Layoffs are mushrooming in the tech industry. For example, Amazon, Salesforce, and Facebook—big, public tech companies—have all announced sizable layoffs. These are high-paying, skilled jobs that used to be thought of as safe. These jobs were abundant while these companies grew for many years and competed for talent, creating a market where talent always knew they could find a job. Things have changed. These companies are all reducing or freezing headcount at the same time. This is playing out with smaller private tech companies too.

Absent a reversal, I suspect this will lead to a big uptick in entrepreneurship. Until now, employees with safe, high-paying jobs have had a strong incentive to not pursue entrepreneurship. Low-risk, high-reward positions were abundant. But with the market changing, the risk is greater. If you’re laid off, your reward is low (zero pay). For those who have entrepreneurial desire, starting a company now makes more sense. They’ll still be in a high-risk situation, but they’ll also have a shot at high rewards and have more control over their own destiny. Said differently, in an environment where you can’t find a job, what do you have to lose by trying to start a company?

I think we’ll start seeing more people (in tech and other industries) look at the changing risk/reward dynamics and decide to bet on themselves.

Today marks the end of my one-hundred-forty-fifth week of working from home (mostly). Here are my takeaways from week one hundred forty-five:

• New year – The new year is here. It’s a fresh start. I’m really excited about what’s in store in 2023.
• Personal velocity – I’ve been thinking about this concept more as it applies to evaluation of individuals. I’ve also started to think about the personal velocity of people in my circle.
• High gear – The most successful people have a hidden gear, an extra one they don’t use all the time. They shift into high gear when they’re trying to create something new or take something to the next level. I feel like 2023 will be the year that many will kick into high gear.
• Layoffs – More layoffs are hitting the news, specifically in tech. Given the macro environment, some of these people will pursue entrepreneurship; it’s likely one of their best options now.

Week one hundred forty-five was short. Looking forward to next week!

I listened to an interview with James Clear, the author of Atomic Habits. He discussed his own daily habits and shared the concept of an upstream habit. The idea is that by doing this one thing habitually, you increase the likelihood of maintaining other habits or generally being set up for a good day. Working out in the morning is his upstream habit.

I agree with this upstream habit concept. Last year, I identified my foundational habit. Focusing on this single habit gives me momentum for the day and increases my chances of keeping up with other habits and having a productive day.  

What’s your upstream habit?

I caught up with a venture investor and talked about a deal that’s frustrating him. He loves the founder, team, and solution. He’s been working to structure an investment that works for his fund and the company. The company raised over $10 million in venture capital eighteen months ago. That fundraising round was large by historical norms, as was the valuation, considering the early stage of the company. But that was the market at the time, and the founders took the deal. They’ve executed but haven’t made enough traction to warrant an increase in their valuation. Given the current market, this investor believes they’re likely worth the same as, or even less than, they were eighteen months ago.

This investor is walking away from the deal. Why? Given the company’s traction and the fund’s target portfolio construction, the investment would need to happen at a valuation that’s materially below the valuation at the last fundraising round. The founder isn’t open to doing a down round.

High valuations feel great to founders when the deal is done, but founders should be aware that they can come back to bite you. If you received investment at a high valuation, executing flawlessly and realizing material traction is likely your best bet to avoid a down round.

Velocity and speed are different. Velocity is how fast you’re going in a particular direction. Speed is how fast you’re moving (in any direction). The direction aspect of velocity is important. People can move fast but in the wrong direction. If they measure speed, they think they’re doing well because they’re moving quickly. If they measure velocity, they think they’re doing well only if they’re moving in the right direction. I believe people who achieve outsize success focus on velocity, not speed.

People who achieve outsize success are usually adamant about learning. Whatever their method, they have a habit of learning. (Warren Buffett reads 500 pages a day to acquire and compound knowledge.) They also have a destination or at least a direction in mind. They know where they want to be and are working hard to get there.

I started thinking about ways to evaluate the likelihood of someone achieving outsize success. Various factors should be considered, but understanding where someone wants to be and how fast they’re bettering themselves (i.e., learning) to get there is key. I think of this as measuring their personal velocity. To my mind, if someone has a high or rapidly accelerating personal velocity, the probability of their achieving outsize success skyrockets. Warren Buffett, Koby Bryant, Tiger Woods, Jeff Bezos, and many other successful people have, or in their day had, high personal velocity. They were clear on what they wanted to accomplish and worked diligently to improve themselves so they could reach their destination as rapidly as possible.

I’m going to start thinking in terms of measuring individual personal velocity.

This weekend, I chatted with two founders who’ve each built a multibillion-dollar company. Both companies are still growing, and both founders want to take their companies “all the way”: they’re planning on IPOs followed by public trading on the stock market. These founders realized that to achieve that goal, they, and their supporting casts, need to level up. They’re both preparing to become public company CEOs, which means they need to learn new skills and improve existing ones. They’ve started hiring company leaders with public company experience and building relationships with public company CEOs from whom they can learn. If all goes well, they should be ready to take their companies public in the next few years.

By any standard, these founders are successful. They’ve built amazing companies from zero to hundreds of millions of dollars in annual revenue, creating wealth for themselves, their team members, and their investors. But even with all this success, neither has ever taken their foot off the gas or become complacent. They continue to level up so they can tackle their next challenge head-on.

Most founders—these two included—have no idea what they’re doing when they start out. A key difference between those who achieve greatness and everyone else is the former group’s desire to continuously level up. They’re OK about not knowing some things, but they put in the work to learn and fill those gaps as quickly as possible . . . over and over again.

My chat with these founders was a reminder that greatness arises not from complacency but from continuously leveling up.

I hope the new year is off to a great start for everyone!

Today is the last day of 2022. This year felt more evenly paced than 2021, which went by in the blink of an eye. Although 2022 was another year of macro uncertainty and pain for many, for me personally, it was a good year. It was a year of learning, refinement, and growth. I appreciate having experienced another year, and I’m looking forward to 2023.

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Today marks the end of my one-hundred-forty-fourth week of working from home (mostly). Here are my takeaways from week one hundred forty-four:

• Christmas – It’s always great to spend holidays with family and friends. This year’s Christmas was cold but a good time. We didn’t do Christmas in 2021, and that’s something I hope to never have to repeat.
• Year end – Tomorrow is the last day of 2022. What a year it was. Lots of highs and lows, but more importantly lots of growth. Looking forward to 2023.
• Public markets – The last two weeks, I’ve had more friends share contrarian views on public market valuations. They’re expressing optimism even though headlines are gloom and doom. Not sure if holiday downtime prompted people to pay closer attention to the latest market movements and share their views. Or something else. I noticed a pattern, though.
• Rest-of-year plans – I shared my holiday plans last week, which helped me be intentional and stick to the plan.

Week one hundred forty-four was a quiet week. Looking forward to next week!

One thing that’s more common than most people realize is early-stage founders not having the data they need to understand how their business is performing. For example, I talked with a real estate founder with multiple properties. I asked how he knows how each property is performing. He doesn’t, he said. He does back-of-the-napkin math on rent and expenses. I’ve talked with other early-stage software founders who don’t have a great handle on their customer conversion rate, customer acquisition cost, or, sometimes, how much runway they have left.

Early-stage founders have limited resources, so it’s not realistic to expect them to precisely measure and understand every data point in the business. But it does make sense to pick two or three that really matter. The highest-priority one should be financial. Businesses fail because they run out of cash. You always want to understand your cash position and its trajectory. For nonprofitable or pre-revenue businesses, understanding your revenue is critical. Knowing how many months you can plan before the bank balance hits zero is key. For profitable businesses, review your profit and loss statement and balance sheet monthly to understand what’s contributing to (or detracting from) your profitability and how much net cash you have on hand. If you’re not a numbers person, there are plenty of firms who can help pull these numbers together and explain them to you.

As we head into 2023, early-stage founders should be mindful of what numbers tell them about how their business is performing. Hint, hint . . . every founder should keep their finger on the pulse of their cash.