Hustle

I spent yesterday morning at the DreamIt Ventures demo day and had a few takeaways.

First, I was reminded that good accelerators are a near-perfect vehicle for early stage companies to get a punch of exposure to investors, and also get the added benefit of refining their stories down to a concise package. I’m optimistic that a number of the companies that presented will raise some runway. Platforms like Angel list and Circle Up are also great ways to introduce your company to investors, but they’re probably better at helping you round out a round than raise the first slug.

Second, I was reminded while watching these companies present of the age-old concept of hustle. Fred Wilson wrote a great story a few years back about the Airbnb founders selling Obama-Os to fund their early days at the company. At YouCast, one of our founders had an uncanny ability to get us in front of anyone we needed, from Marc Andreessen to 50 Cent (both of whom worked with us).

Having hustle is not about being sales-y, or being good at bullshitting people.

I see hustle as an intuitive understanding that access is universal, and an understanding that there aren’t as many rules to the game as you might perceive from the outside. Second, hustle means being incredibly productive with a pathetically small amount of resources.  I saw a few companies presenting yesterday that had great hustle, and I’ve met with entrepreneurs that show it right away. It can’t replace a great market, amazing product team or great operational execution, but I’ve been consistently impressed with how far a startup can go with one great hustler on the team.

Get An MBA, But Not Until You’re Useful

As an MBA working in early stage tech, I’m ambivalent about the current conversation in the community about the value of these degrees. On one hand, I’ve met enough MBA founding teams to understand where the vitriol comes from, but I also believe that my graduate business education has been the most rewarding investment I’ve made to date.

Why Many MBAs Are Bad For Startups

An MBA education teaches students to analyze markets and assess opportunities from a high level [e.g. crowd-funding is going to be a huge opportunity and disrupt traditional business financing, an $xx bn. annual market in the U.S. alone!]. That thinking is fine, but it can only get you so far in the early stage.

The best consumer-facing products satisfy an unmet need. Consumers don’t care where a particular market is headed,  they often don’t even know how to articulate the problem that they want fixed. Nothing in an MBA program really equips students to develop products that solve real world problems, so MBAs tend to create products that wedge themselves into what they view as a market opportunity.  That approach often produces low quality products that don’t solve real problems.  The best products start with an acute, definable consumer ‘problem’ and grow into market-disrupting companies, it’s never the other way around.  While the difference in approach might sound trivial, it results in products that are usually worlds apart in execution.

Also, in the early stage there are very few day-to-day activities where having an MBA is actually useful.  At most early stage companies, people are either building the product or selling it.  Neither of those functions require an MBA, so the other skills become ‘nice to have’, but they don’t necessarily drive the business forward.

Why MBAs Can Be a Really Useful Tool

On the other side, I view MBA programs as a safe place in an unsafe world.  I think they’re safe in two ways:

First, MBA programs tend to lag trends in the business world and that can be a good thing for your career arc, especially if you’re working in an industry that’s very fast-paced.  Skills like strategic thinking, data-analysis and an understanding of the broader business world and global economy don’t run out of funding, they don’t exit and they don’t become irrelevant when the market is disrupted.  MBA programs have curriculum in place that helps students navigate the business world for decades.  That’s extremely valuable in the long term.

Second, MBA programs are a place to learn things that you’ve never understood and that the real world isn’t going to let you learn on the clock.  If you’re an engineer, there are very few on-the-job opportunities to understand option values, venture financing, accounting, macro economics or product marketing.  While it’s true that you can learn many of these things on your own, having a curriculum and a classroom are incredibly helpful aides to the process.  Just having to show up with your homework done will propel you forward.

MBAs Are Useful After You’re Useful

Everyone has a unique set of inputs that should drive their decision about a graduate business education, but my broad advice to most young people interested in early stage tech and considering an MBA is to go for it, but only if you’ve already developed practical skills that will make you invaluable an early-stage company.   An MBA alone will never be enough.

Lean Vetting

I’ve been spending a lot of time reading Eric Ries lately.  If you haven’t read The Lean Startup, you should get it and check it out.  Working in early-stage consumer-facing products, this book is as close to a bible as I’ve ever read and it helped me reframe the way I think about business-building.

In product, when you apply development resources towards a course of action, it can take a while to see if your strategic decisions were correct.  Any efforts you can apply up front to validate your hypothesis can help save time and resources. When it comes to new ideas, at K2 we tend to do this in a few ways before we even start the development process.  I like to think of this as lean vetting:

  1. Have a bazillion conversations with everyone you know, in the market and out of it: I never really understood why entrepreneurs bother to keep their ideas under wraps.  It’s one thing to be in stealth mode and not release your idea on the web for everyone to look at before it’s ready.  It’s an entirely different situation to not tell anyone what you’re doing because you’re afraid of someone stealing it.  Your current napkin idea is definitely wrong.  Not in the sense that it won’t succeed,  but if you are successful your final product will be entirely different from your paper idea. Speaking to people who understand the market is helpful for obvious reasons, but speaking to people who know nothing about the industry makes you zero in on the value proposition and simplify what you’re trying to do.  At the end of the day, technology is an enabling layer – the value proposition is the business.  You don’t have to write a single line of code to define a value proposition, so try doing more of it.
  2. Try selling it:  This doesn’t work for every idea,  but we’ve used variable ad copy and test landing pages to try out different value propositions and it’s given us interesting feedback.  For a few hundred bucks this is a simple test to do.  It may not net you any insights, but you may be shocked by what you find out.  Use your CTR, reach and conversions as a data point in your decision making.  Make sure to isolate your variables to ensure that you know what you’re testing.  For enterprise, sell to your b2b customers before you build.
  3. Take your thinking to its logical conclusion: At the end of the day, most successful companies must exit. Understand the three or four publicly traded companies that you look something like, or that you would be accretive to, and think about what has to happen for you to get there.  Again, you’re not going to get a ‘go / no go’ decision from this exercise, but this step is so valuable and too few entrepreneurs ever get past their first milestone goal of getting active users.
  4. Avoid fair fights: Everyone has a core set of assets: be it experience, a team, relationships, ability, understanding of a market, etc.   Try to figure out which of your ideas you are better suited than 99% of people to execute on and why.  Of note, building businesses that are completely dependent on big business development deals are super risky.  If your competitive advantage is a distribution deal, you  should heavily discount it.
  5. Don’t time the market: Market timing seems to have so much to do with success, but it’s also like the weather – impossible to control.  Try not to build businesses because they are what everyone is investing in.  When everyone tics, you should probably tac, or at least move in isolation to the market trends.  So much can change so quickly and you cannot control macro forces.  If you take any market timing into account, try to think about where your customers will be in three years and build for them,  otherwise you’re wasting your energy.

Joining the team at K2

K2 Media LabsI’m very excited to announce that I’ll be joining the team at K2 Media Labs on a full-time basis in the coming weeks.  K2 is an early stage private equity fund that invests in startups focused on the connected consumer.

The Company is a bit of a hybrid, in that it makes early-stage investments and also incubates companies in-house.  My day-to-day job will include working with CEO Daniel Klaus and Chairman Kevin Wendle on due diligence, planning and implementing strategies around new startup investments, as well as working in a supporting role with the current portfolio companies.  On the investing side I hope to build on what I’ve learned from Joe, Nikhil and the rest of the team at Softbank Capital, and from my time learning from Jerry Neumann at NEU VC.  From an operations perspective,  I’m hoping my time in business development, social marketing, product development, and my background in media & entertainment has given me a foundation of experience to be a value add to the incredibly talented group of entrepreneurs at K2.  I’ve spent lots of time selling services to businesses, and building in mobile and on Facebook.  While I still have limited knowledge and tons to learn, I hope that the skill set and network that I’ve built will be helpful to the entrepreneurs I will work with.

Aside from the in-house team at K2 , the fund has a phenomenal group of investors and advisors. Overall, I could not be more excited by the opportunity to learn from this team.  There aren’t many opportunities to work on both the investment and operations sides of early stage businesses, so I feel incredibly lucky to be here and I can’t wait to hit the ground running.

I plan to invest more time and energy into this blog, posting more often on topics covering startup operations and early stage investing.  If you ever want to connect, you can find me at christian[at]k2medialabs.com, or on twitter @nycsteady.

The Noise Before Defeat

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”
– Sun Tzu

I’m taking a competitive strategy course right  now, which has raised my awareness of being strategic in my thinking and actions.  I think everyone who considers themselves “hard working” tend to do a lot in a day, and to be very productive, but knowing if you’re doing the “right” things can be a difficult question to answer.  I believe that this challenge applies to marketing efforts, as well.

I spent a good part of my twenties trying to master the art of productivity, which I define as accomplishing a certain number of tasks within a given timeframe.   Time management is a big pice of this puzzle, and it took  me a long time to really understand it comprehensively.  Little things like predicting the amount of time it will take to finish any given task has really helped me “chunk” out a day into a series of manageable tasks.

The next step, I feel, is making sure that I do what’s important, as opposed to what’s urgent.  This is a skill that I’ve been trying to acquire over the past two years.  Right now I’m writing a blog post,  is that really the most effective use of my time?  This is where I believe strategy can be applied with great success;  it can help us decide which actions to take,  and it can help us define what a successful outcome to any solution is.  By definition, “being strategic” can boil down to answering a few basic questions and relegating tasks and task management to your core goals and objectives:

  • Goals can be defined as open ended, “more is always better” statements about what you want.  “Become the largest seller of product XYZ”,  or “Be the number 1 software firm in the world”
  • Objectives are similar to  goals,  but are quantifiable and typically have a time dimension. Objectives might be “achieve 20% CAGR in 2011”, or “capture an additional 5% of market share”.
  • Strategy gets into the “how” you will achieve an objective or a goal.  This is where most of the work comes  into play,  and where you need to spend a lot of time looking at your available resources to decide where you can win,  and which battles you need to forgo. “We’re going to build an application that addresses the needs of this target market in 2011,  then build from that base over the next three years”
  • Tactics are the action items that break down the strategy into small, manageable pieces.  These are the the battles.  “buy  SEM and display media, build and market a Facebook Page with a goal of XX,XXX Fans by May 1st”

The elegant benefit of doing all of this upfront strategy development is that it promotes productivity to effectiveness.  To-do lists should be comprised of items that support the strategy, the strategy supports the objective and the objective supports the goal.   Assuming that your strategic thinking is sound,  your tactical actions will all increase your effectiveness at reaching your goals.

The Mis-Application of Innovation

With all of the recent discussion about civil charges being brought by the SEC against Goldman Sachs, I got into a discussion with some friends about innovation, technology development and its abuse by people who either don’t understand the technology they are using, know but do not care about the risks involved, or knowingly behave unethically in an effort to leverage short-term gains.  After reading a blog post by Bill Taylor on the subject, I thought I’d chime in from a technology standpoint (although Bill does a much better job than I do at explaining my own thoughts on the subject–  you should definitely read his post).

Bill points out two blatant misuses of recent innovations developed by really smart people and abused by the financial services industry:  collateralized debt obligations and micro-lending.  These are both somewhat complicated technologies, and I think it’s safe to say that the U.S. housing market collapse was pretty clear evidence that the technology was egregiously abused.  The micro-lending conversation is perhaps a bit more ambiguous (it could be posited that the rejection of certain micro-lending offers are a natural piece of the economic puzzle, and will soon drive rates back down).  My position in the conversation my friends and I were having , which I still maintain, is that blaming technology is pointless and mis-guided.

People innovate.  It’s a natural thing for humans to do and should never be discouraged.   The idea that the innovation is the culprit is a dangerous position to take when situations like this arise because innovation is absolutely a net positive endeavor. Technological gains are part of what has made the U.S. economy surge in the past century, and it will unquestionably be the source of our economic growth in the future.  We live longer, happier lives as a result of technological innovation.

I think problems start to arise because of a lack of transparency and asymmetric information problems.   As Americans, we consume too much health care, we take out lousy mortgages and loans and we tend to make foolish financial decisions  as consumers.  American consumerism is generally an impulsive phenomenon–   or, we know we’re making bad decisions, but everyone around us is making them to so we fall in line with the behavior.  The solution to bad decision-making is more education and greater transparency. The solution is not to halt efforts to innovate from fear that innovation will be abused.