Michael Wolfe about Startups at ESADE: "Quitting, sucking, and failing your way to a better life"
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Michael Wolfe about Startups at ESADE: "Quitting, sucking, and failing your way to a better life"



This is from a lecture given at ESADE by Michael Wolfe to a group of students at the Entrepreneurship and Innovation Lab.

This is from a lecture given at ESADE by Michael Wolfe to a group of students at the Entrepreneurship and Innovation Lab.



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    Michael Wolfe about Startups at ESADE: "Quitting, sucking, and failing your way to a better life" Michael Wolfe about Startups at ESADE: "Quitting, sucking, and failing your way to a better life" Presentation Transcript

    • “QUITTING, SUCKING, and failing your way to a better life” http://www.michaelrwolfe.com! @michaelrwolfe! michael.wolfe@stanfordalumni.org!
    • WHY I’M HERE On sabbatical for a year in Barcelona! Love teaching, evangelizing and explaining startups! Working on several advisory boards and for a venture capital firm!
    • MY AGENDA Convince you to start/join a startup?! (only if you should)! Convince you not to?! (only if you shouldn’t)! Help reason about startups and careers! (even if you never work at one)!
    • FIRST, A QUIZ $1 billion! $3 billion! $3.8 billion! $3.8 billion! $10 billion! $19 billion!
    • CHA-CHING $1 billion! $3 billion! $3.8 billion! $3.8 billion! $10 billion! $19 billion!
    • OVER IN THE b2b WORLD $19 billion! $5.7 billion! $12 billion! $9.5 billion! $9.5 billion! $9 billion!
    • QUESTIOn: WOULD YOU INVEST? $1 billion! $3 billion! $3.8 billion! $3.8 billion! $10 billion! $19 billion!
    • “WOULD NOT INVEST” Little revenue! High P/E (or no E)! Unproven business models! Questionable longevity! Few tangible assets! Competition!
    • “WOULD INVEST” Potential for > 1 billion users! Several revenue models available! Low PEG ratio! High margins! Downside is capped!
    • Let’s rephrase the question What would you pay for a 10% chance of owning stock in the next:! $410B $473B! $313B $170B!
    • the top of the funnel Fall 2013 Class! 2-4 employees! No revenue! Small userbase! Little IP! ~$10M valuations!
    • WOULD YOU INVEST? Fall 2013 Class! 2-4 employees! No revenue! Small userbase! Little IP! ~$10M valuations!
    • MOST WILL FAIL, BUT: $10B! $2.5B! $1.75B! Plus numerous $20M-$200M exits and acqui-hires
    • I’m not saying things don’t get overpriced I think the market is 2-3x overvalued this year! What I’m saying is that we don’t have a great framework for reasoning about such disparate outcomes!
    • OUR BRAINS ARE GOOD AT THIS i.e., a year from now, Walmart will be +-10% away from where it is now
    • NOT SO MUCH THIS Most will return 0-1x! A few will return 1000x!
    • NOT SO MUCH THIS 0x 1000x! Median   Best   Mean   Worst  
    • WHAT IS MY POINT? When startup people talk about “risk”, we really do mean it.! “Risk” is not “something might go wrong.” It is, “a small chance something goes very right.”! Once you accept this, the rest falls into place!
    • PAUL SPEAKS THE TRUTH -  http://www.paulgraham.com/growth.html “If you judge by the median startup, the whole concept of a startup seems like a fraud. You have to invent a bubble to explain why founders want to start them or investors want to fund them. “But it's a mistake to use the median in a domain with so much variation. “If you look at the average outcome rather than the median, you can understand why investors like them, and why, if they aren't median people, it's a rational choice for founders to start them.”
    • BUT WHAT ARE THE IMPLICATIONS? On startup ecosystems! On your career choices! On how big companies approach innovation!
    • IS IT: Technical talent! Business/marketing talent! Funding! Partner ecosystem! Support system! . . . OK, but why are *those* things there?!
    • THIS IS WHY For each win! 1,000 fails! The system is designed to produce the 1,000
    • OTHER PLACES ONLY SAY THEY WANT STARTUPS Employment laws! Bankruptcy laws! Non-competes! Taxes! …but most importantly….! Failure is stigmatized!
    • the most qualified people aren’t willing to: QUIT! SUCK! FAIL!
    • USING MYSELF AS AN EXAMPLE •  Four startups as co-founder or early employee! •  CEO, VP Engineering, tech co-founder! •  One IPO, two acquisitions! •  Raised > $200M! •  > $10B in market cap, > $1B revenue! •  2,000+ employees! •  Twice EIR at a VC firm! •  Several mergers! •  Exec team of two public companies! •  Many advisory boards, boards of directors, or angel investments!
    • Luck and timing and random walks! Surrounded by failure at every turn! “Quitting, sucking, and failing”! THE REALITY
    • QUITTING I quit several good jobs in order to move to the next! Several pivots and abandoned products! I shut one company down!
    • SUCKING Small teams, no resources, overwhelmed! Jobs we didn’t know how to do! No domain expertise! Make it up as you go…!
    • FAILING One company failed! The rest had near-death experiences! All had high likelihood of failure! I’m surrounded by failure!
    • BUT IT IS WORTH IT Lots of fun, amazing teams! Very rapid learning! Three exits! Maintained family life, sports, travel, sabbaticals!
    • CHILDHOOD CLEAR AUTHORITY! Parents! KNOWN PROBLEMS! Be good, sit up straight, do your chores! DEFINED CRITERIA! Praise, rewards!
    • SCHOOL CLEAR AUTHORITY! Teachers! KNOWN PROBLEMS! Math, reading, writing, language! DEFINED CRITERIA! Right and wrong answers, grades!
    • SPORTS CLEAR AUTHORITY! Coaches! KNOWN PROBLEMS! Football, basketball, athletics! DEFINED CRITERIA! Skills, strength, wins and losses!
    • WORK CLEAR AUTHORITY! Bosses! KNOWN PROBLEMS! Well-understood markets, customers, products! DEFINED CRITERIA! Deadlines, quotas!
    • THIS DOESN’t work for startups Small, inexperienced, teams! Markets found via experimentation! Customer, product, market unknown! No “adult supervision”! Most fail!
    • THIS IS WHY venture capitalists GET SO MUCH ATTENTION They fill the vacuum created by the assumption that “someone must be in charge”!
    • FOR example Quit school, quit jobs! Poor management skills initially! Failed projects! Near-death experiences!
    • THE POINT “Quitting, sucking, and failing” is not an unpleasant byproduct.! It is the CORE of the system!
    • “My dad’s job is to speak at Failcon”! -Sarah, age 8!
    • ONLY DO startups if you are really into it •  They take luck, timing, and pivots! •  First company is rarely a hit – it takes multiple tries! •  You’ll see your co- workers more than your families!
    • You don’t have to BE A FOUNDER Joining a startup is a great career option! Risk/reward is better! Great place to find co-founders!
    • DO IT WHILE YOU’RE YOUNG It just gets harder as you get older! It will take several tries! It takes time to develop the skills and the network!
    • YOUR EDUCATION FREES YOU UP The fact you are equipped to get a “real” job! Is precisely why you don’t have to!
    • GET GREAT AT SOMETHING Product management?! Growth hacking?! Content marketing?! Design?! …and also be a generalist!
    • OBSESS ABOUT YOUR NETWORK Who will your co-founders be?! Who will you hire, or who wants to hire you?! Join companies based on the teams you’ll be working with!
    • IT IS POSSIBLE TO STAY LOCAL Join a local startup! Work remotely for a startup headquartered elsewhere! Start a company, then either move it or put offices in the US if needed!
    • “LIVE in the future” •  Smartphones ! •  Cheap tablets! •  Wearables! •  Robotics! •  3D printing ! •  Self driving cars! •  Online universities ! •  Crowdsourcing! These will impact you – get in front of it  
    • Don’t be this guy “That seems like such a time waster”! “How will they make money?”! “Companies will never trust that”! “That team has no experience”!
    • Take This SERIOUSLY “Lean Startup” - Eric Ries! Blog & “Four Steps to the Epiphany”! - Steve Blank! Business model canvas - Alex Osterwalder! Validate, validate, validate!
    • Big companies are the same “Innovation” projects have a very high failure rate! Embrace startup culture of experimentation! And please buy some startups!
    • EMBRACE SALES AND MARKETING Know your customer! Help them find you and buy from you! Obsess about NPS! Most startups focus too much on product!
    • LEARN PEOPLE MANAGEMENT Get hiring and firing responsibility! Seek chaotic environments!
    • LEARN AND READ “Lean Startup” - Eric Ries! “Little Bets” - Peter Sims! “Be a learn it all” - Bill Gurley blog! Blog & “Startup Owner’s Manual”! - Steve Blank! “How to get startup ideas” - Paul Graham Blog! “Founders Dilemmas”! - Wasserman! Reading list at my blog: www.michaelrwolfe.com
    • QUESTIONS? http://www.michaelrwolfe.com! @michaelrwolfe! michael.wolfe@stanfordalumni.org!