Don’t Overthink It
Leonard Speiser, Co-Founder and former CEO, Clover | Season 1, Episode 7
By Shripriya Mahesh, Partner at Omidyar Network
The first startup Leonard Speiser founded essentially led to the birth of instant messaging, and after that he built one of the first user-generated content platforms. Looking back, though, Leonard says he lost the instant messaging and blogging wars because he made things too complicated, rather than solving known problems one by one and as fast as possible.
Since his early days as an entrepreneur, Leonard has founded five companies and sold two of them, and played crucial roles at tech giants Intuit and eBay. Most recently, Leonard was the founder and CEO of Clover, a cloud-based point of sale platform that was acquired by First Data, the world’s largest credit card processor.
“Don’t overthink things” advises Leonard. If you don’t have the team to build a great product, go hire great people. If you have a great team but you don’t have customers, focus on establishing a solid customer base. Just focus on the main problem directly in front of you and solve it as fast as you can. In our conversation, Leonard shares incredible insights from his many years of raising capital, building amazing companies and orchestrating successful acquisitions.
Here’s what we learned when we spoke with Leonard.
Prioritize finding the right co-founders over the idea
“As a serial entrepreneur, I used to start companies by looking out into the world, seeing how things worked, and getting frustrated with something. I based my businesses off interesting ideas, and then I’d try to find people who could help me execute. I realized however I was going about it the wrong way.
Eventually I realized it’s better to start by finding really amazing co-founders, and then work together to figure out what to build. I look for co-founders who are extraordinarily bright and entrepreneurial. I learned the folks who were already working on side projects made the best founders because there was something inside them that motivated them. When I find people who share the same mindset, I’ll go on walks with them and spend as much time as I can interacting with them before choosing to start a company together. I’ve discovered that the best founding teams come from two to three like-minded people who want to solve problems, are self-motivated, and who go through multiple interactions to get to know each other before starting to build things together.”
Hire people who have an insatiable curiosity and a deep desire to learn
“I want to work with people who are curious and have a deep desire to learn. If I’m interviewing an engineer, I’ll start by asking them to walk me through a recent product of theirs. I’ll have them draw out something they built on a whiteboard. If they’re a backend engineer, they may detail the database and how the tables are set up. Next, I’ll ask them how every other system that touches their product works. How was the front end coded? What was the language it’s coded in? How do they pull it? Because someone who is genuinely excited about how things work will be able to talk about anything and everything that touches their code, even if it’s not their area of expertise. That’s how you identify the person who’s genuinely excited to learn.”
Your culture stems from the things you are passionate about
“I used to love reading books and talking to founders about culture in the early days and thinking about the kind of company I wanted to create and the atmosphere. What I eventually realized is that your company culture is not that different from how you raise your kids.
Parents shouldn’t pretend to be really into sports and try to make their kids be really into sports just because they’ve decided sports is a good thing for their kids to do. Kids are going to notice what their parents are really passionate about, and they’ll pick up on that. They’ll be exposed to it and influenced by it in some way.
With company cultures, it’s pretty similar. Your passions and the things you really care about are essentially the culture that you bring to your company. Then, as you hire your first few people, their passions start to influence the culture, too. But you can never fake or force it.”
When raising money, don’t be afraid to ask questions
“It’s really important to always ask as many questions as you can during the fundraising process because a lot of the time, it’s a lack of communication that leads to bad decisions or not understanding where you are in the process. Don’t be afraid to ask your investors questions. They should be willing to tell you what the process is, who the key players are, and what things have to happen before an investment is approved.
One experience really stood out that highlighted this for me. I was pitching to a venture capital firm, and everything seemed to be going great. I met with one partner and they loved the idea. The second, third, and fourth partners loved it, too. Then, all of a sudden, I had a meeting with a partner I’d never met before. And the next day, the firm told me that they were not going to make the investment. I was confused and unable to figure out what had gone wrong. Later, I realized that the final partner was the most important. If I’d known that earlier, it might not have changed the final outcome, but at least I could have set my expectations better.”
Work backwards from the milestones to determine how much you need to raise
“A lot of people who are raising aren’t clear how much money to raise.The advice I give to founders is to figure out what your milestones are (e.g. new customers or product features) that you want to achieve before you need to go out raising again, and work backwards from there. When you go into your pitches, be really clear about how much money you realistically need to get to these next milestones. Just don’t run out of money before you hit these milestones or else you’ll be unlikely to get funding in the next round.
Future investors are always going to ask, ‘What did you do with the money you got in the last round?’ If you have no accomplishments to show, if you haven’t hit any major milestones, they’re going to pass. If you work backwards from that and you can’t raise the money you need, I usually tell people maybe you’re working on the wrong idea then.”
Structure an acquisition to align incentives on both sides
“The whole point of a small company getting acquired by a larger company should be to take advantage of the larger company’s channel and customers. So whenever I consider doing any sort of merger or sale, my number one thought is, ‘How does the acquirer’s current business work, and does it make sense to put my product into their channel? Will my product get discovered in that channel?’
It’s important to look at what potential partners or acquirers are really good at and make sure there are clear, mutual benefits. When First Data acquired Clover, we knew they were fantastic at selling payment processing in the US and beyond. They had great sales figures and had become experts in that area. We were great at building products, and they wanted their entire company to be based off our technology. The acquisition was a really beneficial match for both of us.
It was important for us however to structure the acquisition to ensure full autonomy post-acquisition. This allowed us to continue to make decisions based on what was right for the product and what was the right way to run our business — even down to our HR and benefits programs, and what computers we were going to issue our employees. We said, ‘We need a budget that you can’t alter’ that was at our discretion to spend as we wanted to spend. They trusted us to spend it the right way because our incentives were aligned, as we all wanted to get this product out the door and get it distributed as widely as possible.
The deal was structured such that we would get a cash pay-out upfront to pay off our investors and to comp our employees. We also outlined deal terms such that First Data would have to pay into a pool every time they distributed Clover to the world which allowed both sides to stay aligned. The more First Data distributed Clover, the more payments would get distributed into the pool. This pool went to our investors, current employees, and future employees — similar to stock. It ensured that we could continue to hire the best talent, especially engineers, post-acquisition.”
Look at the problem right in front of you and solve it. Don’t overthink it.
“It may feel counterintuitive, but in my experience, in general it’s best to not overthink things. Don’t make things complicated. Just look at the problem that’s right in front of you and solve that problem. Then move on to the next one.
So, if you don’t have the team to build a great product, go hire great people. If you have a great team but you don’t have customers, focus on establishing a solid customer base. I generally don’t overthink things beyond that. Just focus on the main problem directly in front of you and solve it as fast as you can.”