Christmas: the Bright Spot of 2020
Tomorrow is Christmas, my favorite holiday. The one I most associate with spending quality time with family and friends. It’s also a reminder that the year is coming to a close. Over the past few years it’s become more significant to me, and I completely unplug and stop working from Christmas Eve through New Year’s Day. This allows me to be present with family and friends.
It’s been an eventful year. Many people have experienced unimaginable pain and suffering. I hope that tomorrow can be the bright spot of 2020 and everyone is able to enjoy the holiday.
Merry Christmas and enjoy your downtime with the people you care about!
Partnerships Aren’t Perfect
I’ve noticed a pattern in the lives of people I admire most in life. They tend to be members of great partnerships that contributed to their success. Co-founders . . . business partners . . . spouses. Being part of a team has allowed them to accomplish things they otherwise wouldn’t have. Because their strengths offset their partner’s weaknesses, and vice versa, they form a well-rounded team.
Almost universally, great partnerships go through rough patches. It happened to Bill Gates and Paul Allen. Such a time is a defining moment for the partnership, and how the partners work through it will determine whether their partnership becomes stronger or dies. The partners don’t see eye to eye, but if they make the effort to understand each other and resolve points of conflict in a respectful way, it will demonstrate commitment to the partnership and go a long way toward moving past the period of conflict.
I’m a huge fan of co-founders. I think startups increase their chances of success by having more than one founder. But it’s almost inevitable that the co-founders won’t always get along. If this happens to you, consider taking a step back to think carefully about how you want to resolve the rift. In fact, you might even consider planning for it in advance. Your approach will have a lasting impact on your partnership—not to mention your business and your life.
Close the Loop
Over the years, I’ve been humbled. I used to think I was superhuman—capable of doing anything. Now I recognize that I’m not good at everything, nor do I have the experience to navigate certain situations. I’ve learned to ask for help. Learning from the experiences of others has been invaluable in challenging times. If I’d done it more in those early years, it would’ve saved me tons of time and energy. I encourage early founders to learn from my experience.
Learning from others isn’t a one-time thing. It requires investing in and maintaining relationships. I’m a big believer in healthy relationships being bidirectional. As an early startup founder, it doesn’t feel like you have much to offer people who are sharing their wisdom with you. That may be true, but you can do one important that they’ll appreciate: close the loop. When you ask people for help or advice, follow back up with them to let them know the outcome. Good, bad, or ugly. They’ll appreciate the effort.
I sometimes fall short, but I do my best to close the loop. I appreciate and respect other people’s time, and I make sure to thank them when I close the loop. Simple to say, simple to do—but powerful. It will strengthen your relationships.
What I Least Expected to Gain
I was talking with an early entrepreneur, who asked a great question. “What’s the most meaningful thing you gained from your journey that you least expected?” Now, I admit . . . I was totally stumped. I needed time to answer. I wanted to think about it so I could give an authentic response. Toward the end of our conversation, it came to me: friends who understand me and experienced the struggle too.
Being an entrepreneur is hard. You’re trying to do the impossible with limited resources. You’re pushing yourself and your team to the limit. It’s not something that most people understand or can relate to. I had a great support system of friends and family before I founded my company. I was able to talk with them about most things in my life. But when I became a founder, that changed. I was experiencing things they hadn’t and that they couldn’t relate to. After a while, I steered conversations with them away from work. My company was an outsized part of my life, so I found myself on an island without anyone to talk to who could relate.
I eventually connected with other entrepreneurs at a similar stage and this changed. All of a sudden, I could talk to people who got it. They were problem solvers facing the same challenges I was, and they had crazy visions that others in their life couldn’t understand. Over the years, those peers became wonderful friends. The friendship dynamics are hard to explain, but because we supported each other during some of our toughest times, the bonds are tight.
When I decided to start my company, I wanted it to be a success and I wanted to enjoy everything that came with it. I achieved success, but the thing that stands out more than that are the friendships I formed with other entrepreneurs. We come from different backgrounds, but we bonded over our shared desire to solve tough problems by building amazing companies. Companies can be bought and sold, but true friendships like these are invaluable.
If you’re looking to do something great (even if it’s not entrepreneurship), consider connecting with others who are traveling a similar road. No matter how great your accomplishments, the friendships you’ll build along the way will be priceless.
Vesting Schedules Protect Company Equity
I’ve written about how important finding a co-founder is for entrepreneurs. But equity (company ownership) is a big concern. Specifically, what happens if things don’t work out? If one founder isn’t pulling their weight, do they own as much of the company as they would if they were contributing mightily?
It’s a valid concern. But there’s a simple tool to mitigate it: a vesting schedule. A vesting schedule outlines when each person’s equity is theirs, free and clear. Keep in mind that equity should be earned, not granted, for early employees and founders. The vesting schedule is a great tool to set expectations about equity.
The most common vesting schedule is time-based. You typically see a four-year schedule with a one-year cliff. What does this mean? No equity vests until after a year of employment. If someone leaves in month eleven, they receive zero equity. On their one-year anniversary, 25% of their equity will vest (they stayed for one of four years, or 25% of the four-year schedule). After that, their equity vests in equal monthly increments until the forty-eighth month. Carta has a good article with details and examples.
At CCAW, we used a milestone-based vesting schedule with revenue as our milestone. As we reached certain revenue targets (while maintaining profitability), equity for leaders would vest. We had a minimum revenue threshold (i.e., cliff) the company had to hit before any equity vested. This schedule was very helpful because everyone was aligned. Our approach was specific to what we were trying to accomplish at the time and may not work for everyone.
Many investors will want to see that founders are on some sort of vesting schedule, which ensures that they’re committed to building the company. There are lots of details that I won’t get into, but the takeaway is that founders should have a vesting schedule (in some form or fashion) if they’re raising investor capital.
A vesting schedule is a great way to protect against someone who isn’t contributing having equity in a company. Finding a co-founder is hard, but vesting schedules overcome one hurdle.
Today I participated in an idea session with my Outlander Labs teammates. No agenda, just a topic and a conversation about ideas. It was a topic that I’m not knowledgeable about, so my goal was to listen and learn. And boy, did I! The team’s collective knowledge was vast and we ended up with great ideas. Today was an opportunity for me to fill a knowledge gap, and it highlighted something else for me too.
As I listened, I noticed a pattern. Idea compounding. Sounds weird, so let me explain. Our team is composed of highly intelligent people who, individually, have great ideas and unique perspectives. As one person shared a thought, you could see the wheels turning in everyone else’s head. Then someone else shared an idea inspired by the previous one. This went on for an hour and resulted in more great ideas than we can possibly execute. A high-class problem for sure.
Our idea-generating exercise was highly effective because we approached the topic as a team. Had we assigned it to one person, I have no doubt that their ideas would have been really good. But approaching it as a team resulted in ideas that are great (or so we think).
I wish I had had the benefit of idea compounding in my early days at CCAW. I chose the solo founder path, and it was difficult. I was forced to come up with all the ideas, which were far from great. Years later I hired high-level thinkers and our idea compounding led to some of CCAW’s greatest breakthroughs. We overcame enormous hurdles and made tons of traction in a relatively short time.
Idea compounding is one of the many benefits of working with a team. And great ideas can be the difference between success and failure for early-stage companies. For any founder wondering why you should consider recruiting a co-founder: idea compounding is one of the many reasons you shouldn’t go it alone!
Solo Founders Should Hang around the Hoop
One of the mistakes I made early was choosing to be a solo founder. Over the last year, I’ve been intentional about sharing with early founders the importance of having a founding team. Some still think the solo route is best, but most tell me they want a co-founder. But finding one is easier said than done—especially for nontechnical founders seeking a technical founder.
Nontechnical founders who want to build a technology company face a dilemma. They can’t build the product. They must find a technical co-founder (or a senior developer they don’t have to manage closely). Otherwise the company never progresses beyond the idea stage. Technical solo founders face a host of other challenges, but they can at least build the product. Putting the product in users’ hands can generate traction —a powerful recruiting tool. It’s easier to recruit a co-founder when you can show that you’ve already acquired customers or users.
So how does a nontechnical founder find a technical co-founder? There’s no silver bullet, but a good start is to hang around the hoop. The hoop is anywhere good technical talent might be found: meetups, conferences, pitch competitions, slack channels . . . you get the idea. Colleges are also great resources. Loitering around a school won’t help, but you can reach out to computer science professors and leaders of student clubs. If you’ve got a good idea, can tell a story, and talk to enough people, the odds are in your favor.
The difficulty of finding a co-founder is a problem I’ve heard about often enough that it warrants deeper thought. I’ll discuss it with others and, I hope, come up with a more comprehensive set of ideas for solving it. If I do, I’ll be sure to share it!
Build Rapport Before You Build a Better Mousetrap
Yesterday I had the privilege of being on a virtual panel that spoke to about 50 early entrepreneurs. The session was full of entrepreneurs with great ideas. I found it energizing and insightful. At the end there was a Q&A session. We were peppered with tons of great questions, but one stood out to me:
How do I find early customers?
I’m sorry to have to tell people that there’s no secret group that will unlock the door to early customers. Entrepreneurs have to hustle to find them. In my opinion, the right strategy can make it easier (though not easy). I’ve noticed that finding early customers is many times harder when founders do things in the wrong order, which is VERY common. Bob thinks the world needs product X because he experienced a problem or noticed it would be helpful to others. He decides to build it. What has he done? Created a solution without understanding the problem from the perspective of potential customers. He’s done a ton of work based on what he thinks about the problem, which is worthless. Why? Because Bob isn’t the customer. He won’t pay for the solution. Bob may be right—what he built is missing and pretty cool. That doesn’t mean customers will pay for it.
Ideally, entrepreneurs should build rapport with potential customers before the solution is ready. Sounds hard, but it’s not if approached correctly. The key is to do customer discovery before you start building. Find people who are experiencing the problem you see. Ask them about it. Why is it such a problem for them? How are they working around it now? Have they looked for a solution? There’s a great book that explains how to go about doing this.
People love talking about themselves and their problems. By listening to understand (not to inject your opinions), you’ll develop rapport with them. These conversations should help you build a better solution to the problem. When it’s ready, people you’ve nurtured a relationship with will probably be open to trying it. If it solves the problem (it may take time to get there), they’re likely to refer you to people they know who have the same problem.
In other words, making the effort to deeply understand the problem early on will benefit you in two ways: you’ll have a better idea of how to solve it and you’ll have potential customers already waiting for it when it’s ready.
Entrepreneurs see an opportunity where others see a problem and sometimes stubbornly cling to their vision of the opportunity. There’s nothing wrong with having conviction, but great entrepreneurs take the time to understand the “why” behind the opportunity they see.
Secret Weapons 101: Diverse Networks
When I worked at EY, I had a great group of friends. Over time, I found that my circle consisted mainly of people at public accounting or similar firms. When I talked about entrepreneurial ideas, the response was often a blank stare. Most people in my network viewed life through the same lens. There wasn’t much diversity in thinking or interests.
When I started CCAW I didn’t know many entrepreneurs in Atlanta and struggled to gain traction. Eventually, though, I connected with some amazing founders. These people had different backgrounds and were solving all sorts of interesting problems. They were knowledgeable about finance, technology, the arts, advertising . . . To this day I’m amazed at how diverse this group was.
As I look back, I see that the diversity of my network played a huge role in my growth. These people introduced me to things I didn’t know existed. For instance, in 2009, I had no idea what a software developer did. Exposure to that knowledge led to CCAW building technology that would help power its growth.
When I’ve needed help in an area in which I’m not strong, my network has been a valuable resource. I once renovated a property and was terrified the project would go awry. Someone I knew helped me by giving me information that was critical and led to the project being successful.
Having a diverse network has also helped in recruiting. When I needed a great creative, artists I knew introduced me to credible candidates.
The diversity of my network has helped shape me. It’s broadened my perspective, made me more empathetic, and given me confidence to do things outside my areas of expertise.
If you’re building a company, doing something else great, or simply want to continually grow, seek friends and acquaintances who are different from each other—and different from you. The exposure could change your life!
Sow the Seed Before You Need the Crop
As an early-stage entrepreneur, I didn’t fully appreciate the value of nurturing relationships. I thought that if I worked hard and presented a logical case, others would want to work with me. Eventually I realized that I was missing an important part of the equation.
I wanted CCAW to enter a new segment of the automotive parts industry. It was a massive market and where I saw our growth occurring. We invested in creating a better technological approach to selling these products, but I couldn’t get any vendors to listen. None of them wanted to give us a shot. The conversation would go something like this: “This is great, but we don’t know you” or “How do I know you can do what you say you can do?” I tried for months to get someone to give us a shot. No dice. Then I finally got a lucky break. Someone I had worked with moved to a new company that we’d been eyeing as one we’d like to work with. He vouched for us and described the fruitful relationship we had with his previous employer. An established relationship opened a door that had been closed for months. All of a sudden we got the green light to start doing business with them. We quickly grew the business to hundreds of thousands of dollars a month. The vendor was blown away.
There were tons of things I did wrong in this situation, and the biggest was not establishing relationships with these vendors ahead of time. I should have been telling them about my vision and how we were going to make it a reality through innovative technology. I should have been sharing the success we’d had in other product categories. As we built the technology, I should have been updating them. If I had done these things, I’ll bet the conversations would have been much smoother when we were ready to go live with the new category.
I learned that a great idea can be dismissed if it comes from a stranger. And that the same idea (or a worse one) from someone known and trusted can be welcomed on the basis of the strength of the relationship.
If you’re trying to do something that can’t be done without someone else’s buy-in, make a point of cultivating a relationship with them before you need them. They’ll be more likely to want to work with you.