Sunday, March 30, 2014

Can your startup be data-driven and proactive at the same time?

http://www.livescience.com/32812-why-do-bird-flocks-move-in-unison.html
In the startup world, we have come to appreciate the power of empirical evidence, A/B tests and data-driven decision making. We strongly expect (even outright assume) that our startup founders, leaders and decision makers ground their leadership decisions on hard, solid data (as opposed to personal whims, dreams or anecdotal tales). At the same time, being proactive has always been a prized leadership skill. But if we define "being proactive" as the ability to address a problem or opportunity before there is data about that problem or opportunity, it seems irrational to demand from someone to be proactive and data driven at the same time!

I was confronted with this dilemma last week while discussing the implications of a new feature release with a product team. The aforementioned release would introduce some changes that could potentially make a small percentage of the existing user base of the product unhappy. But no one really knew the size or the extent of unhappiness caused here. Should the product team be proactive and try to fix the problem by delaying the launch, or instead, be agile and launch immediately, only to react to problems if and when they arise afterwards? What if one hour after the release, one user voices very strong dissatisfaction with the release. Do you roll back the release or wait until you receive complaints from at least x% of your users before you decide to do something about it?

I think there are 2 keys to resolving this dilemma in any organizational setting: (1) Clear Product Vision, and (2) Personal Experience. A clear product vision in the organization enables everyone involved to make proactive decisions by prioritizing those decisions against the furtherance of that overarching vision. If the organizational product vision is to provide the "best customer service in ecommerce", for instance, then the decision on whether or not to argue over a customer's desire to return a merchandise can be easily made without having to make elaborate calculations about the impact of the decision. Personal experience, on the other hand, enables the decision maker to spot trends early on and extrapolate inferences from limited data sets that may not, in and of themselves, be statistically significant.

So it seems quite important for the leadership in a startup to recognize the inherent dilemma between data-driven decision making and proactive leadership and to take steps to ensure that there is a clear product vision driving the organization forward, while at the same time leveraging prior experience of team members, advisers or consultants in making inferences from past data.

(Photo Credit: livescience)

Wednesday, December 11, 2013

Get the QUESTION right

I started this post to share some reflections on a classic Depeche Mode song (Get the Balance Right) and how it says a lot about entrepreneurship in its quirky satirical way, but my (evidently unbalanced) subconscious took me back to a startup Board interaction I had recently witnessed. So now I am compelled to share that story instead:

I painfully saw how an entrepreneur who had obviously spent many days of his invaluable startup time researching an answer to a prior Board request get slammed by a Board member for doing so.  This is not because the data the entrepreneur had painstakingly uncovered was bad, statistically insignificant or irrelevant, but because the data was ANSWERING THE WRONG QUESTION.

As entrepreneurs we face a million questions a day that cannot wait to be answered. Answering each one takes time and effort away from answering the others, and in may times, raises even more questions. It is imperative that we truly understand the initial question we are trying to answer before spending efforts to answer it.

Here is a process I would follow to see if you've got the question right:

  1. Repeat the question out loud (even if it is you)
  2. Imagine the best and worst answers to the question
  3. Would the answer have any actionable implications?
  4. If not, ask the inquiror about purpose of question
Repeat steps above until everyone believes there is a question worth answering with a clear, actionable purpose that it achieves
This may seem like a lot to do, but it is a lot less effort than the wasted efforts spent on answering the wrong question (not to mention the demoralizing prospect upon finding out).

So, here is to getting the questions right!




Tuesday, July 23, 2013

Top 10 Ways To Scare Startup Lawyers (+VCs + Acquirors)





As I was preparing for my presentation for Founder Institute yesterday, I compiled this list over a few chuckles. Hope you also enjoy it :) 
  1. Do all your legal work through DIY online forms (from formation to option grants and key contracts)
  2. Get a personal injury lawyer to do your patent and trademark filings, cheaply.
  3. Don't read anything about basic startup law, especially disclosure obligations, fiduciary obligations, and stock pricing rules.
  4. Forget about IP strategy. If anyone asks about your views on trade secrets, talk about NAFTA!
  5. Ignore regulations in your industry (especially for healthcare, life sciences, financial and legal startups)
  6. Burn/shred/ignore threat letters ("nastygrams") by former employers, co-founders, contractors, users, competitors, etc.
  7. Ignore all user feedback on product, from support inquiries to social media and BBB postings
  8. Miss your 83(b) 30-day filing deadlines
  9. If your Board forgets to grant options, go back and re-do it after the fact
  10. Send an email to everyone on your contact list asking for investment in your startup

If any of the above sounds remotely like something you may have considered doing, please, please, please don't do it! You are in desperate need of immediate help, so talk to someone who knows a bit about startup law today.

Monday, July 22, 2013

Startup Legal & IP

Here is a presentation I gave to a bunch of very smart founders and entrepreneurs at Founder Institute tonight, drawing on my past 14 years of experience in Silicon Valley.  It was so fortuitous to give this presentation at Wilson Sonsini, the place where I started my Valley career as a lonely Associate in 1999.



Tuesday, July 16, 2013

Don't Waste A Mistake!



Something that a lot of good parents know is that you gotta let your kids make mistakes. In fact, that's the only way they can learn and grow as confirmed by years of research in developmental psychology (see, e.g., Remember, Mistakes are for Learning).  It's no different for adults either. Nonetheless, when we as entrerpeneurs are in the midst of startup activity, with all the confidence, optimism and forward-looking stamina in the world, we tend to try to brush the mistakes aside (if not under a rug) and move on. Who's got time for all that when you are trying to disrupt the course of mankind?

Problem is, without learning from mistakes we are bound to... you know the rest. So, how do we reconcile the desire to rapidly move forward while also learning from mistakes?

The magic solution to this dilemma is in that elusive notion of "startup culture" that I have been referring to many times in this blog. If your culture is one in which mistakes are punished and viewed as shameful and reflective of your worth as a team member, or worse, human being, good luck to you. You will be chasing your tail to infinity.

On the other hand, a culture that welcomes mistakes as opportunities to learn and grow from tends to be one in which not only innovative ideas find roots, but also find the optimal path(s) to grow among the many good and bad possibilities. Our attitude towards mistakes is what determines our ability to learn from them. Again, there is ample research data to confirm these in case you are interested (see, e.g.,  )

Here is an excerpt from Better by Mistake: The Unexpected Benefits of Being Wrong by Alina Tugend that captures some components of a productive, healthy attitude towards mistakes as applicable to parenting as it is to running a startup:

There are no simple fixes, but there are ways all of us can shift our thinking about mistakes. Starting with our children, we can emphasize effort and deemphasize results. We can appreciate that we -- and they -- can't be perfect, nor is it a goal we should aim for. We should strive to do our best, but if the prize is ever-elusive perfection, then the fear of failure will too often overshadow the willingness to experiment, take risks and challenge ourselves. We should be careful of the contradictory message that it's all right to make mistakes but not where it counts...

Assuming you have bought into the idea that it is better to learn from mistakes than to shove them under the rug, here are some practical steps you can take in that direction when encountering a mistake (be it a bug in your release, catching spelling errors in your expensive ad campaign, misplacing an important document, etc):

1. Always be grateful when a mistake is found. Catching it later would have been worse at the least.
2. Express your gratitude and make sure your body language confirms that.
3. Don't focus on who is responsible, but for what went wrong.
4. Shed light on the situation in a collaborative, problem solving session focused on learning
5. Brainstorm on ways to catch that kind of mistake earlier in the future
6. Focus on learnings and action plan moving forward

Some other quick, noteworthy readings on this topic include:

Fred Wilson's Don't Let a Good Crisis Go to Waste
Jessica Stillman's Don't Let a Good Mistake Go To Waste


Monday, July 01, 2013

How to Hack Your Life Into Flow


To have a productive, enriching and fulfilling life, many psychologists (as well as coaches, gurus, athletes, performers, ...) recommend incorporating as much "flow activities" into your life as possible. Flow activities are basically those in which you immerse yourself willingly and totally, and emerge from them with a continued sense of achievement (e.g., learning an instrument or new language).

To find flow in your hobbies is just a preview of what is possible. The basic concepts of flow can be (and for your sake, should be) extended to our personal as well as professional life. But how do we do that? To me, it is all about our personal approach and perspective (Weltanschauung) on life. In fact, the answer seems to be hiding in plain view, at the intersection of two questions about the most ancient human mental and physical activities:

1) Is life more like a game of chess (predictable, deterministic) or backgammon (where randomness and skill play off of each other)?

2) Is life more like a marathon (where endurance reigns supreme) or a sprint (where episodic bursts of energy need to be followed by periods of rest and rejuvenation)?

My bias and response to these questions is obvious from the diagram above (inspired by weekend conversation with a new and cherished friend, Jerzy).

What do you think? Please share your insights.




Wednesday, February 20, 2013

The Startup of You

Anyone interested in having a fulfilling career ought to read The Startup of You by Reid Hoffman, one of Silicon Valley's exemplary and visionary entrepreneurs behind successes such as Paypal and LinkedIn.  However, if you don't have time to ready the book, take a quick look at the following slides which do a phenomenal job of delivering the key messages in the book.  ENJOY!


Friday, January 11, 2013

Yup, Culture Is Usually the Real Culprit!

It has already been a great year so far.  Many blessings on the family front have kept pace with new intellectual pursuits and personal growth opportunities, all resulting in a flurry of 24/7 excitement and activity around my neck of the woods.

Amongst all that excitement, I still couldn't help but take special personal delight in reading Brad Garlinghouse's recent post on LinkedIn, "What I got wrong in the Peanut Butter Manifesto". Brad, a visionary ex-Yahoo executive wrote the now-legendary "Peanut Butter Manifesto" six years ago, a leaked internal memo in which he pointed out "lack of focus, accountability and decisiveness" as Yahoo's critical problems at that point. He aptly prophesied Yahoo's talent exodus and steady subsequent decline in relevance in the world (until Marissa Mayer).

Now, with the benefit of hindsight and reflecting on his role as the chief executive of YouSendIt, Brad has a revised perspective. Namely, he is now convinced that the problems he pointed at Yahoo were mostly symptoms of a much deeper ailment, one that we could summarize as lack of an entrepreneurial culture:
[Yahoo's] core culture no longer encouraged and celebrated innovation with the same zest and ardent ambition to change the world—too often this had been displaced by half-hearted maintenance of the status quo.

...Great products don’t come out of thin air. They are an outcome of environments where innovation can thrive and talented people are encouraged to be bold.

Sure, one-hit wonders can happen anywhere, but companies that stand the test of time all recognize a fundamental truth: great people build great products and great people gravitate towards great company cultures. The startup culture that Steve Jobs created at Apple to transform a declining computer manufacturer into the creator of era-defining products is an obvious example.

...If a business has to be told that it needs more focus, accountability and decisiveness, there is a bigger problem at hand. Truly successful businesses encourage these qualities innately by creating and fostering a culture that inspires each individual to perform at their peak and rewards passion and results without peanut buttering the end of year bonus.
As I had previously written, the right culture within your organization serves as a success accelerant. The existence of an innovative entreprepeneurial culture is as electrifyingly palpable as its lack is stultifying and stale. But it does not come about by accident. It requires deliberate, relentless acts by the founding team. And it leaves its fingerprint throughout the organization, from the arrangement of desks, to employment policies, perks and benefits, allowed play time, hours worked, mission statement, and even the actual product(s) produced.

As founders, what are some of the things you do to maintain the entrepeneurial culture within your startup? How has that culture helped you achieve your goals?
 

Sunday, November 25, 2012

Bike Like An Entrepreneur

 Assuming you know how to bike, can you imagine learning to do so by reading some books, watching some movies, and listening to a bunch of lectures by some of the most prominent bikers of the time? Exactly! You cannot learn how to bike unless you jump on a bike with some training wheels and then over time start taking off those training wheels.

The same is true of entrepreneurship. Entrepreneurship is a skill, and skills are acquired through practice. There is simply no shortcut around it. Desiring a shortcut, in fact, would mean you are missing the whole point. It is like wanting to know how to ride a bike without having to ride a bike.

And for those of you who already know how to ride a bike, don't be overconfident about your skills. There is still a lot all of us can learn as the below psychology experiment which I just failed demonstrates (excerpt and photos are from May 9, 2012 YANSS Blog):

Take a look at those bicycles at the top of this post. Which one would you say is the most accurate portrayal of a real bike? Psychologist Rebecca Lawson once put together a study that revealed even though most people are very familiar with bicycles and know how to ride them, they can’t draw one to save their lives, and they can’t even pick a proper one out of a lineup. Despite this, most people rate their knowledge of how a bicycle works as being very good. Remember that when someone claims to understand something a bit more complicated, like a sub-prime mortgage. (This is a picture of a real bicycle.)






Sunday, November 11, 2012

Which is Better: Greed or Vision?


Is greed "good" when it comes to high tech startups? A protracted twitter exchange with fellow entrepreneur Jason Tryfon this morning made me realize that it is time to put in writing a more detailed defense of what I have been preaching in the Valley for some time:

It is my belief that startup founders who prioritize financial rewards over a specific vision/mission are less likely to succeed/survive compared with visionary founders.

I have seen many knee-jerk reactions to my above position. Here are some of my favorites:

(1) Accounting 101: A business cannot survive without money. Therefore, the quest to generate cash and ultimately profits should be the most important pursuit for a startup and everything else would be of less importance.

(2) HR 101: A startup needs talent to innovate and survive. Without promise of great financial rewards, a startup cannot recruit and retain requisite talent to really make it in a competitive labor market.

(3) Economics 101: As Adam Smith pointed out, all you need for a well-functioning free market is rational, profit maximizing individuals and firms. As long as people/firms engage in profit maximizing endeavors, the society benefits and progress is made. As a corollary, then, pursuing anything else is sub-optimal and is bad for society.

(4) Psychology 101: There is no better incentive than money to motivate behaviour, because money is quantifiable and can be used to obtain other things that individuals may idiosyncratically value. Therefore, the promise of great financial rewards is what makes a company innovate and succeed.

(5) Business Law 101: The founders/board/management of a company owe a fiduciary duty to their shareholders to maximize their return on investment. Therefore, prioritizing any other goal would be a violation of their fiduciary duty and grounds for shareholder lawsuits.

All of these arguments, however, either lack empirical, real-world support, or are actually compatible with my assertion about the vision-driven startups. So, let's take them one by one:

(1) My Reply to Business 101: A business cannot survive without many things. Cash is of course one such thing. So is motivated employees. But even if cash was the only thing without which a business could not survive, it does not logically follow that businesses ought to make profits their primary objective. Take for instance the statement that "A person cannot survive without air." Does it follow then a person ought to make pursuit of air their primary objective in life? Just because something is necessary for survival, it doesn't follow that its pursuit ought to be the objective of life. It is relatively easy to see that in case of human beings, higher goals and objectives are things that make life (and its necessary attributes such as breathing and eating) well worth it, but some of us lose that perspective when dealing with businesses for some reason. A business needs to make money to accomplish its goals, just as a person needs to stay healthy, eat, breathe air, etc. to accomplish its goals.

(2) My Reply to HR 101: I have been a witness to how non-financial rewards play a significant role in recruiting. I have recruited employees away from other startups because of differentiated vision or working conditions, and at many times, people have been willing to take a pay-cut. I have yet to see a single employee for whom the actual dollar value of results was the only factor in their career decisions. (Continued under Psychology 101 below)

(3) My Reply to Economics 101: News flash for Adam Smith followers: Turns out, based on a number of ongoing studies in econ and psych departments worldwide, people are not purely rational, selfish, profit-maximizing agents! People's sense of morality, fairness, empathy, altruism, and other cultural influences significantly inform and impact our decisions. There is even an emerging interdisciplinary field, called neuroeconomics, that is trying to make sense of all the irrational choices people make in their lives. Bottom line, there is too much unknown about human psyche and motivation to make any kind of normative judgment about how markets function. Furthermore, if the primary purpose of all firms in the market was to maximize profits, wouldn't the market ultimately converge on one firm that had figured out how to maximize profits? On the other hand, there are probably as many visions for the future as there are people in the world. Wouldn't the society benefit more if people focused on how to realize their vision?

(4) My Reply to Psychology 101: Although I don't dispute that money is a motivator, I do think its motivational influence is seriously hyped. Throughout history, tens of millions (at least) have been willing to put their lives in jeopardy or even willingly welcomed death in pursuit of their religious, philosophical or social beliefs. How many have done so for greed? In today's transparent labor market where compensations have pretty much converged amongst startups around the same stage, what startups compete on is their vision and sense of purpose. And in my opinion, when the going gets tough, those emplyees who are their for the vision are the ones who are willing to make "irrational" sacrifices (take pay cuts, work longer than legally or medically sanctioned hours) to see the dream come true.

(5) My Reply to Business Law 101: Maximizing shareholder value is not incompatible with giving priority to the vision of the company. This is assuming that the vision was articulated at the time of fundraising. The vision provides the boundary conditions within which the shareholder-value-maximizing activities are to take place. In fact, if the company decides to change course/vision/industry without approval from shareholders, that can land the Board/management team in as much legal trouble when things go south.

Bottom line, you gotta make money, but that doesn't mean you have to give up your dreams (or soul) to do so!