November 24, 2013

All lessons learned from the Foundation interviews

This is a summary of the key lessons from the Foundation interview series. As more interviews are released, I will add more lessons learned.
Not all entrepreneurs had a college degree. Some dropped out from college and some didn't. Neither the type of education mattered - some studied computer science, some studied business, and others had a military background. 
Most were productive even in younger years. Several entrepreneurs began with more simple companies - such as a company that designed websites.
Several of the now successful entrepreneurs have failed. One lost millions in the stock market, one failed to get a job at Netscape, and one got his car repossessed because he couldn't pay for it. 
When coming up with ideas, you should find a problem. Square was founded because one of the founders couldn't sell one of his creations. TaskRabbit was founded because the founder had forgotten to buy dog food. Focus on solving a real problem - don't invent problems. Remember that there are more areas where you can find problems than the tech industry. One of the entrepreneurs worked in the tech industry and then he founded a tea lounge. Another entrepreneur created an ice-ream machine, and yet another decided to build a better thermostat. 
You will know when you have found the problem. When you have found a business idea you want to try or an area where you want to start a company within, you know it's a good idea/area if you can't stop thinking about it. You can work until 3 AM and feel like the world is limitless. One entrepreneur worked with the problem when he had cancer, so he had to fight to get an Internet connection to his hospital bed so he could do movie promotions. He loved it so he didn't consider it as work. Blogger ran out of money just after the tech bubble had crashed in 2000, so the founder worked on the problem alone for about a year. 
Don't start a company just to make money or just because you are 32 and are depressed because you haven't started a company yet. On the other hand, one entrepreneur realized he wanted to create his own Internet company after watching how others were doing it successfully in a short amount of time.
You may have to redefine the idea. Change the name, rebuild the product from scratch - even though you are profitable. Instagram was originally a competitor to Foursquare. You could post videos and pictures. They realized their users loved to post photos, so they removed the other parts their users never used. Just because you have built an expensive product doesn't mean you have to ship the product if you are not satisfied with it. You may not want to redo it and it will be a difficult decision, but if you have enough passion about the problem you want to solve, you know you have to redesign the product.  
Observe how your users are using the product. Don't look at the data and try to optimize the product you have since it may be the wrong product. What you should do is to observe how your users are using the product and then come up with the correct product. For example, PayPal didn't optimize the original idea which was payments through Palm Pilots - they saw (without data) how people used PayPal on eBay. So they changed focus from Palm Pilots to eBay.
But don't change the idea too quickly. Startups today tend to pivot (change idea) too quickly (as in 2 months). If the idea is big and no-one has tried to solve the problem before, then it will take a long time.
The hardest part of founding a new company is to get started. A lot of people don't get started because they don't believe they have the skills needed or they want a perfect product before they launch it - but there are no perfect products. Foursquare launched despite the fact that the product wasn't finished and kept crashing. Take the idea and get it out of your head and show someone who can (try to) judge if the idea is good or not. 
It may be too early. If you don't feel for the idea, then save it for later. "Build a 1000 things and put them on the shelf." The idea behind Twitter came in 2000, but it was too early. The idea behind Second Life began early, but in 1995, the Internet speed was too slow and so was the computer power.
Seek out and listen to negative feedback. People tend to avoid listening to this because it's painful. "Don't tell me what you like - tell me what you don't like." This is also true if you hear negative thoughts about your company or your employees. In a good company, the bad news travel through the company and everyone is aware of the potential problem. People should be happy to tell others about negative feedback. Every quarter when he worked as a CEO, Philip Rosedale used to send out an anonymous survey with the following questions: 1. Do you want to keep me as the CEO or get a new one? 2. Regardless of the first question, do you think I am getting better at my job or worse? 3. Why?
Listen to nobody. Remember that negative feedback may also be wrong. People will tell you everything, but it's better to listen to your own conviction. Even though Chris Sacca has been successful, you shouldn't always listen to him. He argued how he had objected ideas, but then it turned out the ideas really worked. Investors have to say no to companies because they don't have the time - not because they don't like the idea. David Copperfield's parents didn't encourage him to pursue a career as a magician, but their negative thoughts inspired him to work even harder. You have to "brush yourself off" and keep going because you will make mistakes and the world will criticize you. 
A simple product is often a good start. The first early design of UStream was created with the drawing tools in Microsoft Word. One of the venture capitalists interviewed here was happy if he saw a simple demo with a 15 minute presentation. 
Launch to the public as early as you can. Instagram was in beta for 8 months and that's way too long time. You may be afraid of failing but you should want to fail as early as possible. If it really fails, find something else and don't waste yout time. The best thing is to not use a beta at all.
Don't start a new project when the first project isn't fully developed. You may first argue that if you have 3 projects going on at the same time, the probability of success is higher than if you had only 1 project. But that's not true since not any of the projects will succeed because you can't give any of them enough energy.
It's important to find great people - both mentors and employees. You have to make sure everyone in the team is working in the same direction. If not, then you have to let go of the employee who is working in another direction. Don't postpone the hard conversations - you will feel like a weight has lifted from your shoulders if you do them at once. To create a good culture, recruit only people you like, fit in, and can hang out with on your spare time.
Focus on data. How are people using your system? If you have no experience from an area, you should approach it with a hypothesis - not a conviction. Test the hypothesis and confirm/reject it with data. Try to not create the illusion that you know everything - it's often better to know a little bit and say that you are unsure about the rest. Other people will now be more motivated to help you with "the rest."
Don't be afraid of competitors. You should be open with what you are doing so you can attract talent who are also interested in the idea. It's much harder to recruit talent to a secret black box. Other entrepreneurs argued it may be a good idea to be quiet while you are developing your product - or competitors may come and get you. It's easy to get stressed out and get distracted by competitors, but you should ignore them and focus on your own vision. Focusing on what Google and Facebook is doing is only distraction. Instagram's largest competitor is Instagram itself. Instagram has to recruit competent people and build a good product.
Spend as little money as you can. Philip Rosedale has never seen a big idea combined with a big budget work. Don't raise money until you need it. Raise enough money to get your product to the market and test it, then raise enough so you can scale. Be a small team. Instagram had a team of only ten people when they had 10 million users.
It may be a good idea to give away your position as CEO to someone with experience. Six months after Kevin Rose founded Digg.com, he gave up his position as CEO to someone with experience. Elon Musk gave up his position as CEO of Zip2, but he would later regret that decision.
No experience is an advantage. Every single successful person in Silicon Valley broke rules because he/she didn't know what he/she was doing. Brian Wong compared it with a poker game where an amateur can win because the other more experienced players don't know what the amateur is doing. 
"We have time but we are wasting it." 
Stay small. Focus on the development team and keep the number of business people at an absolute minimum. Try to charge money from day 1. But don't do it alone. If you have a co-founder, it's easier handle the ups and downs that will happen as you try to grow your company. 
Explain the why of things. "If you could explain the why of things then that makes a huge difference to peoples motivation." This was a lesson a young Tim Ferriss learned when he refused to learn the alphabet because he didn't understand why he needed it. But his teacher explained why and Tim Ferriss became an alphabet expert.
Don't forget to sell. Most entrepreneurs spend 100 percent of their time on the product and 0 percent of their time on marketing the product, and as a result they will probably fail. Tim Ferriss spends 80 percent of his time on the product and 20 percent of his time on marketing the product.
The 10 000 people rule. Try to write an article or book for 10 000 people. Never write an article and expect that everyone will like it - write for those 10 000 who will like it. If these 10 000 people like what you have written, they will spread it to 1 million people.
Don't forget your family. Life is short, so don't forget your family by focusing all your time on your company. Tim Ferriss uses Saturdays to regain perspective by not using any computer and he doesn't have email on his iPhone. 
A lot of it is luck. But you make your own luck by working really hard, keep improving what you do, and trying lots and lots of things. 
If your customers can take advantage of the system, someone will find out how to do it. One customer ordered 2.5 tonnes of dog food and had to pay only $10 to get it shipped. The company would have to pay $10,000 in fees to get it delivered to Hawaii.  
Courage is more important than intelligence if you want to succeed. The difference between someone who has courage and someone who is a coward isn't what they feel - they feel the exact same thing - it is what they do. 
If you know you are not going to sell your company - then don't waste your time with those who want to buy your company. 
Outside "experts" are not always experts. "If they have 10 years of experience they must be able to do a better job" is not always true. This can be compared with when IKEA hired a consultant. The consultant felt he had to leave because according to his models IKEA couldn't make money - but IKEA made money. 
The definition of a good manager is someone you can fire and still go and take a drink with afterwards.
The rule of threes. It says that every product you launch and every presentation you do is best in threes. The iPhone is an iPod, a mobile phone, and an Internet communicator.
It's complicated to make a physical product. You need a larger team, it's much harder to iterate, and you have to make sure you can sell the final product for a profit. You will need at least 50 people to build a headset. 
Don't spread bad rumors about your competitors. YouTube's competitors, including Google, began to spread bad rumors about YouTube. When Google acquired YouTube, they realized it hadn't been such a good idea to spread these rumors. 
Don't treat everything like a fire-drill. "Running a startup is more art than warfare, more music than boxing." Take your time to figure things out, recruit competent people, and correct the mistakes. "Life doesn't get better by going faster." People who are working hard tend to continue to work with whatever they are working with because they are busy so they have no time to think what they really want to do. 
The 100 year startup. When building a company, Phil Libin has a 100 year plan. 
Don't be afraid of 3rd party developers. Evernote is happy if a 3rd party developer builds a better product than they have - they want their user to experience the best. They may give up short-term revenues in form of ads and data mining, but they have realized that users who use 3rd party apps are 7 times more profitable than the users who use only Evernote's apps.  
Focus on the main problem. Ask yourself if a new feature improves the solution to the problem.
Try - even if the odds are against you. David Byttow got a job at Google despite the fact that he didn't have a college degree. People tend to say, "Hey, I will not get a job at Google because I don't have a college degree, so there's no point to apply for a job."  

More articles in the same series: Lessons learned from the Foundation interviews