Sex, Drugs, and Startups
Why Founders Fail and One “Hail Mary” of a Solution
We have pretty high expectations of people. Maybe it’s because we hold ourselves to high standards or we just hope that people can be better than they are. But no matter how hard we try to buck the trend, there’s no way around the fact that we’re just plain broken.
The odd thing is a lot of the world we live and work in is built on the exact opposite. When I was studying economics in college, it became pretty clear that something didn’t make much sense when professors started describing the mythical “econs” that all classic economic models were built on. The “econs” were how Nobel Prize winners looked at all of us, assuming that everyone was really smart, and made great decisions, and the bad decisions we made were because we didn’t have all the information (how kind of them). But if you’re anything like me, that theory breaks down the moment I order a #2 at McDonalds and add a 4 piece McNuggets, even though I’ve definitely seen this photo of an almost 1,000 day old Happy Meal.
One of the biggest impacts this overly-generous world view has had on people is how we help others. If all of our mistakes are just chalked up to not having all the info, then all we have to do is patiently educate each other and we’ll be right as rain. But look at how we’ve dealt with diet, addiction, and STIs in the past. Just about everyone knows by now that soda is bad for you, drugs can kill you, and unprotected sex can get you sick, but I’m pretty sure that soda, drugs, and sex are doing just fine.
Terrible odds
In case this doesn’t sound familiar quite yet, this is also how we look at entrepreneurs too. There are loads of great books, podcasts, methodologies, and incubators out there that are filled with everything you’d ever need to know about how to succeed as an entrepreneur. Successful founders share their stories, mentors share their advice, but still we fail 9 out of every 10 tries.
Some people look at those numbers and think “man, some people just get really lucky.” And I’d agree, but it’s definitely not just luck. Look at the real task at hand for a startup:
- Lead a team on a mission to…
- Create a product that people love so much that you can…
- Make so much money from it that you can…
- Grow your team into a profitable company.
That’s a little bit different than “be lucky enough to have a billion dollar idea.” So here’s my question: should an imperfect person be able to do all of that perfectly?
Real talk
Back when I was confused by economics in college, there was finally a day when it started to make sense. At the end of a course on money and banking, the professor stood in front of the class and said,
“Well, everything I just taught you up until now was wrong, because now I’m going to tell you about Behavioral Economics.”
All that meant was one basic thing: those optimistic academics started waking up to the fact that sometimes we do things that aren’t good for us, sometimes we’re irrational, and other times we’re just stupid. And if we’re still trying to help each other but good advice and finger wagging won’t work, then what do we do?
The first step in truly helping someone, adding real value to their life, is to get to know them really, really well. We’ve had the joy of getting to know a whole lot of different people in our time working with startups and the tech industry, but for now I’ll introduce you to three of our favorite and most frequent contenders in the four step journey you heard about before.
Young entrepreneurs are great; full of energy and amazing ideas. They’re incredible at scraping together teams and dreaming up products that people might love. They start down the road fast, but eventually stumble while figuring out how to build a business on top of their dream and doing any of it at scale (the grown-up stuff). A choice few have risen to the challenge, but still just a few.
Engineers are the alchemists of our day and are the best friend of anyone who has a great idea and a great deal of money. In addition to their ability to smack a keyboard and bring technology to life, they have some amazing ideas of their own. Engineers run slow and steady through nights and weekends to get what’s in their head out into others hands. But if they happen to strike gold, the joy of realizing their dream turns into a nightmare of managing corporate culture and P&L statements…the team and business side of a successful product.
Lastly, corporate veterans are the people that have gotten great at running the show over the years. In that time, they get to know all the little quirks, flaws, and inefficiencies of an industry better than anyone. Oozing with credibility and experience, they don’t often have a problem drumming up money or talent to get off to the races quickly, but with their confidence often comes a wake up call when their best laid plans get drowned out in the noise of the real world. Creating products worthy of our time and attention requires humility, empathy, and listening…skills that don’t come easily when you’ve spent a lifetime at the top.
Time for some science
So now that you’ve met these three people, I’ll ask my question a little bit different: is it fair to expect those three people to be good at leading a team, creating a product, and building a business? No, it’s absolutely ridiculous. We’ve heard the cliché “the definition of insanity is trying the same thing over and over and expecting different results,” but at least here, it rings pretty true.
We’ve run the same experiment for decades with the wrong variable. We’ve held on tightly to the immutability of this ridiculous challenge while incessantly fiddling with the variable: the people. “If only they knew more, if only they had all tools, if only they had more money, if only they had a better idea.” We keep trying, keep changing, and get the same results.
Of course this begs the question “why?” How come we’re so committed to getting those same results. Well, I’ve at least got a guess and it’s pretty simple: we expect too much of others because we want too much for ourselves. If we weren’t collectively committed to an almost impossible challenge, none of us would have access to the unfathomable rewards that dangle at the end. In other words, we want others to fail so that we might be the one to succeed. Isn’t that the American dream?
Maybe, just maybe
So in case we are all not collectively ready to stop playing “sword in the stone” by now, let’s at least imagine doing a new experiment: one where we accept imperfect people as the constant, and change the gauntlet we’ve created to play to our strengths, not exploit our weaknesses.
If you were to create a company with all three of our people (the young entrepreneur, the engineer, and the corporate veteran) based on what they are strongest at, how would you split it up? Pretty easy…the engineer would stay an engineer, the young entrepreneur would probably be in product management, and the corporate veteran would run the show as CEO. But based the fact that we know them a little better than what’s on their resume, what if we sliced up the business by when?
Time (The Revelator)
There is real seasonality to business and the changes happen quickly and violently. One over-simplified way to cut the life of a company in two is looking at when it is creating, and when it is growing. I think Ben Horowitz calls this “pre- and post-traction”, meaning at first you’re trying to figure out if you can create a business, and then if it works, you need to grow it and keep it alive.
This is how we stop looking at people in the context of what they are best at, and start looking at when they are at their best. Though our three can easily self-organize into a team by division of labor, they also have very clear distinctions in when they are most comfortable and relevant. The young entrepreneur and the engineer both thrive in the lack of structure and creativity of the beginning, while the corporate veteran has spent their career honing their craft in the later season. So now we have one company, a team of early entrepreneurs and engineers, a handoff to another team of veterans, and some very big problems to solve to make this actually work.
Tectonic shifts
If you’re anywhere over the age of 35, you’re probably composing an angry email to me right now, because it’s absolutely ridiculous to suggest that corporate veterans shouldn’t “get in on the ground floor” and you’re absolutely right. The reason it feels so unfair is that a division based on time rather than skills stands in the face of our economy of ideas.
Having a great idea and turning it into a successful company is a lot like holding a handful of sand: you want to hold on to as much as you can for as long as you can, or at least get there early enough to catch what’s falling out. But remember, we’re trying to stop playing a losing game and get good at doing something really difficult. This means that it’s not about ideas, it’s not about being king of the hill, it’s not about being lucky.
It’s about work.
One-to-many
To change our perspective, we are going to have to turn it upside down. If the average life of an incredibly successful company from founding to exit is seven years, then in this two-team approach, you’d have one team working for a year to find something that’ll work, and the other working for six years to grow and exit. So what does the first team do for the six years after they’re done? Well, they keep doing what they’re good at: creating companies. The ideas can come from anywhere if we aren’t treating them like our golden ticket, but what would become a scarce resource are the teams that are good at taking and running to the end, not the other way around. Six growers to every one sower.
Ours
If we’re ok with the idea that it’s not about luck and much more about work, then the whole six to one ratio creates another problem that I alluded to before. How do we deal with ownership if we stop unequally glorifying and rewarding the teams that create companies, especially as they’ll get touch six companies in the time that the others spend on one? Regardless of who had the idea, we’d have to commit to reserving at least 80% of staff equity for the team that comes later. That’s a lot, but it’d be worth it. Two problems down, and one final doozy to go.
Herding cats
Though this is starting to feel a little bit like the moon landing, this is still very possible if we answer one last question: how the heck do we work together and actually do this? None of this changes the fact that got us into this mess: that we’re all pretty messed up and have never done anything remotely like this.
You can’t practice for a startup, but you can earn your scars and be better for it.
To make this final jump and throw away the old playbook, we have to write a new one and we need people to call the plays. This used to be the founder, but especially for anyone that’s never tried and failed before, it often looks a lot like handing someone a football, telling them to yell out “Blue 42” and wait to see what happens next. It’s possible be good at this, really good, but not on your first try. You can’t practice for a startup, but you can earn your scars and be better for it. We need seasoned leaders with a practiced plan because we need hope that we can do this better together.
This all might be a little crazy, I get that. But at the very least, I hope you might be starting to feel like the standoff that we’ve all trapped each other in for an almost impossible shot at being the next-big-thing is a little crazy too. It’s a prisoner’s dilemma to collectively let go of our dream of world domination and a hard habit to kick.
So, we’re going to give it a shot and let you know how it goes.
We’re going to spend our time in the earliest days of the sowing season and lead others in doing the same. We’re going to lean on people that have spent their careers getting good at growing businesses and give them all the ownership they want. We’re going to try it, and then try it again as many more times as we can.
It might be foolish and it might be impossible, but it’s worth trying if there really is a better way. We only ask for one small favor: just please don’t shoot us when we drop our guns and walk away.
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