Disagree. Founders are heavily incentivized to minimize this at the time of funding since dilution hurts most pre not post valuation. Founders will absolutely expand this as needed to hire top-tier talent. I don’t think this is a strong correlation with being short-sighted.
Also, if it’s so important maybe VCs should be a true partner and take the post dilution hit with the founders.
They won’t because they can’t guarantee their % stake. What calculation do people think founders are doing? (side effect: also good for employees!) It's silly because the option pool will be expanded as soon as it runs out through board consent post fundraising.
1/ *sigh* What happened with the personal computer at Xerox:
The Dallas group knew that if they were forced to add an entirely new product to their customary line of office machines, any hope of meeting their near-term sales & financial quotas for the year would be demolished...
2/ “They had to sandbag the Alto III, because with it they wouldn’t make their numbers and therefore wouldn’t get their bonuses,” Ellenby concluded.
“As a Xerox product, the Alto III was dead.“
3/ Xerox’s top executives were for the most part salesmen of copy machines. From these leased behemoths the revenue stream was as tangible as the “click” of the meters counting off copies, for which the customer paid Xerox so many cents per page...
1/ I spent a part of last week learning about self-driving cars. This doesn't even scratch the surface but for those just starting out here are a bunch of the most useful resources I found & read if you're interested too:
2/ A great lesson structure to get caught up on all the various key parts of what makes a self-driving car work: apollo.auto/devcenter/devc…
The first of many situations. I have not met very many CEOs who were happy with going public. The trend is already anti-public. Once a stable system for liquidity exists for employees & investors, the incentives will be low. Reform will be necessary.
Huge secondary rounds already delay companies from going public by offering liquidity. I remember Sequoia had a panel of CEOs that talked about their exp of going public & they primarily indicated the primary benefit was a nice marketing event & it increased their credibility.
I bet most people think crypto will solve this somehow. But, as long as people can antagonize your stock or distract your employees with price fluctuations, that solution is not likely 10x better.
1/ One thing that was challenging as a 1st time founder was the transition from having built a product people loved to figuring out how to grow it beyond the word of mouth success it had become. Building a great sales & marketing org was frought w/ peril & I made many mistakes...
2/ First, I want you to know that you are not a failure as CEO just because you are bad at this skill. Many product/eng-focused founders screw this up. I thought I was particularly distinct at this until I reached out to CEOs who similarly went through waves of struggle.
3/ Should you think replacing yourself with a CEO who's great at S&M will fix the co, just know that it likely will create a gap in other areas (like prod). Divorcing prod & S&M strategy is perilous. There's no hard rule but the point is there's no CEO that's great at everything.
Always two sides to a story but there's going to be a reckoning if true: "Yang (VC) is said to have eventually disclosed a summary of the report that confirmed the pants-dropping incident, but found there was nothing sexual about it, & there were no repercussions for the founder"
Wow, YouTube Music basically launched & copied Spotify today. We've officially entered the algorithmic playlisting era of how we discover music. Long live the single & hopefully more meritocratic distribution dismantling the major labels.
This is also the beginning of "Playlist Discovery Optimization." For example, Spotify has an API that can tell you whether your song is sad, danceable, chill, angry, etc. You can use the labels to figure out how to enter low-competed for playlists to find opps for distribution.
Spotify just released a way to submit to all their playlists which made having to convince their curators (eg the god of EDM playlists: Austin Kramer) be less of a "who knows who" game. Did you know that it literally started out as Google submit form before they prob made it?
1/ One of the things that gets harder as the company grows is the speed at which the company can make decisions. At some point, it's not possible for you & the person responsible to come to a decision. You must grapple with the spectrum of reaching consensus vs deciding yourself.
2/ The conflict is two fold while making decisions as you scale: (1) if *you* make it, you risk lack of support from the team & possibly move slower because people are reticent or (2) you require support from everyone but risk moving slowly if not everyone agrees w/ the direction
3/ To further exacerbate this problem: (1) you need to decide what % accuracy of data you need to make the decision, (2) is this a decision that needs to be decided quickly (urgent but room for error) vs thoughtfully (avoid irrevocable consequences)?, (3) who do you include?
1/ Every startup goes through the same repetitive bottlenecks: (1) you need to improve the product, (2) you need awareness to test the product, (3) you have scaling problems because people like the product.
2/ Early on, when the team was small, I found we broke through problems more effectively when we focused together on one thing at a time vs spreading ourselves too thin & dividing & conquering.
3/ My best technique was writing down all the possible levers to pull to fix the problem to grow. Then, dividing & conquering as a team on each lever until we achieved victory. Writing it down helped (1) formalize thoughts & (2) prioritizing what to do to make the biggest impact.
1/ Yes. It happens to everyone. It's devastating when you're smaller (< 20 employees). There's nothing you can do except move on. Don't let it scar you. Truth is: even if you made them feel badly & they came back tomorrow you wouldn't them. You dodged a bullet.
2/ Find clever ways to solve this & engage people: (1) invite them to the office for after-hours hang outs w/ team, (2) setup mtgs to take care of HR things prior to arrival to avoid paperwork on the 1st day, (3) grab coffee & guide them on what to read up on before they start.
3/ The point isn't to get the bad apples to not ghost you. It's so that they bail earlier on their commitment to you so you can move on faster. Good apples will appreciate the TLC.
FanDuel raised $416M at a $1.3B valuation & got acquired for $465M. The founders will get nothing after nearly 10 years--can't really beat pref stack. Maybe they took something off the table but still a farcry from the goal. Let this be a reminder: raise what your company needs.
Fwiw, I can't imagine how the founders & team are feeling right now. It's unbelievable that a new CEO comes in after 6 mo & nets $11m. I am angry for them. 😡
“We never envisaged it would be used to screw everyone who wasn’t an institutional shareholder,” said one early FanDuel investor, who did not wish to be identified.
1/ Now that @ycombinator applications are open I decided to share the YC app for Mixpanel we wrote over a decade ago. We were 20. Hadn't had much real work exp. Didn't go to a MIT/Stanford. Only 5 mo into building the product. Here's the application: bit.ly/2Kjmv26
2/ When I decided to apply, I wasn't sure if I was going to join @ycombinator. You see, YC was fairly new. I was worried about giving up 6-8% of equity so early on. There were no big successes yet so I wasn't sure what it'd be like. Also, the recession hit...could we raise $$$?
3/ Eventually we thought: (1) it'll help us formalize & write down our thoughts, (2) if we get to the interview, that's a good litmus test of the idea, (3) it's a good way to formalize the step of becoming real co-founders. We didn't know if we'd get to interview anyway.
1/ Today, I wanted to talk about ENS. ENS stands for Ethereum Name Service. It makes a mapping between something complicated & human readable. Like, domains to IPs. Token addresses to domains (bob.eth). Check it out: ens.domains
2/ ENS is already on mainnet. You can start registering domains now. The controls that maintain the registrar will be reset but you can migrate your domain when things are permanent. Remember, when nobody cared about domains in early 90s...
3/ ENS is already gaining ground. Future integrations with MyEtherWallet, Status, Metamask, Etherscan, etc. 🚀. It's just happening. There's no BD person or sales team.
1/ Getting my first 100 customers always felt like a puzzle. The next 1000 seemed unreachable. Besides, how can you get feedback to make the product better w/o users? After many years, we ended up w/ 6,000+ paying customers. It was a grind to get there.😩 Here's what I Iearned...
2/ This 1st lesson comes hard learned for most engineers: get up — away from your monitor—and talk to your users! I know it’s safer & comfortable to just email people but it’s also easier to ignore you. Your first 100 customers are usually acquired as a result of YOU selling.
3/ Find clever ways to find groups of like-minded people. Early on, I wrote an early Twitter script to follow a person’s followers. That person often blogged about the problem we were trying to solve. We found 100s of customers this way that were happy to try our product.
1/ Recently a new founder asked me: “How do I approach anyone to be a mentor to me? It seems like a very overwhelming ask sometimes.” Here’s what worked for me & this was my advice to him that I thought I'd share for others...
2/ I find asking someone to be your mentor is a bit awkward & you won't even know if it'll be a positive relationship yet. You might not like them or their advice may not feel applicable to you. I often found quickly that my personality didn't match theirs at times. Baby steps...
3/ Instead, I'd recommend developing a relationship with someone by seeking some small advice first & continuing to develop that relationship over time by asking more questions. If they feel taxed by you, they won’t respond. Be nice & empathetic. Don't be scared though.
1/ Great story about survivorship bias that I just read: "During World War II, the statistician Abraham Wald took survivorship bias into his calculations when considering how to minimize bomber losses to enemy fire."
2/ "Researchers from the Center for Naval Analyses had conducted a study of the damage done to aircraft that had returned from missions, and had recommended that armor be added to the areas that showed the most damage."
3/ "Wald noted that the study only considered the aircraft that had survived their missions—the bombers that had been shot down were not present for the damage assessment. The holes in the returning aircraft represented areas where a bomber could take damage and still return."
100% agree. Founders should have to prove viability, that they're making a difference, & that their idea is exciting. VCs should compete for the best opportunities to earn outsized returns for their fund. You break that & LPs run away scarred when they see they made no money.
Founders shouldn't lie. VCs shouldn't be jerks. Neither should be over confident.
Many founders probably don't realize how much responsibility will come after raising money & hiring people. It'll be very stressful if things go south. It's healthy to pass certain litmus tests to body check yourself. People's careers are on the line.
1/ The first 18 months of starting a company is often life or death. I must've made 5 different companies that each failed within 9 mo. 😭 Each time the company failed I figured out what I could do better. Eventually startup #6 got to $40K/mo by month 18. Here’s what I learned...
2/ Stay focused! Ignore things that are a waste of time: meetups & conferences, meetings with no clear agenda, fundraising if you're not fundraising, reading lots of tech media articles, etc. Every week should feel like significant progress in the first year.
3/ Your first 5 hires will be the difference between life or death. Choose carefully. Be picky. Many of the things we do at the company still are a result of those early hires' legacy. Have fun as a tight knit team. It will change & evolve as you get bigger so enjoy this moment.
1/ When I think about the process I had when starting a company for the first time, I realize how much luck was involved. I might've even benefited from my naivete but I didn't do nearly enough. Here are the things I wish I did...
2/ Study the history of prev successes & failures. Understanding the market incumbents is critical to seeing the distance you'll have to go but also where there are many opp to exploit. The Wright Bros made safer planes while testing to avoid dying like their predecessors.
3/ Prototype & learn the technology from 1st principles. There are a lot of opportunities to test why things are the way they are. We built a new kind of db which changed our trajectory. Could things be better if: The internet was 5x faster? Compute was 5x faster? New APIs exist?
1/ I became "CEO" at 20. I dropped out of college. I had only interned somewhere prev. Looking back, I couldn't imagine the journey that would occur from writing code all day to scaling to 300 people. I got lucky, I screwed up a lot, & had a lot of help. Here's what I learned...
2/ Giving up control is hard & it was the hardest for me. I felt like everything at the beginning was important. You can't be good at everything tho. As you grow, I learned it's important to conciously give up things constantly. If you don't, you won't scale & everything suffers.
3/ Your VCs won't want to offend you so I'll suggest it: get a CEO coach & do a 360 review of yourself every few years. It was life changing for me. You can’t fix everything about yourself. Focus on 2-3 things each year. Tell your company you’re doing it. It'll build trust.
1/ Let's talk about fundraising: In 2009, Y Combinator only gave us $15K, half our YC batch died after demo day, 11 firms told us no, 2 firms wanted to find us a CEO, 1 VC told me, point blank, we would fail, we were a week away from death but luckily raised $500K @ 2M pre.
2/ A lot has changed: huge valuations, more capital available, funding vehicles at all stages, "founder friendly" is the norm, uncapped conv notes, seed stage is the new series A, YC isn't as tight knit anymore, hire a COO is the new replace the CEO, & a16z is the new Sequoia 👀.
3/ Some things haven't changed in fundraising land: male dominated/biased, herd mentality, VCs still struggle to pass on a company directly, top 5 firms founders want to raise from are relatively the same, access is still intro-based, and raising money is still a drain.
1/ The biggest discovery in Dec I had when working on a Dapp was how much opportunity there is in building the early development tools for crypto apps: debugging is hard, authentication isn't cross platform, documentation is old/lacking, security is weak. Lots of work to do!
2/ Second major discovery was how basic the VMs are for writing complex apps. We have a long way to go. For example, EVM can't manipulate strings easily. There's so much promise though--it feels like early computing. There will be a lot more focus on the VMs once tx fees lower.
3/ 3rd major discovery was how important it's going to be the fix auth and make it easier. People can't be expected carry their keys or 12 word phrases across devices. Metamask isn't sufficient. It's going to be hard to make mainstream apps without a better solution.