Showing up

Mark Twain famously quipped that “80 percent of life is showing up.” Running a startup, I’d say it’s more like 90 percent. For example, I frequently hear from founders how it’s hard to recruit programmers. It is indeed hard. But great programmers are out there, and can be found in places where other people simply aren’t showing up.

Back in 2005 when I was starting SiteAdvisor with Tom Pinckney (one of my cofounders at my last two startups and non-graduate of high school) we were trying to recruit great programmers. At the time, startups were certainly not the hot thing, especially on the East Coast. We were based in Boston so decided to spend time at MIT where we figured there must be smart programmers. We went to places like the Media Lab and basically just sat ourselves down at lunch counters and awkwardly introduced ourselves: “Hi, my name is Chris Dixon and this is Tom Pinckney and we are starting a company and would love to talk to you about it.” Most students ignored us or thought we were annoying. I remember one student staring at us quizzically saying “startups still exist?” Most of our trips were fruitless. At one point after a failed trip we were on the Redline back to our office in downtown Boston and joked, depressingly, that we felt so out of place that people looked at us like time travelers from the dot-com bubble.

Our first breakthough came after a series of trips when a particularly talented programmer/designer named Hugo Liu re-approached us and said something like “hey, actually I thought about it and your idea doesn’t suck.” Then his friend David Gatenby talked to about joining us. We eventually recruited Hugo and David along with a brilliant undergraduate Matt Gattis. We had finally broken through. Matt and Hugo now work with us at Hunch along with some of their friends from MIT they brought along.

People who say recruiting is easy are probably recruiting bad people. People who say recruiting is hard are right. People who say it is impossible just aren’t showing up enough.

Founder Stories

Erick Schonfeld from TechCrunch asked me a few months ago if I’d be on a TechCrunch video show where we interviewed startup founders. I love startups. While other people watch sports on Sunday, I prefer to sit around with friends and chat about what new startups have launched, how they are doing, what product and marketing strategies are working, etc.

Erick originally called the show “Startup Sherpa.” The word “sherpa” implied that I was giving people advice. The people we invited to the show were either my peers or people who knew far more than me, so I felt very uncomfortable with that title. I really like to hear “war stories” (a term used in venture capital) but calling it that would have been disrespectful to military people who fight actual wars versus the inconsequential battles we have amongst startups and investors. So we chose “Founder Stories” instead.

I don’t get paid by TechCrunch and they don’t have a fancy editing budget so what you see is effectively live. I probably make an ass out of myself a lot. I actually haven’t brought myself to watch most of the episodes because I can’t stand all my verbal tics like saying “etc” and “you know.” The saving grace of the show is the incredible people we get to come on to share their stories. I think they participate mostly because it’s TechCrunch – the premier tech blog – and also because they know I love startups. I want to try to learn from the founders’ early experiences rather than ask questions about “hot topics” or “gotchas.” I like to think of “Founder Stories” as a show that I would have wanted to watch when I was a first-time entrepreneur. That’s how I explain the show to potential guests and also how I think about it when Erick and I come up with questions.

The show is available as a free podcast on iTunes here. It’s also on TechCrunch here.

I’ve never talked to Mike Arrington about this but I’d like to thank him for making long form and respectful content available to entrepreneurs and investors. Erick has also been great, along with Josh Zelman who is the AOL/TechCrunch video producer.

I’d love to hear feedback and suggestions for how to improve the show.

MIT is a national treasure

My friend and business partner Tom Pinckney started two companies with me and one company before. He invented many non-trivial patented inventions and raised many millions of dollars in venture capital, and returned capital to those investors many times over.

He got his Bachelors and Master degrees from MIT. He’s the nicest, smartest, and most decent guy you’ll ever meet.

But my favorite thing about Tom is he never got he never got a high school degree.  High school students today optimize their grades and SATs and after school activities. They speak French and Chinese, play piano and paint abstract art.  They dance around and play hockey and act like they help homeless people.

Tom grew up in rural South Carolina and mostly stayed at home writing video games on his Apple II.  There was no place nearby to go to high school. He took a few community college classes but none of those places could give him a high school degree. It didn’t really matter – all he wanted to do was program computers.  So when it came time to apply to college, Tom just printed out a pile of code he wrote and sent it to colleges.

Stanford, Berkeley and everyone else summarily dismissed his application on technical grounds – he didn’t have a high school diploma.

MIT looked at his code and said, “we like it” – we accept you.

For his Masters the best four CS schools – Stanford, Berkeley, Carniegie Mellon, and MIT — all recruited Tom  He stayed at MIT, the school that gave him a chance without a high school degree.

MIT is a national treasure.  If you believe in meritocracy and the American dream, you believe in MIT.

Timing your startup

I never had the opportunity to invest in YouTube but I have to admit that if I did I probably would have passed (which of course would have been a huge mistake). I’d been around the web long enough to remember the dozens of companies before YouTube that tried to create crowdsourced video sites and failed. Based on “pattern recognition” (a dangerous thing to rely on), I was deeply skeptical of the space.

What I failed to appreciate was that the prior crowdsourced video sites were ahead of their time. YouTube built a great product, but, more importantly, got the market timing just right. By 2005, all the pieces were in place to enable crowdsourced video – the proliferation of home broadband, digital camcorders, a version of Flash where videos “just worked,” copyrighted web content that could be exported to YouTube, and blogs that wanted to embed videos.

Almost anything you build on the web has already been tried in one form or another. This should not deter you. Antecedents existed for Google, Facebook, Groupon, and almost every other tech startup that has succeeded since the dot-com bubble.

Entrepreneurs should always ask themselves “why will I succeed where others failed?” If the answer is simply “I’m doing it right” or “I’m smarter,” you are probably underestimating your antecedents, which were probably run by competent or even great entrepreneurs who did everything possible to succeed. Instead your answer should include an explanation about why the timing is right – about some fundamental changes in the world that enable the idea you are pursuing to finally succeed. If the necessary conditions were in place, say, a year ago, that might still be ok – YouTube happened to nail their product out of the gate, but if they hadn’t a company started later might have succeeded in their place.

Often the necessary conditions are only beginning to emerge and knowing when they will do so sufficiently is very hard to predict. We all know the internet will become fully social, personalized, mobile, location-based, interactive, etc. and lots of new, successful startups will be built as a result. What is very hard to know is when these things will happen at scale.

One way to mitigate timing risk is to manage your cash accordingly. If you are trying to ride existing trends you should ramp up aggressively. If you are betting on emerging trends it is better to keep your burn low and runway long.  This takes discipline and patience but is also the way you hit it really big.

Builders and extractors

Tim O’Reilly poses a question every entrepreneur and investor should consider: are you creating more value for others than you capture for yourself? Google makes billions of dollars in annual profits, but generates many times that in productivity gains for other people. Having a positive social contribution isn’t limited to non-profit organizations – non-profits just happen to have a zero in the “value capture” column of the ledger. Wall Street stands at the other extreme: boatloads of value capture and very little value creation.

I think of people who aim to create more value than they capture as “builders” and people who don’t as “extractors.” Most entrepreneurs are natural-born builders. They want to create something from nothing and are happy to see the benefits of their labor spill over to others. Sadly, the builder mindset isn’t as widespread among investors. I recently heard a well-known Boston VC say: “There are 15 good deals a year and our job is to try to win those deals” – a statement that epitomizes the passive, extractor mindset. The problem with VC seed programs is they not only fail to enlarge the pie, they actually shrink it by making otherwise fundable companies unfundable through negative signaling.

The good news is there is a large – and growing – class of investors with the builder mindset. Y Combinator and similar mentorship programs are true builders: their startups probably wouldn’t have existed without them (and the founders might have ended up at big companies). There are also lots of angel and seed investors who are builders. A few that come to mind: Ron Conway, Chris Sacca, Mike Maples (Floodgate), Roger Ehrenberg, Keith Rabois, Ken Lehrer, Jeff Clavier, Betaworks, Steve Anderson, and Aydin Senkut. There are also VCs who are builders. Ones that I’ve worked with directly recently include Union Square, True, Bessemer, Khosla, Index, and First Round.

Given that there is a surplus of venture money, entrepreneurs and seed investors now have the luxury of choosing to work with builders and avoid extractors. Hopefully over time this will weed out the extractors.