Category: Growth & Operating Insights

using surprise as a means to ask better questions

using surprise as a means to ask better questions

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If you have worked with me for more than a few days, you know my two favorite questions to ask when I am trying to better understand a situation are:

“What surprised you about [x]?”
and
“What will surprise me about [y]?”

I love these questions because if they are answered well, the conversation is engaging, insightful, and educational. If approached well, the questions allow the answering individual to display a combination of empathy and EQ, as well as capability to handle what can be a non-linear progression.

And, while these questions are great to ask others, sometimes they are even more effective when performing your own self-review. If something notable happens and it catches you by surprise (or does not catch you off guard) there is a reason why… and you should reflect to see what drove your handling of the situation. It will help you in spades as you continue to progress personally and professionally.

treat yourself to a zero dollar marketing budget

treat yourself to a zero dollar marketing budget

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There are many lessons you learn early in a VC career. You learn how to identify product-market fit, size a market, evaluate a team, review the business model and determine scalability within the market position. The list could go on for days.

And yet, one of the items that I only slightly recognized in my ongoing venture experience – but ABSOLUTELY recognize in my operations experience is the importance of establishing a very lean (or non-existent) marketing budget for the early stages of a company. There are two main reasons why:

1) Organic / “free” customers that are naturally drawn to your product for the service you offer are VERY different customers than customers acquired through paid channels. The cohort analysis on an organic customer will (almost) always show significantly improved economics versus a paid customer. Solving for your core user base and improving the product-market fit by not being distracted by more secondary, paid channel customers is key. Quite simply, paid customers could hide the real solution you want to solve for with your early adopters. Optimize for those early customers before expanding.

2) Venture capital firms expect a 30-50% annual return on their capital. It is pretty dam hard to get a 30-50% return on marketing dollars. There are many high flying adtech firms out there promising returns of +1-2% more than usual channels – and those companies are still questionable in their success. And even more scary is that if there is an easy way to get a 50% return on marketing dollars, the returns will quickly be competed away by competitors. Just look at the food delivery market. Competition will drive down returns to marginal cost. Combine that with sunk cost bias and you can see why VCs and high flying unicorns are raising hundreds of millions of dollars for what can quickly become a commodity product.

Jim Goetz at Sequoia Capital made a great comment in a recent HBR article that I believe demonstrates the danger of excess capital, usually spent in marketing.

“In our portfolio there is a correlation between cash required and long-term market cap—but it’s negative. The more you raise, the less value you create. Google, Cisco, and Oracle were incredibly efficient with their cash, as were ServiceNow and Palo Alto Networks. Those companies all had market caps north of $10 billion within a couple of years of going public. One curse of raising lots of cash is you lose that discipline. We discourage our teams from raising too much capital.”

Yes, you are reading that right. More cash = less success.

In summary, when you raise money as a young company, focus on nothing but customer-driven product development. Focus on listening to your early customers to create an amazing product that will serve them so well that the customer not only WON’T go anywhere else, but actually CAN’T go anywhere else to meet their needs. Save that money to hire better engineers and do more customer inquiries. In fact, I challenge you: give yourself a $0 marketing budget for the first 12 months and see how scrappy you can become. You will thank yourself later – because when you are ready to let yourself enter the paid customer acquisition channels, your barrier to entry and competitive advantage will be significant.

deliberate diversity

deliberate diversity

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When I lived in London growing up I was immersed between locals, a host of ex-pats, and many African and Asian students that flocked to UK schooling to advance their education. The diversity of backgrounds was significant and it was arguably one of the most transformative and curious four years of my life. In any given week I would learn an Ethiopian tradition, how the local British kids has different curriculum expectations and then how many ex-pats from all over the US viewed different ongoing social events.

I loved the difference every day brought and yet I took it all for granted. You do not realize when you are growing up just how easy it is to fall into a comfortable cultural norm, to shut yourself off from new perspectives and only surround yourself with individuals of similar belief to your own. For many individuals, the most diverse years of their life occur during college, when they are forced together with thousands of other students. How disappointing us that?! How disappointing is it to know that for most people they are not going to learn (and therefore respect) more about other cultures or lifestyles beyond the age of 20.

Much has been written about the lack of diversity in Silicon Valley — mainly on gender and race. Companies that take deliberate action early on to remove the anchor, or expected “normal” will win. Engagement will be higher. Empathy to the customer and the ecosystem will be more noticeable. Long term value will be a mere output. Companies like Slack are the pillar of this movement. I am so confident that their diversity approach will make them a generational winner both as a communication tool and as a social demonstration for the outsized returns generated from the curiosity and empathy of inclusion.

People and companies have to take deliberate actions to expose themselves to new perspectives. There are many reasons why my experience in the UK was so transformative, but the single most important is this fact:

There was no single ethnicity at the school that was “normal” and there was no single background that was consistent.

Imagine that. When there isn’t a default opinion or set of biases that we know to fall back upon, everyone is more open. Everyone is more curious. And the result? The cumulative environment is greater than the sum of its parts. Forget valuations being a sole benchmark for a unicorn, let’s talk billion dollar social & capital return and that is where the true, rare unicorns exist. And I bet we are going to find out that social influence married to a great business model is going to equate to an outsized hundred billion dollar + company with world-impacting change. If this is not the most motivating idea to you, the idea that Silicon Valley may be able to intertwine social acceptance into business models, then you are in the wrong century. When companies like Slack and others prove successful, other companies around the world will slowly adopt the social-influence mantra, and then, Silicon Valley may have just disrupted the workplace.