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daily articles for founders

Here are 10 quality posts from the Founder's Library:

Where to find a business partner   ✶

David Alison:

There are lots of reasons people want to work with a partner when starting or growing a business. In many cases a partnership happens out of a shared passion; two or more people discuss an insanely great idea and before you know it they are sketching out a product or business plan on a cocktail napkin. Then there are those that have an idea but recognize they need someone that has skills they lack or maybe want to share the crushing workload that comes with starting a business.

He proposes the following key methods

  • Find cofounders amongst your friends and colleagues;
  • Use the social web to meet potential cofounders;
  • Always be networking

Cultivate your network carefully and over time you will find that what you are really doing is inserting yourself into a new community, one populated by fellow entrepreneurs that are hungry to build up their business. You may not find a new business partner overnight but in time either the right person will pop up on your radar or you will have learned enough that maybe you don't need that partner after all.

Of particular relevance is this HN comment, which clarifies a very important point:

Never force the relationship. Network - but do it to meet new people not specifically to find a partner.

The way I like to put it is that networking to find a cofounder is like going to a party to find a wife. You might meet lots of interesting, and potentially eligible, partners while out networking/partying, but those who respond favourably when you mention what you're looking for on the first "date" are probably not the ones you want to marry.

It sounds very tricky and Zen-like to say you should go out networking, but you will only find a good cofounder if you're not actively trying to find one, but, sorry, that's the way human relationships work, in both the business and personal cases!

Advice for a young entrepreneur   ✶

Tony Stubblebine starts with the following (well presented) advice:

  1. Surround yourself with interesting people;
  2. Focus on the right things (which means, ironically, figuring out what the right things are);
  3. Be useful.

He ends on a little zinger:

There's basically two ways to be financially successful as a company. One, you could rely on time-tested business fundamentals. I call this the Warren Buffet model.

Two, you could rely on the greater fool theory, which is that with enough hype, smoke, and mirrors you can find a buyer who is an even greater fool than your investors.

(...)

So much of the startup world is arrayed around the greater fool theory that I felt like my best chance was to build a company that was independent of that system. I think of bootstrapping as a very slow form of raising money. But now that we've done it, I have a reliable stream of income and never have to raise money again. It's really just at this moment in time that we can switch from doing whatever it takes to survive to actually testing our ability to make a major impact.

To be fair, there are situations where you do need the extra money to grow extra fast, or else you lose. Groupon is a good example - had they not executed so brilliantly and quickly, they would have been eaten alive by the dozens of clones which emerged everywhere.

I'm a big fan of getting profitable early, but it is neither the only way, nor the universal best way.

Management is a support function   ✶

Here's a great article from Joel Spolsky, which makes the point that management is not about command and control, but about providing support:

Thus, the upside-down pyramid. Stop thinking of the management team at the top of the organization. Start thinking of the software developers, the designers, the product managers, and the front line sales people as the top of the organization.

The "management team" isn't the "decision making" team. It's a support function. You may want to call them administration instead of management, which will keep them from getting too big for their britches.

While there is certainly plenty of decision-making required at the "top" (mostly about strategic direction and key hires), the decisions on what to do to react to specific daily business situations should be driven by those closest to those decisions.

The sad thing is, management gurus like Peter Drucker have banged on that drum since the 50's, and yet many businesses still operate as if centralised decision making was viable to build large businesses. It's not. As Spolsky (and, a few decades ago, Drucker) point out, centralised decision-making is simply not scalable.

That being said, of course, "building a large business" is not everyone's aim. If you don't want your business to get big anyway, you can probably sustain centralised decision-making until your business gets to a few people or so.

How to evaluate founder exits   ✶

Elad Gil with yet another excellent article, this one covering how to evaluate exits, as a founder, from a financial perspective:

(...) as an entrepreneur you should never go somewhere you think you will be miserable, even if it seems to pay more over multiple years. Entrepreneurial people tend to quit more often and more easily, so don't mislead yourself on how long you can stick out working for someone else.

All this is definitely in the "nice problem to have" category, and will not be a worry for most entrepreneurs, but if you're going through the process or planning to at some point, you should definitely have a read.

Working for a no-shot startup   ✶

Randall Bennett suggests, among other things, that you should not feel bad about working for what he calls a "no-shot startup" (one where inexperience meets enthusiasm and results in some kind of startup disaster), because you will still learn from those, and:

Crucially, the biggest advantage of working lower down the spectrum is that mistakes don't stick with you. In general, mistakes don't typically stick with you, but the further up the spectrum you go, the tighter knit the community. Make a mistake at the bottom of the spectrum, and there's enough people making mistakes that it's unlikely your mistakes will give you a bad reputation. On the other hand, screw up a company with $41mm in funding, and those mistakes are more likely to follow you.

That's a fair point. Conversely, I expect that most investors with $41m to swing around won't invest in a team that hasn't cut their teeth on previous ventures. And in fact, they didn't, since the colors.com team, to take the example Randall presents, is actually pretty solid and experienced.

Randall adds that after starting at the bottom, once your first hopeless venture dies out, you should work at moving up the ladder, into more and more successful startups.

I think there's a very valuable further point to make.

Startup MBA

Once upon a time, MBAs used to be designed for people who had 5, 10, or more years of business experience, to enable them to formalise and structure their knowledge of what makes a business tick. This was before the trend became to do an MBA 2-3 years out of university, or, god forbid, right afterwards.

The key point there is that until you have some of your own experience to drawn on, most of the things taught in an MBA won't stick, because deeply, viscerally, you won't understand why they're important.

The same is true for startups, but in reverse. Until you've worked (either as a founder or as a very early employee) in a broken startup, you won't know, deeply and viscerally, why the things that successful startups do matter. There are many lessons that you can only understand by contrasting them with the failure case. That's when the insights happen... "Aha! That's how you're supposed to do that."

In short, breaking your teeth on a "no-shot startup" before joining a successful one will help you make the most out of your time at the latter.

How to explore and develop a business idea   ✶

Here's a great article by Noah Kagan, outlining the steps from defining a business idea, to evaluating its market potential and finally testing its viability.

This should be a must-read for new entrepreneurs, as a step-by-step template for getting started without risking everything into a moon-shot startup. This approach may not make you the next Steve Jobs, but knowing how to do it will require you to learn many skills which are useful in any business.

Three traffic triage questions   ✶

Ilya Lichtenstein on traffic triage, the activity of efficiently filtering which online marketing channels are worth investing in, and which aren't:

The trick to allocating your marketing effectively is implementing some kind of traffic source triage system. When encountering a new traffic source, you want to be able to quickly and consistently categorize it into a low, medium, or high priority group, before spending any time or money testing it.

Ilya then proposes three key questions to ask about any kind of traffic, and goes into detail about how to answer them:

  • Is there enough volume?
  • Is the traffic cheap enough?
  • Does the traffic convert well enough?

Importantly, Ilya describes ways to answer these questions without having to invest money into the traffic source.

Faking initial user interest   ✶

This very interesting article from a couple of months ago comes via this almost equally interesting "AMA" ("Ask Me Anything") post on Reddit, about how to build a social entertainment website.

The key point is that some businesses need to solve a chicken-and-egg problem of getting significant numbers of users before more users will join. One solution to this, which sites like Reddit or the new darling Quora have used, is to fake the initial activity, to present a higher level than would otherwise be apparent.

Of course, this doesn't mean put up false testimonials ("Great app; use daily! - Barack Obama), create fake real-time activity (extremely easy to spot), and fake your numbers (though I know plenty of startups that do, and it works).

Rather, you can engineer your appearance to give off a sense of size.

Worth a quick read.

Balance in the startup life   ✶

Through the example of his excesses during his years at IronPort, Scott Weiss comes to a wise conclusion:

In retrospect, I believe that I could convince the hardest working CEOs that having some real life balance by investing in your important relationships will make you a better CEO. When you are out of balance, it affects your stress, judgment, and ultimately becomes another destabilizer just when you need to be the most put together. I also believe this change is actually a much better example of leadership than the one I was exuding. When a leader shows the way toward getting things done and balancing their life, it sets a much better example for everyone else in the company who struggle with it too.

Reading the whole article is quite harrowing. Scott's wife deserves a medal for putting up with all this.

At the end of the day, my advice is to reject the Aztec Principle of work: that there must be sacrifice and hardship so that the sun may rise tomorrow. Instead, realise that a healthy, balanced life is a much better starting point for success than an excessive, unbalanced, unhealthy life.

Tough choices

We all have priorities in our evaluation of different aspects of life and business, whether conscious or subconscious. When we make decisions that respect those priorities, we tend to feel at peace. When we make decisions in conflict with those priorities, we feel that something's wrong. In some cases, being forced (by circumstances, someone, or one's own lack of awareness) into making such a decision can leave one very distraught.

Very often, the right choice can be found by simply "feeling" for it. You can rationalise it all you want, and even come up with elaborate, sophisticated and very convincing arguments for why it's right, but cheating on your partner (to take an obvious example) feels wrong, and that's your subconscious telling you this is not the right choice according to your priorities.

Unfortunately, life also throws much tougher choices at you. Making decisions is (comparatively) easy when there's a right choice and a wrong choice, but in many situations, it feels like there's no right choice - just wrong choices. In those situations, no matter what you do, someone will lose out on something and they'll be pissed off at you for making that choice. These are what I call "tough choices" - they're tough, because all the options feel wrong.

This happens particularly often in business. Tough business decisions are inevitable. Whether it's dealing with a fallout between cofounders, firing an employee that's not performing, negotiating a tough deal, or even assigning shares in a new business, businesses seem to have an almost magical way of providing an endless series of tough choices. To make matters worse, many startups are like pressure cookers that heighten emotions and drama and make all those decisions seem even more important and personal to those involved.

I've had my share of these tough choices (though there are no doubt many more to come), and I've come to realise that there are some very fundamental principles that can help with those situations.

1. Be aware of (all) your options

Most of the "tough choices" in life are artificially limited. "You have no other choice," says the authority figure in the famous Milgram experiment. "Oh, I have a lot of choices", replies one of the very few subjects who resisted this artificial narrowing of possibilities. Watch it for yourself here. It's inspiring.

Life and business throw many real "tough choices" at you, but the first thing you should do when faced with one is not to make a decision, but to see if the landscape of choices can be expanded. Many times, it can. In particular, it is always worth being suspicious of the menu of choices on offer, when it is offered by someone else. Chances are, consciously or not, the choices on that menu will be crafted to lead you to make the choice that someone else wants you to make. That is one of the most common ways that you can end up making decisions that conflict with your internal compass, and which you end up regretting.

Another factor that often limits our choices is our own axioms of behaviour. "I won't break my word" is a common one, which is easily discarded in extreme circumstances, but which we hesitate to disregard in normal situations. I am an honest and sincere person, but if I was in Nazi Germany, and an SS was asking where the Jews are hiding (and they happened to be in my neighbour's cellar), I would lie to them without hesitation and not feel bad about it. In more mundane situations, we tend to ignore this option of evading our own behavioural axioms.

Now, I'm not suggesting that breaking your word should become a routine, daily maneuver (though I'm sure some people will misunderstand this... this is the internet, after all). However, when you have really tough choices to make, I believe it's important to consider all options - including those that involve behaviours that you would not normally condone.

So, the first tool at our disposal is to reject externally and internally dictated set of choices and explore the full landscape of choice. This should be an automatic reaction to a situation where a tough choice presents itself.

2. Be aware of your priorities

The second principle is to be aware of what your priorities are. I'm not talking about your business priorities, or your priorities as an entrepreneur, though both of those matter and you should be very aware of them. Ultimately, however, you will have to live with your choices as a person, as a human being. So what are your priorities on a personal level?

Everyone will have a different set of priorities there, and the point is not to judge whether your priorities are what they should be (that's a whole different exercise), but simply to be clearly aware of what they are.

Are friends more important than business? That's an important bit of internal compass to be aware of when you start businesses with friends, because you will probably end up being faced with a decision that hinges on this question, some day.

Is creating value for customers more important than making profits? Are employees' livelihoods (if you hire any) more important than your own financial outcome from the business? Is your family more important than your employees? Is being entirely honest more important than closing the sale, or is it ok to be mostly honest? Is your health more or less important than your achievements as an entrepreneur? Would you sacrifice your life to make that dent in the universe?

There are many such questions that you can ask yourself. They're tough questions, whose answers will often determine your decisions when faced with a tough choice. Yes, they seem more personal than business-driven, but that simply reflects the fact that business is (for now) conducted by human beings, not by impersonal processes. You have to live with your decisions on a personal level, no matter how you may try to justify them as "just business".

Many may look at these questions and say "well, I don't want to make that choice - I value both family and employees", or "friends are just as important as business, I don't want to screw up either". Fine, tell yourself that if you want to, but that's just denial (similar to a product manager ranking all of 50 items on the development plan as "highest priority"). Some day, you'll be faced with a choice where either your employees or your family will be disappointed with you, where you'll either hamstring your business or your friendship, and then you'll have to choose one of the two.

That the choices will come is inevitable. What I'm suggesting is that by spending the time now, when you're not facing a crisis, to clarify what your priorities are, you will find it much easier to deal with the tough choices calmly, without panic, and correctly, when they do come.

A worthwhile exercise, then, is to try and figure out what are your top three or five priorities in life. What are the things that trump all others, and in what order do you place them? Having done this homework (and redoing it when you sense that your priorities have changed) helps in both personal and business life.

This is the second tool to deal with tough choices: be aware of your priorities in life, so that you can use them when making tough choices.

3. Erring on the right side

Sometimes, even though you're aware of your priorities and the full landscape of your choices, you might be confused about which choice best supports them. It might seem that all the options disregard your priorities equally.

When priorities fail, you can still fall back on universally accepted human values. Generosity, mercy, freedom, love, peace, life - those values (and many others) are universally accepted as good, and, should all other methods fail, falling back to them is a final safety net to make decisions that you can live with.

This might seem melodramatic, but it is a powerful tool when faced with the really tough choices.

If all the choices seem to contradict your priorities equally, which of the options is more generous, more merciful? If every decision is a mistake anyway, we can at least try to choose so that our mistakes lead us towards a better world rather than a worse one.

That is the final line of defence: if every choice is an error, we still have the choice to err towards good rather than evil.

In conclusion

I've proposed three principles to deal with the tough choices that come with every business. All of them start by accepting that we live with our decisions as human beings. "It's just business, it's not personal" is a fallacy. Everything is always personal to both the decider and the ones impacted by the decision, and recognising that leads to a framework that enables people to make decisions that they can live with.

The three principles are:

  1. Reject externally and internally dictated sets of choices and explore the landscape of choices on your own.
  2. Be aware of your own priorities in life, so that you can use them to guide your tough decisions.
  3. If every choice still feels like a mistake, err on the side of good, universal human values.

I hope you find this useful the next time you are faced with tough choices.


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