Start-Up Drugs

Start-ups can be a vice grip of stress. At first you don’t have money, and so when you finally do, it’s feels like a victory. You are funded at last. So much effort goes into fundraising that it feels psychologically like you’ve made it.

You haven’t.

Within six months of raising venture capital, something goes wrong. It always does. You quickly realize you’ve added a huge new source of stress: getting a return for major shareholders who define winning as building a huge business. That goes on top of the formidable baseline stress of building a great product, delighting your customers, and providing stable and meaningful jobs to your team.

The new capital is different than the angels who invested previously. They came in for the love of the game and owned a tiny stake. The venture capital is a different ballgame. These folks are fiduciaries whose own jobs are on the line, and they probably own at least 10% of your business, and on frequently more.

You don’t want to let them down. So why did you feel a sense of accomplishment when the capital came in, when you really were just getting started?

It’s a paradox that because the process of raising venture capital is hard, it feels like an ending when it’s really a new beginning. The goal was never the fundraising, it was the innovation that fundraising enables.

So now what? The core business isn’t producing. The thesis of the investment isn’t panning out. You’ve got capital. But you’re not deploying that capital into growing your business effectively.

The narrative is gonna be you raised money against something that showed promise and could have been great, you took dilution and raised the stakes with pricey valuation, and now you’ve screwed the whole thing up because you couldn’t translate that capital into growth.

The pressure to grow increases as you miss numbers. You know it, your board knows it, your team knows it: growth is the lifeblood of a start-up. Your current investors can’t put more money in if there aren’t new investors who want in. Fresh blood is required. And the romance phase with your VCs moves into the marriage phase. Will it end in divorce?

You thought not having money was more stressful than having it. Now you’ve got it, and you realize you are even more stressed than you were before when it was just you in the garage.

What do you do when you have cash but no productive use of it? Drugs.


Advertising, or paid marketing, is one way out. You spend money, you make money. You spend more money, you make more money. The only problem is the money you are “making” is showing up on the top-line and not the bottom-line.

Once the dust settles, as you look more closely, you will find you are acquiring worse and worse cohorts of customers. In many cases, to make the advertising really sing, you are running promotions and deals that erode your margin and your brand.

Now everyone is hooked on the top-line growth. The revenue expansion is driving a (private market) valuation that you need to keep “up and to the right” to raise capital. You must avoid the dreaded down round at all costs.

With supreme intellectual dishonesty, everyone marches on, temporarily intoxicated by the envisioned share price appreciation that comes from growing your top-line. Founders are usually the most guilty of this delusion. If you don’t have honest investors around you to tell you the truth, god help you.

What does advertising have to do with this? It’s the crack. It becomes more and more addictive as you use it. As one of my lead investors — the Oracle — once told me:

Spending a lot of money on paid marketing is a great way to scale a bad business.

Once you start, it’s like building a time bomb into your P&L which pushes out your break-even. It cannot be shut off without shutting off growth. Your investors may get liquid along the way, but if you really care about this company, you as the entrepreneur are screwed because your company’s never going to win.

How does this happen? Everyone wants to see that the advertising works, so they look for the confirmation bias of good news: more advertising equals more growth. What they don’t do is the more nuanced (hard) work of looking at how the marginal cohorts are declining in value. What they don’t look at is the detailed impact on the quality of that growth, aka the margins and repeat transactions attached to it.

Why don’t they do this?

Part of it is the systems to look at the data are rarely very good in a start-up. Part of it is you’ll need really talented analysts, a precious resource and often a luxury at the early stage where most people are zapped just keeping the trains running on time. Part of it is even if the systems are pristine and the data is rapidly returned by ready analysts to business (which I’ve not seen three for three at any start-up), it can take twelve to eighteen to twenty-four months to have confidence in where the cohorts are going.

In startup lifetime, that’s an eternity, and you’ve already burned through cash for a business which might be cash flow negative even pre-marketing dollars. You’re ready to raise your next round, because you need to, and you don’t even know if your growth is good.

Something stinks, but no one has an incentive to look under the hood because the bad news could preclude the next round.

A paradox is that it can be worse if you actually get the money raised without addressing the problem. You may have your conviction furthered in using crack to scale by the new capital coming in. Worse still is when founders get liquidity as part of these “hit the crack-pipe” rounds. Founders take huge sums of money off the table before employees or other investors have made a penny. The stomach turning part is that non-founder shareholders may never become liquid due to this top-line expansion/death spiral valuation fallacy.

So what to do now? Your whole company is hooked on crack. You are, your board is, even your internal team culture and organizational structure is architected to it. The very people you have in chairs is structured to deliver that shot in the arm.

What are you going to do? I don’t know exactly. What I do know it is likely to involve emotional turmoil and that ultimately nobody cares.

Speaking of which, can we get Ben Horowitz posting up in here?

What I can do is tell you what I did. When I do, the word did will become a link.

What I can do is tell you is that if you’re not going to pivot, you’ll need lead bullets and little bets.


Founders have a gift for imagining a future that might be and then endeavoring to make it so.

By definition if you make it past the first few years, you have a track record of envisioning the future, attracting resources to that envisioned future, and in fact creating it.

This track record of success in achieving something likely thought contrarian when you began — otherwise everyone would be doing it — is both the reason for the company’s being and a threat to its existence.

The former we all get. Why the latter?

Mostly because the act of scaling a company once created is very different from the act of creation itself.

Scaling a company requires focus and execution. Starting a company requires imagination and being driven to distraction by life so much so that your imagination becomes your reality.

When the time comes for imagination vs. execution to do battle within your own company, it won’t be clear who is right. As the founder you will have history on your side (we made it here by following me, didn’t we), persuasive ability on your side (you wouldn’t be in the chair if you couldn’t attract talent and capital), and one of the most powerful home court advantages in humanity going for you (everyone is there because of you).

This doesn’t mean you will be right about what to do, which will be tricky for you, internally. Deep down you know you don’t know the future, and so you may end embodying a quote from Reinhold Niebuhr:

Frantic orthodoxy is most often rooted in doubt.

According to a little Harvard Business Review ditty called The Founder’s Dilemma, 30% of founders are gone in three years, 50% in five years, and 90% in ten years. I believe the fundamental reason is because creating something and scaling something are different jobs.

Yet the paradox is that the biggest companies are created by founders who can grow into becoming CEOs. I don’t have much to add on why this is, as Andreessen Horowitz pretty much wrote the book on it.

What I can say is that start-ups which become big companies are a survivorship bias of rocketships. Rocketships are start-ups which grow so fast that the founder has the luxury of learning on the job because they’re viewed as geniuses, or are indispensable in the early innings. That genius attracts a lot of capital, and capital plus indispensability plus strong growth equals plenty of founder time to evolve from founder to CEO, and to over time hire a leadership team that can cover for their weaknesses. As time heals all wounds in life, growth solves all problems in start-ups.

Perhaps I spare too much credit though for the rocketship founders, which leads me to this: most founding CEO are better at focus and saying no than I have been over the past six years. Particularly under duress, I find myself coming up with new ideas and getting excited about shiny new objects. The really good founding CEOs I’ve seen are much, much better at saying no.

Hope is not a strategy.

Prior to a lobotomy I just underwent which removed shiny new object syndrome (SNOS) from my brain, I was both an asset and a threat to my own company.

The company is trying to do one thing, and I would come up with another. I can’t tell you how dangerous this is. If the founder doesn’t know what the company is doing, the company won’t either.

In some cases the shiny new object you come up with saves the company. In other cases it sinks it. If it’s the former, they will call it a pivot and hail you as brilliant. If it’s ends up being a distraction or taking the company off course, they will call you delusional and un-focussed.

So which will it be? The evolution of the company that creates an awesome core business? Or a hope-fueled delusional fantasy of what the future might bring that creates the accurate narrative that the founder screwed the whole thing up?

I’ve attempted both. One thing has worked so well it might change retail forever. The other thing went so poorly I literally can’t understand the self that thought it possible.

When something isn’t working, there are two strategies. One is do more of what isn’t working. That’s crack. The other is do something totally different. That’s ecstasy.

If you have to make a radical pivot, do it. It’s the equivalent of leaving South America on a man-made raft to sail to Africa. You might make it, you probably won’t, but if it’s more hopeful than staying the course, then go for it.

In all other cases, there is a third path which I have come to believe is better: let’s call it LB squared, which stands for lead bullets and little bets.

Little Bets + Lead Bullets = LB Squared

There are no silver bullets for this, only lead bullets.

First, you just have to do the hard work of fixing what’s broken about what you began in the first place. A lead bullet is this: just fix it. Do whatever you have to do, but fix it.The godfather lays it all out here.

Once you’re on the lead bullets track to fix the core, it’s time to make some boundarized little bets to expand the horizon for what the company might become, and this is critical — without de-railing the core endeavor which is in the lead bullet itself.

In the words of the author of the man who wrote the book on it, Peter Sims:

We all want to make big bets. That’s a Silicon Valley mantra. Be bold. Go big. But I think ingenious ideas are over-rated and that people routinely bet big on ideas that aren’t solving the right problems.

A little bet is this: you take your pivot idea or an aspect of it, and treat it not as a game change but as an experiment. You might even be able to run a couple little bets in a year while you focus on fixing the core, the lead bullet. Remember: don’t make any little bets which are too big to fail.

If they’re too big to fail, you’re actually attempting a pivot.

It’s critical that the company understands whether the experiment is a pivot or a little bet. They need to know where the lion share of the company’s energy is going. They need to know if what they’re doing is fixing the existing business or moving into a new business.

Sound like fun? This job largely isn’t. It’s one of the great myths of starting a company that it’s fun. It’s like being with an infant. It’s really hard work, it’s often miserable, it’s frequently stressful, it’s incredibly meaningful, and it’s sometimes fun.

Start-ups are my favorite thing in the world because they are the direct collision of fantasy and reality.

Charisma will get you capital. It won’t get you a business. Imagination will attract people. But it won’t give your employees the lasting sense of purpose that winning will.

Getting to a real business from something that is a twinkle in your eye is a long journey. If you really want to build a P&L vs. just sell your top-line user or revenue growth story to an acquirer, be prepared to buckle in for ten years at least.

When it gets hard, and it will, avoid drugs. They’re temporary relief but as they do in real life for addicts — they only make the recovery harder, the lead heavier, the stakes of the little bets higher.

The stakes are high enough already.

The magic of a founder in times of duress is that you have the imagination and the moral authority to lead people through the scary parts of the journey. The scary part is that the very personality traits that enabled you to start the company could ruin the company if you can’t rein yourself in and become a CEO.

Next Story — The Emerging V-Commerce Encyclopedia
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The Emerging V-Commerce Encyclopedia

The goal of this encyclopedia is to create a compendium of V-Commerce brands. If you’d like to be added, add your brand in the notes or please comment. For purposes of this list, it might be good to observe a $1m run-rate min.


American Giant



The Bouqs
Brilliant Bicycle


Combatant Gentleman


David Kind
Dollar Shave Club


Ernest Alexander


Frank & Oak




Honest Company
Hungry Root


Interior Define


Jack Erwin


Koio Collective
Kopari Beauty




Mack Weldon
Ministry of Supply
Mizzen & Main
Monica & Andy
MVMT Watches


Noble Brewer


Outdoor Voices


Pact Coffee
Pact Underwear

Paul Evans





Ratio Clothing
Roka Sports


Shoes of Prey
Smart Bedding
Sole Bicycles


Tea Collection
Tommy John
Tuft & Needle


Warby Parker
Whipping Post

Originally, this encyclopedia called these brands Digitally-Native Vertical Brands, aka DNVBs. As this acronym was cumbersome according to a lot of people including Inc. Magazine, I awaited a better idea from the internet, and one came thanks to Dan Scinto. While it has also been used for virtual commerce, that never took off — so hopefully it sticks here. Thanks Dan.

Next Story — What’s V-Commerce? Only the Future
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What’s V-Commerce? Only the Future

Vertical Commerce brands are up next in commerce

A V-Commerce brand, or digitally native vertical brand (DNVB), meets four criteria:

  1. It’s primary means of interacting, transacting, and story-telling to consumers is via the web — desktop and mobile. In almost all cases the V-Commerce brand is born digitally.
  2. It’s a brand, and that brand is vertical. The name of the brand is on both the physical product and on the website. It requires the commercialization of an e-commerce channel, but that channel is an enablement layer, it’s not the core asset. It’s not E-Commerce, it’s V-Commerce.
  3. The V-Commerce brand is usually maniacally focused on customer experience and on customer intimacy. The experience tends to be three-part bundle of physical product, web/mobile experience, and customer service that collectively become the brand in the consumer’s imagination.
  4. While born digitally, the V-Commerce brand rarely ends up digital only. This means the brand can extend offline, eventually. Usually its offline incarnation is through its own experiential physical retail or highly selective partnerships. In nearly all cases of partnerships, the brand controls its external distribution versus being controlled by it.

As an investor community, too often the V-Commerce brand is compared to a typical E-Commerce company. If a typical E-Commerce company is a frog, at birth a V-Commerce brand does look a lot like a tadpole. But it doesn’t end up as a frog. The difference is profound, and it requires an appreciation the role brand plays in inspiring people, speaking to them, and shaping their choices.

It also requires venture investors to look more closely at the downstream math of a V-Commerce company versus an third-party E-Commerce purveyor. That difference in the unit economics is so meaningful that you can hardly compare the businesses. Just because they both have LTV and CAC ratios does not mean they both have the same potential value to the consumer in the medium to long run. The third-party stories are flashier at first on the top-line (more brands!), but the long run winning strategy may well be more focus (building a brand monotheism). The E-Commerce company is a channel; the V-Commerce company is a brand.

Furthermore, while third-party E-Commerce requires you to compete against a grizzly bear called Amazon, creating a V-Commerce brand gives you an opportunity to combine the growth of being an E-Commerce company with the margins of being a brand, and with a proprietary selection of merchandise where you control distribution and your own destiny. Moreover, when done right, aka where there is some differentiation in the core physical product made possible by the V-Commerce nature of the model (and this is the key thing entrepreneurs get wrong in starting V-Commerce brands the world doesn’t need), the model enables a better experiential bundle than consumers have ever seen before. These V-Commerce brands can begin to turn entire industries on their head. This creates a brand loyalty impossible to create in the commoditized world of “channel.”

In the history of V-Commerce brands, it’s incredibly early. We are still in the first decade of a multi-century macro trend where retail is re-organizing from around the automobile to around the smartphone. Vertical brands were a huge part of the last era of retail (Zara, Ikea, Gap), aka the offline one, and now they become the driving story in the future of digital retail. The moving parts in the shifting retail landscape are right in front of us to see. What is not appreciated is that the best opportunities may accrue to entrants rather than existing players. The creation of the V-Commerce brand becomes a profound opportunity for investors, entrepreneurs, and consumers alike.

The $1B acquisition of Dollar Shave Club is just the beginning.

Next up: the encyclopedia of V-Commerce brands.

Originally, this article called these brands Digitally-Native Vertical Brands, aka DNVBs, exclusively. As this acronym was cumbersome according to a lot of people including Inc. Magazine, I awaited a better idea from the internet, and one came thanks to Dan Scinto. While it has also been used for virtual commerce, that never took off — so hopefully it sticks here. Thanks Dan.

Next Story — The Day Badi Mummy Died
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The Day Badi Mummy Died

Parkash Rani Ahuja, 1922–2016

Three years ago for Mother’s Day I wrote this tribute to my grandmother and the women in my family. It begins like this:

My Indian grandmother was born in what is now Pakistan ninety years ago. She was promised to be married at 11, married at 13, had her first miscarriage at 14, her second miscarriage at 15, her first child who passed away at 16, another child who passed away at 17, and then seven children who survived, the middle of whom is my mother.

This Mother’s Day we celebrate her passing on to the next life. This letter is my woefully inadequate tribute to her:

Dear Badi Mummy,

You came here to take care of me and so my mom could go back to work. You were a child bride yourself but you understood that women should have more independence than you did. You raised me like a second mother for some time, and then you went and did it again for our cousins.

Whenever you went to India, I asked you to bring back a gold elephant. You always did. I never connected the dots that the elephants were female. You were our matriarch and we revered you. We touched your feet each time we said goodbye. You must have known.

It’s sad that I didn’t acquire the language skills to understand the parts of your matriarchy that could be more, how do we say this, forceful. Turning over the cups in the pantry to be right side up versus wrong side down after my dad unloaded the dishwasher, admonishing him in Punjabi about the trapped water though he spoke only English.

While I couldn’t really understand you either, we shared an understanding. I always gathered that you loved me and that I should be good, work hard, eat a lot of roti, and know that I was loved. Recently I once asked you through my mom if you could go back in time and do life again if you would do it differently. As a deeply spiritual person I assumed you would say no, nothing different at all. What you said I’ll never forget:

I’d like to have been like my daughters and make some of their own choices. Maybe I would have gotten married at 25.

That’s a long way from 11. I read somewhere they are introducing anti-child bridge legislation in India this week. 88 years after you were born my niece was born, into a world of different choices. You predicted her birth would bring with it great fortune, and it did. She was born the same day as you, providence for all of us. She’s just three generations downstream from you, and yet she seems oceans and a time warp apart in terms of the opportunities in front of her.

In your life I see a vast bridge between a past where women make no choices to a future which looks remarkably brighter. We need only look at the maps of the world to see where this is becoming true and where it’s not yet true. In this look to my niece, I want to believe you mean this: it’s on us now. We will do our best to make you proud. Who would have thought a child bride could teach us so much about feminism.

In that same ‘interview’ I even asked you: what advice do you have for raising Bella? You told me this:

I don’t know. I raised you. Now you figure it out.

Gone at 93, hands clean from lotion every day, showering by yourself to the end, teeth and eyes and ears intact. That we might all live to old age, die of natural causes on our own terms, breathe our last breath with loved ones, and never once have moaned in pain. That we could all have your gratitude and reverence and stoicism and spirituality, through life and death.

I got to touch your feet once last time before you went while you still lived. Tears rolling down my face, I will always be grateful for that.

Indian culture teaches that there is a cycle of life. Your great granddaughter Bella, born on your birthday, is a symbol of just that. She claps when she blows out these birthday candles, but we all know who really did it.

Your five daughters ended up with high-powered jobs: a schoolteacher, two doctors, a physical therapist with her own practice, and a hospital department leader — my mother. You did a lot with the opportunity you were afforded. You taught us the power of spirit, of faith, of infectious positive energy, and of a mixture of daily asceticism, pragmatic routine, and spartan living. It brings to bear the question of who was more ‘educated,’ let alone who is more enlightened.

We love you. Though with you gone now I believe that isn’t exactly the point. I think the point is that you loved us, and taught us what it meant to love and be loved.

We will never forget your incredible laugh.

My only wish is we could go back to that cold Chicago day in the 1980’s, at the Burlington Coat Factory, and that we could find you that purple coat faster. We tried so many on. We didn’t know many years you would still wear it, what good care you would take of it, and of all of us.

Parkash Rani Ahuja

Born: November 22, 1922 in Rawalpindi, Punjab province, what is now Pakistan.

Emigrated to New Delhi, India, moving through many cities, 1947–1952 at the time of partition. Our mom was born in 1949 on the refugee trail.

Came to the US in 1976 to care for my sister and emigrated to the United States in 1985 to live with my family before settling in Valparaiso to care for our cousins.

Died: May 6, 2016 in Valparaiso.

Next Story — We Will Never Be Satisfied
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Renee Elise Goldsberry as the wise older sister Angelica Schuyler

We Will Never Be Satisfied

How ‘Hamilton’ Makes America Great Again

Okay so I am obsessed with Hamilton. It may not be just the best musical I’ve ever seen. It may be the best thing I’ve ever seen. It kind of breaks the genre, like how Jordan broke basketball, Beethoven broke classical music, and Cher broke Twitter.

By now you may know the drill: it’s the story of the life of Alexander Hamilton as told by Aaron Burr, the lifelong frenemy of Hamilton who ended up killing Hamilton in a duel. The musical is set to an incredible hip-hop driven score, and it stars a largely black and Latino cast. In so doing, it re-appropriates the story of our country’s founding and makes it less about a history particular to white men and more about a history of the ideas that belong to us all. When separated from its context and placed in ours, Hamilton’s story has a modern day hip-hop narrative arc:

Started from the bottom now we up

Watch for a reference in the opening song to just this sort of Drake-ism. The lyrical genius of Hamilton’s creator, Lin-Manuel Miranda, is not of this world. Well, it is of this world, in the way that Shakespeare and Tupac were of this world. The word and tonal play is unbelievable. It is confounding, it is inspiring — the references and the re-references taking you through back and forth through early American history, through the history of hip-hop and musicals, and back and forth within the musical itself. Your ears are peeled from start to finish, and even after dozens of listens I’m still checking Genius to pick up on things.

February 20th I went on the occasion of my 37th birthday. I came home and checked Lin-Manuel’s Twitter feed, which I creep nightly, and beamed with unmerited pride to discover I share that birthday with Angelica Schuyler, who was Hamilton’s wife’s sister. She would have been 260 this year and she is, for me, the show’s most wonderful surprise of a character. She sings a favorite verse, one star of many on a starry night:

So so so — 
So this is what it feels like to match wits
With someone at your level! What the hell is the catch? It’s
The feeling of freedom, of seein’ the light
It’s Ben Franklin with a key and a kite! You see it, right?
The conversation lasted two minutes, maybe three minutes
Ev’rything we said in total agreement, it’s
A dream and it’s a bit of a dance
A bit of a posture, it’s a bit of a stance. He’s a
Bit of a flirt, but I’m ‘a give it a chance
I asked about his fam’ly, did you see his answer?
His hands started fidgeting, he looked askance?
He’s penniless, he’s flying by the seat of his pants

This flying by the seat of his pants thing resonated, literally. The real man flying by the seat of his pants is Hamilton as played by Miranda, who is doing anything but. He’s the closest thing I’ve personally seen to a modern day musical and lyrical genius. It is his not his standalone capabilities in each genre he traverses, it is his mixture of talents that is other worldly. He’s at the center of the Venn diagram of two worlds which Stephen Jay Gould would have called ‘non-overlapping magisteria.’ Broadway and hip-hop. Really? Non-consensus and right.

Daveed Diggs, the man who plays both Lafayette and Jefferson, is a budding hip-hop star in his own right, and has more fun on a stage than anyone. The Incredible Oak, who plays Madison in part two, brings a guttural Wu-Tang like vibe to the first half. Leslie Odom Jr. as Burr anchors the whole thing, with a silky smooth ability to sing, rap, or chat as required. He is vocally a mixture of Drake, Nas and a blues singer, and his three tunes Wait For It, The Room Where it Happens, and Dear Theodosia are my top three plays on Spotify other than Satisfied by the indelible Renee Elise Goldsberry and Right Hand Man which introduces George Washington. The traditionalist vocals of Christopher Jackson as George Washington and Phillipa Soo as Eliza Hamilton are stunning in their own right — as much for the wisdom, integrity, soul, and judgment inherent in their performances as for their musical contributions. The comic levity of Groffsauce as King George III grounds the whole experience. He is the oppressor from afar, and provides a safe and slightly ironic home-base for the mostly older white audience to latch onto as recognizable with his old school pop-rock form.

It’s a crazily pricey ticket. For many, Spotify is the only option. That said I’ve heard plenty of people who I know can afford this experience improperly value it. Genius is expensive. It’s also incredibly rare to see a work of art performed by its creators, let alone one that will inspire us again, at a critical time, about what America can be. There won’t be many times in life where we get to see Beethoven perform the 9th. What would we pay to watch Shakespeare star as King Lear, or for one last time see Tupac to do the full end to end of All Eyez on Me?

Whether you go now, later or never, start listening. You’ll hear the voices of our founders. What they’re saying is this: America has always been about a fierce battle of ideas. When it happens, don’t say this isn’t America. Say it is.

Make America great again?

She was. She will be. She still is.

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