Do More Faster

by Brad Feld

  I started my fifth company in 2007. My first three companies were successful and my fourth company was off to a great start. So, I did what every serial entrepreneur does—I started a new one. I came up with the idea of a thing I called the “Zenie Bottle”—a beautiful, collectible physical object (similar to a Lava Lamp) linked to a social website mashup. I pulled the plug on the project a year later. Here is where I went wrong.

  I built the business for my ego, not the market. The idea I started with was very simple: Sell a novelty item that was fun to collect. The Zenie Bottle was a pretty glass bottle filled with a colorful substance that, when shaken, looked like a genie was living inside. But I didn’t feel like selling a novelty item was a big enough idea, so I added elements to the business to make it more complex and hipper. I created a social website in which the owner of a Zenie Bottle would have a virtual bottle where they could put pictures, music, and video into it so they could share it with their friends. I also created an elaborate story in the form of a serious web video of the origin of the Zenie Bottle with the goal of having the Zenie Bottle become a crossover entertainment experience. If it sounds complicated, it was.

  I ramped expenses up before we had success in the market. If you are planning for success, that’s good, but don’t spend as if you are successful. I took our burn rate to more than $100,000 a month before we launched, which is fine for some businesses, but not a novelty business. All of the unnecessary complexities I added, such as the website and the video series, required us to spend more money. We quickly turned into an entertainment company, not a novelty business, well before we knew if our novelty concept made any sense.

  I was embarrassed to tell people what I was doing. In hindsight, the idea was silly and didn’t fit my personality. I told myself that I would be proud of my accomplishment if we had tremendous success. But that wasn’t enough—I needed to be proud of what I was working on every single minute of every single day.

  Ultimately, we were underfunded for the scope of our effort. We weren’t sure of our identity. Were we a novelty item, a social website, or an entertainment company? Nope—we were all three! In each category, someone other than us was already the winner. While combining all three may have worked, it would have required Herculean efforts to rise above the din of other more focused companies. We were hoping to become a fad—with very little effort. While this would have been nice, it was a fantasy.

  Any one of the mistakes mentioned could have been overcome, but the combination of all of them did us in. We realized our mistakes fairly early and decided that it was better to close up shop, return the remaining cash (about 20% of what we raised) to our investors, and sell the assets instead of thrashing around trying to reshape the business into something different.

  Brad was one of the investors in the Zenie Bottle. Brad had been a seed investor in Paul’s second company (Raindance) and loved working with Paul. When Paul first mentioned Zenie Bottle, Brad didn’t get it, but was amused by it. Paul was so excited about it at the time that Brad committed on the spot to invest in the angel round. When Brad saw the first prototype, he said to Paul something like “I didn’t realize I had funded a bong company!” Paul ignored Brad and steered him to his computer, where he showed off all the cool ideas for the website he was going to create.

  A few months later, Brad and Paul had dinner. Paul seemed down and when confronted, admitted that the Zenie Bottle embarrassed him. It wasn’t selling, no one really cared, and even he didn’t really know why he was doing it anymore. Brad and Paul talked late into the night with Brad telling him much of what he had been thinking but hadn’t been willing to talk about because Paul had been so enthusiastic about the idea. While it was easier for Brad to be a cheerleader and support his friend, it would have been much more valuable to Paul for Brad to say what he was thinking and feeling at the time. During the course of the evening, Brad came clean and said that he never really understood why Paul had been working on the Zenie Bottle.

  A week or so after the dinner, Paul decided to pull the plug. As part of this, he decided it would be better to send the remaining money back to his investors rather than run things all the way to the end and use up all of his investors’ money on something he didn’t believe in. Once Paul admitted he wasn’t excited about the Zenie Bottle anymore, he pulled the plug.

  Now, pulling the plug, like failing fast, doesn’t always mean that you shut down the company. The original vision of Paul’s third company, Raindance Communications, was to create a video service on the Internet. Raindance was founded in 1996, well before Internet video was commonplace. Paul and his partners raised some initial financing, built a data center, created a streaming Internet video service, and got some initial customers. They quickly got the business up to $200,000 per month of revenue before hitting a wall and realizing that to build a substantial business they needed to do a number of things very differently. They were also frustrated with the customers and the market dynamics, as the amount of noise around Internet video was substantial, making it difficult for Raindance to stand out from all of the other offerings.

  So, they pulled the plug. They stepped back from what they had created and thought about what they could do better than anyone else in the world. As part of their Internet video business, they were working with audio conferencing technology with the idea of incorporating audio conferencing into Internet video in some way. They realized one day that there was a much bigger opportunity in transforming the way audio conferencing worked. Up to this point, audio conferencing was expensive, required human intervention in the form of an operator, and was impossible to control over the Internet. Paul and his partners decided to build on the technology and data center infrastructure they had created for their Internet video service and use it for a reservation-less conferencing service.

  Over the next several years, Raindance Communication built an $80 million company that helped make audio conferencing commonplace and affordable. Also, they were an early entrant in the web collaboration market, took the company public, became profitable, and were eventually acquired by a much larger company. By pulling the plug on the first incarnation of Raindance, Paul and his partners ended up creating a valuable company.

  There is another lesson here for the startup entrepreneur: the difference between advice from friends and advice from mentors. Because Brad and Paul were friends, Brad was reluctant to push Paul on his business idea. A Techstars mentor would have been much more forthright and challenging of Paul. So, friendship can hinder honest advice, while mentorship is more honest and truthful. As a startup entrepreneur, you need to get the honest, truthful feedback, otherwise you could be living in a bubble.

  Chapter 18

  Love Doesn’t Scale, or Does It?

  Nicole Glaros

  Nicole has been with Techstars since its earliest days and is currently Chief Investment Strategy Officer.

  One of my secret weapons is identifying talented entrepreneurs before anyone else, and I’ve been doing this at Techstars for the past decade. For me, founders’ ideas aren’t worth much, but their motivation and vision are what sets founders apart. To better understand founders and their motivations, I like to ask two simple questions.

  You could work on any idea in the world. Why this one?

  Where do you see this company going?

  Every person can string some words together to answer those two questions, but I’m looking for answers that indicate a founder is driven by belief rather than desire. Let me provide a tangible example of a company that came in with a belief—a vision—but could easily have settled for a desire.

  One of the companies that participated in the Techstars Boulder accelerator in 2012 was DigitalOcean, founded by brothers Ben and Moisey Uretsky. They were born in Russia, moved to the United States when they were small, grew up in New York City, and had already created a successful web hosting business together. You could imagine how interesting their relationship was! But because they were brothers, becaus
e they knew how to “work it out,” and because they had already been in business together in a relevant industry, I knew they had the ingredients for a great startup.

  Here were two founders, brothers, who had already started a business together and were interested in leveraging their knowledge of the previous business into the next startup. I was intrigued until I heard their idea. They wanted to start a cloud hosting company.

  I laughed.

  “Rackspace and Amazon already dominate that market! Amazon has about 80% market share. How can you possibly compete with that?” I asked.

  Their response took me completely by surprise. “Love. We will love our customers more. Amazon and Rackspace’s products are hard to use, and everyone complains about it. We will love our customers by giving them exactly what they want.”

  “Love is expensive, and love doesn’t scale,” I mocked.

  Undeterred, they went on to show me how hard it was to spin up new web servers—how many screens you had to go through, how many fields to complete, boxes to check, and code to deploy. It took a ton of time and know-how, most engineers screwed it up at some point, and there was very little support on how to do it correctly. They wanted to make cloud-based web hosting stupid simple and make the lives of their customers so easy that they would love DigitalOcean. Their whole plan was to love the customer. Love and simplicity. They aligned themselves with customers by truly caring about them.

  I laughed, but I wanted to believe them. I wanted to believe that love could be a differentiator, that love could scale, but I had my doubts because that much attention is extremely expensive. Here’s the thing: They believed it. They didn’t have a vision of being the best cloud-hosting site, they didn’t aspire to be the cheapest or the fastest, or even the simplest; they aspired to love their customers the most by listening intently to them and giving them exactly what they wanted. Ben and Moisey didn’t just want to create a successful business—they believed that by loving their customers, everything would work out. They believed it so much, they didn’t care what other people thought. They believed it so deeply, they could taste it. With that belief, it never crossed their mind that they would fail. Every speed bump, every problem, was something that they could overcome, if only they loved on their customers enough. They would ask one question in every meeting: “What can we do to make our product even easier for our customers?”

  The DigitalOcean experience taught me the difference between belief and desire. When founders believe something, deep in their core, they have a crystal-clear vision of the future with that belief as a reality. They don’t exactly know how they will get there, but they know they can—they just have to keep going until they manifest their vision into reality. Desire is good, but our desires change as we grow and mature; our beliefs tend to persevere. Beliefs are reinforced and grow stronger, whereas desires wane with time.

  Ben and Moisey believed that by loving their customers, they could compete with behemoths like Rackspace and Amazon. Turns out, they were right.

  So, Ben, Moisey, you were right, and I was wrong. Love actually does scale.

  It’s not uncommon for founders to have differing views on important issues, nor is it uncommon for them to have a “falling out” and each stick to their beliefs. In fact, conflicting views that are ardently held can lead to a better company—providing that the founders are able to reconcile their differences. It’s easy to think, since the founders of DigitalOcean were brothers, that they would be able to reconcile differences, but it was their united and strongly held belief in “loving the customer” that allowed them to move forward. Are you motivated by a strongly held belief, or a desire?

  DigitalOcean founders Ben and Moisey Uretsky in deep conversation.

  Chapter 19

  Reconciling Vision and Focus

  David Cohen

  David is the cofounder and co-CEO of Techstars.

  Which is more important for your startup—a big vision or a specific focus?

  I often hear about this dilemma from companies I work with through Techstars. These companies have mentors or advisors telling them they need a big, bold vision to draw others to the company, attract investors, and be viewed as thought leaders.

  At the same time, they are also being told that they need to focus—they need to do something very specific and really build up a dominant market share with good revenue in a specific area.

  Many startups view this as conflicting advice. It causes them to thrash about between big vision and specific focus. In reality, it’s not conflicting at all.

  Having a long-term vision and having focus early on are completely compatible ideas. The key here is that your focus should show how you’re executing along the path to fulfilling your vision. Recognize that over the long term, your company has a trajectory with a start point and a theoretical envisioned endpoint where you change the world. Focus on one concrete step that lies on the path of that long-term vision. You need both your vision and a focus that is in line with that vision.

  When I was at the Disney Accelerator a few years ago, the vision-versus-focus topic was coming up a lot. One of the participating companies provided a great example of focus that also demonstrates progress toward the overall vision. The vision for this company is helping parents and kids connect and communicate. They’re doing that right now, but they’re doing it in one very specific area—chores—with a suite of web and mobile apps called ChoreMonster.

  Of course, chores are only one way that kids and parents will communicate. But what if you think of chores as one interaction along the path of helping kids and parents communicate more effectively? ChoreMonster, by teaching communication skills, can help parents and kids communicate better with each other when more difficult or emotional situations arise. By focusing on chores, the company is making progress while still maintaining their overall vision.

  Vision or focus? There’s no need to choose one or the other. Instead, choose both—talk about your vision while making progress with your focus. Just like with your eyesight, vision is of no use without focus.

  Theme Two: People

  The famous real estate cliché is “The three most important things in real estate are location, location, location.” An analogous entrepreneurship cliché is “the three most important things in entrepreneurship are people, people, people.”

  At Techstars, everything starts with people. We deliberately describe Techstars as “The worldwide network that helps entrepreneurs succeed.” Techstars mentors are a fundamental component of what makes this special. We think entrepreneurs without mentors is like cookies without milk, or chocolate without peanut butter, or—well—you get the idea. Mentors and entrepreneurs working together leads to a better result for both of them—the magic that we and others have found here at Techstars.

  We don’t have a profile of an entrepreneur or mentor at Techstars, as we don’t want a measuring stick or a set of checkboxes to grade the people we want to work with. We appreciate the vast variety of backgrounds, perspectives, experiences, ethnicities, nationalities, genders, gender preferences, gender identities, and personalities that make up the world of startups. One of our goals with Techstars is to expose entrepreneurs to a wide range of mentors—some involved in billiondollar companies, others who have created multiple companies, and yet others who have taken one idea and run with it. As a special bonus, we expose mentors to a variety of fresh perspectives from the entrepreneurs they work with. Both entrepreneurs and mentors participate and benefit.

  Over the course of the threemonth long Techstars accelerator program, lifelong friendships are formed. The friendships happen among founders, between founders and mentors, and even among the mentors themselves. People are at the center of every community and Techstars is no exception.

  Over and over again, we see team issues with startups, especially with those composed of firsttime entrepreneurs. On day one, everyone is excited, enthusiastic, and aligned about creating something new and amazing. Several
months later, one or more of the founders leave because of irreconcilable differences.

  The following chapters are designed to help startup entrepreneurs understand more fully the people issues that can accelerate your growth, or those that can thwart your growth and destroy your company. And, as a bonus, you’ll learn ways that you can find new people to join you on your journey!

  Chapter 20

  Be Open to Randomness

  David Cohen

  David is a cofounder and the co-CEO of Techstars.

  Take a moment and think back to all the good things that have happened to you so far in your life. If you’re like me and you contemplate that list, you’ll realize that many of those good things came about in very random ways. Perhaps it’s the way that you met your significant other, or how you decided on the college you’d go to. Maybe it’s how you got that great job offer, or how you found out on your last business trip that your favorite band was playing down the street. Or maybe it’s just who you happen to be sitting next to on the airplane. There’s a lot that happens in life that’s random.

  I think it’s important to be open to randomness in your life. Many of the most successful people I know are very deliberate about randomness—they seek it, plan for it, and embrace it. Brad Feld is a great example. For many years, Brad held “random days.” On those days he’ll meet anyone to talk about anything for 15 minutes. He does this back to back for an entire day once in a while. Brad has no expectation about meetings on his random day. They’re meetings that he normally wouldn’t take or at least that he has no specific reason to take. But he figures he’ll meet a few interesting people, and maybe something good will come out of it once in a while.