Will Herman + Rajat Bhargava: Episode 94

Transcript

[0:00:35] Charlie Hoehn: You’re listening to Author Hour, enlightening conversations about books with the authors who wrote them. I’m Charlie Hoehn. Today’s episode is with Will Herman and Raj Bhargava, coauthors of The Startup Playbook. How many startups fail? Just take a guess. The answer is 90%. Having a better idea or a bigger market or just working harder isn’t enough. What every entrepreneur needs is a fast track to the wisdom and experience gained from building successful companies and that’s what today’s episode is all about. Will Herman is an angel investor with more than 60 investments in startup and a five time founder. Raj Bhargava is the cofounder and CEO of JumpCloud, the first directory as a service. He’s also a 10 time entrepreneur with six exits including two IPO’s in four trade sales. In this episode, Will and Raj share their years of knowledge to help you keep your company out of the startup graveyard. Now, here is our episode with Will and Raj.

[0:02:14] WH: When I was in college, after a couple of years I quit college to join a startup, I actually got hired by a startup over the summer after my sophomore year and decided to stay there because the startup environment was so cool and just way better than college and my parents were frustrated, they were angry but you know, I just had to do my thing. Well, the culture was, you know, a complete meritocracy, we were only about – I was probably the eighth or ninth employee, it was the wild west you know? The biggest gun slinger wrote the most code, got the most done, got the biggest reward, got the most visibility and was a short feedback loop which was really nice. It was you know, where school was this incredibly long feedback loop, why do I need to know this kind of thing. Startups tend to be very short feedback loops which is good and bad. In this case, all I remember is the good part. Until it became all bad. About 18 months in, the company slammed into a wall and failed. I had no idea why, even though I was one of eight or nine people, it wasn’t even clear that the people – the founders of the company knew why it had crashed and burned. We ran out of money, we didn’t have enough equipment, we couldn’t get customers, we didn’t have a unique enough idea, we weren’t differentiated enough, we didn’t have enough marketing spent. Still to this day, unclear to me what happened. But one day I had a fun, exciting job and the next day I didn’t. Lay off is a very nice word to what happened, a very nice term for what happened.

[0:04:04] Charlie Hoehn: What happened?

[0:04:07] WH: Basically, I came to work one day and we had a company meeting, I was going to say a team meeting, it’s a company meeting which all of us in a small room, basically said, “Doors are closing at 1:00, get the crap out of your desk.” That was it, it was just over and in a 24 hour period, I went to the people who should have known to ask, “Gee, what went wrong, everything seemed to be so good, I was working my ass off.” The customer seemed happy and everything and you know, basically all anyone understood was we didn’t have any more money and it was all over and that’s it, that happens to a lot of startups, exactly like that, they’re almost blindsided by their failure. In fact, you know, we know the vast majority of startups fail and they fail in sort of the same way. That started my learning process about what was important, what needs to be watched, I can’t say I learned a lot that first time, just that, I learned that because things are going well is not a reason to believe they will continue to go well. Of course, the worst part is I had to go back to my parents who said, “Yeah, we told you this was going to happen.”

[0:05:24] Charlie Hoehn: What was the startup?

[0:05:27] WH: Startup is called Healthcare Computer Systems. Just outside, just north of Philadelphia.

[0:05:35] Charlie Hoehn: What year roughly was that again?

[0:05:37] WH: You can embarrass me by outing my age here, that was 1979.

[0:05:43] Charlie Hoehn: Well, the reason I asked that is Healthcare Computer Systems, probably back then sounded very fancy and potentially successful.

[0:05:53] WH: To me, I was what? 19 years old. To my 19 year old sensibility, yeah, it sounded like this is an ace, this is General Electric, this is, you know.

[0:06:04] Charlie Hoehn: Yeah. It was a small scene, a startup, and you were doing startups way before they were a thing. Raj, did you go through something similar?

[0:06:16] RB: Yeah, absolutely, I started my first company while I was still in school and Will and I met there actually when he became one of the first investors but all the issues that you can think of around building that first company, I experienced. “What’s the right idea?” “How do you build the team?” “How do you build the founding team that’s functional?” I’ve struggled with that a great deal, we tried to raise money a number of times, we almost got bought at one point and that failed and then when we tried to raise money, we picked the wrong investors and then that changed the dynamic of the whole company. Hired the wrong people, I mean, almost every mistake you could think of, I made. As part of that, you quickly learn that you got to go figure these things out before you make these mistakes because some of these mistakes can be company killers. Fortunately, they weren’t company killers but that wasn’t necessarily because of skill on my part, it was because some other people came in and helped me out and helped the company out to help make sure it was successful.

[0:07:29] Charlie Hoehn: Tell me, what was the most painful mistake that you remember making, tell me about that moment?

[0:07:35] RB: I think the most painful mistake was picking the wrong investor. By this time, Will and a friend of ours, Brad Feld had decided to invest just a little bit of money to get us going and then we came to the point where it was a couple of rounds later, where we were picking venture capitalists and we were choosing between a few different venture firms. I didn’t really understand the process or the game or kind of the signals that they give you about what they’re going to do or what they want to do with the company once they invest. What happened is, I picked what I thought was the best firm because they were offering us the best financial deal. And like many things, be careful of the great deal because there might be a lot of strings attached to it and in our case, there were. We just didn’t know what those were and once we closed the financing with this firm, they decided to promptly, decided to change just about everything in the company including asking for a new CEO to come in.

[0:08:50] Charlie Hoehn: Yeah, they got that leverage.

[0:08:51] RB: Yeah, none of that was discussed beforehand and so – but that’s what they wanted to do and they clearly knew they wanted to do it because it happened within a couple of weeks of after the financing. Now, we had a choice between them and a few other firms and one of the other firms that we were deciding on, we had an incredible relationship with the person and they were not offering us the best financial deal. It’s one of those situations where you realize, you know, maybe the best financial deal isn’t the best outcome for the company always. Sometimes it is but in this case, having an investor who is more aligned with our philosophy of how to run the business, maybe I had spent more time with – They weren’t coming in last minute with a better deal that might have been the better choice and very likely may have – would have been the better choice but that was a very painful mistake for the entire company because it changed the trajectory of the company forever. You know, that you do at the early stages changed the trajectory forever and you can’t – there’s things that you do that you can’t recover from or undo and one of them is who you pick as a financing partner.

[0:10:14] Charlie Hoehn: Both of you have earned your startup scars so to speak? That leads us to your book, the startup playbook. Now, I understand why you two wrote this, this is something that a lot of first time entrepreneurs can benefit from to avoid mistakes but what is the core idea, the one thing that you really want listeners to take away from this conversation?

[0:10:41] WH: I think that there is a large set of misconceptions about what’s important in the startup process and they’re driven a lot by the financial community and as Raj has pointed out, it’s not always clear if that’s the best place to get advice. Core among them is that ideas need to be outstanding and unique and we don’t believe that’s the case you know? Steve Jobs didn’t create the mobile phone, Bill Gates didn’t create the operating system, you know, Henry Ford didn’t create the car. They just all perfected it and there’s actually more opportunity in great execution of a company, of converting a good idea into a solid company than there is in actually having a unique idea. We also believe the odds of you having a unique idea in general are exceedingly low.

[0:11:46] Charlie Hoehn: They’re basically zero.

[0:11:47] WH: They’re basically zero, we always advise companies, Raj and I both mentor and advise a bunch of companies and we always advise them to just assume that they don’t recognize that somebody very close behind them is smarter, has a bigger team, and is better funded than they are, doing exactly the same thing. The message they need to take out of that is that everything they do needs to be pretty optimized and they need to move very fast.

[0:12:23] Charlie Hoehn: I totally agree with you on this point, I want to dig a little deeper into this notion that you don’t need a unique idea. What do you guys think about being in a category that’s not dominated yet? To kind of explain to the listeners, one of the strategies that you can kind of follow is to create a new category and to come in with the perfect product for that category. Uber did this, obviously very well, where a transportation, cars on demand, it kind of became this new category because of the timing with the iPhone, the App Store, all these factors kind of align perfectly. They came out with the perfect product first, then the lion share of all the customers, the revenue went to them and Lyft and then it became kind of a two horse race. This is not different from what you’re saying is, don’t be discouraged if your idea has competition basically but do you think it’s wise to pursue creating a new category or is it okay to go into an existing category that already has some top dogs in it?

[0:13:42] RB: I think you’ve made our point for us in a lot of ways. Uber and Lyft didn’t necessarily create a category, they were taxis and limousines. You could hail a cab in New York City, you can hail a cab almost anywhere in the world. They just created a different model to make that work. They made it far more convenient, they made it cashless, they made it so that in fact, anybody who wanted to have a job could go drive a car and so they worked on both sides of the equation and they brought tremendous innovations to that area. I’m not sure that the category was necessarily new. It was transportation, we’ve got transportation in many different forms to day and before they started, they were all existing in that way, there were limousines, there were busses, there’s many carpools. People did all those thing, they just happened to take, have this incredible take on it that was far more convenient, easier, safer, et cetera, et cetera. That’s I think the core of our point is that you don’t necessarily have to have this completely novel idea, you know, I think we say, you don’t have to have this new algorithm or this new box that you’re creating that nobody’s ever thought of in the world before. But what you do need to have is a different take on the whole thing and Uber and Lyft are a great example of something that we like to think is a sleepy industry up until they showed up and boy has it gotten really interesting and competitive. What’s fascinating to me about that particular category is, they moved beyond replacing or being an alternative to limousines and taxis but they’ve now potentially become an alternative to a person buying a car.

[0:15:39] Charlie Hoehn: Yes.

[0:15:41] RB: That’s sort of fascinating is that they had this completely different, novel thought process or approach to something that had already existed or a thing that we used on a daily basis but they completely turned it on its head and it’s been tremendous. I think that’s sort of what we talk to people about is that, “Don’t worry about if it’s a completely new category, if it is, great, wonderful. If you come up with something that’s so novel, that’s incredible,” and we don’t want to discourage that but it doesn’t have to be that way to build an incredible business.

[0:16:16] Charlie Hoehn: Great point and this reminded me of a joke that my wife and I were making the other day which was – it would have been funny if Amazon in its early days was like, you know what? Christmas is too inconvenient, it happens only once a year, why don’t we deliver this to everybody every day if they want to, make it Christmas on demand, get gifts delivered to your door.

[0:16:41] WH: That’s a great idea.

[0:16:48] Charlie Hoehn: Is that really the biggest objection is, or internal resistance that first time entrepreneurs have is they’re worried about not having a unique idea and well, actually, what are some other things that they run into, that are keeping them from succeeding in their first startup?

[0:17:08] RB: Well, I think part of the point of that is, I think that’s sort of the tip of the ice berg. What we’re trying to say is, there’s so much blocking and tackling that needs to be done, you can make such a great business by just focusing on execution. Maybe you don’t have a completely novel idea but you have sort of a very innovative approach to deliver that solution or product or you have a way to service the customer that’s better than somebody else. Our point is, go all in on those things and really work hard at building just incredible business overall and that means, the team, that means your pricing model, it means the way you attract customers, the way you service them, the way you work with them on an ongoing basis, all those things are opportunities for you to differentiate. It’s such an all-encompassing thing to create a great business that our point is, you can innovate in many of those areas but you also don’t have to innovate in every one of those areas to be successful. Pick the ones that really matter to you and then go deep on those and make those differentiators.

[0:18:21] WH: Most of the entrepreneurs we talk to have – don’t really understand there’s a path between the idea, well first of all, they don’t understand that an idea needs to be a problem and a solution. It can’t be one or the other, it needs to be both and that there’s a path between that idea, taking that idea and making it into an actual product or service that gets delivered to a customer. That path actually is where a lot of, on that path is where a lot of companies fail and it has to do with the things that Raj was just talking about, you need to make sure that there’s a fit between the product and the market that you’re going after that you can market to those customers, that you can price to them correctly and that you can differentiate what you’re delivering from what everybody else is delivering and even in differentiation as Raj was saying. You don’t have to be the best product, you can have a better distribution channel, you have better documentation, you can be easier to use, you can have better service. When you start throwing all of these factors in and think about the permutations of a company that you can create out of that, it’s really not one idea to one product, it’s one idea to dozens of products that are a potential. That’s why nobody should be limited by the idea that they have, there’s just lots of ways to optimize to make a great product into a great market.

[0:20:45] Charlie Hoehn: Let’s make this a little bit more concrete and I’ll be kind and let you two pick the option that you want for this. Option one is we can talk about actual companies, startups that you two have advised and helped and seeing these transformations for or I can give you a hypothetical and we can walk down that path. What do you prefer?

[0:21:16] WH: I think the innocent should remain unnamed so – or even the guilty also should remain unnamed so –

[0:21:23] Charlie Hoehn: You don’t have to name the company but have a general idea of what problem they were trying to solve and how they solved it, that sort of thing.

[0:21:34] WH: I think that works, I think we can go that way.

[0:21:37] Charlie Hoehn: Yeah, tell me about a company, a startup that started in a place where they didn’t really know what they were doing, they weren’t hitting, checking off all the boxes that you two just listed and how did you get them from there to where you’re describing.

[0:21:57] WH: Company X, a category of company that became more popular lately is these hardware oriented, consumer product companies. That is a startup that’s doing hardware which was fairly rare in the past have now become more popular and then there’s – of course, targets.

[0:22:19] Charlie Hoehn: What’s an example of one, not the one that you’re talking about but one we’re all familiar.

[0:22:25] WH: A FitBit’s actually a good example of the model that’s going on where a fairly inexpensive piece of hardware is being sold but the differentiation doesn’t really completely come in the hardware or the business model, I’m sorry, it doesn’t really come as part of the hardware, their business model really is, “We’re going to sell this product, we’re going to make a little money on the hardware part of the product and then we’re going to sell a bunch of services behind it,” and that’s really where the companies make their money. Without that hardware lever, it’s difficult for them to actually make money just on the hardware and that happens off in consumer products, like a Nest thermostat for example. It’s a cool device but you got to sell a lot of Nests if that’s all you’re going to do, if you use it as a lever then to create a larger business around the IOT devices and the home that you can then start charging a monthly fee for – that’s a pretty good model. The problem with it is that getting the hardware product to market for startup, it’s very difficult, it’s much more difficult than getting a software product to market and the companies have to understand the complexity of manufacturability, the error rates that they’re going to have. Generally speaking if they build it themselves, it’s going to be costly, if they build it domestically, it’s probably going to be costly. If they go over to China to have it build, it’s going to be costly, mostly because of the distance and understanding the failure rates and the problems that they’re going to have, there’s expertise around about how to do those things but often it’s not sought out and this is a key problem we address in the book is that really a startup, especially a startup that’s going after markets that they don’t already have a lot of wisdom about which most don’t, they need to bring in that wisdom. They need to make sure that on their team, there is wisdom about how to do these things. Otherwise there’s a load of potholes and in hardware, there’s a special – there’s more than usual. As I said, there’s manufacturability. What happens often is that these companies, they go out and they get some funding, they get venture capitalists, angels even accelerators very excited about what they are doing and they tend to underestimate the difficulty in getting the product out. So they have to turn the product, that is they have to do new revs of the product one, two, three times which consumes all of their capital and once they got their product right or close enough, then they have to go to market and they’re out of money and they have no money for marketing and sales. We see it all the time. This is not an unusual problem, it’s almost always underestimated the amount of capital required to make it happen and –

[0:25:29] Charlie Hoehn: That’s the number one reason startup fail, I believe, is they run out of capital.

[0:25:35] WH: They ran out of capital, yeah and the wall that they run into seems to be taller and they’ve got more momentum hitting that wall when they involve hardware and that’s not to discourage anybody from doing a hardware startup. It’s just like everything else in the startup world. Once you have an idea, you need to understand all the parameters of what it’s going to take to turn that idea into a product or service. I advised several companies that no matter how much information is out there about this problem, they go along the same path. They think they are going to get it right the first time and so that’s how they budget and they find that their first gen product doesn’t work or doesn’t work to what the customers expect, to the level that the customers expect and they have to turn it. It happens all of the time, when you turn in software, when you make a new rev software it’s a couple of days and a few man hours of effort. When you turn a new product, a hardware product you have to go through a whole new manufacturing process and it’s timely and expensive.

[0:26:49] Charlie Hoehn: So as a quick rule of thumb Will, let’s say I run a kick starter campaign because I want to create a FitBit for laughter. So I want to track how many times a day I laugh. I end up raising a quarter of a million dollars and I think, “Great, that is how much I wanted to raise.” How screwed am I? Like how much more should I have raised?

[0:27:17] WH: Yeah, I don’t think there’s absolutes – I think if although I will tell you as a fairly active angel investor myself, I’d say that you’re way under where you need to be, I mean just using some pattern matching of companies that came before you. I think one thing, we talk about this in the book, we call it the vetting process and it sort of a loop – not sort of, it is a loop of points, where each point along the loop is a test of converting your idea. It’s a process and a test of converting your idea into your ultimate product When you’re at the early stages we suggest you go through this vetting process and what you can do very cheaply because it’s virtual here, the only hardware part of it in this case, in this example, is build a prototype on a bench and it could be your FitBit for laughter, your wrist laughter recorder, could be the size of a dresser. You know whatever it needs to do to prove out the functionality but not the packaging. And so it’s not very costly and you can go to customers, potential customers. You’d say, “Well just imagine if you could fit this on your wrist.” And actually see if there’s market demand and then you can check with people who are experts on manufacturability and you can talk with them and understand that and that is all very low cost and so you take your 250K and you don’t play yourself or your team a dime and you use that money to develop that first prototype of a product and get feedback from the market. And see if the market is interested and even go to a couple of VCs to say, “Hey, if we could do this, would you be interested in funding?” And it’s not until you have tested all of those things that you leave that loop and move forward and build your product and none of that really cost much and if you do that, you optimize your chances for success later on and minimize the amount of money you’re going to consume.

[0:29:23] Charlie Hoehn: Yeah, so you can actually use that money, it’s a wiser that you use that money that you just raised to not only do that testing and validation of the market but as a signal to the VCs that, “Hey there’s demand here”.

[0:29:37] WH: Perfectly said, that’s exactly right.

[0:29:39] Charlie Hoehn: Got it, interesting.

[0:29:41] RB: And I think that the interesting point there is it’s almost like you’re going slow to go fast, right? And we are not really saying go slow at the beginning but you’re testing in let’s say small quantities or in very specific ways to make sure that those all work before you really spend a tremendous amount of money and go with large scale. So that is sort of the point there.

[0:30:06] Charlie Hoehn: How often do you guys see that? Because the testing period where you are figuring things out and there’s a lot of editing so to speak of your products and services and it’s just that you are running up into customers in the real world and they are telling you things that you don’t like, how often do you see entrepreneurs skipping that step because it’s not fun and sexy and trying to go straight into scale?

[0:30:33] RB: I see that all the time. So there’s so much incentive to try and skip that step. You’ve got potentially you have already raised money and you’ve got this idea because you’ve got experience in the space and you know exactly what needs to be done and so the investor say, “Just go fast.” And so you jump in and you build the product and you get it out there, you hire lots of sales people, do tons of marketing and then you find out, well the product wasn’t quite right. There was problems with maybe the fit of the customer relative to the product or maybe the product still had some issues, maybe it is not complete. We see that all the time and the amount of money that you spent and the amount of time that you sort of burn through puts you at a huge disadvantage. So it’s actually every interesting to me that the company that maybe take a little bit more time just upfront vetting and really iterating and testing to make sure that we call product market fit it is there, they end up having the ability to scale at a much, much greater sort of level than if you haven’t really obtained that fit and you’re trying to do it with many sales people, lots of marketing dollars getting spent, maybe too big of a staff, those all end up being a factor on whether a company runs out of money too fast.

[0:32:04] Charlie Hoehn: Right, so how does a startup know when they’ve done the hard work upfront and that phase is complete? Because I’d imagine you can stay in that phase indefinitely as well.

[0:32:17] WH: That’s a very good point. You could loop in that phase and it’s an aberrant case but once in a while, we see companies that are sort of stuck. They are stuck, they can’t – well it is not formalized process that they’re stuck in. They are actually can’t – they can’t pull the trigger and move forward, but that’s fairly rare. Of course there is no completely quantitative way to determine when is the right time to exit that loop but we suggest that primarily with good, really solid customer feedback. And we are not talking about from one or two potential customers but from a fairly large group of customers. Depending on your market, it might be 20, it might be 50 customers, that if you can sit down with them and you can test whether they’re really interested in buying what you’ve got, you’ve got the momentum to leave that loop and as part of the loop, you have already determined you can build what you’ve promised to build and that you can afford to build what you’ve promised to build. You pass all of those gates and it’s reasonable to exit and now move forward and complete your product and as you said before Charlie, at that point you have also created a lot of momentum for financing. So just leaving that gate, leaving that loop before you’ve even started to really build your final product, you are now in a place where you can go raise more money to help you build that product and to accelerate your pace to get through the product creation and the marketing and sales.

[0:34:00] RB: We like to talk about it in the way of saying pull versus push. So if you are really pushing your product or your service really hard and there is not much pull from the customer, then you probably aren’t ready. If you’ve got a lot of pull from the customer when they are saying, “Hey this really matches a problem I have.” And even though you’re not maybe quite there, you haven’t figured out all the challenges and problems and you don’t have all the features if you will, I still really need it and I’ll pay for it today because I know ultimately you’ll get there.

[0:34:34] Charlie Hoehn: This reminds me of the meme of, “Take my money. Shut up and take my money.” I think that’s actually a really practical useful framework and entrepreneurs who are friends of mine have described that exact dynamic of how weird it is when they finally hit upon a business where people were handing them checks, unsolicited.

[0:35:03] RB: It’s an unbelievable feeling and the challenge is that not everybody is going to hand you a check because not everybody has the problem that you’re solving but for the people that do have that problem that you have a solution to, they want to hand you a check. So if you can frame it that way and understand that when you talk to a customer that fits your target if you will that has the problem and they want to hand you money, well now you’ve really got something. And you’re right, it’s an unbelievable feeling when you have that because the business goes, it starts to scale very fast. It goes faster, you have many more pressures and demands but they are all good pressures and demands because you can’t keep up with enough customer demand and so it’s not every business unfortunately hits it but the ones that do it’s an incredible feeling.

[0:35:57] Charlie Hoehn: Yeah and I want to dive a little bit deeper on this point because I think it’s really, really important for a first time entrepreneurs and Will you said something to this effect as well which is, test if they are really interested in buying what you’ve got. Which I think is a really important distinction between the impulse that a lot of first time entrepreneurs have, which is test to see if they’re interested in what you’ve got. Huge distinction. You have to be able to get money from them basically, right? They have to not just you persuading them but them saying, you’ve nailed the problem, that is my problem and if you have a potential solution that’s better than what’s out there, take my money, right?

[0:36:47] WH: Yes. I think that’s perfectly said. We often, I think Raj mentioned this earlier, that the entrepreneur wants to have, get positive feedback and so we’re – and they will get it there.

[0:37:01] Charlie Hoehn: They will get it, guaranteed.

[0:37:02] WH: We’re humans, we hear what we want to hear and you know all of these cognitive biases that we have will distort anything to be what we want and you hit the nail on the head, that you have to ask, this is ask the customer and then you have to close. And granted you won’t have anything early on to close with but you can frame it, you know Raj and I like to talk about if we can deliver it tomorrow and in pink would you buy it? And would you buy it for $15? It is actually a gutsy and hard thing to do that we don’t try to minimize this because it really is validating that your baby is cute enough to be kissed.

[0:37:52] Charlie Hoehn: Yeah, you know now that you say that it’s so funny that you say that, I’ve never made this connection. It’s similar to the biggest fear being public speaking that humans have. It is asking for, I mean you put so much of your life, so much of your energy into being an entrepreneur that asking if somebody would validate your efforts and your energy and your love, is a hard thing to do and that’s what you have to do. You said this earlier, you have to do that and you can’t skip that. That’s the thing as like Raj said, you have to move slow to move fast. That’s a critical gate that you have to go through before you can be successful and the earlier you do it, the earlier you can do it, the more successful you’ll be. In fact, it gives you the chance to iterate on what you’re doing to say, “Okay that’s not what you’ll buy now, what do I need to do to make it into something that you’d be interested in?” And that’s really cheap and really fast early on, but gets very expensive and very painful later on.

[0:39:00] RB: The other point I would add to this is, it’s tough for us to feel that rejection but in a lot of ways, you want to feel that rejection from people that aren’t in your target customer set. So, it’s okay if somebody says “No.” If they weren’t part of your target segment that you were going after anyway. If you are selling to men and a woman says, “Well I don’t really need that product because it’s only for men,” that’s okay, right? That part of how you had – Right, exactly and it gets much deeper than that when you are selling to a very small segment but you really want to find that segment who is, that’s the target that you’re going after and they’re the ones who say, “Yes, this really matches what I need.” But if the person is not within that segment, it’s okay if they say that this isn’t the right product or service for them. That’s what you want, you want it to be focused at the beginning where it’s one really tight group of people or companies that say. “Yes. This is really, really interesting to me and I want to spend money on that.”

[0:40:06] Charlie Hoehn: Great advice and I especially love having the follow up question. Assuming you are talking to the right person, you are talking to a true prospective customer that’s a good fit, somebody who could love what you offer, asking them after the rejection basically, “What do I need to do to make it something you want to buy now?” That is a great follow up question. So before we kind of start to wrap up and I know at the time of this recording your book isn’t out just yet but are there a few or is there one favorite success story that comes to mind of a startup, an individual, who incorporated the lessons in your book?

[0:40:52] WH: Yeah, I don’t think I want to take credit for that, for any of that because I mean ultimately, I am going to be evasive here but I’ll come up with a good example but in the end, Raj and I feel strongly that it’s about good execution. So you could take all the advice in the world, if you don’t execute fairly well on that advice then you’re – it’s going to be a tough road. It’s just going to be a really tough road. I’ll say that again, not mentioning any particular companies but I worked with a company a couple of years back now that with a founder, a couple of years back now that was struggling. In fact, they have raised some initial seed funding and they had come out of an accelerator where they got a little money. He had come out of an accelerator where he got little money. He actually raised money from some angels afterwards. He probably had about a million dollars in funding before he had released a product. And it was a software company, ran out of money, eventually, to make the long story short, ran out of money, I got introduced to him and walked him through building a team around him. When I met him, he was very bright guy, a very natural engineer, not a very good sales person and really didn’t have a lot of empathy for his customers to put it mildly and we worked through building a team around him to fill in, to recognize all of the personality deficiencies he had, let’s put it that way. And to build a team to fill those in, skill and personality things and he did. He went out and brought three more founders in. So there’s a team of four, once the team came together they started to execute. They went, they were able to get a little bit more money, they revved their product, they started working with their customers early on talking with them about, “Is this right? Would you pay for this? Would you buy this? What can we make changes?” They did a bunch of revs of their product and eventually had something that came to market and was quite successful and within a year they were acquired by a very large company for a reasonable outcome. In fact, since they had raised so little money it turns out that the founding team even though it was bigger had a big chunk of the company and each of the founders including the first one who started with the idea came out very successful. I think they would look back and they’d say that was financially successful and educationally very successful and all four of them had gone on to start subsequent companies.

[0:43:41] Charlie Hoehn: I want you guys to give our listeners a challenge and I usually ask what’s the one thing they can do from your book to change their life this week, I want to make a suggestion based on what you both have said which is just focus on execution and this is one of those ones where I’d imagine some entrepreneurs think they are focused on execution but they’re actually not. Could you break down how to be an effective executor this week?

[0:44:19] RB: That’s a great one. I think one of the things that we advocate and really talk about in the book is setting goals and milestones and we talk about how you set them sort of from big picture all the way down to tiniest milestones that could be over the course of a week or a day and ultimately, what execution to us is that you figured out the right things to do and then you just do them. You have to think big picture and you know, very tactical, short term but when you think about the big picture and break it down into the steps, you know that you’re going to get to the right outcome or you’re going to be on a trajectory to get to the right outcome. If you want to do that, the best way to do that is you know, figure out what the larger goal is, break it down into those steps as many small steps as you can and then just start checking them off. It doesn’t sound complicated but it really isn’t, it’s just hard to do because it takes so much energy and effort to check off all those little steps and not be distracted by all the other things that you can be distracted by. That’s one of the core things that we talk about in the book is that this book is really founder to founder because we’ve been founders and there’s so much noise out there for founders, there’s investors, there’s investment bankers, there’s lawyers, there are CPA’s, you know, everybody wants to be a part of this ecosystem and they want that founder’s time. Because they’re so incredibly important to the whole ecosystem. It’s so easy to get distracted and defocused from your core mission because of all these demands on your time and that’s why we wrote the book to say, “Hey, from a founder to founder perspective, let’s tell you what it’s really like and what are the things that you need to focus on,” not what the investors say that you might want to focus on. Not what the press or the analyst or whomever, it’s really what you need to focus on. It’s a great question.

[0:46:22] Charlie Hoehn: Perfect. Now, where can our listeners find you guys? How can they stay connected with you or even contact you? If you want that.

[0:46:33] WH: Definitely. We have a website, it’s startup-playbook.com.

[0:46:46] Charlie Hoehn: Well, this has been a great episode, thank you both for sharing your startup wisdom.

[0:46:50] RB: Thanks for having us.

[0:46:51] WH: Thank you Charlie, appreciate it.

[0:46:55] Charlie Hoehn: Many thanks to Will and Raj for being on the show, you can buy their book, The Startup Playbook on amazon.com. Thanks again for listening to Author Hour, enlightening conversations about book with the authors who wrote them. We’ll see you next time.