so to find an idea, you can start a virtuous cycle by asking yourself what you can learn in order to earn money. You then start the circle:
Learn → Master → Return on investment → Learn → Master → ROI → Learn…
The funny thing is that if you do this and it works, you’re getting positive market feedback, all of a sudden you’ll find that you really like it. It’s super encouraging and fun to do something that works, even if it wasn’t your passion before. (And it’s super not fun to do something that doesn’t work, no matter how much you love it.)
In that case, selecting an idea becomes pretty simple, because it doesn’t really matter that much. You just pick some and test them, seeing whether you can turn it into that positive feedback loop.
Another way to find an idea is to not really find it at all, but to join someone else’s project. If you find someone who’s super passionate about something, it can be very rewarding to help them turn that vision into a reality.
In a lot of ways, that’s what happened to me with The Family - I wasn’t taken by the idea of doing an incubator, an accelerator, whatever. But I really wanted to help Alice, who was absolutely in love with the idea of building a real community of entrepreneurs.
And the secret is that when you’re helping someone else, it’s extremely liberating. You’re able to step back and say, well, OK, but what about this? What is it about other people who are trying to do the same thing that doesn’t work? What’s making them all fail? You see pretty clearly, because you aren’t grabbed up by the passion that’s driving your cofounder. That attitude can bring a ton of value and be super rewarding (as long as you’re 100% sincere in your admiration for them and wanting to help them succeed).
All of this is linked to a simple fact of entrepreneurship: it’s a game where you keep learning and moving up. Afterwards, people can tell all the stories about how you’re a genius, you had a vision, you saw what it would become…
Right. Look, Jeff Bezos is incredible, but you can’t tell me that he saw what Amazon would become when that first iteration of Amazon made users hit “ctrl-f” to find out if the book you wanted was there (that, or you just scrolled through all of the books that were in stock). Vision and entrepreneurial genius are built up over time, as you find one thing that works, which gives you a little more money to go find another thing that works. And if that works, you’ve got more money and a little bit of leverage, so then you find another and another and another thing that works. The important thing is to get moving and speed up your learning curve as much as possible.
Always remember that the goal of an entrepreneur isn’t to prove to the world you’re right - it’s to win. You can’t be focused on the idea, or who came up with it, or whatever. The only thing that matters is building something that people use and enjoy. That’s winning. And if you find one day that your users are doing something you never expected with your product, well, the answer definitely isn’t to try to force them to use it how you want. It’s to grab on to what they’re doing, learn from it, and start running.
Learning will often mean being data-driven. This can be super broad, like checking out Google Trends to figure out what problems people are getting more and more interested in. Another way of doing that is by going on Amazon and seeing which books are moving up on the bestseller lists. That info is all sitting out there, ready to be used.
If you see that a trend is exploding, it becomes a question of creating a product that satisfies that trend, nailing the marketing and the customer experience, mastering distribution, etc. You get the point - the idea isn’t the hard part, it’s all that other stuff.
That’s why you don’t need to worry about anybody stealing your idea. After all, what are the odds that you’ll talk about it with someone who then says, “Wow, that’s incredible. I’m now going to stop everything else that I’m doing in my life, and my sole mission will be doing the exact same thing as you.” Nobody would ever do that! The fear that someone will steal your idea is just an example of an entrepreneur overestimating their own intelligence and thinking that somehow that’s what makes the difference. But no - the real difference is all the hard, hard work involved in actually building a startup.
(This is why the concept of a “non-disclosure agreement” in startups is dumb and no one in the business who’s smart will sign one. The best application we ever got at The Family was from someone who sent an NDA accompanied by a letter from a lawyer saying that we had to sign the NDA to hear about the idea because, and I quote, “This is a billion-dollar idea.” We laughed for days, the only bad part being that the poor guy had paid some lawyer a thousand bucks to get that letter written.)
In moving from an idea to a real product, you have to find the simplest way to clearly show what you’re doing. It’s usually called a pitch, but it’s just an abstraction that makes it obvious for your listener what problem you’re solving and how you’re doing it.
One big mistake entrepreneurs make when working on their pitch is thinking that they need to include eeeeeeeverything they’re doing in one sentence. But that’s impossible. What you should do is to distill your startup into its most captivating phrase, which then lets the person show if they’re interested. If they are, you can go on to describe a bit more, and a bit more, and a bit more.
Look at it like a staircase. That first step should be accessible to anyone. So if I’m talking about The Family to the general public, I’ll just say, “It’s an investment firm.” Simple as that - anybody who’s listening understands. Then if it’s someone who’s interested in investing, they’ll ask, “Oh, how much do you invest?” And then I can go on to the next step, and so on and so on.
Obviously things are more complex than they seem in your pitch. Reality is always more complex than anything that tries to capture it. And trying to impact that reality will always show just how little power you have over it. An entrepreneur’s job is to live with that knowledge of being powerless and still turning that into something extremely objectifiable: “How do I earn $1 this week?” Then it’s “How do I earn $2?”, “How do I earn $10?”.
Don’t get caught up in the idea, in the big plan. Know the problem you’re trying to solve, find concrete goals to move towards that solution, keep building, listening to market feedback, iterating, watching the data, iterating. Little by little you’ll actually feel like you’ve got a product that solves the problem. Reduce your timelines, concentrate on today (and maximum this week), and then when you’ve learned and built everything you can this week, start the whole process over again next week.
Got cofounders? Yes or no, it’s the team that wins.
If there’s one piece of advice I wish people would take about finding a cofounder, it’s this: Stop looking for a cofounder, and just start doing things with people.
There’s something that follows from that, which is to also stop looking for cofounders who somehow complement you, being magically able to do the things you can’t. Cofounders aren’t cartoon characters, you can’t just combine all your skills together to meld into a perfect team.
I’ve never understood why people give that advice either. First, it’s empirically not true: if you take Larry Page and Sergey Brin, where was the complementarity? They were two engineers working on an engineering problem. I’ve seen the same thing with founders at The Family - the best teams are usually cofounders who are very similar to each other, with the same backgrounds, the same educations. It’s pretty rare to have a strong cofounder bond created by struggling to overcome a bunch of cultural and social barriers.
Second, it’s actually a dangerous piece of advice because it fundamentally misunderstands what a cofounder is. Being a cofounder isn’t about having a given skill. Being a cofounder is about being a psychological and emotional support, bringing positive energy to the rest of your cofounders for the company’s entire lifespan.
Like so many things in startups, it’s kind of like having a kid. No one looks for a partner to have a kid with saying, “Ok, I’m great at diapers, you’re great at blending up food, we should have a kid together, I think we’ve really got what it takes!” Having a kid isn’t a set of tasks, it’s about being in the same boat together and supporting one another. A startup’s the same.
Obviously this doesn’t mean that within a cofounding team there aren’t people who have different specialties, concentrating on certain parts of the business. And obviously the ideal is to have someone who’s in charge of the tech, someone else in charge of marketing, another in charge of design. But that distribution of roles should be a second-order question that comes along later, not a first-order way of deciding to found a startup with someone.
This is especially true because I get so many people saying that they’re looking for a technical cofounder - a developer. But the market for developers doesn’t really work like that. Why?
A developer today either:
- Has an idea and so they’re building their own startup already;
- Can be hired and paid really well at a big tech company or a startup that’s raised a Series B and is hiring 50 engineers this year.
So you’ve already taken most of the really talented developers off the market right there. The ones that are left aren’t the ones you need - either they’re not that good technically, or they’re so anti-social that they can’t work as part of a team, or they have zero confidence in their work, or whatever.
Going back to the more general error, though, entrepreneurs don’t see that the idea of complementarity is related to an ideal that only exists in their head. And as an entrepreneur, you can’t be living in a fictional world, you have to see reality as it is.
So what’s really important in the reality of finding a cofounder?
The decision to be cofounders is more important than any decision you’ll ever make in your personal life. You’re going to spend more time with your cofounder than with anyone else in your life, including your husband, wife, boyfriend, girlfriend, etc. That means you have to feel really good when you’re with that person.
Too many people can tell you their story of founding a company with someone for rational reasons and having it end in catastrophe. There’s something irrational about finding people that you’re that comfortable with, who you want to spend that much time with.
(That’s also why I’m very for cofounding teams that are also together in their personal lives - that additional bond can create incredibly strong startup teams. Obviously it can end badly as well, but that’s usually because there was already something that didn’t work within the couple. And an entrepreneur should always be optimizing for the upside, not trying to avoid the downside ;)
The worst cofounding teams are the ones where you need to talk to every cofounder in order to make a decision. That’s how you end up with endless debates, and then there’s one person who still doesn’t agree, and then they get upset because nobody’s listening to them, etc.
A great cofounding team is when one cofounder can make a decision, and none of their other cofounders agrees, and there’s no discussion whatsoever. It seems strange, but that’s how you can rely on everyone’s strong points and make sure your startup moves faster and faster.
Of course there are limits to this, since 80% of the time those decisions should be ones that everyone agrees with. If that’s the case, the 20% of the time when there’s disagreement doesn’t really matter because as a team you’re moving forward and doing more things faster. That execution speed is what makes a great team. (And if you’re disagreeing 80% of the time, or even 50% of the time, the problem won’t be solved by debate - you’re just not with the right cofounders.)
Having that kind of confidence doesn’t mean there won’t be mistakes, and mistakes that cost a lot! We had one startup at The Family where a cofounder made an accounting mistake that ended up costing $250K. Everybody’s telling the other cofounder to get rid of the other, that it was a gigantic error, how could that happen? But the response was simple: “Yes, it was their responsibility. Yes, it was a mistake. Would I have caught it if I’d been looking over their shoulder? Maybe, maybe not. But it happened, we’re moving on.” Why? Because the cost of that mistake was nothing compared to the enormous value the two of them had created together, where their way of trusting each other and moving fast had built a startup worth way more than $250K.
We can’t avoid mistakes. Everyone makes them. That’s why confidence in your cofounders is the foundation on which everything else is built.
Next, cofounders have to remember that they’re not employees. A cofounder can’t act like the value they bring is in the work they do; instead, it’s in their ability to invest as the startup’s biggest shareholder.
That means you can’t be held back by your ego. A cofounder needs to be able to identify, as the startup grows, whether certain tasks shouldn’t be taken over by someone else. And they need to be able to find someone else who’s better at that task than they are, because 1) that’s all they’ll do and 2) that’s what an employee is. A cofounder should be looking at things like a shareholder: “How can I build a team that will positively impact my shares?” If you let your ego get involved, thinking you don’t want to hire a developer who’s better than you, or an incredible salesperson, or a super talented young designer, you’re thinking like an employee who’s worried for their job, not a shareholder.
Cofounders are there to do the things that no employee can really do, constantly growing, learning, and taking on new roles. This is why it’s important for cofounders to represent the company in public - after all, no employee can ever really speak about the company as well as you. Cofounders should also be taking care of HR and recruiting - after all, if a CTO has found great developers, why would they keep coding? Go find 10 more great engineers and convince them to work for you.
That kind of role switching, growing as the company itself grows, really only works when there’s a sincere love and admiration among cofounders at the beginning. And that love and admiration is what lets cofounders act as a real support system for each other, sharing how they’re really feeling, their fears, their anxieties, sharing things they can’t share with anyone else in the company and probably in their lives.
That’s why having cofounders can make things easier. It’s not that being a solo founder is impossible, it’s just that it makes some things much more difficult, because you don’t have that emotional support to lean on.
And sure, having a cofounding team that’s completely united on the personal level while also complementing each other in terms of skills, that’s the dream. But finding that isn’t a realistic goal, it’s something that can only happen by getting very, very lucky. People get lucky every day, you can win the lottery. But you can’t wake up in the morning planning to win the lottery.
What you can do, as an entrepreneur, is to stop looking for a cofounder and start doing things. As you put yourself out there, you’re creating opportunities to meet your cofounder. But it’s much more likely to happen through some random circumstances than by you actively searching.
Take my example - I wasn’t looking for Alice Zagury when I found her. I had just been working as a consultant for dozens of startups, talking to founders and helping them out. I had met hundreds of people in those same days, and Alice was one of them. In that moment it was incredibly obvious that I wanted to build a company with her, but the circumstances that led it to happen were just me getting out there and doing things with people.
You can lessen some of the pressure by remembering too that whatever you’re doing now, it’s not the last thing you’ll do. Successful entrepreneurs aren’t usually 22 years old, they’re more likely to be in their 40s. So you can keep your eyes open, maybe you build a company as a solo founder now, or you join someone else’s startup, whatever you want to do. What you don’t want to do is to wait, thinking that there will be some magic moment coming along to give you “the signal”.
And at some point maybe you’ll have to convince people to join you. That’s part of being an entrepreneur, too. If you’ve got your best friend, or your boyfriend, or your cousin, someone who loves you unconditionally, and you can’t convince them to join your project as a cofounder, what chance do you have of convincing 1000 people to use your product? Sure, it’s hard, but that’s literally what being an entrepreneur is - it doesn’t just happen, it’s all about convincing people to participate in something that barely exists and that won’t exist if you give up.
In terms of convincing people, once you’ve settled the cofounder question, you come to the team. And there are three stages of a startup team: pre-product-market fit, post-product-market fit, and scale.
Pre-product-market fit, keep your team as small as possible. If you need a big team before finding product-market fit, you’re in trouble. This is especially true if it’s your first company, when you need to keep things simple, go to market fast, and make sure you’re earning money. If you build up your entrepreneurial CV and show people you can succeed, you’ll be able to move on to even bigger things. Michelangelo’s masterpieces weren’t the first pieces of rock that he carved, and an entrepreneur’s greatest company usually isn’t the first one that they start.
Having a big team pre-product-market fit is also trouble because you don’t know who you need on the team, you don’t know what you should pay them, and you don’t have any money to pay them anyway. So keep things small.
(And don’t fall into the trap of giving away titles. Too many startups have a CMO, a CTO, a CPO, and… two interns. What exactly are you the “chief” of? But believe me, later on it’ll be a problem to make people give up those titles - and they’re right to not want to lose them. Ego is important, and an entrepreneur needs to understand that people are rational, that there is a real cost to taking a title like CMO away from them. Plus, as an entrepreneur it’s a giant step forward when you can convince people to join the adventure not for a title, not for the pay, but just because you’re solving a big problem by building something really cool, and worst comes to worst, you’ll all have a good time doing it. Take yourself seriously enough to convince people without dangling worthless titles in front of them.)
Post-product-market fit, you need a team, but things aren’t going to get any easier. Now everyone has an objective idea of what your startup is worth. That creates a giant misalignment between your need as an entrepreneur to dedicate as many resources as possible towards growth and your employees’ need to maximize their short-term rewards.
This is a real difficult moment between entrepreneurs and employees. Before pre-product-market fit, everyone was working hard for a dream, a hope. Now that hope is becoming real, money’s coming in, and the question becomes how that money is divided up.
There are three tools you can use at this point. The first is total transparency. The new generations arriving today have no tolerance for people who don’t respect them enough to be transparent with them. Yes, that means that your employees will know what you’re making (because if you try to hide it, there’s always a document somewhere that shows it, and it’s better to be upfront and honest than to have people feel like you’re hiding things from them).
The second tool is that once you’re being completely transparent, you can explain the whole plan, with every employee knowing why they’re earning what they earn, how they can earn more, and how that’s related to how the company is doing. It’s not about a bonus mentality, it’s about understanding that as the company grows, its costs will also grow. The key is being clear with your team about what percentage of the company’s revenues will be put into more growth and what percentage will be there to pay the people who have been around for a long time. Make things explicit and rational.
The third tool is seeing pay as a dynamic thing. Once you’ve reached post-market-fit, you should be reevaluating your pay structure every six months or so. Have regular one-on-one meetings with people and stay up to date with how people are feeling and how the company is doing.
Take care of your team and they’ll take care of you. The real secret in startups is that “who” you’re working with is so much more important than “what” you’re building with them. Strategy in a startup is pretty simple: build a good product that people want, distribute it wherever people buy it, and try not to screw up anything else too much. Executing that strategy is all about who’s in the room and whether or not they’re fully aligned with you and the company’s success.
After the pre- and post-product-market fit stages, your team goes into the scale stage. And it’s the blurriest stage, because let’s face it, it’s pretty rare for a company to get this far. Plus, it’s the one where you realize that it’s easier to survive than it is to thrive.
The biggest problem for teams when they’re scaling is dealing with the constant rotations and transitions. Your team isn’t going to be made up of the same kind of people as it was when you were smaller, and definitely not when it was just a handful of people sitting on two ratty sofas.
That’s a hard thing to accept as an entrepreneur, that you’re going to have to bring on people who are different and that some people you love are going to move on. But people who love fighting aren’t usually all that great with peace, and in the early days you need fighters.
Why is this important to think about, even for a young entrepreneur just starting out? Because you have to start thinking of your startup as something that exists within time, that there’s a day when it starts and a day when it ends. Accepting that inevitability means you’ll make better decisions because you won’t be thinking in terms of some infinite timeline that no company has ever followed.
Learn to earn (more money)
When it comes to money, understand one thing: When you’re an entrepreneur with a business, money is an omnipresent issue.
Why? Because money is the objective measure of value that your customers give to you in return for your solution. Because money is the objective measure of value that covers the costs you have in providing that solution. And because combining those two numbers leaves you either with a loss (in which case you need to find a way to cover that, whether with investors, state or local funds, loans, etc.) or with a profit (in which case you need to decide what to do with the excess, whether that’s taken out of the business to have fun with or reinvested to grow the company).
Entrepreneurs’ biggest problem with money is that they don’t understand that while it’s an objective measure of value, it’s also an irrational, living thing. They’ll ask, “What’s the right price?” Well, the right price is whatever you think it is. “What’s the right salary for this person?” It’s whatever you think you’re able to pay them. The answers to these questions are always dynamic and they depend on you, the entrepreneur.
This goes all the way up to the ultimate question of “What’s the right valuation for my company?” It’s whatever you decide. You just have to realize that money is an objective measure of things that are profoundly irrational, animalistic, and dynamic.
If you don’t think money is important, any investor will sense that. If you truly believe you don’t need money to be happy, everyone around you will feel it. If money isn’t important to you, everyone around you will make you pay for that. And no matter what your personal feelings are, as an entrepreneur you have to - at the very least - understand money as a tool.
Let’s look at that on its most fundamental level in a business: pricing and revenue. At its heart, there is no objective price for anything, there’s simply supply and demand.
People usually think that demand drives pricing, which is both true and false. When you’re on a market where the supply is much lower than the demand, that demand will drive the price up. This is the entrepreneur’s dream, because there’s essentially a competition taking place among the people who want to buy your solution.
But demand isn’t the only thing that affects the price. Take the example of diamonds - why are they expensive? Everybody thinks it’s because they’re rare, that there’s more demand than supply. Not at all. Diamonds are expensive because the vast majority of the supply is controlled by one family/company who came up with a genius marketing campaign back in the 1940s, “Diamonds are forever.” That led to a world where people associate diamonds with luxury, with eternal love, with marriage, and so they associate the price they pay with the emotion they feel (or are supposed to be feeling, anyway :). And so even though diamonds are quite common, that has no impact on the price because of a combination of control plus marketing.
All to say, price isn’t solely driven by demand. It can also be driven by storytelling, by the image that you give of the solution. Just because there’s a lot of supply doesn’t mean that you can’t create a situation where the price can be high.
Money functions as a signal. In economics, a signal is information that two parties exchange. When something’s expensive, part of the signal says that it’s high quality. But selling something that costs a lot to produce at a high price is just the basics of pricing. The real dynamics of pricing are found when you can sell something for a lot even though it didn’t cost that much to produce.
Entrepreneurs get into trouble for two reasons: first, because they’re scared, afraid that their solution isn’t good enough; and second, because they see pricing as being static instead of dynamic.
One of the worst pieces of advice people give to entrepreneurs is that it’s easier to lower the price than to raise it. And that’s because those people have never built a company, and so they’re speaking as consumers who would rather have prices come down than go up.
But it’s much more complicated to lower a price than to raise it. When you lower a price, something happens in your company. The company has been built using your margin (the difference between how much it costs to get the solution into people’s hands and how much you sell it for).
There’s a simple rule here: if you have a high margin, you have high costs - salaries are high, rent is high, etc. If you’re in a discount business with super low margins, you have low costs - you pay people less, your office is in the cheapest part of town, etc.
If you have low margins and you raise the price, all of a sudden you have more margin to work with. You’re creating a profit. So if the supply is good and demand is strong, raising a price is very easy.
When you lower the price, you’re lowering your margin. That whole structure that you’ve built on that higher margin is still there - so now you have to lower salaries, fire people, find a new office that doesn’t cost as much… all things that make nobody happy and that send a really bad signal.
At the beginning, make things simple: put your price at a level that covers some very obvious assumptions. Ask how much the product costs you to make and how much you need to make to cover all the other costs. So maybe you need to make another 3x what it costs, since you need another ⅓ for salaries, ⅓ in SaaS, ⅓ in profits, or you need to make another 4x, or whatever. Make it so you can easily justify the price in just one sentence.
Then one day, when things are going well and you have product-market fit, you can reevaluate things. If you have product-market fit and your company is growing, you can pretty much try out pricing almost at random. Increase the price 2x, 4x, see what happens. Because at that point, you’re growing, what’s the worst thing that can happen? People get really upset and you go back to where things were! No harm, no foul.
Because pricing is dynamic, you can test it out over time. Try one price with one group and another price with a second group. But this is something you only want to do once you’ve understood the basics of your price, the price that makes things work and that gets you to product-market fit.
No matter what price you decide on, get up in the morning and repeat one thing to yourself in the mirror: I’m worth more than I’m charging. If you don’t fundamentally believe that, you’ll never move forward as an entrepreneur and as a company.
You need that kind of exercise because you need to prepare for the day when someone comes along and wants to put $5M into your company. If you haven’t managed to get over any complex you might have with money, that’s going to be a very difficult day. You have to develop a neutral, utilitarian relationship with money. And then you have to go earn it.
If you’ve earned it, you spend it. And when it comes to spending money, there are just two types of entrepreneur: cheapskates and everybody else.
Cheapskates have one short-term advantage and one long-term disadvantage. Over the short-term, they have a better chance of survival. When you start a company, every dollar is key, because you don’t know if it’s that dollar that will end up killing you because you don’t have it later on.
But over the long-term, the cheapskates need to remember that the game isn’t about reducing costs, it’s about increasing revenues. Make sure that you aren’t mistreating the people around you, because if you are, you’re going to create real problems when the company’s earning more money. It helps to make things explicit and objective, because naturally a cheapskate doesn’t want to share the value the company’s creating. But you have to, and this is one place where you can make it easier on yourself by looking at how other people are paying their team.
We at The Family are always saying, “benchmarking is for losers”, and it’s true - except in the domain of remuneration. You shouldn’t benchmark your product against competitors because pretty much no one ever does that - consumers aren’t out there looking at every option, products are very rarely in that kind of competition with each other. But employees will absolutely benchmark what they can make somewhere else, and all that information is easily available now. An employee can go do the same job in a different company, and so if you’re underpaying them, there’s no reason for them not to leave (assuming they have the opportunity).
So over the long-term, cheapskates can create a kind of anti-selection, ending up with a team made up of all the people out there who couldn’t get the same job in a better-paying company. The likelihood that you as an entrepreneur can convince the top talent you need to join for a salary that’s below what they can get somewhere else is very, very low.
Then you have the other kind of entrepreneur, the kind that’s more than happy to spend and share value. Here you risk building a team where people are there just for the money. This is harder to treat in an objective way. But if this is your personality, you have two things you can do.
First, never build a business with low margins. Low margin businesses can only be built by cheapskates.
Second, set milestone revenue objectives for your team that are pretty much impossible to meet. If you can keep encouraging people to bring in more revenue than they ever thought possible, and they can get even close to that, you’ll be fine even though maybe you’re paying them too much.
Like everything else in entrepreneurship, it’s not about what personality you have, it’s about being super honest about who you are and playing the game accordingly. You can’t win by playing someone else’s hand, you can only win by understanding yourself. I know that I’d never be able to build a company where I’d need to be super cheap and have the accounting done perfectly every day, it’s not possible. Everything I’ve lived and done in my life has contributed to making me who I am, and so I know that I need to build a company where we try to earn more money, not to save it. Figuring that out for who you are as a person is critical for an entrepreneur.
And again, creating higher margins isn’t impossible. The act of purchasing something is fundamentally irrational. You can’t just go around asking people in the street what they’d pay for something, because they quite literally don’t know! If Steve Jobs had done market research asking people if they’d pay $1000 for a phone, they’d have laughed in his face. Even when iPhones fly off the shelves, people tell you they’d never pay that, and lots of them don’t. But enough people have done it that Apple became a $2T company.
There’s another phenomenon that makes this work, in that if people make the irrational decision to buy something expensive, there’s a little thing in their head that will make them justify the decision to everyone around them. They become the greatest salespeople ever - “No, but you have to understand, the quality of the materials, it’s incredible!” - because they’re trying to shut up that little voice in their head that’s also saying, “Wait, you spent how much on that?!”
(By the way, the same thing happens with philosophers. When I was studying philosophy, I realized that 100% of the people who studied Hegel loved him. But it’s just because Hegel is so impossible to understand that when you get to the end and realize that it’s all just a circular philosophy that doesn’t really mean anything, even though you just spent 3 years of your life trying desperately to understand it, your brain immediately protects you and you start telling everyone how mind-blowing Hegel is. Derrida, same thing. A real philosophy makes 50% of people love it, 50% hate it! John Stuart Mill does that, because he’s saying something real. Anyway ;)
Money, prices, fundraising, valuations… entrepreneurs always try to make them rational and objective, but they just aren’t. They’re dynamic relationships that are profoundly personal and intimate. Money is something that we learn about when we’re young and that relationship has a huge impact on the rest of our lives.
An entrepreneur’s job is to take whatever relationship they’ve always had with money, whether they come from a background with lots of money or none at all, understand it, and then find a healthy approach that corresponds to your market and what you’re trying to build. It’s the only way to create real magic as an entrepreneur.
The mentality for finding growth
Every business needs growth, because that’s the nature of the capitalistic society we live in.
It took a Communist to teach us that. Marx explained the concept of diminishing returns really well, about how we live in an inflationary world; and since everything continues to cost more and more, if you aren’t growing too, you won’t survive.
So if your company makes $1M per year, and it keeps making $1M per year, over time that $1M is worth less and less. Any company that wants to have a sense of stability needs to be growing faster than inflation.
That’s the macro view. The micro view is that within any company, growth is what brings novelty into the structure. Novelty has the great benefit of killing boredom. If your company doesn’t grow, nothing new happens and everybody gets bored as hell. When you’re bored, you start putting in less effort, and things get worse.
For both of those reasons, finding ways to grow your company is healthy. Doing it requires keeping three things in mind.
First, you have to measure what’s happening inside of your company. Anything that isn’t measured won’t get better, and everything that is measured gets better.
That makes the decision of what to measure super important. You need to figure out those few KPIs that are critical - revenue, conversion, leads contacted, etc. - , put them on a spreadsheet, and keep track of them.
Keep it simple. If you have a spreadsheet with 70 categories, it’s both impossible to understand and it’ll always give you something positive that lets you say, “Oh, hey, we’re actually doing kinda good!”
Clearly measuring those critical KPIs helps you as an entrepreneur and it also keeps everyone on the team on the same page. Objectively measuring things gives everyone a real reason to either be happy or sad at the end of the week. A team that’s unhappy when things are going well is toxic; a team that’s upset because things aren’t going well is a good thing, because they see what isn’t working and they want to change the situation.
Measuring also lets you overcome psychological barriers to growth. An entrepreneur and their team need to feel like the company’s potential is infinite, that it can grow forever. Obviously that’s not literally true - no tree ever actually touches the sky, that sort of thing.
But! Before you ever get close to any natural limits on a company’s growth, the barriers are all psychological, existing only in your head.
Take the example of conversion rates. People used to think that the maximum conversion rate you could have in e-commerce was X% because they looked at Amazon and the other leaders, and figured that was the natural limit. But then some other entrepreneurs came along and said, “Wait, why? Why don’t we just try to make our conversion rate go up every week?” And they were able to completely explode every idea about e-commerce conversion rates, simply because they took away that psychological barrier that said it couldn’t be done.
And that’s the second thing: an entrepreneur needs to think in terms of flow and a posteriori understanding.
Entrepreneurs are lucky like that, because they don’t need to plan out every little thing, optimizing it perfectly before it exists. They get to build brick by brick, starting from something very simple and moving up into something much more complex. It’s always easier to optimize something that already exists - a posteriori understanding - than trying to visualize every little detail a priori, somehow miraculously fixing problems before they arise.
What’s the difference between thinking in terms of flows instead of stocks? Take two goals:
- Stock: “This week we’re going to make $1000.”
- Flow: “This week we’re going to double the revenues we made last week.”
The stock reasoning can make you happy and satisfied; when an entrepreneur is happy and satisfied, another entrepreneur is going to come along to grab everything they can. The flow reasoning is a goal that keeps moving upward; when an entrepreneur is moving upward, you’re the hunter, looking for exponential growth that’s very hard to stop.
By using a posteriori reasoning, the entrepreneur can hit the third key to growth: optimizing processes. You have to constantly be looking for ways to save time.
Take a simple example: let’s say your salesperson can deal with 10 clients. If you want to add 1 more client, you’ll need to add a 2nd salesperson. At that point, you’ll be losing money until you get 9 extra clients to fill up that 2nd salesperson’s day. That’s an investment, and it costs a lot of money.
On the other hand, if you take your original salesperson and optimize processes to save them time, they could go from 10 to 20 clients. That’s a benefit to your company that requires no other changes, no HR issues, no recruiting, no middle management. Now you’re finding internal growth that can be regularly evaluated, continuing to optimize it, continuing to improve it.
That said, there’s nothing worse than creating a process just for the fun of it. People need to be free to execute their tasks, to optimize on their own. When something really works well, OK, it can become a process and you can roll it out to more people in the company. Just remember that the process isn’t the key - it’s the mentality of always looking to save time.
This kind of growth philosophy is able to be applied everywhere. Never create artificial barriers in your mind. Never give yourself predefined timelines. If you tell yourself, “I’m going to take the next 6 months to develop my app,” you’re going to take 6 months to do it. But what if it could have been done in 2 weeks? That’s why instead you say, “I’m going to develop my app as fast as possible,” and then do it.
There are three things that go into the entrepreneurial recipe: money, people and time. Money and people can both be replaced; time is the only thing that you can never get back. And a founder’s time should be spent on bringing the most value to the company with tasks that no one else can do.
Those tasks change over time, and tomorrow they won’t necessarily be where you can bring the most value today. Constant change means anyone wanting to become a great entrepreneur has to learn to delegate. So many entrepreneurs never really grow because they’re not able to effectively delegate.
Take the example of a founder who’s a great salesperson. Every minute they’re not spending on sales, the company’s making less money. So they think that their goal is to spend as much time as possible selling. But that’s short-term thinking that loses sight of the real goal, which is to be successful over the long term.
Because in the end, you’ll reach your limit of what you can sell. There are only 24 hours in the day, it’s inevitable. And then your company will stop growing, it’ll just stagnate. That’s when the problems really start, because you’ll try to hire people to take over sales. Except they’re all worse salespeople than you, and nothing has ever been organized to help them get better. You never wrote anything down. You never brought anyone along to client meetings. And so you let them go, the process keeps repeating itself, and years later you realize you’re just the head of a local SMB.
This is a classic example, it happens all the time. It’s easy to understand why.
One giant reason is because people try to delegate things that they don’t know how to do. When you do that, you keep being the master of your domain, but you can’t evaluate how the people you hired are doing in those areas you don’t master. So now you’ve got a company where everything you don’t really understand is going badly and everything that is going well is done by you personally.
You can’t grow like that. Even if at the beginning your growth curve looks like it’s going up, you’re going to reach a plateau. There’s only so much any one person can do. The growth that you can have with a team is slow at the beginning, maybe even non-existent. But over time, those people will learn and get better. And once their curve starts going up, it’ll go far past whatever you can do yourself. Any one individual is linear; only a team can be exponential.
Delegating isn’t easy, but it’s necessary. To do it right, you need to keep a few things in mind:
- When you hire someone, have them follow you around and watch/listen for a while. They don’t say anything, just watch and listen. Once something’s done, talk with them as much as possible. Explain - everything that goes on in your head, try to make it come out of your mouth. Ask them questions, what they thought you’d do at this moment, then explain why you didn’t do that, etc.
- Once you’ve done that for a while, throw them into the deep end. Give them 100% responsibility to execute the task. This is the really hard part, because it’s when the dumb mistakes happen - a lot of them. And your job then is to remember two things: First, that every mistake they make is your fault; you put them in this situation, you’re the one who apologizes if things go wrong. Second, do everything you can to help your employee gain as much confidence as possible.
- Remember that if you didn’t make a giant mistake with who you hired, there’s a limit to the amount of mistakes they can make. If you push them to make those mistakes as quickly as possible, within a year or so they’ll be at the point where they really own the job. The key here is to never, ever make an exception during that year, to never take that task back into your own hands, even for a minute.
- And then it gets really tough on the entrepreneur, because after a year or so they’re doing the job better than you. After all, you were doing it together with all the other things you had to handle, but them? They’re specialists! Congratulations, you can now actually grow.
This comes back to what I was talking about earlier - as a founder, you’re not the company’s first employee, you’re the company’s first shareholder. Your goal as the first shareholder is to build something where you don’t even need to be in the office, where you can go on vacation for 364 days a year and just pop in for a day to make sure everybody sees you’re still alive.
Making sure that you, the entrepreneur, keep moving is the only way to eventually build a company where you’re the one who really understands the company as a whole. If you’ve mastered all the tasks and delegated them, built a team that’s autonomous and doesn’t need you, that’s when you can finally move toward making strategic decisions, because you’ve actually got the knowledge and understanding it takes.
A founder doesn’t make the decisions in a company because they’re the smartest one there, they make them because they’re the one with the most information. If you’re the smartest person in the room but you’ve only got 10% of the information, you’re going to lose to someone who’s only got 10% of your intelligence but 100% of the information. A smart person who’s missing information will end up at the wrong decision; a dumb person who has all the information will eventually make the right decision. (Of course, the best case is to be smart and well-informed - but if you have to choose, make sure it’s the latter ;)
The triangle of growth works like this: understanding and then delegating leads to a good team; a good team leads to growth; growth leads to more delegation because you have more money; more delegation leads to an even better team, an even better team leads to more growth, and so on and so forth.
The amount of work it takes to delegate, the amount of knowledge that person gains, it all means that keeping that person on your team is super important. Employee retention has to be at the top of your list, because otherwise the loss of those people is too much. You can’t put in the time and effort to train them properly only to have them go somewhere else. Obviously everyone won’t stay, but you need to think in terms of percentages, where your employee retention rate is high. That means paying people well, giving them more money when it’s possible, creating an experience that they enjoy, appreciating them.
Growth has its dark side, sure. If you’re talking growth, you’re talking speed; if you’re talking speed, you’re talking accidents. The more you grow, the faster you’re pressing on the accelerator. But as you go faster and faster, tiny errors can become catastrophic.
If you’re in a company that’s still struggling to take off, a mistake doesn’t really have much impact. But let’s say your company goes from $1M in revenue last year to $30M this year - all of a sudden, a little mistake that last year would have cost $10K now makes you lose $5M.
Startups are very fun to manage at the beginning because people are kind and happy, it’s all potential. But when you’ve got a real company that’s growing fast, attitudes change. An entrepreneur who makes a mistake from their couch isn’t treated the same as the entrepreneur who makes that same mistake after raising $10M with top investors.
Growth is that moment when a startup goes from being a kid to being an adult. If your growth is super fast, you have to become an adult super fast. And it’s pretty obvious why that can be a problem when you look at all the moments, all the mistakes that go into turning us from kids into adults.
Fast startup growth is unnatural, and that’s why you have to be obsessed with the operations and details of your company. Every detail where you can have an impact needs to be going in the right direction. If you’re growing and there’s a small detail going in the wrong direction, you end up paying for it 10 times over.
You can prepare for growth, but you need to do it right. For example, a bad way to prepare for growth would be buying an enormous server because someday you’re going to have a million people on the site at once. That’s just adding costs today for something that’ll probably never happen.
A good way to prepare for growth would be writing the code for your site in a way that makes it easy to adapt the site for users who come from all over the world. Even if you’re only operating in one language right now, you can pretty easily optimize the code so that it’s very simple to eventually change the language on the site. That doesn’t have any real cost right now, it’s preparing for future growth, and it’ll save you a ton of time later.
One last thing about growth. The problem with a company that grows in an infinite way is that it has to take infinite risks as well. That can create an issue of misalignment, because maybe you as an individual aren’t ready to take an infinite amount of risk. If your company is always rolling the dice and making bigger and bigger bets, you as a person are also taking the risk that you end up with nothing.
That’s why you need to make sure, as your company grows, that you do what’s needed to take care of yourself on a personal level. If you’re the only one at the table who has no money in the bank, your entire net worth is tied up in the company, how likely are you to take those bigger and bigger risks that come with really growing a company? You’ll be scared - naturally! - and so you’ll try to protect yourself.
Good investors know that, and there’s enough knowledge out there showing that entrepreneurs need to have a good salary and even sell some of their shares as the company moves through its various stages. You can’t take too much out too early, it’s a judgement call. The goal is to make sure that you as a person can stay aligned with the company’s trajectory. So on a practical level, don’t forget to take care of yourself.
On an emotional level, you also need to understand that you are not your company. Even if it takes up all of your time and you’re obsessed with it, it’s not you. The right way of seeing things is that you’re the parent to your company, the company is your child.
What’s the right way to raise a child? You can’t hope that they’ll be a carbon copy of you. There are strong emotional and physical bonds that grow and change over time, you love them, but they aren’t you. Your child has things that come from you and they have things that come from elsewhere. They’re their own person, they exist autonomously. Your job is to raise them so that they can exist on their own, living as happy adults.
A company is the same. You’ll make mistakes. You’ll have beautiful moments to celebrate. You’ll be tired sometimes, super energized at others. Through it all, your job as an entrepreneur is to do everything you can to make it grow strong and healthy.
Bonus: The COVID-19 Section
The past year has thrown entrepreneurs into a crisis that’s different from any the world has ever really seen. But that doesn’t mean you can’t apply good “startup crisis” knowledge, so here are entrepreneurial lessons on the mindset you need to steer a company on stormy waters.
Surviving a crisis
On the most basic theoretical level, the economy has the supply side, companies that make goods and services, and the demand side, customers who want those goods and services. A market is simply those two sides coming together and finding a (constantly shifting) equilibrium.
The COVID-19 crisis did something unique: it’s the first time we’ve ever seen a crisis with a complete breakdown in both supply and demand. 3 billion people who were confined in their homes, that’s 3 billion people who demand less, 3 billion people who no longer need a ton of goods and services. At the same time, there are goods and services that those people do still need, but the companies that provide them weren’t able to respond because their activities were brought to a halt.
That’s how we got a unique situation: hundreds of millions losing their jobs, trillions of dollars in destroyed value, and an entire system brought into question.
Anytime there’s a singular moment of crisis like this, everybody with an ideology comes rushing forward. You’ve got the people who are religious telling you it’s a punishment from above, the environmentalists telling you it’s nature taking its revenge, the anti-capitalists telling you the revolution is finally here, the capitalists telling you that only more capital will save us…
And they all find strength in the fact that they’re speaking directly to people’s fears and anxieties. Between the virus itself and confinement, this year has been a huuuuge moment for fears and anxieties.
My take? It’s pretty simple: Nobody knows anything right now. Including — especially! — me. I don’t know what’s going to happen next. But I can tell you what’s already happened.
With the first set of lockdowns, supply and demand came to a complete halt for 2 months. And no matter what, the impact of that is going to stay with us for years. It’s like a speeding train. If you’re going along at 300 km/h, and the brakes suddenly kick in and everything screeches to a halt, you know what comes next. Even once the train starts moving again, it takes a long time to get back to where you were before.
So people ask, Is the economy going to come back? Is the economy going to crumble? Are we going to completely reinvent our social system? Are we going to go back to normal?
All of that is in the future. It’s a mystery. And as an entrepreneur, it’s not your concern.
As an entrepreneur, your concern is figuring out how to make your business survive in a world that is going to take a long time to get back up to speed.
Another thing that’s totally new in this crisis is that it’s not caused by a war, or a financial product, or speculation, or anything like that. It’s caused by a virus, a virus that doesn’t have any nationality, that doesn’t stop at any border, that can affect all of us, that is invisible, and that every country is dealing with in its own way, without any real international coordination. That creates even more uncertainty for you to deal with as a business owner.
Faced with all this, there’s only one thing to do: make sure you stay completely, 100%, absolutely pragmatic over the short term. You have zero margin for optimism. If you are thinking that things will get better, that the economy will restart quickly, and you’re wrong, your big risk is getting kicked out of the game completely.
That’s the case for most entrepreneurs right now. If you’re in the lucky few who are doing well with the crisis, who are even getting growth, the question is still there: “How do I go faster in such an uncertain world?”
In that case, your determination is going to be the key factor. Even with a company that’s doing well, in a chaotic world it’s going to take an enormous amount of energy and intensity to keep things on the right track.
Everything you do in a recession/depression as bad as this one is going to take more effort than before. People are spending less money, less quickly. Opportunities are restricted. That means you’re going to have to do things by hand, to do the hard work of selling.
Be paranoid. Look at your situation and ask, “What can I do today to ensure that my business is still alive tomorrow? How can I act to make sure that I stay in the game?”
Reduce your timeline. It does no good right now to put together a 6-month plan, even a 3-month plan. The only way to be as agile and inventive as you need to be is by acting and reacting on a short timeframe. Don’t make decisions and investments that are only going to make sense over the longer term.
In the upheaval of a crisis, and especially what we saw with COVID-19, things are changing from day to day. It’s way easier to face that uncertainty, both emotionally and financially, by planning and acting from week to week.
Restructuring your business
COVID-19 is the latest catalyst, but it’s not the last crisis entrepreneurs will face.
There are 2 parts to a restructuring. One is the legal aspect, which changes depending on your specific context. Right now, we’re in a world where governments are letting businesses both put off a lot of their fixed costs (salaries, rent, taxes, etc.) and access loans — theoretically, at least.
But all that is just doing one thing: creating a ton of debt that’ll come back to really bite you. It’s not solving anything, it’s just pushing the pain off into the future. Is your business going to be able to take that future pain? Are you going to be able to pay off all that debt? And most importantly, are you going to be able to pay off all that debt when the world economy takes forever to get moving again, when your revenues over the next months or years are down 20, 30, 50%?
That’s why you need to restructure. You need to reduce your costs as much as possible and you need to come out of the crisis period with a business that’s lighter than it was before. I know it’s not what people want to hear, because one consequence is letting employees go, and that has a real impact on people. But as an entrepreneur, you need to ensure that your business not only survives, but thrives — otherwise, you aren’t going to employ anyone. It’s the only way you’ll be able to keep hiring people again when things turn around for your business.
So let’s get into the actual business aspect of restructuring — which, by the way, is way less obvious than the legal side and has way less information available online.
The first thing is to be upfront and honest with people from the beginning about the personnel cuts you need to make. If you have employees who you have to let go, tell them as soon as possible. They might be on various government programs during the crisis, in France we talk about “chômage partiel”, but you need to tell them ASAP that when things change and it’s possible, you’ll be letting them go. Some people might even be willing and able to help you out. After all, if you’ve built a business where people know each other & appreciate each other, you could have some employees who could want to start freelancing right now — developers, graphic designers, there’s a lot of demand out there. But accept the fact that if an agreement can’t be found, you may have to simply fire people.
I know that lots of people will scream at me about that, but that’s ok. I’m not here to talk about the bigger picture or how society should respond to this crisis. I’m talking about how to save your business and make sure it gets to a point where it can grow and thrive. This world we’re in isn’t going to get back on track by following the rules that were in place before. The COVID-19 crisis has been called a war, and you need to adopt that mindset.
Once you’ve reduced your salary costs as much as possible, get obsessed about your other costs. A good place to start is by just cutting 100% of your payments. Cut it all — business credit cards, bank accounts, make it so that no one in your company can spend anything. And you tell every employee that 100% of whatever they want to spend, they have to come to you.
You have to understand, line-by-line, the expenses that are critical for your business. And for each line, judge whether it’s absolutely necessary or whether you can switch to something else. Remember that you can renegotiate everything. Everything. Get on the phone and talk to people.
And make the tradeoff. If there’s a free tool out there that you can use and it’s half as good as the one you’re paying €500/month for, well, it’s half as good but it’s infinitely less expensive. Infinitely less expensive in today’s situation is a no-brainer.
Usually there are 2 ways to make more money: either you earn more or you spend less. If you know me at all, you know that I’ve spent years saying to go out and find ways to earn more. But today, there are 2 problems: you don’t know if you can earn more and you don’t know what your ceiling is. That uncertainty means that in the short term, you need to make radical decisions and spend as little as possible.
The third step of restructuring is profoundly rebuilding your business model.
In a crisis, you have to refocus 100% on your core activity. Whatever you have that’s adjacent, experiments, diversification, etc., forget about it. Cut it all, and put all your efforts into your core business.
This is one I can really testify to, because at The Family we’re always experimenting. We’re investors, we want to diversify, and for the past 7 years we did a lot of that. But today, the current situation means that we have to refocus 100% on our portfolio investments. So we stopped lots of activity, we sold off some holdings, we spun off some businesses. Everything that wasn’t our core business, it had to stop so we can get through the crisis and be ready for what comes next.
One last thing. Refocusing on your core also means coming back to how you price your business. And I know that 98% of you won’t listen to me, but right now is the moment to increase your prices.
A crisis is a moment when money is less available. It doesn’t flow as quickly, it doesn’t flow as far. But the people who have money in a crisis, they end up having more available. So you’re going to have fewer clients, but the ones you keep will have money to spend. Collectively, we’re becoming poorer, but individually, some people are becoming richer.
Think about what’s doing well: if you’re a video game company, you’ve never had so much money. If you’re a sex app, you’ve never had so much money. If you’re in telemedicine, you’ve never had so much money.
So if you’re one of those companies, or if you’re working with them, you’re in a moment when you can increase your prices and boost your margin.
The key to rebounding is having money to invest when things start moving again.
By the way, that’s why people who are starting from zero today are in a better position than people who started a year or two ago. They’re able to build clean, they don’t have to worry about all those early steps that I talked about above, they don’t have to deal with HR and firing people or anything like that.
But no matter if you’re restructuring or starting from zero, you need to be completely focused. Succeeding today is all about being strong, having no fat, being absolutely disciplined, and thinking about the short term. Long-term business models have no place in a crisis (and in startups, they weren’t great before either ;).
Marketing in a time of crisis
COVID-19 brought together two phenomena when it comes to marketing your business and making sales.
First, there are a ton of people pushing content online. Everyone launched their newsletter, their live show, they started tweeting more, everything.
And now everybody’s exhausted. People got burned out on having multiple Zoom happy hours per day, for work, with friends, their families… Somehow we were in confinement, we couldn’t see people, and all we needed was some alone time.
That means your marketing needs to be better than ever. A crisis is no time for amateurs, because the best of the best are doing the same thing. You have to become in-cre-di-ble if you want people to hear you. Use your own unique voice, now more than ever.
Second, this crisis brought out a big emotion when it comes to marketing — guilt. There are three levels of guilt to watch out for. There’s a baseline guilt, where we say to ourselves, “Man, this isn’t the time to try to make money, people are suffering, people are dying!”
Then there’s a deeper level of guilt, when it’s “There’s so much needed right now, I’m going to focus on doing something other than my core business!”
They’re both easy to feel — you saw how LVMH started producing hand sanitizer, how Tesla was buying masks… But the difference between LVMH or Tesla and the startup entrepreneurs that are reading this is somewhere around $400B.
My position is simple: the best thing an entrepreneur can do to help in a crisis is building a business that works and solves the problem it’s trying to solve. Everything else will follow.
Governments are out there putting their plans in place, experts are working day and night to figure out how to fight the virus, people are playing those roles. The entrepreneur’s role is to keep pushing, innovating, and creating value and prosperity that will get the world moving again.
Because there’s that third level of guilt, when you start questioning everything, looking around and say, “I’m not a nurse or a doctor, I’m not a first responder, I’m not doing enough, what’s the meaning here?”
I’m gonna be honest — this is the one that gets me the most pissed off. Because it means that before this crisis, you were in a bubble, you lacked empathy and didn’t understand what life was like for people who really do have hard jobs. If you needed COVID-19 to figure out that the people working to stock supermarket shelves had a hard job, that nurses were completely overworked, what were you looking at? COVID-19 didn’t start all of this, it just made it impossible to ignore.
But still! Praise be that we have people who do things other than medicine, or nursing, or working in supermarkets! We need musicians, we need writers, we need actors, we need people who concentrate on pleasure. Life isn’t just about disease, it’s not just about crises. We need all kinds of people doing all kinds of things. That’s what helps people live happy lives.
So yes, it’s the time to sell makeup and make people feel pretty. It’s the time to make movies that make people laugh, or cry, or scream. It’s the time to play video games and read comics, and to be the people who make them.
Your startup doesn’t need to be an obvious piece of the bigger picture — it needs to make sense for a particular reason, because it solves a particular need.
So don’t give in to the guilt. But also don’t waste your time at a job that you don’t love. If wasting time didn’t make sense a year ago, it definitely doesn’t make sense now.
If you now want to go and become a doctor, that’s fine, sign up for medical school. But if you really love what you do, keep doing it. There’s no need to feel guilty about that.
Remember that you need to listen to the people who are interested in your product, not the people who just want to find things to criticize. If you listen to the haters, you’ll never sell anything, because you’ll always be listening to the wrong people.
But let’s be clear: You can’t do your marketing like before, either. You can’t act like COVID-19 doesn’t exist, like the lockdown didn’t happen, like the world is somehow “normal”.
Today, you need to market using a few key ingredients: authenticity, tact, sensibility. If you’re too insensitive, find an empathetic friend and test out your message with them. We’re in a moment when you can’t make a mistake in terms of tone, you don’t want to really offend people.
Get back to the heart of your business. Whether it’s frivolous or serious, explain why you’re doing it. Even better, show why you’re still doing it, and find the message that will let you cut through all the noise.
That focus will serve you when you move from marketing (casting a wide net) to sales (closing deals).
Sales during this crisis are really hard, more so than most parts of your business. Developers don’t have lots of problems with remote, online marketing and ads, remote’s not a problem, those people have been doing some version of it for years.
But sales usually has all your salespeople in one room, they get each other worked up, they feed off each other’s energy, they get immediate feedback — that’s really hard to do remotely.
And let’s face it, the typical salesperson is an extrovert — and it’s much harder for extroverts to deal with a crisis where everyone has to stay away from each other than it is for introverts. I know, I’m an extrovert myself, and it’s been super hard for me! What gives me energy is meeting lots of people every day, having thousands of new encounters every year, sometimes every month. So I know what it feels like when all that’s taken away.
Because that’s what’s happened for so many salespeople. They were used to being surprised, having weird things happen, and then… poof.
As an entrepreneur, you need to understand that and find new ways to manage your sales team within this context.
First, remember that doing sales remotely is going to be a question of writing things down. Not everyone’s good at writing, so don’t feel bad about going on Upwork and finding super copywriters who can help structure it all. The energy that used to happen in person, now you have to make it burn through on the page — concise, precise, invigorating.
Next, realize that doing remote sales right is pretty much still to be invented. So get creative — don’t just do another boring webinar, really think about what you can teach people and how.
Since sales needs to be totally reinvented for a world of social distancing, that means there’s a giant advantage to be won if you’re one of the companies that figures out the new playbook that works. Selling at a distance is hard because it’s almost impossible to create trust from a distance — but only “almost”!
The companies that I’ve seen doing this best in our portfolio at The Family all have some similarities. One big thing they all did was to restructure to maximize leads, since it’s so hard to generate trust and close people. Read everything you can on increasing your leads and getting that first meeting, and put it into place.
They also adjusted expectations. Salespeople are going to end up having to work more than they did before. If before a good salesperson was taking a few hours to close a deal, now it’s going to be at least double that. It’s a marathon — so recalibrate what you think they can do, and take care of them.
This crisis is one that makes empathy and care so, so important. Do it for your customers, do it for your team. And do it for yourself, too.
Managing your team in a crisis
Restructuring, everyone getting thrown into remote work, the upheaval within teams has been massive lately. There’s a huge problem with people feeling isolated and like all they’re doing is working, especially because there’s no separation between their home and workspace anymore.
As a manager, you need to make your team understand that even though it’s a crisis, it’s a marathon, not a sprint. We’re living in a situation that changes all the time, with lockdowns being installed and then being lifted, guidelines that change from week to week, everything stopping and then rushing forward. To manage that kind of uncertainty within your team, you have to be super proactive with your employees.
When you’re all in the same room together, there are a ton of things in a startup that can be almost implicit, everyone’s aware of them just by being there. But when your team’s working remotely, you have to become very explicit - and that means writing things down very clearly. You can’t count on informal communication anymore; you have to adopt a more formalized style of communicating.
You also need to clearly see a difference among employees in this particular crisis: you have employees who are single or live with someone, but without kids, and then you have employees with kids. For the employees with kids, their productivity is going to be cut in two, there’s no way around it. Working from home with kids around is a gigantic challenge, and as a manager you need to acknowledge and accept that. It’s just a fact of life right now.
For the others, they might well be very productive working at home - no distractions, they’re comfortable, they can work all the time if they want. But that leads to a different problem, in that they won’t realize they’re pushing themselves into burnout. People can easily start sending messages at all times of the night, on weekends, because their social lives have been effectively cut off. As a manager that can be tempting to enjoy, because hey, they’re being super productive! But again, it’s a marathon, and over the long term it’s just not sustainable.
To find out how people are doing, you have to ask them. You need to build regular one-on-one meetings into your week to see how they’re feeling, for real. Ask about their fears, their anxieties (and if they don’t have any, great - but make sure to keep checking in, because that doesn’t mean they won’t have any in the future). You have to show them that you really care about how they’re doing.
It’s hard for employees to keep morale up during a crisis, and it’s your job as the manager to help them do it. With so much uncertainty floating around, it’s easy to get lost. Help your team to reduce their timelines, staying as focused as possible on what’s happening today and this week. Having objectives that are farther away than that is dangerous, because the likelihood of the situation not changing between now and then is pretty small. And nothing’s more depressing than not reaching your goals because outside circumstances get in the way.
This doesn’t mean you need to have small goals. You can make strong, radical decisions that put your company and your team into a better position at the end of the week than you were at the beginning. It’s not that you’re focusing on the short term, it’s that you’re focusing on things that you know are achievable. Hitting those goals and getting those wins boosts your team’s morale like nothing else.
Plus, this is a way of working in a startup that is just a good practice even when we’re not in a crisis. Startups aren’t defined by their ability to make good decisions, they’re defined by their ability to make fast decisions and execute them just as quickly. A crisis like COVID-19 can force you to reduce your timelines and act now, which is something that will only help your startup.
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