5 Reasons Why Lying is Stupid in Startups (and Life)

Posted on January 12, 2010. Filed under: startups, venture capital | Tags: , , , |

1) You spend more energy/bandwidth maintaining a lie than you do dealing with the adverse effects of telling the truth: This is the main reason why I have categorically banned mistruths from my life (I’d say, by the way that 0% mistruth is almost impossible, but I have gotten damn close over the past 6 months or so).  In the near term, there are so many opportunities to “facilitate your path” through a small mistruth.  I challenge you to count the number of mistruths you tell in a day (I’ll bet it is north of 5)…It may seem like these mistruths are making your life easier (getting out of meetings you don’t want, getting meetings you do want, etc…), but I would argue that even the mistruths that are intended to make life easier end up requiring more energy than their truthful counterparts.  Let’s take the example of a friend who would like to work at your startup, who you don’t think is the right fit.  When they email you to ask for a coffee and you have 15 other things on your plate, the near term easiest solution would be to say “I’m slammed this week…can we try to catch up next?”  That clears you inbox in 10 seconds and you can move on to areas where you’d like to focus.  But what happens when that person email you again next week?  Now you need a new excuse, so you say “hey man, I’m traveling this week…I’ll ping you when I get back.”  That’s an additional xx units of bandwidth you spent creating a more complex excuse not to meet.  Then, when you do bump into this friend a month down the line, and he asks how your trip was, the entire balance of your interaction, and every interaction that follows, must exist with maintenance of your initial mistruth about being out of town.  That’s a lot of mental bandwidth to expend.

Now let’s think about what the case where you had taken 2 minutes, instead of 10 seconds, to address your friend’s initial request honestly but respectfully.  That’s 60 seconds of analysis as to why this person is not the right fit, 30 seconds on what you’d like to communicate to them, and 30 seconds to write, “hey man…the first 6 months of this company, we have very specific needs with regard to domain expertise.  If something comes up that seems right for you, I’ll let you know, but happy to grab coffee and talk about who else I know that might be looking for someone like you.”  Now, you won’t feel uncomfortable seeing this person, you don’t have to maintain any mistruth, and although you may not have given them what they really wanted, you are still being a solid friend and helping out where you can.  Life is FULL of these opportunities to take an extra pause to think about what you really want to say, as opposed to what’s easiest at first glance.

2) Interesting ideas and conclusions occur at the point where you analyze a temptation to lie: Simply by training yourself to pause before delivering a mistruth, you will begin to think more deeply about the points of friction in your life that evoke such an inclination.  Analysis of these points of friction can lead to proactive reduction in occurrence.  Pay attention to these points instead of glossing over them with an easy lie and you can begin to consciously influence their frequency.  For example, when an investor asks you “so what worries you? What keeps you up at night?” you could either give the stock answer which reveals a minor concern and represent it as your largest concern, (and then repeat this answer every time someone ask you this question)…or you can tell them the actual greatness weakness in your model…you might think that you are hurting your chances of raising capital, but in actuality revealing this weakness will force you to resolve/strengthen it (maybe even through a dialog with said investor).  Once strengthened to the point where this weakness does not prohibit investment, you will no longer feel inclined toward dishonesty when faced with the question.  Short term you may increase the risk of securing fundraising, but long term you are decreasing the risk of failure….

3) You set a context for interaction that results in other people telling you the truth (better data): If you make it clear that you will never lie to a party with whom you are interacting, that establishes a plane of trust that is usually reciprocated.  People feel much worse about misleading someone who they know is being completely honest with them (as opposed to a dynamic of gamesmanship in which misdirection and indirect communication on both sides is understood).  You would not believe how frequently professionals set this indirect tone when engaging with external parties…waste of time, energy, and generally a very myopic approach to maximizing value of relationships.  By establishing an environment of honesty and direct communication in any interaction, personal or professional, you will receive a flow of more accurate data on which to base decisions and opinions.  Better data equals better decisions.

4) Being direct about what you want usually gets you want you want: Ask for the order, whatever it might be.  Trying to extract value through indirect communication takes longer and often fails.  Example: When I began to raise my first seed round I met with a friend who is an entrepreneur and seed investor.  I hadn’t really asked anyone for money yet (and I felt a little uncomfortable doing so), so I pitched him under the guise of “seeking advice.”  When the meeting was over, he said “I hate it when people aren’t up front about what they want.  If you are asking me for an investment, ask me directly.”  He forced me to “ask for the order” and from that point forward I had no problem doing so with everyone else.  After that I started asking people for investment instead of advice and guess what I got?

5) Sometimes you get caught: this one is straightforward…when you get caught in a lie you lose credibility and damage your relationship with the recipient as well as your overall credibility.

There are many more reasons (ethical, karmic..etc…) why setting a personal goal of zero lies per day is a righteous endeavor.  The purpose of this post is simply to outline some of the more practical and tangible effects of eliminating mistruth from your existence.  So now I have established a plane of truth with every one of you.  Anything I tell you and anything you ask me (professional or personal), my response will be 100% truth.  Fire away.

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Give us your [rich], your tired, your huddled masses longing to be free

Posted on January 7, 2010. Filed under: startups, venture capital | Tags: , , |

Yesterday I dropped into office hours at a venture firm who I didn’t really know, but wanted to meet…the format was basically 5 or 6 entrepreneurs sit down and chat with the investors for 30 minutes in an informal conversation about everyone’s efforts.  My understanding is that if the venture firm thinks you’re high potential, they’ll give you a desk for 3-6 months.  That desk comes with free internet/coffee/conference rooms and the opportunity to collaborate with a bunch of other startups and share learnings and ideas…there’s also one dude from the firm who sort of hangs out there and spends time working on his own projects, but also providing guidance to the folks in the space…this model is a great contribution to the NYC startup community, and one which I think will yield fruit for the firm.  What amazed me, however, was not the new presence of this firm in NY, but rather the backgrounds of the other entrepreneurs in attendance.

For the last year, I have been listening to members of the New York startup community speculate about the migration of talent away from wall street toward entrepreneurial endeavors post financial apocalypse.  I largely viewed this thesis to be wishful thinking, as having worked on wall street myself after college, “investment banker” is not exactly the psychological profile I envision when i think of early stage entrepreneurs…but yesterday was the first real data I have absorbed which makes me question my skepticism.  It’s one thing for talented engineers who were engaged in algorithmic trading pre-meltdown to be recruited away to established venture-backed startups that could afford their 6 figure salaries.  But it is entirely another when 4 of the 5 early stage founders with whom I met hailed from Merrill Lynch, Citigroup, Morgan Stanley, and DE Shaw respectively (amazing btw that when I went to link to Merrill’s website using Google Chrome browser, I get this message:

An incompatible browser has been detected and your page layout and/or functionality may be effected.
This Merrill Lynch website (www.ml.com) is designed for viewing in the below browsers:
Microsoft Internet Explorer (I.E.) 5+ Download
Netscape 7+ Download
Firefox 0.8 + Download
Anyway, these are not guys who grew up programming in their garage before being scooped up by wall street recruiting at MIT (in fact one of them had spent $100K of his own hard earned wall street cash on an outsourced website for which he did not even know the language in which it was written…note: i actually liked that guy and thought he was pretty smart despite this shocking stat).  Rather, they were bright and ambitious young guys to whom Wall Street had obviously fallen from grace.

Through an investor’s lens, I think there will be some winners out of this generation and profile of NYC entrepreneur, but if I had to guess, I’d say it may be a little early to put my dollars into this group of folks. I’m more interested at the point where this class of wall street emigrants matures over the next 12-18 months (and natural selection/financial recovery seduces the ones who aren’t cut out for it back to wall street).  Those who remain, will likely represent the conversion from would-be lifetime financiers to would-be lifetime entrepreneurs, and they will be the ones to create companies that contribute to the renaissance of NYC entrepreneurship.

So, I know the sample size is relatively small, but I was excited to see the talk of a talent transfer in NY manifested in real life.  I’m assuming venture firms have had this empirical data point for quite some time, which can only hearten their recent commitments to our geography (see “NYC Venture Capital War” for more on that), but it was strange and refreshing to experience potential history in the making first hand.

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Newsflash: Your Startup Is Not In The Playbook

Posted on January 6, 2010. Filed under: JumpPost, startups, Uncategorized, venture capital | Tags: , , , , , |

A former investor of mine, Fabrice Grinda, recently wrote a blog post enumerating the reasons why businesses that are started with two co-founders are more likely to exit big than are those with a single founder at the helm. That line of thinking seems to be the common sentiment at least in the venture world, and one which having seen more than a thousand founder/cofounder setups while on the venture side, I think I would tend to agree with.  When I started thinking about leaving General Catalyst to start my first business, I mapped out a progression of events necessary to take the plunge and build a company.  The planned progression of events went something like: 1) idea, 2) diligence, 3) cofounder, 4) quit job, 5)raise capital, 6) build product, 7) achieve seed stage milestones, 8 ) raise more capital and scale.

This play book is sort of a standard one that I had heard many entrepreneurs and investors tout, and not having been through it before, I largely executed according to plan (minus 7 & 8 that is).  What I’ve learned, however, is that someone else’s play book is only a guide, and to execute against it without flexibility and recognition of your own context/data is a mistake.  Nothing in startup world happens exactly as you expect it to.  Sometimes a recognition that you need to write your own play book can prevent what I’ll call “inorganic progress.”

“Organic progress”, to me, is when the events in an operating plan occur as the result of successful completion of tasks/goals/learning on which that new event is dependent.  In other words, progress that occurs naturally or without force.  An example of organic progress would be when a management team builds a product, puts it out to consumers, people buy this product, and THEN they design a customer service program to support their newfound customers.

“Inorganic progress”, then, would be occurrence of an event ahead of completion of the tasks/goals/learning on which that event is dependent.  Or, forced progress.  The company builds a product, puts it out to consumers, and then designs a customer service program in anticipation of its first customers…although it may seem that management is getting ahead (or making progress) by finishing their customer service design quickly, they are doing so without the data/learning of customer feedback, and thus an event (the customer service design) occurs before it’s antecedent (inorganically).

It has been my experience that when progress is forced, although potentially forward moving from an aesthetic sense, this is progress in a wrong direction.  The customer service design, when created through inorganic progress, will not address the needs of the company’s customers, thereby creating an operational inefficiency that would not have arisen had management allowed this piece of progress to develop organically.

As it turned out in our last company, steps 1-4 were in line with the concept of organic progress.  My immediate instinct when starting JumpPost was to replicate a known play book: 1) idea, 2) diligence, 3) co-founder, 4) give up job opportunity in venture capital (replaced quit job), 5) raise capital.  What I realized when I began executing on this play book, however, was that I had a previously non-existent understanding of the difference between organic and inorganic progress.  Steps 1 & 2 were the same, but as I began to work on 3, I realized that recruiting A level talent, and especially a cofounder, could be a 6 month cycle.  A number of people I am close with expressed an interest in cofounding the company, and had I been executing to “plan,” I would have taken one of them on before moving forward to step 4, but this didn’t seem “natural.”  Why? Because I was missing two antecedents to this decision.  The antecedents, in this case, being 1) an understanding of what domain expertise would become most important to our company, and 2) an understanding of what caliber of talent I could expect to bring on board pre vs. post venture financing.

So…I sort of tabled the old play book, continued to meet with interesting people, but began executing the subsequent steps before completing step 3 (cofounder)…As soon as I moved past step 3, another deviation from the play book arose.  The play book would have said I needed to raise capital in order to develop the JumpPost product (especially without a technical cofounder), but again it didn’t seem natural…what I realized was that I wasn’t ready to commit to investors a single vision for the Company without the data of product/market fit behind us.  So I read a lot about a new play book, rooted in the philosophy of customer development, and then began recruiting a team to build something ahead of financing.  Now, we will begin to acquire the data needed to complete step 5 (fundraising) organically.

I ran into Chris Dixon on the street in our neighborhood a few weeks ago, and after chatting for a bit about this blog, he asked about JumpPost.  His first question was “how are things going? still searching for a technical cofounder?”  From an investor’s perspective (and Dixon is another example of a guy who has seen a thousand startup teams, and subscribes to the “cofounder law” for many of the reasons Fabrice articulated), acquisition of a cofounder (step 3) was a data point that would indicate where I was in the progress of a conventional startup play book.  Although my answer to his question was, “yea, I guess so,” the reality was I was well beyond this step in the play book, but only because I decided a while ago that I would design a new play book, drawing on conventional wisdom for sure, but not without a few of my own creative plays mixed in.

So all this talk of organic and inorganic progress is just to say that while I recognize Fabrice’s points about the benefits of a cofounder, I will not take on a “cofounder” until it organically presents itself.  As JumpPost progresses, I view every early hire, part time contributor, and even advisor as a founding member of our company and I rely on them all as a sort of “aggregate cofounder.”  The interesting part is we are going to hit step 6 (product) and have a real good shot of hitting step 7 (achieve seed stage milestones) of the old play book, before executing on steps 3 (cofounder) and 5 (raise seed round).  It just happens that this was the most organic and natural path of progress given all the events/goals/learning that we have experienced to date.

So, I guess my advice to entrepreneur’s considering Fabrice’s (and common wisdom’s) suggestion that “2 [founders] > 1”  would be, “yes, a cofounder does represent a huge amount of value when starting a business…BUT there are many ways to skin a cat, just make sure you don’t do it inorganically.”

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The “Real” Behind Online Analytics (Entrepreneur’s Therapy Session)

Posted on December 7, 2009. Filed under: startups, Uncategorized, venture capital | Tags: , , , |

Being an entrepreneur or an investor in consumer internet land, it is very easy to become jaded by big numbers.  The metrics we use to track engagement with an online product or content are dehumanizing.  People who interact with an online site are immediately transformed into statistics like “active users,” “clicks” and “page views,” and somehow they become less real.  Mark Zuckerberg announces that Facebook has surpassed 350 Million “Users” and I am conditioned not to internalize just how many people are engaging in the action of Facebooking.  I guess when I hear a number like that, I try to benchmark it against big numbers I am already familiar with, to get a sense of scale.  I’ll say, “350 million people is 5% of the World’s population,” that is amazing market penetration.  But still, that number may as well be written in cotton candy, hanging from a tree in The Cat and the Hat, puffing out plumes of saffron colored smoke into a balloon shaped like the letter R.  That’s how far my perception of “350 million users” is from the reality of 350 million people performing one single and common action.

This only really dawned on me yesterday, when I stumbled into Madison Square Garden, sat down in the 8th row, and looked up into an endless sea of Knicks fans.  I thought to myself, “there are a ton of fucking people, packed into this arena, all concentrating their attention on the same thing.”  I leaned over to my friend, Phin (who has been kind enough to bring me to these games for the last 15 years), and for the first time I asked him “How many people does MSG hold?”  Phin answered 19,763, and I was paralyzed.  I thought to myself, “on any given day, I can write a blog post that reaches half of this arena, and it would be equivalent to calling a time out, handing out a piece of paper to the entire left side of the Garden, and having them read it in silence for 30 seconds, before the game resumes.”

Something is lost in the translation from a physical crowd to an online crowd.  As I try to identify what it is about that arena that I find so impressive, despite the relative size of its audience compared to online crowds, I am drawn toward a few concepts: 1) concurrency, 2) time, and 3) friction.

1) Concurrency: I guess I have a newfound respect for a product that captures a high volume of concurrent users.  The trend toward On Demand information consumption has removed a key constraint in attaining a volume of consumers.  Live (in person) entertainment is one of the last frontiers where the concept of On Demand consumption is impossible.  An event is only consumable in person during a specific window.  Therefore, 19,763 represents a much larger market share (of attention) than does the same number in the online sphere.  The potential volume of attention during the hours of 12:00-2:30PM is 1/12 the addressable attention of a piece of online/on demand content.  Think about how asynchronous consumption has expanded the addressable audience of a television show.  Between DVR, DVD, Hulu, and Cable On Demand, an episode of television has a near infinite number of opportunities to reach a consumer, as opposed to 10 years ago when an episode of Seinfeld could only reach the number of people sitting in their living room from the hours of 8:00-10:00 on Thursday nights.  Madison Square Garden is still living within the constraints of concurrent consumption.

2) Time: this is a metric that actually translates well between the physical and online realms.  A minute of someone’s time is a minute of someone’s time independent of whether it is spent consuming a product in the physical or online realms.  The product of a live basketball game is significantly better than the product of a blog post, which is why the Knicks are able to capture a full 2.5 hours of 19,763 people’s time.  I would have a very hard time convincing a reader to spend 2.5 hours reading this blog.  Time on site is actually a great metric to bridge the disconnect between the online and physical worlds.

3) Friction: by far the most amazing thing about filling an arena with 19,763 people is the amount of friction the Knicks are able to overcome in order to reach their audience.  Getting a consumer to move his physical location is probably 10,000 times harder than getting a consumer to move his online location (from one site to the next).  Consumers drop off from any product when they encounter friction of experience.  The amount of value on the other end of that friction determines how much friction a consumer is willing to endure before giving up and reallocating their attention/effort to an alternative.  When you load a webpage and it doesn’t render properly, you will hit refresh.  If you try again, and it fails, you might hit refresh.  Try a third time and almost everyone will give up on that piece of content.  If it was raining yesterday, I still would have gone to the game.  If the subways weren’t running, I would have taken a cab.  If there was a riot outside MSG, I probably would have passed.  The fact that the Knicks are able to mobilize this volume of people to stand, clothe, travel, and congregate is a testament to the quality of their product relative to alternatives (Sunday afternoon football on TV, shopping at the Apple Store, etc..)

All that being said, Facebook destroys the Knicks with the time lever alone.  It is a far superior product.  The aggregate volume of human time that their 350 million people devote to a single experience is breathtaking (with or without the crutches of a low-friction environment and asynchronous product consumption).  To all the web entrepreneurs out there, living in the analytics behind your product (especially if you haven’t broken out from 50,000 users to 350 Million): start visualizing your audience in the physical world.  Size up a crowd in the most densely populated area in which you find yourself, and then remember that it is likely a fraction of the number of people you reach on a daily basis.  It will make you feel good.

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    I’m a NYC based investor and entrepreneur. I've started a few companies and a venture capital firm. You can email me at Jordan.Cooper@gmail.com (p.s. i don’t use spell check…deal with it)

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