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

1. “QUITTING, SUCKING, and failing
your way to a better life”
http://www.michaelrwolfe.com!
@michaelrwolfe!
michael.wolfe@stanfordalumni.org!

2. 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!

3. 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)!

4. FIRST, A QUIZ
$1 billion!
$3 billion!
$3.8 billion!
$3.8 billion!
$10 billion!
$19 billion!

5. CHA-CHING
$1 billion!
$3 billion!
$3.8 billion!
$3.8 billion!
$10 billion!
$19 billion!

6. OVER IN THE b2b WORLD
$19 billion!
$5.7 billion!
$12 billion!
$9.5 billion!
$9.5 billion!
$9 billion!

7. QUESTIOn: WOULD YOU INVEST?
$1 billion!
$3 billion!
$3.8 billion!
$3.8 billion!
$10 billion!
$19 billion!

8. “WOULD NOT INVEST”
Little revenue!
High P/E (or no E)!
Unproven business models!
Questionable longevity!
Few tangible assets!
Competition!

9. “WOULD INVEST”
Potential for > 1 billion users!
Several revenue models available!
Low PEG ratio!
High margins!
Downside is capped!

10. Let’s rephrase the question
What would you pay for a 10%
chance of owning stock in the next:!
$410B $473B!
$313B $170B!

11. the top of the funnel
Fall 2013 Class!
2-4 employees!
No revenue!
Small userbase!
Little IP!
~$10M valuations!

12. WOULD YOU INVEST?
Fall 2013 Class!
2-4 employees!
No revenue!
Small userbase!
Little IP!
~$10M valuations!

13. MOST WILL FAIL, BUT:
$10B!
$2.5B!
$1.75B!
Plus numerous
$20M-$200M exits
and acqui-hires

14. 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!

15. OUR BRAINS ARE GOOD AT THIS
i.e., a year from now, Walmart will be
+-10% away from where it is now

16. NOT SO MUCH THIS
Most will return
0-1x!
A few will return
1000x!

17. NOT SO MUCH THIS
0x 1000x!
Median
Best
Mean
Worst

18. 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!

19. 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.”

21. I’m NOT TRYING TO BE ORIGINAL
HERE

22. BUT WHAT ARE THE IMPLICATIONS?
On startup ecosystems!
On your career choices!
On how big companies approach
innovation!

23. NEXT QUESTION: WHY ARE MOST OF
THESE IN SILICON VALLEY?

24. IS IT:
Technical talent!
Business/marketing talent!
Funding!
Partner ecosystem!
Support system!
. . . OK, but why are *those* things there?!

25. THIS IS WHY
For each win! 1,000 fails!
The system is designed to produce the 1,000

26. OTHER PLACES ONLY SAY THEY
WANT STARTUPS
Employment laws!
Bankruptcy laws!
Non-competes!
Taxes!
…but most importantly….!
Failure is stigmatized!

27. the most qualified people
aren’t willing to:
QUIT!
SUCK!
FAIL!

28. 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!

29. Luck and timing
and random walks!
Surrounded by
failure at every
turn!
“Quitting,
sucking, and
failing”!
THE REALITY

30. QUITTING
I quit several good jobs in
order to move to the next!
Several pivots and
abandoned products!
I shut one company down!

31. SUCKING
Small teams, no
resources, overwhelmed!
Jobs we didn’t know how
to do!
No domain expertise!
Make it up as you go…!

32. FAILING
One company failed!
The rest had near-death
experiences!
All had high likelihood of
failure!
I’m surrounded by failure!

33. BUT IT IS WORTH IT
Lots of fun, amazing teams!
Very rapid learning!
Three exits!
Maintained family life,
sports, travel, sabbaticals!

34. FAILURE CULTURE

35. STANDARD MODEL of the world
CLEAR AUTHORITY!
KNOWN PROBLEMS!
DEFINED CRITERIA!

36. CHILDHOOD
CLEAR AUTHORITY!
Parents!
KNOWN PROBLEMS!
Be good, sit up straight,
do your chores!
DEFINED CRITERIA!
Praise, rewards!

37. SCHOOL
CLEAR AUTHORITY!
Teachers!
KNOWN PROBLEMS!
Math, reading, writing,
language!
DEFINED CRITERIA!
Right and wrong
answers, grades!

38. SPORTS
CLEAR AUTHORITY!
Coaches!
KNOWN PROBLEMS!
Football, basketball,
athletics!
DEFINED CRITERIA!
Skills, strength, wins
and losses!

39. WORK
CLEAR AUTHORITY!
Bosses!
KNOWN PROBLEMS!
Well-understood
markets, customers,
products!
DEFINED CRITERIA!
Deadlines, quotas!

40. THIS DOESN’t work for startups
Small, inexperienced,
teams!
Markets found via
experimentation!
Customer, product,
market unknown!
No “adult
supervision”!
Most fail!

41. THIS IS WHY venture capitalists
GET SO MUCH ATTENTION
They fill the vacuum
created by the
assumption that
“someone must be
in charge”!

42. FOR example
Quit school, quit jobs!
Poor management skills
initially!
Failed projects!
Near-death experiences!

43. THE POINT
“Quitting, sucking, and
failing” is not an unpleasant
byproduct.!
It is the CORE of the system!

44. “My dad’s job is to speak at Failcon”!
-Sarah, age 8!

45. WHAT YOU CAN DO

46. 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!

47. 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!

48. 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!

49. YOUR EDUCATION FREES YOU UP
The fact you are
equipped to get a
“real” job!
Is precisely why
you don’t have to!

50. GET GREAT AT SOMETHING
Product
management?!
Growth hacking?!
Content marketing?!
Design?!
…and also be a
generalist!

51. 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!

52. 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!

53. “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

54. 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”!

55. Take This SERIOUSLY
“Lean Startup”
- Eric Ries!
Blog & “Four Steps
to the Epiphany”!
- Steve Blank!
Business model
canvas
- Alex
Osterwalder!
Validate, validate, validate!

56. Big companies are the same
“Innovation” projects
have a very high
failure rate!
Embrace startup
culture of
experimentation!
And please buy some
startups!

57. 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!

58. LEARN PEOPLE MANAGEMENT
Get hiring and
firing
responsibility!
Seek chaotic
environments!

59. 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

60. QUESTIONS?
http://www.michaelrwolfe.com!
@michaelrwolfe!
michael.wolfe@stanfordalumni.org!