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I had a wonderful time interviewing Larry Gold last night at Entrepreneurs Unplugged. Larry is a special guy and someone I learn from every time I’m with him. Among the many great stories he told, including a doozy about the time he was a sophomore at Yale, he had a powerful one about how entrepreneurs assess potential outcomes. It resulted in a fun version of entrepreneurial math.
Envision a scenario where you there are 10 separate things you need to do to have a successful outcome. Each one has a 90% probability of success. What’s the probability that you will achieve a successful outcome?
I struggled with 6.041: Probabilistic Systems Analysis and Applied Probability (the probability course I took as an undergraduate) – it was one of those courses where I felt like I was a week behind for the entire semester. I did better in 15.075: Statistical Thinking and Data Analysis - maybe I was a little older, it was a little easier than 6.041, or I was more interested because I liked the professor better. If you are having trouble with a quick answer, both courses are available to you on MIT OpenCourseWare.
Back to the question. If you guessed around 35% you are correct. It’s actually 34.87%, which is (.9)^10. Now, by using the word separate, I’m implying 10 independent events, but this is the nuanced joy of theory versus practice.
Larry pointed out with glee that regardless, entrepreneurs believe when they start down the path of doing these 10 things there will be a successful outcome. Hence entrepreneurs math is (.9)^10 = 1.
Whether you agree with the math or not, it’s a great anecdote. So many things that we try as entrepreneurs and investors fail. We never make an investment thinking “this isn’t going to work”; we always invest thinking “this will work.” I don’t know any entrepreneurs who started their business thinking “this will fail” or even “this only has a 35% chance of working out.”
This shit is hard. And it’s low probability. Even if you have an ultimately successful outcome, many of the things you are going to try along the way are going to fail. But to do them, you’ve got to believe they are going to work. You’ve got to enter into the illusion that (.9)^10 = 1.
Techstars is rolling out a short video program with some of the entrepreneurs and mentors favorite quotes. I recorded a few of them recently – my first one is up.
I’m a huge Battlestar Galactica fan and think Commander William Adama has amazing leadership lessons for any entrepreneur. If you don’t know what “rolling the hard six” is, it’s a classic example of a high risk / high reward scenario. Per Urban Dictionary:
“Rolling a hard six has a probability of about 3% whereas rolling six by any other combination has about a 14% chance. A hard six pays 7 to 1 whereas a regular six pays only 7 to 6″
I’m not a craps player, but I love the metaphor. As an entrepreneur, you often have to combine luck with the right call at the right time. You can make the right call and be unlucky, or you can make the wrong call and be lucky. But when you find yourself in a jam, you often need to make the right call AND be lucky.
My imitation of Adama is pretty lame however.
Phin Barnes at First Round Capital just nails it today with his post To get the most out of your investors, turn them into rubber ducks.
Go read it – I’ll wait and will be here when you get back.
I love Rubber Duck Debugging. I use this approach when writing, which I call “Writing with Yoda.” I have a little Yoda figurine staring at me at all times and when I stall out I just talk to him for a little while and then get started again. He always looks serene and wise and I almost always get going after talking to him for a little while.
Phin describes five steps to turn your investors into rubber ducks:
- Frame the problem you are facing: describe the challenge in enough detail that I can understand it without being an expert (because I am probably not an expert)
- Create context for an answer: Explain why this problem is a priority for you and the business and why you need to solve it now (because I am not involved in the day to day operation of your company)
- Propose a few solutions: Describe a few paths you might take and talk through how you would choose between them (this helps me understand the outcome you want to achieve)
- Be patient: Be open and engage deeply in the questions that I have and explain your answers with specific detail (even if it seems obvious)
- Be active: The goal is to debug the system and the builder is most likely to find the bugs we seek (and to see others along the way)
These are similar to how to engage a great mentor, which we teach over and over again in Techstars – both to the entrepreneurs and the mentors. If you’ve ever done a Top of Mind Drill with me, you’ll recognize the Rubber Duck approach with one twist – storytelling.
I’m a storyteller. I learned this from my dad. It’s part of why I love to write – it’s a way for me to think out loud and figure stuff out while telling stories. So – my favorite Rubber Ducks are the ones who can also tell stories, at the right time.
The risk of a Rubber Duck only approach as a VC is that you become overly socratic. We all know the VC who just asks question after question after question. The questions are often good, and they drive you deeper into the problem, but at some point you need to take a break. You need a breath from answering more questions. You need an analogy to relate to.
This is when the Rubber Duck should tell a story.
At a board meeting recently, the CEO looked at me and said “just tell me the fucking answer.” So I did. And that works also. But not until the CEO wants that. Until then, be a Rubber Duck.
Remember – the CEO makes the decision, not the VC. Unless the CEO explicitly asks. And – if as a VC you don’t trust the CEO to make the decision, you have that discussion with the CEO right now. And if you are a CEO who’s VCs aren’t letting you make the decisions, buy them some Rubber Ducks.
“Passion is temporary. It doesn’t last long. Love is enduring. And that’s the important thing. If we all had love in our lives to the degree that we should, it would be much happier.”
— UCLA Anderson | John Wooden Global Leadership Award ceremony (May 21, 2009)
Last night I had dinner with my partners and our significant others. It was a wonderful evening with the three people I work most closely with, the people they love, and the most important person on the planet to me.
Earlier this year I had dinner with Jamey Sperans, one of our investors. Late into the night we talked about a variety of things at an outdoor restaurant in Philly under the heat lamps as a chilly spring night unfolded. Much of the conversation was personal, as in addition to being one of our largest investors, Jamey has become an incredibly close friend. I was struggling with my depression so we talked some about that, but that merely served as a launch point for a deeper conversation.
In that discussion, we talked about the concept of “Business Love.” For a long time, I’ve talked about “business intimacy” – it’s the relationship I try to develop with the entrepreneurs I fund and the people who I work with. It’s a level of emotional engagement that is much deeper than “friendship” or “respect”, is not easily developed, and can be quickly lost if one party isn’t interested in investing the energy or violates a fundamental principle such as trust or honesty.
Jamey and I agreed that “business love” was more profound and significant than “business intimacy.” We discussed the concept of business love in the context of Foundry Group with the unambiguous agreement that the four of us (Ryan, Seth, Jason, and I) have a “business love” relationship.
Once a month we have a full-day offsite. We try to keep our process to an absolute minimum, so we have lunch together on Monday’s and a once a month offsite. The rest of our interactions are continuous and real-time, including almost all of our investment decisions.
Yesterday’s offsite was a perfect example of business love. We spent the day sitting around Jason’s dining room table (the general location of our offsite), got calibrated on a few things that are new initiatives of ours including FG Angels, a new treat coming out next week from us, and a new project we are launching in January. We talked about a few deeper, long range things we want to get right, especially in the context of several of our very successful investments. And we argued about some stuff that we disagreed on in an effort to both understand the data and get aligned.
It was awesome and one of my favorite days of the month. When we split up around 3pm (we end when we are finished) I had a permagrin on my face. I walked home and spent a few hours grinding through email. I went to a meeting and then picked up Amy to head back to Jason’s for dinner. We had an amazing dinner as a group to end the day.
I woke up this morning thinking about business love. I remembered my conversation with Jamey. I recalled that Jo Tango had written a post on business love a while ago and went back and looked it up. I’m guessing that Jamey was the LP in the post that Jo is referring to, since the principles of business love, that Jo refers to, are exactly what we talked about.
- Members of those firms really respect and like each other. They’re very tight. In fact, they love each other
- They have a sense of mission. They want to make money, but that’s not the most important driving force
- How they treat each other spills over to how they treat their entrepreneurs and investors
The process of creating and building new companies from nothing is hard. It’s incredibly rewarding when it’s successful, but the process can be an excruciating, chaotic, and messy. There are moments of extreme stress. Failure is always lurking in the background. Working alongside people you truly love makes a huge difference, at least for me.
I’ve been a big supporter of Startup Weekend, locally and nationally, since the very beginning and I’m continuing to do so by both sponsoring and mentoring in the NEXT Boulder program. NEXT by Startup Weekend is a wonderful next step for entrepreneurs looking for feedback on their idea or early business, while heavily leveraging the Lean methodology. Below are the words of Ken Hoff, an up-and-coming leader in the Boulder startup community. As the City Coordinator of the NEXT program, check out what he has to say about why he thinks the program is valuable. Ken can be found at @ken_hoff or email@example.com. Following are Ken’s thoughts on NEXT Boulder.
NEXT Boulder is a 5-week pre-accelerator program, beginning on 10/15. Entrepreneurs will be immersed in the skills and tactics their startup needs and will get consistent advice and feedback from the best mentors in Boulder. Sign up here!
As a recent graduate of the Computer Science department at CU Boulder, I’m really lucky to have found what I want to do for the rest of my life, even if it was only recently. During my senior year, I took “Startup Essentials for Software Engineering” (taught by Zach Nies of Rally Software) and I can confidently say it was the best class I ever took at CU.
We learned how to take an idea and turn it into a company the right way using the Lean Startup process. We learned how to do customer development, conduct empathy interviews, and build a real MVP (not just an alpha version). We learned hands-on, functional, pragmatic skills for building a startup; not high-level theory or “how to write a business plan.” We got off the ground and out of the building right away.
Not everyone gets to have this experience – I was lucky to be a student at the time it was offered. For those of us who aren’t in school, you can try to do it all on you own, but you have to rely on the generosity of mentors to give you their time and their feedback. Accelerators and incubators can offer this, but they require you to have your business already in motion and are difficult to get into.
That’s why when NEXT decided to hold an event in Boulder, I jumped at the chance to help. I want to give entrepreneurs the same awesome resources I had as a student. NEXT can give aspiring entrepreneurs three major tools:
1. A cohesive, comprehensive curriculum on how to build your startup, with clear, pragmatic directions on what steps to take next.
2. The ability to work on your idea – something that you’re vested in and passionate about – and the confidence to take that idea to a competition or accelerator.
NEXT Boulder runs from 10/15 to 11/12, and consists of weekly 3-hour sessions on Tuesday nights at the Silicon Flatirons Center in CU Law. Single founders can sign up, but co-founders are encouraged to attend together.
If you’d like to:
Sponsor NEXT, contact me at firstname.lastname@example.org for more information. It’s a great way to get your product or brand in front of lots of early-stage entrepreneurs and great mentors from Boulder.
Mentor for NEXT, contact me at email@example.com for more information. This is a great chance to give back to the Boulder startup community and see what the next generation of entrepreneurs has to offer!
A big thanks to Brad Feld for his generous donation, as well as Silicon Flatirons Center for the use of their space. NEXT provides entrepreneurs with the right combination of everything they need: skills, feedback, and the motivation to keep it going. I’m really looking forward to seeing a lot of great companies come out of the program!