Elon Musk gave an interview at a conference yesterday. A few friends who attended the conference texted me to suggest that I check out the interview replay. The interview touched on many topics, but the part about the macro environment for founders was most interesting to me. Here are a few takeaways:

• Fundraising environment – Elon pointed out that things can change quickly. He shared his experience raising for PayPal. They raised $100 million in March 2000 when fundraising was easy—so much so that people wired them money without PayPal agreeing to take the investment or even seeing a term sheet. A month later, good companies couldn’t raise money.
• Have capital – Have money in the bank so you have the runway you need to execute against your strategy.
• Recessions aren’t all bad – If times are too good for too long, the result is misallocation of capital. Ideas that aren’t that great get funded. Because subpar ideas get funded, human capital is misallocated: people are working on things that aren’t useful to society.  
• Watch your cash flow – Be aware of your cash position and how much is coming in and going out. Get to positive cash flow as soon as you can.
• Tough times pass – Hard times don’t last. They will pass, and boom times will return.

Regardless of your opinion of Elon as a person, he’s a credible founder who’s built great companies many times. His views on navigating challenging times are worth considering.

Today I had a chat with an emerging venture capital investor who’s raising his first fund. He shared the journey with me, and it didn’t sound that different from a start-up founder’s fundraising journey. He worked to refine his story and pitch potential limited partners (LPs) to invest in his fund. He’s heard more noes than he can count but pushed through until he heard yes.

The fundraise has been a grueling multiyear journey for him and his partner. It’s finally coming to an end (for fund one at least). I asked him what his big takeaways are. He has quite a few, but two stood out to me:

• Knowledge gap – Just as founders don’t understand the VC landscape when raising for the first time, neither did he. It took him months to learn that each LP is different and looking for something different in the fund investments they make. After he filled his gap, he adjusted his outreach strategy.
• Timeline – Their raise process initially was open-ended, with no timelines. Potential LPs were slow to commit or decline. He and his partner were in limbo, and so was the overall fundraise process. Once they established a timeline and asked people if they could respect it, they got clarity on who was serious.

This emerging manager and his partner hustled their way to raising a $50+ million first fund. He’s now focused on building out the team and infrastructure to support the operation of his fund. I walked away from today’s call thinking of him as more founder than investor.

A friend in VC sent me a video this morning and suggested I watch it. It’s a Craft Ventures presentation on how founders should operate during a downturn. David Sacks and Jeff Fluhr do a great job of articulating their perspective on what’s happening in the public markets, how it will affect the venture ecosystem, how it compares to previous downturns, and what founders can do about it.

Lots of takeaways from this presentation are helpful to founders, but Jeff’s glass-half-full perspective stood out. Times may get tougher, but great companies are built during downturns (Salesforce, Airbnb, Amazon, etc.). Capital may become harder (not impossible) to come by, but other things become easier: hiring, customer-acquisition costs, the ability to course-correct with less scrutiny, etc.

Jeff ends on this point: “The world will keep spinning.” I totally agree. If you’re an early-stage founder, focus on things you can control (Jeff shares metrics that founders should watch closely), not the macro environment. Even in a downturn, there’s still demand for solutions that solve problems and create value for customers.

Over the past month, I’ve talked to four founders who are looking to hire CEOs to run their companies or who’ve already done it. Two are early-stage; two, later-stage and more mature. This isn’t abnormal. Lots of founders transition away from being the CEO for one reason or another in the company’s life cycle. Some founders even come back and reassume the role.

The early-stage founders’ thoughts around this really struck me. They described hiring a CEO as if they were hiring any other employee. I don’t think they fully understand how hard it is to find the right CEO for an early-stage company and set them up to succeed.

Hiring a CEO for a mature company makes lots of sense. Product–market fit has been achieved. The team is stable. Processes are established. There’s historical data to help inform future decisions. The machine is already built. It may need tuning, but it’s there and working.

Hiring a CEO for an early-stage company is a different story. The pieces to the machine are scattered all over the place, and the new CEO must figure out how to assemble it. It can be done, and it has been done, but it’s harder. Trying to find product–market fit can be challenging if you’re not passionate about the problem or don’t have deep experience in the space. CEOs are the glue holding small companies together, which is hard to do if you didn’t write the blueprint or understand how all the parts work together. There’s usually little historical data, so decision-making can be harder for a non-founder CEO. Most founder CEOs don’t leave in the early innings because everything is going well. Cleaning up someone else’s mistakes is a tight spot to be in.

If you’re an early-stage founder, be mindful of these and other variables if you try to replace yourself.

Someone once asked me what I would change most about my experience in corporate America. I don’t have any regrets, but that question got me thinking. I told them I would be crystal clear about what I wanted to gain from my experience before I started working. I’d then push aggressively (and unapologetically) for opportunities to work on projects or work with people that helped me achieve that goal. Said another way, I’d be clear on what I want beforehand and to be directionally accurate during my time there. I didn’t do that and still got a lot from my experience, but I could have gotten a lot more.

It's hard to do, but if you can be clear on where you’re trying to go (or at least the direction) it has a big impact on your journey. It helps you be able to better evaluate opportunities (does this get me closer or further away from X) and makes it easier for others to help you. The end result is that you’ll likely end up where you want to be in significantly less time.

‍

One of the exit strategies early-stage founders often have is strategic acquisition. This means the acquiring company will get strategic value from the company it acquires—it’s not just a financial buy. Buying a company and bringing its talent onboard is often quicker than building something from scratch. And in some acquisitions, a larger company quickly grows the smaller company’s sales by using its massive sales force to offer the latter’s product to its existing customer base.

These options sound great, and they are—but there’s something lots of founders don’t consider. Often these deals are structured so the founder will need to stay at the larger company for a few years. The founder usually has what’s called an earnout—they don’t get all their money from the deal when it closes; they must earn it over time. Doesn’t sound like a big deal, but it can be. Especially If your motivation for starting a company was to be your own boss.

If you’re a founder aiming for a strategic acquisition, get a great deal attorney and be ready to hang around for a few years post close!

I connected with someone who’s successful and super busy. During our meeting, I asked a favor. I was thankful that he gave me time on his calendar and had low expectations of his doing me the favor. But I asked anyway because the answer is no 100% of the time you don’t ask. He agreed to do it, but I still figured he wouldn’t.

To my surprise, he did. It took my nudging him a bit, but he came through. We caught up afterward, and I asked him why he took the time to do something for me. I expected some deep reasoning, but it was quite simple. He said most people who ask him for something never follow up. When they don’t, he knows they’re not serious. I took action by nudging him, so he knew I was serious.

My takeaway is that having a bias toward action and following up with people in a thoughtful manner can set you apart. Most people don’t take this extra step to see things through. It’s something simple but powerful that anyone can do.  

As a kid, I had lots of dreams and ideas. Regardless of how bad or outlandish the idea, my mom always listened and encouraged me. She let me know I could do or be whatever I wanted if I set my mind to it and worked hard. Her encouragement during my formative years gave me a solid foundation and the confidence to pursue entrepreneurship (and all my other ideas, good and bad) over the years.

Happy Mother’s Day, Mom! I appreciate your love and support!

The last two years have been interesting ones for companies. Founders who were well positioned for the revenue redistribution did extremely well. Revenue skyrocketed for some of these businesses as customers sought solutions to new challenges. I’ve been chatting with some of these founders. Some of them are starting to see early signs of their customers’ habits changing again. The customers they acquired in the last few years are beginning to redistribute their revenue again.

This poses an interesting problem. These founders scaled up their companies around this new customer segment, which became a large percentage of their overall revenue. Sales, marketing, etc. are all optimized for this segment. They thought their ideal customer profile was made up of these customers because so many of them willingly and rapidly paid for their solutions. Now, they’re starting to see these customers churn as life trends toward historical norms.

These founders have a dilemma. It’s beginning to look like the house they thought they were building on a concrete foundation was built on slow-moving sand. They have significant expenses for the scaled-up organization. Do they redirect their teams to go after a different customer profile? What does the ideal customer profile now look like? How long will it take to redirect the team? These and many other questions will need to be answered by many founders in the next year to eighteen months. I’m curious to see how founders handle this dilemma—I suspect that many will shrink their teams to reduce burn until they have more clarity on these questions.

I noticed a problem some time ago and decided to dive into it to understand it better. I emailed a bunch of people and asked others to introduce me to people who’d lived the problem. So far, a high percentage of these people have agreed to chat. The calls have all started off the same, followed a consistent path, and ended well.

People are a bit suspicious when they first hop on the call. I introduce myself and share some info on my background. I then share the problem (I frame it in a way that’s unique to my background) that I’m trying to learn more about from people who’ve lived it. That’s when the conversation changes. They warm up and start telling me all about their experience with the problem. They love talking about how the problem affected them. By the time the call ends, we’ve built the beginnings of a relationship and I’ve learned a ton. If it’s gone really well, they’ve agreed to intro me to someone else.

The most important thing I’ve learned from these conversations is that people love talking about their problems and feeling heard. If you’re a founder, take the time to talk to people—and, especially, to listen to them—to understand the problem you’re solving. The time and energy you put into this will pay you back many times over.