I recently chatted with an early-stage entrepreneur who built an app that enables businesses to accept almost any payment method. As I learned about the problem he’s solving, he mentioned that his target customers are “micro SMBs.” That caught my attention—I liked that framing.

“SMB” stands for small and midsize business. It’s normally applied to any company that’s not a huge enterprise. This bucket is pretty wide. For example, a midsize company might be a retailer with $75 million in annual revenue and 150 employees. A small company might be a graphic design shop with 10 employees doing $1 million in revenue. Though they’re both SMBs, their complexity and problems differ wildly.

The micro SMB is the smallest business in this group. I think of it as solopreneurs (i.e., the founder is the only employee) and teams of up to five people doing $500,000 or less in annual revenue.

For many years, I’ve been bullish on building a business that solves problems for SMBs as a way to build a large business. According to an older book by Verne Harnish, only 4 percent of businesses in the U.S. have revenue of more than $1 million a year. Translation: the market to serve small businesses is huge. If you can solve a problem they have, you can get a lot of customers.

I love going after micro SMBs because they don’t expect perfection, there are tons of them, you’re usually selling to the owner, and they make purchase decisions quickly. Solutions to problems they couldn’t solve themselves and solutions that significantly free up their time so they can work on other parts of their business do great in this market. They’ll often buy on the spot if you check either of those boxes.

One knock against micro SMBs by investors and founders has to do with the process of selling to them. Price points for solutions in this market are often lower, which means you can’t afford outbound sales teams in many cases. That’s true, but I don’t think it’s a negative. I think of this market as more of a prosumer market. You’re marketing to a sophisticated consumer who is more willing to spend than the average consumer. Instead of outbound sales, strategies that gain this customer’s attention or educate them can attract them. Easier said than done, but highly effective when done strategically.

My conversation with this founder crystallized something for me. I like serving the SMB market, but I love serving the micro SMB market. It’s a tough-looking market, but once you nail it you can build a massive business with customers who often won’t consider switching solutions because they’re too busy running their small business.

Reading Netflixed, I learned about an entrepreneur I’d never heard of. His name was Andre Blay. He was the man who created the market for VHS tapes and a multibillion-dollar industry, VHS rentals. That industry birthed tens of thousands of video rental entrepreneurs and led to the creation of Blockbuster Video. And he did all that in a few short years.

I want to learn more about him and how his vision led to a multibillion-dollar industry. He wrote a memoir that’s nearly impossible to find at a reasonable price, but I’m determined to get a copy. When I do, I’ll share what I learn.

Students versed in AI are concerned because entry-level software developer jobs are hard to land.

This week, I spoke with a computer science student at a top-tier school known for computer science. He’s about two years from graduation and already all in on AI. He’s creating side projects and is well versed in the latest technological developments.

He said the job market is tough for entry-level software developers (and internships). He and his friends are looking for ways to gain more practical AI experience to increase their chances of getting full-time roles after graduation.

As he talked, I couldn’t help but think of myself and early-stage entrepreneurs. I haven’t found the right developer to help with the next phase of my book project. And I know several other entrepreneurs with internal and customer problems they think AI can help solve, but they too haven’t found the right talent to help them.

I’m out of touch with the job market for entry-level software developers. But if it’s as tough as this student says, then helping entrepreneurs build AI solutions to sell or use internally is a great option for students. They would learn how to use technology to solve real problems and get to see firsthand how doing so creates value for a business. That experience could give them a leg up in recruiting or give them the know-how and confidence to start their own company to solve a problem.

This week, I had a long conversation with an entrepreneur who owns retail stores. The conversation centered on how tariffs are impacting her business. Most of the items she sells are imported from China. The only other countries with manufacturing capabilities are also subject to high tariffs, albeit lower ones than China. So, shifting to other countries wouldn’t solve her problem.

This entrepreneur traveled to the West Coast to understand how her wholesalers are planning to react. It wasn’t good. Some are raising prices to reflect the full tariff amount. Others plan to close up shop and walk away (after decades in business).

This entrepreneur’s wholesale costs will more than double, and she will likely have to double her prices. The challenge is that she doesn’t think her customers will be willing to pay double. She figures that revenue will decline regardless of what she does; the question is how much.

She also shared that she’s now considering starting other businesses. The possibility of her retail store failing for reasons beyond her control is real. It’s forcing her to be open to new opportunities in other industries to pay the bills.

I don’t know what will happen with tariffs. I suspect lots of entrepreneurs are rattled and thinking about plan B. I’m curious about what this will lead to. We could see a burst of entrepreneurial activity. When entrepreneurs’ backs are against the wall, they’re forced to do their best work. With tons of them facing this situation at the same time, some good is bound to come out of it.

AI is a hot topic among entrepreneurs right now. It’s a fantastic technology that makes the previously impossible possible. In the last few weeks, I’ve talked to several founders who want to use AI in their companies. They’re thinking along the lines of chatbots and other features. This struck me as odd because it’s not clear if these things would add value to their customers.

After I left one of these conversations, I realized that the founder is building technology in search of a problem. To his credit, he knows that AI is powerful and can change his company and benefit its customers. But he just doesn’t know enough about the technology to determine how to apply it in his business. So, he defaulted to building what he’s seen be successful at other companies: chatbots and the like.  

Companies exist to solve problems. By solving problems, they add value to customers, and customers pay them for that value. If a technology doesn’t help a customer materially or help you help the customer, what’s the point of using the technology in your business?

AI is powerful, and all entrepreneurs should explore and use it in their businesses. I think the best approach to adopting it, if you’re unfamiliar with it, is to pinpoint a problem that’s painful for you or your customers—one that you can’t solve or that’s painfully expensive to solve. Then, search the numerous AI tools for one that can help you solve that problem. Evaluating each AI tool to understand whether it can do that will expose the limitations of each tool and the technology as a whole. This process will accelerate your AI learning and help you get comfortable with the technology.

This approach will help you create a better solution for yourself or your customers and give you a deeper understanding of AI capabilities that you can use to solve future problems.

Tariffs and the stock market decline after they were announced were all over the media late last week. I lived through tariffs with my e-commerce company, and it wasn’t fun. I learned valuable lessons about how tariffs impact wholesale and retail markets for physical goods, especially for the automotive parts we sold online.

I was curious about how entrepreneurs think about tariffs, so I talked to a few e-commerce entrepreneurs, who are also friends, this weekend.

A few things I learned:

• Entrepreneurs in retail (online and physical) are worried about tariffs because they can’t absorb the cost of tariffs—they have to pass the cost on to customers.
• All the entrepreneurs saw sales soften in the last quarter or two before the tariff announcements. The tariffs feel like a double whammy.
• Customers are asking when or if prices will increase because of tariffs.
• All the entrepreneurs are looking at ways to do more with less and exploring whether AI can help.
• They’re all pausing any spending on new growth initiatives.
• They all recognize that they can’t do anything about the tariffs and aren’t dwelling on them—but they’re monitoring developments like hawks and navigating them as best they can.

Tariffs are a big deal for e-commerce companies whose products aren’t manufactured in the US. I’m curious to see how this all plays out, and I’m mentally preparing myself to pay more for physical goods.

Today, I talked to an entrepreneur who’s a dentist. Over the last decade, he’s steadily grown the business to about 20 dental offices (each office does ~$1 million in annual revenue). To date, he’s used bank loans and hasn’t raised from investors, but he’s considering raising growth capital to accelerate growth and build his company to more than 100 locations.

During our chat, he shared that he recently stopped seeing patients. That decision completely changed his business. He realized that for many years he’d been a full-time dentist and a part-time CEO. He wasn’t giving the business the attention it needed. He didn’t have the bandwidth to work on long-term or strategic planning. He was too busy working in the business, seeing patients.

Now that he’s a full-time CEO, he sees the opportunity ahead of him more clearly, and he realizes he needs to raise eight figures of growth capital to turn his vision into reality.

His insight reminded me of the difference between working in the business and working on the business. For years after I started my company, I was deep in operations to keep the company going. Once I hired more people and removed myself from operations, we grew rapidly. I was finally able to think higher level and longer-term. I identified growth initiatives and focused on making those projects successful so the business could grow.

Like this dental entrepreneur, I didn’t realize for years that to grow my business, I needed to be working on it, not in it.

Two weeks ago, I read a second biography about Albert Lasker, The Man Who Sold America. It mentioned how Lasker worked with Adolph Ochs, who owned The New York Times, to free Leo Frank, who had been charged with the murder of Mary Phagan in Atlanta in 1913. Lasker and Ochs, both Jewish, felt Frank was being wrongly accused because he was Jewish. Learning how Lasker and Ochs created a sophisticated media campaign to draw attention to this case nationally was fascinating.

I’d never heard of Ochs, but I was curious about his journey and how he became the owner of The New York Times. This week, I began reading a biography about him, An Honorable Titan, by Gerald Johnson.

I’m early in the book, but I’ve already been surprised by Ochs’s history: The publisher of a nationally recognized and New York–based newspaper dropped out of school at 14. He wasn’t from an elite family or background. He had to start working full-time at 14.

Adolph began his career as an information entrepreneur in Chattanooga, Tennessee, where he sold a directory at age 19. In 1878, he and a partner created a directory of all the businesses in Chattanooga. This was a manual effort requiring them to canvass the entire city house-by-house to collect the information before they compiled it in a book.

The benefit of this grunt work was that Adolph developed a detailed understanding of the town, its businesses, and the entrepreneurs who owned them. His directory became a valuable resource that allowed him to establish relationships with all the entrepreneurs in town and add value to them by providing aggregated information about where to buy goods and services.

Adolph was selling information that, for the most part, was readily available to everyone in Chattanooga. But by compiling it and making it easy to use, he created something of value that others were happy to pay for. It’s not exactly the same, but it reminds me of how Michael Bloomberg took publicly available bond market data, centralized it, and made it easy for people to make buy-and-sell decisions around bonds (more here). The information product is still, as of this writing, the anchor of his empire and over $100 billion fortune.

It’s interesting how these two information entrepreneurs took a similar approach when they started out though there’s a 100-year gap between them.

I’m curious to learn more about Ochs and how all this led him to The New York Times.

Yesterday, I shared what I read in the Netflix biography That Will Never Work about how cofounders Marc Randolph and Reed Hastings divided equity and how the first financing round led to Reed owning 68% of the company to Marc’s 30%. I shared all the math in this post.

The interesting outcome of that scenario was the ownership, voting control, and control of the board. Marc was CEO, but he owned a minority 30% stake in the company and didn’t have voting control. He also didn’t control the board because he wasn’t the board's chairman. Reed wasn’t an employee of the company but owned a majority 68% stake in it, which meant he had voting control. He was also chairman of the board, so he effectively controlled the board, too.

Marc and Reed were friends and had worked together at another company. They spitballed ideas until they landed on the idea that became Netflix. So they were used to working together and being brutally honest with each other.

In the fall of 1998, about a year into the company’s life, Reed sat Marc down and told him that he’d done some good things. Then he added, “I don’t think you’re a complete CEO” and “A complete CEO wouldn’t have to rely on the guidance of the board as much as you do.” Reed proposed that he join the company full-time and become the CEO. He suggested Marc become the president and that they run the company together as a team.

Reed had voting and board control, so technically he could have forced this decision on Marc. Instead, he left it up to Marc. Marc thought about it and in the end decided that Reed was better suited to be CEO and that he himself was better suited to work alongside someone disciplined like Reed. They divvied up duties. Reed focused on what they called “back-end” functions such as finances, operations, and engineering. Marc handled customer-facing things like PR, web design, movie content, partnership relations, and customer service.

With the changes agreed to, there was one last issue: compensation. Reed surprised Marc by requesting that the two cofounders redivide their ownership. Reed wanted 2 million more shares—and he thought they should come from Marc.

Marc doesn’t share exact numbers in the book, but he does say, “In the end, I’d agreed that a third of the shares Reed wanted, if he was to come on as CEO, would come from me. The other two-thirds he was going to have to ask the board for. Which he did – and which he got.”

In the end, roughly one year after the birth of the company, Marc relinquished the CEO title to Reed and Reed received additional shares. By this point, they’d raised an additional $6 million from Institutional Venture Partners, a prominent VC firm in Silicon Valley at the time. I’m not sure what the exact ownership split between the cofounders was, but I’d assume Reed had a significant, majority ownership stake in the company.

That’s the story of how Reed Hastings became the CEO of Netflix, as told from Marc Randolph’s perspective.

I’m making my way through That Will Never Work, a biography about Netflix’s origin. I finally got to the part I’ve been curious about. Marc Randolph is the author and was the first CEO and cofounder of Netflix, along with Reed Hastings. I’ve always considered Reed the founding CEO, and this book is helping me understand why.

A little bit of background first. When they started the company in 1997, Marc and Reed each received 50% ownership. They valued the company—an idea and two guys—at $3 million (pre-money). They issued 6 million shares, with each share valued at $0.50. Here’s how the ownership looked at this point:

• Reed: 3m founder shares *$0.50 per share = $1.5m (50%) ownership stake
• Marc: 3m founder shares *$0.50 per share = $1.5m (50%) ownership stake

To capitalize the company, they raised $2 million from investors. The company was worth $3 million (pre-money) and raised $2 million from investors, so its post-money valuation was $5 million (pre-money plus cash raised). For their $2 million, investors were buying 40% of the company. Here’s the math:

• $3 million pre-money valuation + $2 million raised from investors = $5 million post-money valuation
• $2 million raised from investors / $5 million post-money valuation = 40% ownership

Six million founder shares already existed. To give investors 40% ownership, the company issued 4 million investor shares, increasing the total to 10 million: 6 million founder shares split between Reed and Marc and 4 million investor shares.

Marc had a young family and was working full-time in the business, while Reed was part-time and had ample liquidity from selling another company. Reed believed in the idea and invested $1.9 million of the money they needed, and angel investors contributed the other $100k. Marc didn’t invest any capital. Here’s how the 4 million shares issued to investors were split between Reed and the angel investors:

• Reed: 3.8m shares ($1.9m / $2m = 95%) * 4m investor shares
• Angels: 0.2m shares ($0.1m / $2m = 5%) * 4m investor shares

This is where the ownership between the two founders changed drastically. Reed was a cofounder and investor, while Marc was just a cofounder. Here’s how their ownership changed after this fundraise was completed:

• Reed: 68% = 6.8m total shares (3.8m investor shares + 3m founder shares) / 10m total shares
• Marc: 30% = 3m founder shares / 10m total shares
• Angels: 2% = 0.2m investors shares / 10m total shares

Even though they were cofounders and Marc was CEO, Reed had a majority 68% ownership position in the company and was also the Chairman of the Board. Marc was CEO but had only a 30% ownership.

In the next post, I’ll detail how the ownership and other dynamics led to changes in leadership titles.