Mark Peter Davis of Interplay: Five Things You Need To Create A Highly Successful Startup

I believe entrepreneurs are the real change makers of society. Nearly every major advancement to society has come from an entrepreneur. And I believe that lots and lots of people have the potential to be founders. Unfortunately, most of them don’t have the resources or the tools so it seems too daunting and they never try.

Startups have such a glamorous reputation. Companies like Facebook, Instagram, Youtube, Uber, and Airbnb once started as scrappy startups with huge dreams and huge obstacles.

Yet we of course know that most startups don’t end up as success stories. What does a founder or a founding team need to know to create a highly successful startup?

In this series, called “Five Things You Need To Create A Highly Successful Startup” we are talking to experienced and successful founders and business leaders who can share stories from their experience about what it takes to create a highly successful startup. I had the pleasure of interviewing Mark Peter Davis.

Mark Peter Davis is a venture capitalist, serial entrepreneur, author and community organizer. He is the Managing Partner of Interplay a top-performing venture capital firm based in NYC. As part of Interplay MPD has built a 500-person platform of service companies that provide support to 15% of all venture-backed companies in the US, creating material synergy for portfolio companies. Through Interplay he also manages his multi-family office and is an active LP and investor in frontier/social impact technologies.

He’s also an active podcaster, the author of The Fundraising Rules, and the founder of both the Columbia Venture Community and the Duke Venture Community. You can follow his tweets at @mpd.

Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?

I’m a lifelong entrepreneur. It’s not something I chose — it chose me. I always had an entrepreneurial mindset from childhood through college, and frankly, it is still with me today. I can’t really think of a time when I wasn’t starting a new venture. So after getting some professional training in consulting and an MBA, venture capital seemed like a great way to learn another dimension of the startup method. I was fortunate enough to work at two NYC-based venture capital funds and learn the trade.

What was the “Aha Moment” that led to the idea for your current company? Can you share that story with us?

It was while I was living deep inside “startup land” when I first thought there might be another way to approach the venture capital business. Most VCs operate their firms like investment bankers. They’re really agents, representing their investors and running around trying to put money into deals. The firms are composed of people and a bank account — that’s kind of it.

Since I had started out as an entrepreneur, I tended to look at the VC business more as an operating company. What if we ran a VC fund the way I would run a startup? I started thinking about how operations, technology, customer service and strategy should shape a firm to give it a unique advantage. And that’s when the lightbulb went off.

Was there somebody in your life who inspired or helped you to start your journey with your business? Can you share a story with us?

I’ve had a lot of incredible mentors. Maybe only a few of them knew they were mentoring me, but I was watching and listening to all of them. For that I’ve been grateful and I’ve tried to pass along the favor.

But our story didn’t start from a mentor, it started from a pain point. While I was thinking deeply about the strategy of venture capital, I experienced what it was like for a startup to buy commercial insurance. An insurance salesman came to visit in a bad suit asking for our fax number. As tech entrepreneurs who rallied around advancing society and disrupting the old ways, suits and fax machines were about as symbolic of the enemy as it could get.

That’s when I realized that a venture firm needed to offer more than capital. It needed to offer a solution that helped founders build their companies the way they wanted to build them.

What do you think makes your company stand out? Can you share a story?

Two answers:

First, we’re a mission driven organization. Interplay is an ecosystem that offers services to help entrepreneurs at every stage of their journey. We wake up every day focusing on how to help founders and we’re thinking broadly about the whole startup lifecycle, not just one particular moment. We help founders find ideas, get the advice, capital and services they need, and after they exit, we help them manage their capital.

Second, we’re a culture-first organization. I didn’t raise any outside capital when we started our firm so that we could make long-term decisions that allow us to be happy at work. It was a selfish decision — I wanted to enjoy working. Those good vibes permeate through our work, our relationships and enable us to live our best lives.

How have you used your success to bring goodness to the world?

Our mission is to accelerate humankind’s potential by streamlining the journey of the entrepreneur. We believe that innovation drives social advancement. By streamlining the innovation ecosystem we’re not only helping build companies that are changing the world, but we’re also creating more entrepreneurs that are going to go build more innovative companies that will change the world. As the pace of innovation increases, so does the number of entrepreneurs.

You are a successful business leader. Which three character traits do you think were most instrumental to your success? Can you please share a story or example for each?

It’s funny. The further I’ve gone down the business rabbit hole the simpler I think business really is at its core. I believe that the things that make people successful are less edge-case forms of genius and more mastery of the basics.

The top three skills that I think matter are: grit, organization and humility. I’ll bet on the combination of those three traits any day over a bunch of prestigious degrees.

Often leaders are asked to share the best advice they received. But let’s reverse the question. Can you share a story about advice you’ve received that you now wish you never followed?

The advice that really screwed me up was “don’t take no for an answer.” It’s bad startup advice.

I was a wrestler. In wrestling we were trained to be relentless. So when I heard “don’t take no for an answer” it was something I understood. Line me up in front of a brick wall and I’d run head-first into it over and over again.

But it turns out that when customers don’t want your product, people don’t want to join your team and investors don’t want to back you, you could be wasting your time. It’s important to learn to hear “no” so you can iterate to find “yes.”

The big turning point for me was when I realized that entrepreneurship wasn’t similar to wrestling; it was similar to science. Every hypothesis from an idea to a strategy to a tactic needed to be tested and the data informed the path forward.

Can you tell us a story about the hard times that you faced when you first started your journey?

When I started Interplay I wasn’t building a company. It wasn’t a normal venture. It was a mission. I believe that founders are the drivers of social change and I wanted Interplay to become a platform that can help them in their journey. To make that vision a reality, I needed a great culture in the company because it was always going to be the team at Interplay that carried the vision on into the future.

I felt that the best way to build a great enduring culture was to have a firm that was unfettered by short-term profit motives. I wanted to be able to make decisions that could prioritize long-term culture and build a strong company, not a fast one. To do that I didn’t raise any money to start the firm. I bootstrapped it. And that was hard.

When we started we couldn’t afford much of anything, let alone an office. Our team spent the first six months working out of the Carlton Hotel in New York City. We were holding meetings just past the bar, laptops out while hotel guests gave us the stink eye.

When you truly invest in culture it generally creates short-term pain for long-term gain.

Where did you get the drive to continue even though things were so hard? What strategies or techniques did you use to help overcome those challenges?

My wrestling coach told us on the first day of practice my Freshman year that by the time we were seniors he’d be able to punch us in the face and we wouldn’t care. I’m not sure I never stopped caring about getting punched, but he sure toughened us up. From cutting weight to training for hours per day he taught us discipline and grit. While I aged out of the sport, those lessons have stayed with me.

The journey of an entrepreneur is never easy, and is filled with challenges, failures, setbacks, as well as joys, thrills and celebrations. Can you share a few ideas or stories from your experience about how to successfully ride the emotional highs & lows of being a founder”?

The rollercoaster is exhausting. The highs and lows are too high and too low.

After living on the rollercoaster for 25 years I think the key is to stare out at the horizon. When the rollercoaster takes a dip the horizon will be looking slightly up. When it’s at a peak the horizon will be lower than your current euphoria. The horizon is the average of the highs and lows. When things get euphoric or depressing I know that they’ll revert back to the mean. Experience has taught me to take the long view and ignore the ups and downs in the short term.

Let’s imagine that a young founder comes to you and asks for your advice about whether venture capital or bootstrapping is best for them? What would you advise them? Can you kindly share a few things a founder should look at to determine if fundraising or bootstrapping is the right choice?

I’d say that they should read my book — The Fundraising Rules. My biggest contribution to the collective startup consciousness comes from one of the first chapters in that book (and it’s now taught at various business schools).

In that chapter I present a 2x2 decision framework that should help folks decide on how to finance their company. At its core the decision to raise capital should be first a function of the scalability and capital requirements of the business. And, then in some cases barriers are a critical determinant as well.

This is a great question because almost nobody focuses on it. Everyone defaults to assuming that they should raise venture capital, but properly financing your company can be one of the single greatest determinants of the payout that a founder ultimately receives.

Ok super. Here is the main question of our interview. Many startups are not successful, and some are very successful. From your experience or perspective, what are the main factors that distinguish successful startups from unsuccessful ones? What are your “Five Things You Need To Create A Highly Successful Startup”? If you can, please share a story or an example for each.

When I was in business school we did a case study. In it we were asked to read about three super successful companies and pick which one we would invest in. One company had a large market, another a great team and the last big barriers. It turned out that all three companies were winners in real life, but the point of the exercise was to help us figure out what type of investor we were going to be.

I struggled with this exercise, because I wanted it all. Big markets, great teams and barriers. And, what I’ve realized is that you can have it all. So here’s the list of must haves:

* Customers that want to buy the service / product. Start here.
* A team of complementary people that have grit, organization and humility.
* A profitable marketing equation.
* A sufficiently large addressable market.
* A financing strategy that is aligned with the potential of the business.

What are the most common mistakes you have seen CEOs & founders make when they start a business? What can be done to avoid those errors?

One of the most universal mistakes that founders make is trying to reinvent the wheel. Company building involves five thousand small decisions. Each decision is fairly simple, but it takes time to research and learn. Getting help from an advisor or incubator can be invaluable as new founders can skip the learning curve by just getting the answers about how to do things.

Startup founders often work extremely long hours and it’s easy to burn the candle at both ends. What would you recommend to founders about how to best take care of their physical and mental wellness when starting a company?

This is a big problem. Founders have to actively invest in their physical and mental health to endure the journey.

I suggest eating healthy, sleeping on a regular schedule, exercising daily, meditating and taking frequent short vacations. I think folks should take off every eighth week if they can. Sprint hard and then take a breather.

You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)

If I had my way I’d pull more people into entrepreneurship.

I believe entrepreneurs are the real change makers of society. Nearly every major advancement to society has come from an entrepreneur. And I believe that lots and lots of people have the potential to be founders. Unfortunately, most of them don’t have the resources or the tools so it seems too daunting and they never try.

That’s actually our mission at Interplay — to help accelerate the journey of entrepreneurs. We aim to help folks at all stages. If someone needs a worthy idea to work on they should tap into our foundry. If a team needs coaching they should reach out to our incubator. If they need services or capital to rev the machine up, we can help with that too.

We are blessed that some very prominent names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US with whom you would love to have a private breakfast or lunch, and why? He or she might just see this if we tag them.

There are so many great people out there. I think I’d pick Carl Icahn. I like that he was a mission driven business pioneer. I see a parallel in that. His mission was to defend shareholder value. My life’s work is to help founders succeed.

How can our readers further follow your work online?

I’m a year into podcasting, so I’d encourage folks to subscribe to the pod on YouTube or wherever they listen to pods. It’s called Innovation with Mark Peter Davis. For social media, I’m most active on Twitter and LinkedIn. We’re also ramping up our events initiatives. The best way to stay in the loop for those is to subscribe to our monthly newsletter.

This was very inspiring. Thank you so much for the time you spent with this. We wish you continued success and good health!