One of my favorite events last year was attending Startup Grind where I got to interview Clayton Christensen, author of The Innovator’s Dilemma. Not just because meeting Clayton was influential in shaping my thinking about markets but also because Derek Andersen (who founded Startup Grind) is such an awesome host and runs a very informative events.
Last month they turned the tables on me.
What I enjoyed was that Derek did his homework on me and allowed me to talk about a lot of personal topics, which I rarely have the chance to do.
I know my title is a bit goofy since it talks in third person but I figured if any of you hit the Tweet button (feel free to!) it would make more sense than “me.”
We talked about my influences as a younger person and what got me started in technology and entrepreneurship. And of course we talked about many of my views of building startups. It was a more intimate version than you might find in one of my speeches and I enjoyed that.
I spoke a lot about the need for “personal branding” which I plan to write about soon. If you want a sneak peak on that it’s in the video or transcript.
It did come at the end of 3 marathon weeks of travel to SF, London & NY and I had just gotten back the day before so I’m a bit exhausted as you can probably tell. Below is an edited transcript if you prefer to video – easier to scan I guess.
[00:00:06] DEREK: Tell us about growing up in Northern California, tell us about what your dad did, what your mom did, and your family a little bit.
[00:00:52] MARK: Sure. Well, for starters, I was born in Philadelphia, so I’m a lifelong Eagles fan. I grew up in Northern California. My father was a doctor, a pediatrician with zero interest or knowledge in business at all. He grew up in Colombia, South America. He still speaks Spanish more than he speaks English. His father came from Romania. So my family is Jewish and very typical immigration story – his father left Romania at 19, had to get a fake passport in order to get out of the country, left and never went back, and left in the middle of winter and got frostbite.
And his entire life, I never knew this – he didn’t have toes on one of his feet. He used to go in the swimming pool when we were little, and he used to wear sandals, and I’m like, “Why the fuck does this guy wear sandals in the pool? It’s the weirdest thing.” But he didn’t want anyone to know he didn’t have toes. Life is so easy for our generation, and we don’t know how much people struggled before us. The truth is that struggle still exists for probably two-thirds of the world, and we’re just immune to it all, and I think that struggle is going to get a lot worse with climate change. So it’s something to be mindful of, how lucky we are.
My mom grew up in the States. My mom was an entrepreneur – she was kind of my inspiration for entrepreneurship. She was originally a nurse and then she did nonprofit work. She was president of the UJA in Sacramento – the United Jewish Appeal. Then she opened a bakery and a second bakery and then a restaurant – in Sacramento. And she bought a computer because she wanted to computerize her business. And so I started playing with it when I was young. It was an IBM XT. It was the first ever IBM to ship with a hard drive. It had a 10 meg hard drive. And that was like the coolest thing ever, because you didn’t have to swap floppy drive anymore. I don’t know why, but she bought Lotus 1-2-3 and I had learned Lotus and VisiCalc before it. I bought a book and I learned how to program macros and build spreadsheets.
I was 14. And as a result, I got a job in a computer store during high school. Before you think I was a complete nerd, in addition to making money selling software, which I did at 15, 16 years old, I also made money throwing keg parties. And we had these vans and mobile kegs in the back, and we would go to golf courses. The big decision for us was, do you have three or four kegs, and do you charge two or three dollars a head? Too many kegs, you don’t make enough money, too few, you have a lot of angry people chasing after you. The hope was that the police would bust the party before you ran out of beer. I’m not joking.
[DEREK] You didn’t get a computer science degree in college, but you still coded, right?
[MARK] I started comp sci. Comp sci in the 80s was terrible. So that didn’t last very long. But I was a programmer in college. I got a job at a bank, and I worked in their corporate finance group. It was the biggest bank on the West Coast at the time. We had a finance group for all of the bank branches based in San Diego, and I wrote programs to download stuff from the mainframe so we could do analysis three days faster than they could send us the data. So I did that kind of stuff. I did programming for the career center at UC San Diego, trying to build programs for the career center. I don’t know, I was just always dicking around with computers.
[DEREK] So you go to UC San Diego, you graduate, you start working for Andersen at the time, which is now Accenture. You start traveling around Europe, starting working for them overseas. Tell us about that.
[MARK] The thing is, it was 1991 and it was a terrible recession. We’d just had the savings and loan crisis and people couldn’t get jobs. In a way, I think I was unfortunate to get a job because I really did have these entrepreneurial skills. You know, there were a number of small businesses in San Diego that were producing hard drives and computer assemblies and, you know, a lot of stuff in the IT sector, and I had gone off to meet a bunch of them because I didn’t know if I could get a job. You didn’t join startups then. You joined a startup if you couldn’t get a real job. To some extent, unfortunately, I guess I got a real job.
Some of my friends who were forced to go into startup companies ended up working for these biotech firms that became huge, and they made a lot of money by not being able to get a job.
So it was from ’91 to ’94 that I programmed. I started as a programmer, and then a database designer, and then a project manager, and I led conversion teams. It was all technical. And my specialty was computer networks. At the end of ’94, most of my friends quit to join startups, and that’s when startups were really starting to become a bigger deal. By the way, this was still pre-Netscape, pre-Internet. They mostly went to work for companies doing programming languages. So Small Talk was a big object-oriented programming language, and a bunch of people from our company went to work at Small Talk, and they all went into the software industry.
I had this path to choose. Did I want to go do a startup where it seemed like people wanted to try and make money? Keep in mind I always wanted to do startup stuff back in college. There was an appeal to it. Or did I want to move to Europe? I like to say I chose life. I don’t have regrets about that. I only went because I wanted to live and work in Europe. No other reason.
[DEREK 8:33] So you’re working in Europe. Talk to us about when you got the idea for BuildOnline and how that came to be – how you finally got out of the job.
I started the company for all the wrong reasons. So at the end of ’94 I moved to France, because I wanted to learn Spanish. It’s actually true. It was the closest I could get to Spain.
I didn’t have someone willing to offer me a job in Spain. I had someone willing to offer me a job in France. I lived in the south of France in Antibes and in Cannes. So I went from San Diego to LA to Miami to the south of France. So that didn’t suck. And then I went to England.
I wanted to learn Spanish because it was my dad’s language and I always felt like I was never good enough at Spanish. I thought if I could live and work in Spain I could become bilingual, but I never got the opportunity. Later, I got the opportunity to live in Barcelona, but they speak, ironically, Catalan there. You know, the weird thing, Derek, and I should probably let you speak some time, but I was deeply technical when I went into Andersen consulting, and I got paid much less than engineers who graduated, because I had a degree in economics. They paid engineers $4,000 more entry-point. By the way, the salary, which was a good salary, was $27,000 entry salary, and engineers were paid $31,000 to $35,000.
[00:10:30] DEREK: So that was significant. Engineering vs. non-engineering.
[00:10:32] MARK: Yeah, some of my friends were making $18,000 or $19,000. The thing that pissed me off is I had a friend who had been a cocktail waitress who had never done shit on computers, and she was paid $34,000 just because she was an engineer. Cocktail waitress, really. Engineering degree. It wasn’t even electrical, I think she was a mechanical engineer. Like, in college I’m working in a computer store, I’m doing programming, and she’s not even waiting tables. She was a cocktail waitress and a receptionist.
There’s nothing wrong with that, but I mean – there’s a point I want to make here, and it’s not about cocktail waitresses. She was paid much more than me and no matter how technical I was, they saw me as the business guy because I graduated with a degree in economics.
So my goal was to transfer into the deeply technical part of Andersen Consulting so people would see me as a technologist because I love technology. I finally got transferred, and the move to France, we had three tech centers around the world. There was one in Silicon Valley, unsurprising, one in Chicago, and there was this group out of the south of France that served all of Europe. So I joined this group called Network Solutions, we did computer networking, the predecessor to the internet. And then no matter what project I went on, suddenly I was no longer the business guy, I was the tech geek. I was like, “Hang on a second. I have an economics degree, I did all this business stuff.” No, no. You go in the corner with the nerds and do all the tech stuff. And then a few years later….
[00:12:12] DEREK: Were they still paying you as a business guy or did they start paying you as a tech guy?
[00:12:15] MARK: Well, it all kind of equals out in the end. It does. And then I got into strategy consulting, and I wanted to go into strategy consulting, and they said, “Yeah, but you’re a tech guy. We don’t take tech guys in the strategy consulting group.” So I worked on that for a few years and got them to accept me. And they transferred me in. Probably the internet helped because they needed internet skills in their strategy group. Then suddenly I was a PowerPoint weenie. It was like nobody would give me any respect and they just saw me as the guy who goes and talks to senior people who does PowerPoint slides. So when I left Andersen I did a startup…
[00:12:57] DEREK: This was in Europe? You stayed there?
[00:12:59] MARK: Yeah, and I’ll tell you the story of how I did that for all the wrong reasons.
But when I did my first startup, then it was like, okay, I was a startup guy. And no one could see me as anything but a startup guy, so I started a second company and called myself a serial entrepreneur. I guess if you do more than one, I guess by definition, that’s serial. Then everyone just started calling me a serial entrepreneur.
So then when I wanted to go into venture capital, they said, “You can’t do that, you need to be in EIR.” I said, “Why?” They said, “You’re a serial entrepreneur.”
So the moral of my story is you make your own brand. If you want to be the marketing person or you want to be perceived as a businessperson or a VC or technical person or whatever you want to be perceived, people will always define you. And the only way to break that mold is to define yourself, and the only way to define yourself is to come up with the brand you want to create for yourself, and to always tell people that’s what you are.
So when I got into venture capital, I thought, “Well, what can I do that’s different?” I thought, “I’m going to be in LA.” I was only supposed to be here for 2 years and here we are 6 years later. I was only supposed to come for 2 years, and I thought, “Do I want to brand myself as the LA guy?” I thought, “Nah.” I want to do the best deals wherever they are, but I thought, most VCs I met didn’t have very good operational experience, so I thought, “Well, what if I created a blog called Both Sides of the Table and could emphasize the fact that I used to sit on your side of the table?”
So I just decided to brand myself as that guy. But you can create your own brand. What was the question?
[00:14:38] DEREK: It was, “Can you create your own brand?” [laugh] Well, we’re on the subject, so let’s talk about that a little bit. You’ve got entrepreneurs and founders who are really – a lot of them are in the very early stage of their startup. And we’re here in LA, but we’ve got people all over the world watching this. So what are some of the things you could do? You’re two guys in a garage, two guys across campus trying to make a name for yourself. How do you define yourself? Where do you start? How do you figure out even what to define yourself as?
[00:15:14] MARK: Well, one thing that really matters is confidence.
Confidence and maybe a sense of purpose. And what I mean is, I told this story in a blog post I wrote called, “Is It Time to Earn or Is It Time to Learn?” I have a friend – he’s probably now like 48 or 49. At the time he was 42, 43. And he said to me, “Mark, I’m going to take a job as president of this startup. Do you think I should take the job?” And I said, “Well, tell me about it. President is kind of a weird title. You’re 42. Why are you being president of a startup? Is there a CEO?” He said, “Yeah. Technical founder. He wants to retain the CEO title.”
And I said, “That sounds pretty terrible to me. You have been at five startups, you had an exit at your last company where you were the Chief Revenue Officer. Why on earth would you go take this job as president?”
He said, “Well, I think if I do this, and I do it successfully, then VCs will back me as a CEO.”
I’m like, “Dude, you’re 42! I’ve got guys getting funded at 23! If you’re not confident enough to get funded now, you’re never going to be funded. Just forget it.”
By the way, it’s no great failure to not be CEO. CEO is the most overrated job in the world. It’s pretty terrible to be CEO. People just don’t realize that until they do it. But I said, “If you really think you want to do it, like you need to be confident and tell people, I’m CEO material – I’m CEO, I’m CEO. You know what? I’m CEO.” And then – so I have a
[00:06:58] DEREK: It’s like Jedi mind games almost, right?
[00:17:01] MARK: I have a friend who wants to sell his company for $100 million. He’s got a chance. He sold his last company for $244 million and he sold his previous one for $450 million. So this guy doesn’t need to work.
But the current company he’s created, which I won’t name – he just knows it’s not going to be a $1 billion company. And it’s not worth $100 million. But he’s telling everyone it’s worth $100 million. And he just said, “Mark, trust me. The more times I say this, someone will buy it for $100 million.”
He tells everyone. It’s a $100 million business.
You have to be confident to pull that off, and you have to message it enough, and then everyone starts saying, “Well, I don’t know, this is the $100 million business, right?” I’m not joking. Confidence matters, and a sense of purpose matters.
You don’t have to start by saying you’re a $100 million business, but if you’re two people working across campus or working in Skokie on your project, it’s – you know, we’re a startup company that has ambitions to do x and we want to build a big company, and whatever. Make our dent in the world. Whatever your ambition is. If you don’t believe it, no one else is going to, trust me.
And you have no reason to believe it, because most likely it’s not going to happen right? As an entrepreneur you have to suspend disbelief. I came from a board meeting to here. I was saying to this CEO at the board meeting, I said, “I don’t know, I just have this blind belief that you guys are going to create an enormous success. And for every time I’ve felt hugely stressed that our burn rate was getting too high, and I didn’t know who else was going to fund the company, and I’m all in on this company, right?” And I’m all in on the company, and they’re doing well. But the problem with being all in – all in for me, let’s say I can write $10 to $12 million per company. If I write $2 million and we hit a bump in the road, I can write another $2 million. If I write $9 million and you hit a bump in the road, I’m pretty fucked. Am I allowed to say this? This is on camera, right? Okay. You know, I’m like fudged, you know. We’ll just snip that last piece out. And I don’t know why, but like, I suspend disbelief. I just know it’s going to work out.
[00:19:39] DEREK: So with this company, I’m going to assume you believe in it. But if you didn’t believe it, would you still say it so that he would believe it? You wouldn’t say it? You wouldn’t feed him a line?
[00:19:52] MARK: No. I wouldn’t make him unconfident. I would say, “Dude, we have some real challenges here.” I say that to people. I really do. You can ask. I say, “I’m nervous about the direction of this company. What are we going to do to make it better?” I guess my point, Derek, was this: To be a CEO, you go out and you recruit somebody, and you recruit someone from Google, Yahoo, Facebook or the startup around the corner, and you say to them, “I know you’re on a career track, I know you’re earning x and I can’t pay you x, but come join me. We’re going to go do something special.” And the minute you do that, I own your success in a bad way. Meaning, I’m responsible for you. I’m responsible for your career track. If I screw up and you’ve got this little blip that you have to explain, why did I work at Startup Grind for two years when it went into the ground? Which of course it won’t, right? You have confidence.
[00:20:54] DEREK: We will be a $100 million company, Mark. I don’t know. Sorry. There’s the confidence. I need to get in the mirror tonight and work on it.
[00:21:05] MARK: There you go. No, but honestly, that’s why it sucks being a CEO. Because I had people coming to me – by the way, we’re completely bouncing off walls. I think it’s my lack of sleep or ADD, but I had a guy come to me who said, “I’m thinking about getting a mortgage. Do you think now’s a good time?” And I’m like, “Fudge, no! It’s a terrible time! We’ve got three months’ cash and I have no idea if we’re going to raise more money!” But that’s not actually what I said. So I said to him, “Listen, it’s a startup.
Obviously startups never have long runways. But I feel pretty good about how we’re doing, I feel good about our chances of raising more capital. If you feel it’s the right thing to do, you should do it, but just know we work at a startup. Right? There’s risks.” So he goes away and he gets his mortgage, and now I own the responsibility for that. And I don’t take that lightly, like you have knots in your stomach on a constant basis. You worry about all of your staff, you worry about their reputations, you worry about your own reputation, you worry about the people who gave you money, you worry about the customers who entrusted you. Because everyone who said, “I’m going to use Mark’s software…” They made that decision. If I go under, they’re the putz who… You know? Yeah. So it’s a lot of pressure.
[00:22:30] DEREK: I think, too, to tie back to what you said earlier – these are good types of problems. In the grand scheme of the world, I think, I sit in my garage in Palo Alto and sometimes I think, “Oh, man. I feel so sorry for myself.” Then I’m like, “Geez. What am I saying?” You know? My life could be so much more difficult. And hey, I have the freedom. Yeah, I may not have dental insurance. Or hey, I may have to continue to rent in perpetuity. But these are good problems to have, and I have the freedom to work on what I want to work on.
[00:23:07] MARK: I think if you haven’t traveled around the world and seen how people live, you should, if for nothing else than perspective. It’s humbling to spend time in India. You spend time in some of the poorest areas, and it’s really surreal knowing that you get to jump on a plane and end up the next night in your own bed in wherever you live in relative luxury. And these people don’t. They don’t have that option. And that’s the majority of the world, and I don’t mean to depress you all, but you should feel pretty good about what you have, and not take your stresses too seriously. It’s something I’ve talked a lot about – I worry about it. Like last year there were quite a number of suicides, you know? There are a lot of stressed-out people in our industry, and I think we just need to take down the stress a little.
[00:23:58] DEREK: Well, and this balance that we call work-life balance – but it’s not necessarily balanced, right? It’s not equal. But it’s – you’ve got to keep your head on straight. For me, and please jump in here, it’s probably the same for you, but I say to myself, “Hey, the worst thing that happens to me is I lose everything professionally. But I’m not going to lose my family.” And at least I’ll draw the line at that point, and if it ever gets too close, I can always go back and work at Electronic Arts.
[00:24:26] MARK: But Derek, a lot of people do lose their families. And that’s the point. They lose relationships. They lose their wives, husbands, kids, you know. They end up splitting their kids and it’s a result of not having good work-life balance.
[00:24:42] DEREK: I think – look, I may not have faced harder challenges. But I think as entrepreneurs we have to make decisions. What are you going to do? You’ve talked a lot about integrity in your writings and things. What’s important to us? What’s not? How far do we go? And sometimes we push it too far, and sometimes maybe we don’t push it enough. We don’t hit success. You’ve written so much that’s impacted me as a founder – which – I used to sneak up at Steve Blank’s classes at Stanford when I worked at EA, and your lecture was one that I did that for. And things like that have had a great impact on me. And I wondered if maybe tonight, we could kind of go through this experience and kind of rapid-fire hit a lot of these points that you’ve written these essays on. But just give people a taste, and then what I would challenge the community here to do is, these different things that you’re not an expert on or you’re not good at, go back and read what Mark has written about it. If you’re okay with that, maybe we could do it. We could play me as the entrepreneur and I was going to ask the crowd if we could get a startup idea, and we will start at the beginning. I’m an entrepreneur chasing an idea. What’s some of the worst ideas you could possibly think of?
[00:26:25] MARK: How about if we just choose a cliché? Ridesharing. Let’s go create a ridesharing site.
[00:26:32] DEREK: Awesome, because I had an idea for that, so it’s perfect. So Mark, I want to build a great product. I want to change the world. I want to build a great company, and I want to get you on my board for my new ridesharing service. Which is just amazing. And it’s going to be a $100 million idea, Mark. $100 billion idea. Talk about some of the foundations that I need to have. Let’s just – some of the attributes that you want me to have. Why would I need to have tenacity? What does that mean to you? What do you need to see in me that would be tenacious?
[00:27:11] MARK: Well, I can say this. It’s not out of arrogance, it’s out of capacity. I can sit on probably eight or nine boards at a time. That means I do one or two investments per year, and I see a lot. So for me, I’m most likely going to tell you no. And no doesn’t mean – well, sometimes no means not ever.
[00:27:38] DEREK: Well, you’re going to tell me no if I come at you like that. But I’m saying, work me through this process as though you were saying yes. So starting at the beginning, the type of entrepreneur
[00:27:49] MARK: Well, you were asking me about tenacity, so I was going to answer that question. Because, almost by definition, I’m going to tell you no. And no is either not ever or not now. Or – this is kind of interesting, but I’m kind of busy. And those are pretty much my only three answers. And then occasionally I do a deal despite myself.
And I’ll just say, “Derek, you know, this is nice but there’s a few of these ridesharing things. I’m just not into it.” I’ll probably say a nicer version than that. And somehow you’ll have to find a way that you’re on my calendar six weeks later. And I’m like, “How the fuck did Derek get on my calendar? Didn’t I already see him?”
Then my assistant says, “Yeah, but he’s so nice, and he gave me this nice talk.”
“Fine, I’ll see him.” Then I’ll see him, and somehow you got her to give you my text number – my cell phone number. And somehow you got it out of her, and I’m showing up across campus at a Startup Grind event, and you text me right before and you say, “Mark, I know how busy you’re going to be. But would you mind coming just ten minutes early and meeting me in the parking lot? I just have one idea I want to show you. It would really make a difference to me.”
And I’m thinking, “Really? Fine. Ten minutes won’t kill me. I’m going to be there anyway. Right?”
And then your thing you wanted to meet me about is you have this company you want to introduce me to where the founder, you think, is going to be really valuable to me, so you do the introduction and I meet him and that was – “Wow, what a great meeting I had! Thank you for doing that!”
Now suddenly I’m thinking, “That guy Derek, that was pretty cool of him. I kind of like that guy. I don’t know why. He seems nice enough.” And just – you develop a pattern over time that no matter how many times I try to say no to you, I can’t. Because I’m going to say no to you, and the guys you want to hire from Facebook are going to say no to you. And you’re going to call a journalist and he’s going to say, “Everybody has a ridesharing idea. I’m not interested.”
Then you’re going to ask David Hornik to go to The Lobby and he’s going to say, “I’ve got too many guys already.” And everyone’s going to say no to you. And if you don’t have what it takes to accept that and keep coming back and keep coming back and keep coming back, how the hell are you going to get customers? How are you going to get employees? How are you going to get bought one day? How are you going to get biz dev deals? So tenacity matters a lot.
[00:30:25] DEREK: Okay. Well, I’ve got that. Check. Let’s talk about the ability to pivot. I think this is an interesting one. What does that mean? I mean, ridesharing, this is going to be hot. I’m sure this is the meal ticket, Mark. But you say I need to have the ability to pivot. Talk to me about that.
[00:30:42] MARK: So I don’t mean pivot in the Eric Ries sense of the word. What I mean is this. I believe that the best entrepreneurs make quick decisions, and are decisive, and don’t have analysis paralysis. And the overwhelming majority of people I work with in my life can’t make decisions.
Everybody thinks they want to be the leader, very few people really want to do it. It’s hard. You’ve got to make decisions on a daily basis. Should we get 8,000 square feet or 6,000 square feet? Should we put it in Amazon or should we have hosting here? Should we offer a dental plan or should we not offer a dental plan? Should I raise $300k or $800k? Should I hire or not hire this person? Should I give him a point and a half or not? Should I agree to the indemnification clause or not? Should I use Gunderson or not?
You’re overwhelmed with decisions.
And I see a lot of people just don’t – they’re not good at making decisions, so I value decisiveness. I value people who can say, “Look, I’m never going to have more complete information than I have today. Let me make a rational, structured choice here, based on logic, based on intuition, based on my past experiences in life, based on triangulating – I always say you need to talk to lots of people.” Get lots of data points and say, “Okay, well, I kind of heard what people think about being located in Santa Monica versus Venice, the pros and cons. I think I want to make this choice.” Right?
And honestly I think the smartest people in the world, if you make that many decisions that quickly, are only going to be right 75% of the time. And then you see people who, once they’ve decided, become so dogmatic and inflexible because they’re worried that they’re going to look dumb for changing their minds. And that’s what I meant by ability to pivot. Like, I’m going this way and the data suddenly says that’s not a good idea? Okay, well this way looks good to me. Water off a duck’s back.
[00:33:10] DEREK: Humble enough to admit you’re wrong. Something like that. Why do I need to have a willingness to accept risk? When you meet with founders, do you just see all across the board, like this guy you mentioned with the mortgage, or who wants a mortgage?
[00:32:26] MARK: Can I tell you another story? This is really answering this question.
When I wanted to work in venture capital – and I don’t know why I wanted to work in venture capital, but I thought it would be a good idea. A lot of the VCs I talked to – I was living in NorCal, a lot of the VCs were saying, “Yeah, come on in, EIR.” I was like, “I don’t know, I want to be a VC.” They said, “Okay, we have a principal role open.”
“I’m 39, I’ve sold two companies, I think I’ve proven myself.”
“Okay, well you can be an operating partner or a venture partner.”
“Well, what is that?”
“Well, you get to be involved with our portfolio companies after we invest.”
Well, I really wanted to be a general partner but there weren’t a lot of general partner openings.
So I talked to my buddies at GRP [now Upfront Ventures], and they had funded my two companies, so I knew them.
And they said, “What are you going to do next?” I said, “Probably another startup.”
They said, “Have you ever thought about being a venture capitalist?” I said, “Yeah, I’ve thought a lot about it. I don’t know if I’d be good at it.” They said, “Come on down.”
So I came down and they – we – are based in LA. They said, “We’re going to go raise another fund, and when we raise the next fund, we’d like to bring you on as a partner.”
I thought, “no fucking way! Either it’s now or it’s never! I’m not going to wait until you raise another fund.” (I didn’t say that out loud)
My mentality was, once you raise the fund, then you’ve got all this money, and now you’re like, well, let’s do a recruiting process. Right? I knew it had to be now. And frankly, I had kids by then, and I want my kids there for the school year.
They said, “Well, we can’t do it.” I said, “Why?”
“We don’t have the fees to pay you what we want to earn because we haven’t raised our fund.”
“I don’t care. Pay me half what you think I want to earn and I’ll pay all my own moving costs.”
“We couldn’t do that.” “What are you talking about, you can’t do that?”
“Of course you can.”
“We’d feel bad.”
“Let’s look at my options. My options are I can either pay myself zero, or I can pay myself half of what I ultimately want to earn. It’s a no brainer!”
“When you put it that way…” ”Okay, fine. Come join.”
They offered me a certain amount of carry, and that carry was about a third of what a normal entry-level partner in a fund gets.
I thought to myself, “Well, that’s a bit low. But I don’t want to fight. I just want to get in the door. And once I’m in the door, I know I can prove myself. And if I don’t, I suck anyway. But if I prove myself, then I have the right to ask for more later.” Which is, in fact, what happened.
And I’m now managing partner six years later.
But back then, it was like a third of the normal entry-level of the most junior partner that came in.
The reason I point it out is I had another guy who’s coming out of Stanford, and he had just finished his second year, and he said, “My lifelong ambition is to be a VC.” I’m thought, “That’s a pretty unfulfilled life, but if that’s your lifelong ambition – how about you come work as an intern?”
“What do you mean?”
“Well, we’re going to be hiring in six months. We’re not hiring now. Come be an intern for three to six months.”
He said, “I can’t do that.”
I said, “Why?”
“I’m finishing my second year of Stanford, not my first. Maybe you misheard me. I need a full time job.”
“No, no, no. Just come. Be an intern” And by the way, this is 2009. You remember what 2009 was like, right?
And so he said, “I can’t do it. But I’ll make you a deal. If I do a good job, promise me you’re not going to run a recruiting process.”
I said, “I’m not going to promise you that at all.”
“But if I do a good job?”
“No, No promises.”
He said, “Well, then I can’t do it.”
So he didn’t take the job.
And I thought to myself exactly this: If you’re not confident enough to come in and knock the cover off the ball – of course if you knock the cover off the ball I’m not going to take a resume of someone I’ve never met with a guy on the inside who’s crushing it, right? But he didn’t have the confidence in himself and he wasn’t willing to take the risk.
Here’s the thing, the punchline.
If you as a VC are not willing to take risk, how can you ever understand what it’s like to walk in an entrepreneur’s shoes? That’s why I told him no. He called back three months later and asked for the job and I told him no again. Look, being an entrepreneur is about willingness to accept risk. Too many people are, “Well, I want to quit my job at Microsoft but it pays me $180,000 a year. I’ll quit if you fund me.” I mean, you have absolutely no self-confidence to take that risk on yourself. Why should I take a risk on you?
[00:39:18] DEREK: Take the risk and then go out and get the work done. Go work your butt off and make it happen. I mean, that guy, if he had done a great job, where could he be today?
[00:39:28] MARK: I think he would be at Upfront Ventures, probably. My guess.
[00:39:34] DEREK: Okay, I’ve got some of these qualities of an investable entrepreneur. I’ve got the foundation for my ridesharing service which is going to change the world. What comes first? Does the entrepreneur come first, or does the product come first? What I mean by that is, I’ve got this great idea. Does that make me an entrepreneur? Or do I need to go out and make it happen, and that’s when I can call myself an entrepreneur?
[00:40:00] MARK: Well, if you’ll allow me, I’ll answer two questions. One you didn’t ask, but I think you’re implying. Or maybe you’re not implying, maybe I just want to answer it.
But I’ve had this debate so many times, whether entrepreneurs are born or made. Whether it’s nature or nurture. And of course it’s a subjective question with no answer, but I have my opinion. That won’t surprise you.
I think entrepreneurs are born. I think your mind is wired in certain ways. We see children and we say, “That person is musically gifted. She just has a right brain and she can do what other people can’t do. That girl is good at sports. That guy is good at mathematics.” I think all of our brains are wired in a certain way, and of course you can be better at anything.
So, 10,000 hours of basketball, you can shoot really well, but this kid ain’t ever gonna dunk a ball, right? So there are certain physical limitations to how we’re wired.
And when I look at these skillsets of leadership – being self-confident, being able to persuade other people against all other rational reason to join your company and your cause and take a lower salary than they could get elsewhere, and to get press, and get people to give you money, and biz dev partners, whatever you have to do. That leadership trait is just not innate in everybody.
And the willingness to accept risk – I have an older brother who’s just a deer in the headlights when it comes to risk. He’s very good at other things, but he just can’t accept risk. He’s not wired that way. He’s a year and a half older. We were raised together. Chemically, he’s just not wired for risk. I, for whatever reason, was wired for risk. And ability to take vagueness and turn it into ideas. Ability to have certain attention to detail. Like if I go through all the traits I think it takes – like, the chutzpah, the ability to push things a little bit too far but not further? I don’t think everyone’s born with that.
And I see people in leadership roles that can’t handle the stress, and I think sometimes people just aren’t chemically wired for that.
So that isn’t the question you asked, but I believe not everybody is made to be an entrepreneur, or not a CEO entrepreneur. And if you’re not, there’s no shame in that. It’s not the world’s greatest job. So if you’re passion is marketing, if your passion is engineering, if your passion is selling, if your passion is whatever it is, but you don’t necessarily want to have to do all those other things? There’s no shame in that at all. What was your question again? Was it kind of – was it close? Oh, what should I do – what comes first? The entrepreneur or the idea?
[00:43:09] DEREK: Well, I mean, you’ve got an entrepreneur. He or she may or may not have a job already. They’re trying to get an idea off the ground. He or she is trying to figure out when they should jump full-speed. I think it’s this idea that, if I’m trying to get this idea of ride sharing off the ground, then do I jump out of the plane and make it happen? Do I validate it first? At what point do I say, “Hey, you know what? I’m an entrepreneur.”
[00:43:37] MARK: There’s a few things bundled in that question. If I go back to this idea of 2/3 of the world’s people are not as blessed as we are. Not everybody’s life circumstances allow them to live the archetypal, I-quit-my-job-and-eat-pizza-
But today failure’s okay, it really is. In California. Failure is not tolerated in most places. Not in Europe or South Korea. You fail and you’re ostracized. I’m dead serious about that. But you owe it to yourself to try, because failure is so easy these days. The options for a failed entrepreneur are immense. And so if you try and you fail, that’s okay, you pick yourself back up and you go. But when you become 35 and you’re married and you’ve got two kids and responsibility – I’m not saying don’t do it, by the way. I think three of the first six entrepreneurs I ever backed were in their 40s and had kids. So I’m definitely not ageist in that regard. I just recently backed a woman who was 37 weeks pregnant with her third child. So I think it’s not about ageism, it’s just harder. It’s harder for men, it’s harder for women. You have other responsibilities. So I’m just saying if you’re young and you have the passion to try, try. But it’s not right for everybody.
[00:46:00] DEREK: Sure. Let’s talk about – so I’m going to do it. I’m going to jump and I’m going to build this product. I’m trying to figure out if I’m going to do it alone or not. I have to build a team – I can’t possibly do everything by myself. But let’s talk about the good and the bad of cofounders. You have a great take on this whole thing, and I highly suggest people go read your posts on this. But a lot of people – we see Sergei and Larry. We see Larry and David. Chad and Steve. Mark and Eduardo. So talk to us about – let’s talk about the good things about having a cofounder. Shared risk, shared… What is the good that you see from your…?
[00:46:49] MARK: So what I think is that we have a few extreme successes that draw the wrong conclusions. So if you do want to read it on my blog, it’s called the “Cofounder Mythology.”
The cofounder mythology is this: We know the Larry and Sergei and David and Jerry stories. We know Steve and Chad. You have these archetypal startup founders. And we hold those up and we say, “That’s the model.”
But the reality is, more often than not, it’s a bad. Not always, but more often than not.
Why? Well, first of all, often cofounders didn’t know each other all that well before they started. And you started a journey and you think you’re similar, and when things are going incredibly well, no big deal. But when you hit tough times is where you find out what your partner’s really made of. And if you’re 50/50 founders and you don’t have the same risk tolerance, someone wants an exit, the other person doesn’t.
Someone is willing to have a high burn rate because they want to build something big, and the other person wants to have a lower burn rate. Someone gets a dog, gets a wife, has a kid, loses interest, starts drinking too much. By the way, I’ve seen that a lot. Yeah, honestly. Starts drinking too much, starts traveling. Someone loses confidence. Someone gets depressed – depression, I’ve seen it a lot.
And even people who have known each other since high school get like this, and it just becomes unresolvable if you’re joint co-founders. And nobody ever talks about that because people don’t want to talk publicly about these failures, and I’d say it’s more often the rule than the exception. So what I like to tell people is, hire your cofounders. If you’re confident. Or be the cofounder that gets hired. But hire your cofounders if you’re confident.
Why? So you talked about jumping out of a plane. I really believe that most entrepreneurs – people who want to do it – they only are willing to do it if they have two other people lined up on the cliff ready to jump at the same time as them. Because it’s so much easier to call your mom and say, “Yeah, we quit our jobs, look at us!” And it’s so much lonelier to be the one person who did it. But here’s the weird thing. If you can do a business plan, and good PowerPoint slides, and get a few people excited, hire a couple guys who are willing to do front-end design, and maybe some back-end of your product, raise a little angel money – just like the basics. Then people will come join you for significantly less than 50%. And I never tell people to be ungenerous. You can give them 5%, 3%, 12%, 25%, 40%, 46%, I could name more numbers, but you could offer anything. It’s not about the number. It’s about the prenup.
If you fall out of love, it’s still your business. And if they’re not working out, you can still terminate. And if you hit a loggerhead, you can either choose to say, “Look, I want to do it my way.” Or you can say, “Gosh, over all this time, I think I trust your judgment more. Let’s do it your way.” But you have the right to make those choices, and you don’t control that in a 50/50 or a 33/33/33. And by the way, most founders I know prefer to do 3 founders, right? Because there’s much less risk with three of us.
But here’s the thing – I always say to people – I don’t know. Safety in numbers? Sometimes it works incredibly well, but here’s the thing. You come to me and you’re grinding me over whether I get 18% or 19%, and it’s like a death match. But you gave away 2/3s of your company to these putzes you barely know before you ever came to see me. It just makes no sense. So most first-time entrepreneurs do it. Most second-time entrepreneurs start themselves. Not all. But people who have really been through it – like when I said this publicly, a lot of people were like, “You’re full of shit.” But people who were there would say, “Thank you for saying that.”
[00:51:27] DEREK: We’ve got a few more minutes. Let’s talk about building relationships. This is something you just talked about today. This idea of giving without expectation. And you mentioned it to earlier in this experience with – if an entrepreneur wants to show tenacity, he would meet me in the parking lot, but he wouldn’t meet you to pitch you, he met you and he did something that might help you. He brought a cool founder to you working on something interesting. Talk to us about what is currently happening. How does this work? This culture of asking. And talk about – in your perfect world – what should this look like? How should we as entrepreneurs and as a community be acting?
[00:52:12] MARK: So, if you don’t know Robert Cialdini you need to, and if you don’t know his book on influence you should buy it. And even if you find it unpleasant, in the sense that everyone wants to think “I don’t play games.” That’s underhanded to know how people influence others.
What Cialdini talks about is the pshychology and science of what really influences people. And of course like all of human nature, it’s the opposite of what you think. He just goes through methodically and explains things. He’s a very good author. One of the most powerful tools there is is reciprocity. If I show up at your office and I got you this nice bottle of wine, a special edition from Napa, and Derek, I just want to say, I got this for you because you wrote this blog post that really inspired me and I want you to have it. Right? It shouldn’t be, but now you feel obligated to me.
I’m giving you a very simple example, but if someone went out of their way to do something thoughtful for me – a handwritten note. I always e-mail back when I get a handwritten note. Every time. 100%. I put it right next to my keyboard and I say, that person took the time to write me a handwritten note, I’m going to send a thank you. Send me an e-mail not so much. Not that I don’t have good intentions. I just get too many e-mails. Handwritten note I always say thank you.
It’s the special things, it’s the people who make a little bit more effort. Sometimes I’m slow to write back, by the way. Someone – if they happen to be in the audience – someone sent me this big box of soft drinks, or something. I have no idea. And to me I didn’t feel the reciprocity feeling from that. I’m sure they’re great drinks, but I feel more like that’s marketing materials. That’s Chotckys or something. I’m not saying I want everyone to send me a bottle of whisky. I don’t. I have twelve un-drunk bottles of whisky on my desk as it is.
I’m just saying, in life, not related to me, but just be thoughtful. The thing about influence is, when you help other people, they mentally think, “That’s someone I owe.” They don’t think it externally, they just know. And I hate owing people. Jason Nazar, who I wrote
[uh, oh. that’s where the transcript ran out. I should be getting the rest in a couple of days and I will post. If you’re enjoying you could always watch the video from minute 52! ]
(Cross-posted @ Both Sides of the Table)