“You must be good at telling your story” and other startup secrets

An interview with Mike Shaver, former Director of Engineering at Facebook and partner at Real Ventures

Facebook, Google, Apple, Microsoft; these are names of companies we have all heard of. Most of us use a product from one of these companies in our daily lives. Do we ever ask ourselves where these companies came from? Most people know the answer, that is “startups”. When I say start up, most people envision Mark Zuckerberg’s character from the social network. Some guy with a who-cares kind of attitude creating something and getting rich off one idea. This is not the case. In fact, 90% of startups fail. With this in mind, I went out looking for answers and to my fortune Mike Shaver agreed to let me interview him on the topic of startups.

Who is Mike Shaver?

Mike Shaver is a partner at Real Ventures, venture capital investing company that focuses on seed and early stage companies. With no formal education beyond high school, Mike has achieved a high level of success. He was VP of engineering at Mozilla where he managed QA, Firefox, Security and Localization groups. He was also Director of Engineering at Facebook from November 2011 — July 2016 where he focused on Facebook Mobile, VR, security, a touch of AI, diversity, recruiting, and mentorship. He since has been working with Real Ventures helping startups grow.

Common Misconceptions

Liam — So what do you think are some of the biggest misconceptions for young entrepreneurs who are looking to dive into the startup world?

Mike — I think one is that your product idea has to be perfect, that you really have to sort of have this next google idea. Early stages in a startup, there is less that you know than you don’t know. So, the product process is a way to explore that. When we look at evaluating a company we know that the product that somebody comes with to a seed stage investor is not necessarily the one they are going to launch. The product is more about showing if they are thoughtful about the space. Are they asking interesting questions about it? Do they have an idea of how they might change that market or industry? Having an idea of a problem you want to solve is enough sometimes to start on a very productive path.

Getting started

Liam — What do you believe are the essential steps to lay down a strong foundation before you start a business?

Mike — You need to know what you care about. Starting a business is a lot of work. I would never want to have to work that hard. You’re going to wake up every day for the next 5–10 years thinking about this problem. It’s got to be something that excites. You don’t have to be an expert. There is no better way to learn than trying to build something. The most important thing is that passion for that space and the problem. The other piece is to know what you’re good at and what you are not, you can construct that founding team to complement each other.

Getting Funding

Liam — “Do you think a lot of these young entrepreneurs need a little bit of a reality check. It may be a bit of a stereotype, but do a lot of them think they are going to be hotshots?”

Mike — “I think every entrepreneur thinks they are going to be a hotshot, and in a way every entrepreneurs is a hotshot. I think the reality checks come when you have to take your idea and your passion and infect other people. Like this is what I want to do, join me and people are like “ehhhhhhhh maybe not”. Sometimes that means you got to find that other person. Sometimes you have to look and see why this isn’t compelling to people. Whether it’s investors or people on your team or potential customers. And you usually get that feedback early.

We see solo founders and I generally don’t invest in solo founders even if they were sort of the unicorn that is good at everything.

You need other people who are as invested as the founder, not employees to really build that team that can build a business that way.”

Liam — “Now do you solely choose teams on the premise that it’s just too much work for one person?”

Mike- “No, usually because it’s very rare to have that complete set of skills in one person. The other is that we have 3 people’s experience instead of one. You just want the numbers. You want people who have made differences out of mistakes, some people who have different connections, different perspectives, different skills. So even then if you had all those skills in one sort of “super” entrepreneur it’s still just one life lived. Its still just one person’s network. And so those founders really broaden it. They can rely on each other. Like if somebody gets sick the company can continue. If you’re raising money, the CEO is full-time raising money, that’s how it works. You want those people to be founders not just employees because you want that level of engagement with the mission.

Liam — “ When do you think a startup should start looking for outside financial help? Should they try to bootstrap it as long as possible?”

Mike –“There are two things money does. One is it lets you do what you are currently doing longer. It extends the runway. The other is it lets you change the curve. I think the first thing you need to know is what are you going to use that money for? I always want to know, when this money runs out, what does your company look like? I need to make a return on my money. I need you to be a better company at the end of this. I think you want to have a relatively nuanced understanding of how you’re going to attack this market.”

Liam — “When you are looking to invest what are you hoping to see from the prospective business?”

Mike — “Lets say you have a theory about your business. You have a theory about a certain problem and you are going to attack it with this technical approach. You don’t want to just have that idea. It will be really hard to raise money. Now if you’ve had 3 or 4 successful businesses then we know you understand markets. We know you can build a team. You have to have an idea of how to answer those questions because any investor will ask you about those things. You must be good at telling your story. It’s got to be polished. It must emphasize on the right set of things. You must be able to tell that story in a way that will make people want to be involved in the next chapter of it.”

Liam — “Now would you ever give a startup a second chance if they mess up the first time?”

Mike — “That’s very rare because I always have a choice over how I can spend an hour. It can be a company that I already have an opinion on and it wasn’t very good. Or it can be a company that is unknown. The company I didn’t like might become an ok company but it’s pretty rare that something goes from not good enough to amazing. Sometimes I’ll tell them to come back when you’re further along but right now we don’t think this piece is there just yet. I always try to tell an entrepreneur why I’m not investing. Sometimes they argue with me and it’s not super pleasant but you do what you do. Now when I turn down an entrepreneur I always want to be wrong. I want to look like I make the worst investment decisions. Obviously, I want the companies I invest in to do well too but there is enough success to go around. I hope that every entrepreneur I meet with, we have our next conversation on her yacht. That’s exactly what I want. I don’t have any animosity there it’s just not the right investment for me to make.”

Liam — “What are the traits you feel are key to find in a founder or co-founder?”

Mike — “I think every founder and co-founder need to have strong communication skills. Not everyone will agree with me on that but I think everybody at this small company carries the story of the company whether you’re recruiting, you’re selling, you’re raising money, you’re networking, or talking to press. Everyone on that founding team needs to be able to go and pitch that company. Luckily communication skills can be taught. They also need to have a respect for the power of organizational, structure, and choices. It’s very easy for a single founder to be aligned in vision. But if I took all the founders of one business individually into a room and asked why does this company exist I would need to hear exactly the same thing.”

Keeping it going

Liam — “How can you keep that passion alive and that drive going to avoid burning out young?”

Mike — “Yeah it’s easy to burn out. It’s probably easier to burn out when you’re passionate right? It’s a problem you really want to see solved, it’s a company you really want to build.

What I always ask entrepreneurs to frame for me is: ‘In 10 years how am I going to know that your company was successful? If I hadn’t talked to you, if you hadn’t told me its successful, what is the change in the world that is there because you did this thing. What would the world be lacking if you didn’t?’ Thinking about the legacy of it. Which goes beyond a specific product or partnership or even composition of the team.”

Liam — “So anyone going in with the idea of just getting rich is doomed from the start?”

Mike — “Starting a company is a terrible idea to get rich, you hear the stories but there is a huge survivor bias. Most companies fail, most companies we invest in fail. It’s the nature of the environment. Sometimes they fail because it’s a bad idea, sometimes is because they have the wrong team, sometimes it’s because they couldn’t get the funding or they run out of money. It’s one of those things where you want to make this change in the world and it may take a couple companies to do that and to treat those companies especially when they are really young as a way to test the hypothesis. The hypothesis is: is this team going to work well together? Is this specific market worth attacking? Is this kind of product the right way to do it? So focusing on that longer term piece can really feed that sort of shorter term immediate passion.”

The future

Liam — “What are the next big upcoming industries?”

Mike — “ I think we are going to see a lot more stuff around voice and around alternative interfaces like gestural AR. I think there are a lot of computing interactions where we can move computing into different contexts that are more comfortable, like VR inputs. But they are pretty sophisticated and challenging to build. I think we are getting to the point where we are going to start to see quantum [computing] do something or fall completely off the map. There is enough energy in it and enough different approaches that if its going to work it’s going to work in the next 5 years. I don’t think we are done with AI. The opportunity to augment human performance in professional and personal environments is still enormous.

I’m a bigger fan in augmenting a human rather than replacing one. I think AI + Human is going to be more powerful than just AI for a long time. I’m still waiting to see what happens with The Blockchain, everybody talks about it. We need to see some real defining applications that aren’t currencies. There is a ton of energy in it but we just haven’t seen something that wasn’t possible without The Blockchain.

Our future

Liam — “What advice would you give to young people about their careers and life.”

Mike — “When you’re in school, there is a structure around you that’s designed to encourage you and help you in learning. When you leave school you no longer have that structure. Now its your responsibility to figure out what you’re going to learn and keep learning. Now there is some stuff you get by default in your job. But that’s going to be the stuff that’s good for the company. You have to be deliberate about what do I want to be able to do in the future. That can affect what jobs you take, what positions are there, and the companies and extracurriculars you get involved in. This is something I wish I had done more of. It’s being deliberate about setting up learning opportunities for yourself and reflecting on what you learned from them.

I used to do this thing where I would write down everything I knew how to do. It would take about 4 hours over the course of a week or two. I would write things like I know how to bake a cake or sharpen a knife. Then I would put a mark next to the things I learned last year. It would be like ‘wow I only check like 5 things’. So, I need to do something in my life to create more learning opportunities. If you did it right now you’re in school you would have a ton of shit to check off because you had people forcing you to do it. But you get two years out of school and that list shrinks. The school year is the most intense learning environment. Your whole job is just to learn and you may not ever get there again when you have other things to do.

[Edited for brevity]