The things they don’t teach in business school, from over two years of building Veho.
It has been more than two years since I took the sharpest turn in my professional life and became an entrepreneur to start Veho. Last weekend I paused to reflect on, and summarize, my key learnings from this ride to date. No filters, just telling it the way it is. All based on my very own, hands-on personal experience.
If you read carefully, you will likely notice that more than pure entrepreneurship insights, these are general life lessons. And these lessons can be applied no matter where you are or what you do (though I would caution that what may be true for me, does not have to be true for you).
As always, comments and feedback are welcome. Also, don’t forget to follow my on Twitter.
- Success is 1% ‘product-market fit’, 99% determination.
Ask most investors, business school professors or entrepreneurship authors, and they will tell you that the most important factor to a startup’s success is product-market fit. So much has been written and said about product-market fit, that the real predictor of success is too often neglected.
The one factor that will determine your long term success — both as a founder and as a startup — is your ability to build resilience, persevere through the difficult times and stick to your long term goals in the face of adversity. All founders sooner or later face adversity: key people leave, money runs out, customers cancel pilots, sales miss targets etc etc. Having the strength to overcome these challenges is far more important than luck, business plan, or product-market fit — which will come anyway with grit. Even beyond entrepreneurship, studies have shown that grit is the number one predictor of success in life.
So If you’re serious about entrepreneurship, you should develop a framework to deal with the inevitable adversity that you will face: seek sources of inspiration and motivation; build a support network of friends, family and mentors; invest in your physical and mental health; make a habit of reflecting on past mistakes (like writing a blog post about it…); keep your eyes on the long term and learn from the experience of others. But more than anything, remind yourself that no successful person ever got to where they are without dealing with, and beating adversity. If they can do it, so can you.
2. People are going to disappoint you. Deal with it and move on.
Idealism and reality don’t always go hand in hand. About a year ago, one of my closest friends at the time decided to leave Veho, almost without notice, at a critical time in my life and the life of the company. This was a huge blow for me and Veho, and it took me months to recover. Two other friends, and even a few people I saw as mentors, disappeared from my life this past year without notice.
One of the most difficult things for me to accept has been that not everyone values loyalty the same way. Some people realize they do not have the grit to climb with you to the top; others have different priorities in life; and some see the world very differently or simply do not share your values. Of course, this does not mean you or I should ever compromise on the integrity and values of the people we partner with. But, you should accept the reality that some people are going to disappoint you. The sooner you accept this, the sooner you’ll get back on your feet when this happens.
Learn how to better spot the red flags, think what you can do better next time, and move on.
3. The greatest startup success stories begin with contrarian thinking.
The greatest startup success stories of our time are of founders who have been bold enough to imagine new markets (Uber, Airbnb), compete in a saturated industry in a completely different way (Google), or make infrastructure investments that nobody else would dare to make (Amazon). This is no coincidence. The barriers to launching a company today are so low that any straightforward idea is already being tested, and monetized, by multiple competitors. Big companies are not born from doing things slightly better. They are born from thinking different.
But while contrarian thinking is supported by vast business theory (“Blue Ocean Strategy”, “Zero to One”, to name a few), very few startup investors practice it in reality. I can’t even count the number of times I was told by VCs: “your idea is never going to work”, “you’ll never be able to scale”, “you’ll have a low valuation”, “autonomous cars will make your company obsolete” and “Uber will eat you alive.” The same VCs, by the way, also said similar things to the founders of Uber, Airbnb, Google or Amazon…(We’ll get back to whether you should listen to VCs later).
4. Only partner with people who are 100% aligned with your motivations.
The most important decision you will make as a founder (and arguably — in life) is the people you partner with. And you should be very, very sure they are completely aligned with what you want to build and are comfortable with the risks that your vision entails.
I learned this valuable lesson the hard way soon after graduating from HBS. My co-founders at the time and I had just returned from an interview with Y Combinator — who criticized our business model. One of my co-founders began advocating that we should pivot to a completely different business since he was not OK with taking the business risks that Veho at the time entailed (remember, we are trying to revolutionize a big old industry — that’s not an easy thing to do). We debated this for months, and when we couldn’t settle — he decided to move on to a different opportunity (thankfully we were able to maintain our friendship). By that time we had wasted months of valuable time and burnt through a significant portion of our investment money.
There is no right or wrong in having a certain motivation. Every person is entitled to have their own risk profile. However, like everything in life, companies too have a risk-reward ratio. And those who aim to be big naturally need to take more risks. If you’re aiming high and willing to take the risk, it is critical that you choose partners who are completely on-board with where you want to go. This lesson is not confined to founders. By way of extension, it also applies to employees, investors, advisors and even early customers.
5. “Lead by consensus” doesn’t work. Rather, embrace “disagree and commit”.
HBS coached me to be a more empathic leader. But I took it the wrong way. In Veho’s early days I instituted a culture that gave everyone an equal say about the direction of the company. My goal was to empower my then-partners as decision makers, and encourage them to fully buy-in to our mission. But as soon as disagreement emerged, it was almost impossible to make decisions. We found ourselves spending hours trying to convince one another, to no avail, and grew more frustrated about our slow progress.
Do yourself a great favor and avoid my mistake.
Decisions need parents, and parents need autonomy. You certainly do not need to, and should not, make EVERY DECISION at your company. Rarely do such dictatorships work. But do make sure to explicitly define, to you and others, what is important for you to have a final say in. And similarly, what is important for other leaders in the organizations to have a final say in.
My co-founder Fred often talks about the Holacracy system. Another smart person — Jeff Bezos, talks about a “disagree and commit” approach to decision making. Both prioritize the same thing. Deciding fast and moving somewhere, even at the cost of certain mistakes, is far better than deciding slow and moving nowhere.
6. Traction trumps everything.
About two years ago, I pitched my company (still at the idea phase) to a VC investor. “If this is your idea, you should stop right now and go find a job” he said. Seriously. Four months later — when the same investor heard that Veho had already delivered thousands of packages with crowdsourced drivers, he emailed me: ‘Let’s meet again. I’d like to bring my business partner too!”. Other skeptical investors who had been sitting on the sideline wanted in as soon as they smelled success.
Since nobody can predict the future, it really doesn’t matter what people think about your idea — these are all speculations anyways. You believe in your idea? Find a way to make it work. And when you make it work — make sure to share your traction with the skeptics. My experience is that even little data can quickly change people’s mind.
7. VCs don’t know.
As a young entrepreneur, if you are fundraising for the first time, you will likely listen to the opinion of potential investors much more than you should. True, VCs see a lot of startups; some of them have had successes. They see which types of technologies and business models tend to attract more funding, and which — on average — yield higher returns. If you are somewhat inexperienced, it is tempting to mistake the opinion of VC investors for a solid truth.
Always remind yourself that no VC knows nearly as much about your business as you do. It is impossible for any investor, even the smartest and most experienced, to see through all the holes and opportunities, digest all the data, assess your capabilities as a founder, and predict where the market is headed — all the more so in a 20–30 minutes conversation. Moreover, every VC only makes a few investments per year, and says ‘no’ to founders far more often than ‘yes’. So they are very trained at coming up with reasons why they should not invest.
While it is valuable to listen to experienced professionals, never replace your own opinion and analysis with theirs. Remember that NOBODY can predict the future, and that every great VC has passed on some amazing companies. You may well be one of these companies.
By the way, a good technique for getting more ‘yes’ than ‘no’ is to invest time in educating investors about your market, position yourself as an expert, and collect data to refute their concerns. Or simply focus on investors who already understand your field. This will make life much easier on you.
8. Make ‘challenge conventional wisdom’ your second nature.
Just because someone says something, it doesn’t make it true. One example is the notion that founders should only start companies where there is a ‘founder-market fit’, namely in a market they are already very familiar with (think handymen selling software to handymen or moms marketing diapers to moms). Of course, VCs love ‘founder-market’ fit because it reduces their own risk of investing in someone who is not an expert in their space. But, since when should you listen to VCs??
Jeff Bezos had nothing to do with selling books, or e-commerce, prior to starting Amazon. Herb Kelleher — founder of Southwest Airlines was previously a litigation lawyer and knew nothing about starting an airline. Mark Zuckerberg is far from being the most ‘social’ person as the founder of the world’s largest social media platform; The Airbnb founders had zero experience in hospitality; Haim Saban never produced a record in his life before starting a record label and becoming one of the richest people in America; and the list goes on and on (trust me, this is a very long list). None of these people would have been successful had they followed conventional wisdom.
In the past two years I have heard every type of conventional wisdom about Veho: “logistics is a bad industry for startups”, “operations heavy businesses always get low valuations”, “you will never be able to recruit enough drivers” and “autonomous cars are going to disrupt everything tomorrow morning” etc etc. I listened, thought about it for a minute, and moved on. And so should you.
9. Make the difficult decisions, earlier.
While many founders abide by the rule “hire slow, fire fast”, there is something cold, almost ruthless, in the idea that people can lose their job so fast. However, through my own experience of separating from co-founders I learned that the faster you execute difficult decisions, the better it is for everyone involved. In my case, I had been working with a co-founder who was not aligned with my vision for the company. I tried to compromise, looking for a middle ground between what either one of us wanted to build, and we got nowhere. It took us months, and significant investment money, and lots of arguments to fully embrace what had already been clear for a long time: we were good friends, but were not meant to be good co-founders.
Time is money, and headaches can cost your health. Do yourself a favor and don’t avoid reality. If something isn’t going to work out — it’s much better to call it off early.
10. If you don’t respect your own time — nobody else will.
It is common for inexperienced founders to be very thankful to VCs, advisors or potential customers for spending time with you. But don’t make the mistake of thinking they are doing you a favor. If they didn’t think talking with you was worth their time, they would not take the meeting at the first place.
I learned a very valuable lesson when an associate at a large Boston based VC made us wait outside his office for 40 minutes past our scheduled meeting time. As I was sitting there, I could see that he was not speaking on the phone or doing anything that seemed urgent, but probably answering some emails. And he would not stop for a second to apologize for the wait. As we finally walked in, I decided to respectfully confront him about this. “Can I give you some feedback?” I asked. “…I appreciate you taking the time today, but would you agree that our time is valuable too? We are running a company, juggling between customer meetings, fundraising and operations, and had to say no to two other meetings this afternoon to meet you. And quite frankly — by letting us wait for 40 minutes, I feel that you do not respect our time.” Needless to say, this investor did not see this feedback coming. He took 3 seconds to think about it, then said: “you are absolutely right, I deeply apologize.” He never made us wait again.
I took this approach with other potential investors and customers, even at large companies. It works 95% of the time (and with the other 5% you probably shouldn’t meet the person anyway). It helps reminding your counter-parties that they are not doing you a favor — they actually do want to talk with you. And it helps them see you as a serious person whom they should respect like anyone else.
11. Never compromise your reputation.
The VC and entrepreneurial community is smaller than you think. And the Internet makes it even smaller. People WILL do their homework about you before they join your company, invest in you or write an article about you. Reputational stains are hard to clean up, so try to avoid them as much as possible.
One common mistake I made in the early days of Veho was to focus on selling a grand vision to investors, and at the same time sweep under the carpet anything that wasn’t positive about the business. I made a conscious effort to avoid any discussion about our challenges, concerns, or hypotheses we hadn’t proven yet. But soon I learned that hiding things was counter-productive. First, because people do find out sooner or later. Second, because when they do find out — it reflects negatively on you as a founder.
Only founders who think short-term compromise their reputation. If you think long term, you should develop a habit of being honest with investors, partners and customers.
Avoid over-promising, and try to follow every handshake — even those you regret (of course there are exceptions but they are very few). You may lose a potential term-sheet here and there, but you will gain a lot more trust and respect that will serve you down the road when it really matters.
12. In the end, what matters most is how you see yourself.
While staying humble is always a good thing, don’t pay much attention to what other people say or think. Entrepreneurship can be a lonely road, but If you live by your values, pursue your passion, and treat people fairly and respectfully — you should feel really good about yourself.
There will always be skeptics, naysayer and critics — and they will continue living their conventional, riskless and uninspired life while you go out and change the world.
Don’t let anyone stop you.