Founders,

Let me start by saying, with local elections, a tiny number of votes can swing an election. So, your vote truly matters. A few companies just showing up can swing an election and dramatically impact policy for years to come.

We’re in the middle of a housing crisis. People are paying an exorbitant amount for rent. Teachers and other workers can’t afford to live here. Homelessness is increasing. A lot of people are leaving.

I went to an event this week with other CEOs and a few elected officials. The CEOs represented thousands of employees. We were all at this event to talk about how we could solve this problem - ultimately by increasing housing supply. When I talked to a local official about what’s going on, the person replied, “tech people don’t vote”. It just hit me. That’s why our issues, like solving the housing supply, don’t get as much attention as we’d like. Our officials pay attention to people who vote. We don’t vote, we don’t matter. We vote, we matter. It’s that simple.

There are a lot of reasons we may not vote. As the organizer said, as founders, we have blinders on. We have to do some version of, grow, raise capital to hit the next stage, grow, raise capital and grow more. It’s all consuming. Maybe you also just moved to the city and haven’t figured out how to register.

This election is incredibly important, if you want San Francisco to be an affordable city. You can probably tell that the topic I'm most passionate about is solving the housing crisis, but that may be different for you or your team.  No matter what issue is most important to you all, the common theme is figuring out how to mobilize our teams to go out to vote.

Here’s a quick list that you can go through with your company, while staying apolitical.

2. Invite your local elected official to come speak. Ask questions like, why is rent so high? What are they doing to alleviate the housing crisis? If you’re too small for them to speak, combine with other offices. Here are a few you could invite:

• CA State Assembly member David Chiu
  
• CA State Senator Nancy Skinner
  
• CA State Senator Scott Wiener
  

3. Invite a housing expert to speak. Here are a few people that were recommended to me:

• Kim-Mai Cutler. She’s now at Initialized, used to be at TechCrunch and wrote an incredible piece on the housing crisis. If you’re too small for her to speak, combine with other offices. Kim also recommended a few other people to invite - added them in the notes.
  

4. Email your company the day before the election.

• Let your team know they can take time off on election day to go vote.
  
• Send a batch of voting guides to help, whether from the SF Chronicle, Democratic party, Republican party, Libertarian party, or more.
  
• Let them know Uber / Lyft have free rides to polling stations that day.
  

6. Join the YIMBY movement! The YIMBY (Yes in My Backyard) movement is the opposite of NIMBYs (Not in My Back Yard). The YIMBYs believe that dramatically increasing all types of housing supply is key to solving the housing crisis. As Kim explains, for 40 years, California has downzoned neighborhoods and restricted housing supply, in addition to tilting the property tax system in favor of property owners. The YIMBY movement is pushing to tilt that system back; it recognizes that increasing housing supply at multiple income levels is critical toward managing affordability. Here are some groups you should join:

• SF YIMBY 
  
• CA YIMBY for state issues
  
• South Bay YIMBY   
  
• Marin YIMBY
  

8. Any other suggestions? Please add them to the comments.

This has gotten insane. It’s time to do sometime. It’s time we all mobilize and make a difference. Would love to hear ideas. 

-Joseph

• Corey Smith from SF Housing Action Coalition
• Jeff Kositsky, who runs SF's Homelessness and Supportive Housing Department
• Richard Rothstein, who wrote "The Color of Law."

Ten person startups (or smaller) often have a lot of generalists. Everyone does a little of everything, which is what can make startups exciting. We had “support / office admin,” “product / support” positions and other combinations. The reason startups do that is because they don’t have enough admin or product work to warrant a full-time role.

When you grow past 10 people to 15 or 20, that structure starts to break down. All of a sudden the generalists in slash positions will move from two part-time jobs to two full-time jobs and will stop being effective. The people who depend on generalists will stop being effective too.

A few years ago, we scaled from 10 to 20 people. In hindsight, there are some things we did well and other things I would have done differently. 

Here are my lessons:

1. Create an organization chart for the next year

Although this may feel corporate, put together an organizational chart that maps out your current team and your planned hiring over the next year. Every job description and every new hire needs to be made in the context of how your organization will grow and how the individuals will come together.

If you don’t do this, every hiring discussion will be a micro-optimization — you’ll end up making decisions that optimize for the short term, at the expense of the long term. For example, it makes no sense to hire a person without an understanding of how that team will evolve over the next year. If you do, you could end up with someone who wants to be a team lead but isn’t ready for the role, since you were only optimizing for the short term and not taking into account where the dp is headed. Then, that hire will likely be dissatisfied as the team grows. One step forward, one step back.

2. Turn generalists into specialists

Although being a generalist is exciting to many, having a lot of generalists on your team makes it very difficult to scale. If you’re serious about growing your business, generalists need to transition into more more specialized roles whether it’s Product, Support, HR, BD, Marketing or something else.

The consequences of having generalists running key functions are significant. To use myself as an example, I was the CEO / PM and at a certain point, I was context switching so often, I didn’t feel I could be effective at both jobs. I had so much on my plate, I was concerned I’d send mockups to the designers and engineers that haven’t been fully vetted and thought through, which would make them less effective too. So, I replaced myself as a PM. I’ve also found that as a company grows, generalists start to context switch so often between their different roles, they feel like they’re not able to do as good of a job - and appreciate being able to focus.

3. If you’re going to make the generalist to specialist transition, do it quickly and be clear about new roles

I thought we did this transition quickly, but in hindsight it didn't happen fast enough. The problem is that if you change a role and there is even a little uncertainty about their responsibilities or who they report to, it’ll slow down the entire company. As one example, someone on the team thought she reported to two people. That’s a major failure in communication that resulted in a less-than-ideal transition.

Before making a new position available to people internally, put together a job description for that role. Then, if someone internally applies to the role, you have an objective way to evaluate whether that internal candidate is qualified. If you don’t put together the job description first, the decision will be too ad hoc and you may end up with people that aren’t qualified holding key positions. Conversely, you may overlook someone on the team who would be great for a new role.   

5. Hire or promote team leads; then have them build out their own teams

Instead of adding the members of each department in an ad hoc way, we focused on bringing in team leads, then letting them fill out their team. Those people know way more than us about their function than we do.

6. Create a transition checklist

As mentioned above, we went through a transition and realized that some people were still confused about their role. Maybe we covered most of our bases, but not all of our bases. Missing even one important item can lead to confusion. Our head of HR put together the checklist below. I found it to be hugely helpful in clearing up any potential confusion.

• Discuss reason behind the change
• Review new job description
• Discuss current responsibilities that will continue
• Discuss new/additional responsibilities
• Discuss responsibilities that will no longer be part of the new role
• Discuss changes to decision making and ownership
• Strategize handoff of responsibilities with incumbent
• Discuss new manager (if applicable)
• Discuss other changes to new reporting structure
• Confirm when this new role will be announced to direct team
• Confirm when to announce to company
• Confirm official start-date of role
• Schedule kick-off meeting to review goals, expectations, priorities for new role

7. Go through the transition checklist with every transitioning role

No exceptions. It’s the only way to make sure there is no confusion.

8. Minimize your direct reports

Startup founders often find themselves with a lot of direct reports in the early stages and are reluctant to hire management. I think this is a common mistake that can be hugely detrimental to the company.

Let’s say you have 8 direct reports — that’s 8 hours each week (an entire day of work) just for one-on-ones. And that time commitment doesn’t even include preparation for those meetings and anything you need to do to help them out during the week. If there’s an annual review or an issue that comes up, that can take even more time.

Having a lot of direct reports is a problem because it eats into the time you need to focus on the future of your company and critical big picture goals like scaling the business, managing finances, setting up culture, interviewing candidates and other important issues. Instead of focusing on those things, you’ll get tied up with the day-to-day. That can be a slippery slope that slows growth and leads to missed opportunities. If the status quo is that you have no time, any unanticipated disruption can destroy your week and you’ll never have time to take advantage of opportunities. Founders need some flexibility in their schedule to handle important ad hoc tasks so hiring management to take on a chunk of the day-to-day tasks is crucial. Your org chart should be able to anticipate this problem in advance (see #1).

9. Hire HR

I recently read an article about how HR is no longer valuable. I think this is hugely wrong. Your biggest investment in a company is the team. Often, the vast majority of a startups' cost is the team salaries — a confused team is a huge waste of resources.

Is it worth having 1 person out of 20 completely focused on making sure the team operates effectively? Absolutely. I think it’s worth hiring HR early and the companies that don’t are making a big mistake.

10. Communicate. Communicate. Communicate.

It’s important to communicate to the team how startups evolve over time. Talk about how roles transition from generalists to specialists and other typical changes that occur as a startup grows. This is part of the startup experience and isn’t unique to you.

11. Be respectful, listen and apologize

People spend a huge portion of their time at work. They’re invested in the company. If it’s a startup, they may even be working long hours to make sure everything is covered. The absolute worst thing to do is be calloused about upcoming changes.

When you talk to the team, it’s important that you’re respectful and listen. As much as possible, incorporate their feedback into the process. One person suggested an entirely new role for herself, one that I hadn't considered. She put together a job description for the role, we created it and it’s been hugely helpful.

It’s also likely you’ll make some mistakes during your scale process. If you do, apologize, sincerely. Sure, it doesn’t feel great to hear all of your mistakes. But, they’re your mistakes and the only way to fix them is to 1) Accept them 2) Sincerely apologize and 3) Put together a plan to fix them.

12. Anticipate potential team scaling problems in advance

I can think of a few companies that hit major team scaling issues that led to many people leaving the company. Scaling out a team isn't a secret. A lot of founders have gone through these transitions and are willing to give advice. Some even have written blog posts! To the extent possible, you can prepare in advance and change the company accordingly before, not after, you run into issues.

13. Be deliberate about values and culture

With 10 people, the founders are likely present for all key decisions. At 20 people, tons of decisions get made without the founders. A company’s values determine how decisions are made. Does the team value empathy or is it something you never articulated? People will make decisions based on your values, so hopefully they are good ones. Based on a recommendation of a few people on the team, we did an offsite with the team and codified our values.

We were ad hoc about culture in the beginning. A few people on the team made the case that we needed to be more deliberate. They had a great idea: every few weeks, everyone meets for lunch to discuss our company culture. Because of that suggestion, we now have extremely candid conversations about things that happen at the company and whether we should start, stop, or continue them. Instead of ignoring important items, they're surfaced and we talk them over.

Unless you’re deliberate about how your team grows, you’ll hit a lot of unnecessary growing pains. Your vision won’t matter if people are confused about their roles or even worse, leave the company in confusion. Conversely, if you’re all aligned, engaged and moving in the same direction, you can have a massive impact together.

I hope these transition lessons are helpful. Good luck!  

I’ve received a lot of feedback about startup ideas over the years. I had this ‘aha!’ moment, when I realized I was in a Catch 22 and if I kept listening to people, I would never start a company. 

It seems like there are two reasons people don't think a startup will succeed:

1. It has been ‘done before’

2. It hasn’t been ‘done before’ and if it were worth doing, someone would have done it.

It's a Catch 22. There are a lot of reasons to build or not build a company and if you do #1, you should certainly seek to differentiate. But, be careful of listening too much to other people, otherwise you may never take that first step.

Originally posted on the HelloSign blog. 

The image above sums up how I think of everything at HelloSign. If you want a snapshot of what’s going on in my head, it’s an image of a circle with three different pieces: customers, revenue, and team. This is how we will build a significant company.

We rolled this idea out about a year ago. I realized as we grew from 10-20 and 20-30, not everyone was on the same page. I started getting questions like:

• Are our customers still a priority?
• Why are we talking about customers so much? We really should be driving revenue.
• Are we just focused on revenue?

When I’d hear about revenue not being a priority, I’d talk about the importance of revenue at a weekly meeting or mention it more in meetings. When I’d hear about our customers not being a priority, I’d do a presentation on that. It was like communication whack a mole!

I finally realized what I was missing. I needed to tie these separate elements together into one message. I started calling it –

The Circle of Life!

What’s the circle of life? It’s how we enter into a constant, positive flywheel of growth.

• A really smart and engaged team can build and support a phenomenal product for our customers.
• We drive value for our customers. They pay us for that value, creating revenue.
• We use that revenue to invest in our team.

The reality is that all three are the lifeblood of any company. Focusing on just one is like letting the hyenas into the Kingdom. If you only focus on the team but don’t get any customers, you’ll run out of revenue. If you only focus on revenue, but not on the team or making customers happy, you’ll have turnover and churn. If you only focus on customers, you won’t get revenue or be able to continue supporting the team. Explaining the relationship between these three things was hugely helpful for the team. As soon as I explained the circle of life, the questions went away. People seemed to get it.

In the last few months, we’ve started to see which companies aren’t balancing all three, as fundraising has dried up. Maybe they have a phenomenal product but can’t get the revenue to continue supporting the team. Funding can replace revenue for awhile or even kickstart the circle, but it’s not a permanent solution.

You need all three and they all have to work together. When you focus on constantly improving all three, that’s when the magic starts to happen. It’s pretty simple, but this is how you build an enduring company.

My friend had a major site issue and she was up all night fixing it. Fortunately, by the morning, everything was fixed and none of her users noticed. Good times. 

She asked if I have any tips on managing the ups and downs of a startup?

Ah, the things I’ve seen!

I’ve had a lot of time to think about stress. Founders can be comically optimistic when you ask them how things are going. No matter how confident anyone looks on the outside, everyone deals with hair-on-fire problems. Wait until someone is a few beers in and then ask how are things really going?

Fundamentally by building something new, you’re trying to change the status quo, which takes a lot of effort and rarely goes according to plan.

Here are lessons I’ve learned from a lot of burnt hair, wasted time and needless stress.

1. Nothing should be surprising. Expect that crazy stuff will happen over the entire lifespan of the company. Potential issues: diminishing runway, over/under hiring, site goes down, losing a key customer, competitive pressure, legal issues, team burnout/your burnout, HR issues -- you name it.
2. Anticipate and plan for as many problems in advance as possible (see #1). There’s an aversion to planning in startups, which just creates more stress. Planning reduces the number of potential issues that will come up. (Your company should never be frantic)
3. "It's your job to deal with hard problems.” Zach Coelius told me this during a tough moment about 4 years ago and for some reason I found it relaxing. I thought, ah, this is my job. Then, I focused on solving it.
4. Know that you wouldn't want to be working on anything else.
5. Eat, sleep and work out. Need to be in marathon mode, not sprint mode, otherwise you won't have energy for the occasional crisis. Same for the entire team.
6. Be careful of team stress or burnout. Most problems are solvable, but I can tell you the outcome of people working 6 days a week for 12 hours a day. Maybe Elon Musk can pull it off, but I don’t think the majority of companies can. I think that better people, rested, with long term knowledge at a company, working together for years, is better than optimizing for 7 days per week, 12+ hours per day, for 1 year, before they burn out and leave.
7. Optimize for output, not hours.
8. Take at least one day off a week. 7 days a week isn’t effective long term.
9. Visualize an alternative, crappy version of your life often. No job or crappy job, sleeping outside, annoying co-workers, unreasonable boss, no one listens to your ideas, and you can't improve things. Perspective is helpful.
10. Get at least 1 great, consistent adviser. 2 average advisers ≠ 1 great advisor. They can help problem solve and put things in perspective; plus, contextual advice is 10x standard advice. (Investors and advisors: the crowd, the ringside, and your corner)
11. Have enough runway and always know how much you’ve got. Make sure you always have > 6 months left. (Don’t be the startup that accidentally runs out of money)
12. Run financial projections. Flying blind can be stressful - for good reason.
13. Have a plan and execute on it. Control for the things you can control.
14. Know that you're getting better. I like to think I do less stupid stuff over time. That’s relaxing.
15. Hire great people who deal well under stress. Don't get stressed in seemingly stressful situations. Have a history of dealing with hard situations. You realize how amazing these people are during the moment of a crisis when they’re calm, own the issue and quickly problem solve. I have interview questions to filter for these attributes. This is key.
16. Hire for people that will stick around. (Mark Suster: Never hire job hoppers)
17. Don’t confuse hoodies for culture fit. Hire for experience, alignment on values and desire to be there.
18. You're constantly reaching your level of incompetence, which is why startups can be stressful. It's also why you learn a lot. (see #14)
19. Whenever something crazy happens, say, "good times" and smile.
20. Talk to other founders.
21. Read A Guide to the Good Life.
22. Do what you’re doing for the right reasons. If you’re building a company to flip it asap, it’ll be hard to go through tough periods.
23. In inflection moments, have a good BATNA.
24. Avoid personal debt, if possible.
25. Don’t consider anything closed until it’s signed (and use Hellosign!)  
26. Don’t consider a round closed until the money is in the bank.
27. All founders go through this. It’s not just you.
28. There are net positive investors, net neutral investors and net negative investors - avoid the net negative ones.
29. Avoid non-standard, uncommon investment terms.
30. Think twice before building a startup in Minnesota (see The Benefits of Building a Company in the Bay Area). Sorry Minnesota. (I’m from Minnesota, btw!)
31. Hire HR early. If the team is truly the most important thing, act like it and hire someone dedicated to taking care of the team. We had a full time HR person at 15 people. (NYTimes: Yes, Silicon Valley, Sometimes You Need More Bureaucracy)
32. Hire people that want to work at your company, rather than people just looking for a job.
33. Focus on revenue. All other metrics are a proxy for revenue. This one is more controversial, but revenue solves a lot of problems and reduces stress.  (43 lessons growing from $0 to $1+ million in revenue, twice)
34. Become profitable at least once. Another controversial one. But, I think first time founders don’t always know the tradeoff between free user growth and revenue, so they end up with free users that aren’t valuable. If you become profitable once, you can intentionally move into negative burn, if you want to accelerate growth.
35. Talk to customers. Building something people don’t want can be stressful.
36. Create an org chart before hiring. Otherwise the team doesn’t fit together well.
37. Write investor updates monthly. It keeps you disciplined, deliberate, top of mind for your investors / advisors, allows them to give contextual advice and makes sure the company doesn’t quietly die, which would be stressful. (David Lee: Updating your investors)
38. Have a livable salary, if possible.
39. Don’t raise before you’re ready (Setting your angel round up to fail)
40. Go through a transition checklist every time someone changes roles (covering duties continuing, discontinuing, new manager, title change, etc). Otherwise, people may end up reporting to 2 different people and be confused.
41. Get a board, but maintain control. More controversial, but I found the board very helpful. Having active observers works too. (Too much funding, not enough action)
42. Plan for the next stage. Ask investors / advisors / founders what it takes to get there. Better to optimize for what you know you’ll need then get there, not be prepared and too late to fix it. (PandoDaily: The series A Crunch is Happening Now)
43. Build a culture of feedback. That can help prevent issues from building up, unresolved over long periods of time.
44. Get a ping pong table :)

As years go by, I think you just stop being surprised. In a world of unexpected things, even the unexpected isn’t unexpected anymore. Hope these are helpful. Here’s to tranquility (if possible) while building startups!

Feel free to add any tips in the comments.

-

Recommended reading:
Sam Altman on Founder Depression.  

I met up with a friend a while back who was running a super lean startup team. It was a team of around 10-15 people, working long days, six days a week. He shared some insight into a few problems he was facing at the time due to the team being overwhelmed. I can see the appeal of running at capacity, since staying efficient is key. In the early days at HelloSign we ran really lean, but we were never this lean. As soon as the first employee joined we stopped running so lean because we realized there are very serious costs to being understaffed.

Here are the major downsides you risk by running short staffed and overwhelmed:

1. Anything can disrupt the team

When you have no slack in the organization even the slightest hold up can have major consequences. Let’s say someone gets sick and can’t work for three days. This is a pretty common occurrence, but since everyone else is already working at capacity, there is no one to pick up the extra work. This has a domino effect on the entire organization. It’s very important that there’s some leeway in the organization to account for life’s unforeseen circumstances.  

2. No flex for someone leaving

To expand on my first point, imagine everyone working six days a week at capacity. You’re barely keeping up. Then, imagine if someone leaves the company. There’s not enough bandwidth to absorb the responsibilities of the role. So, with just one less person, everything would fall apart.

3. Bad for morale

You’ll end up losing people to burnout or they’ll end up leaving the company for another role that’s less intense somewhere else. The people that do burnout and stick around will likely be less effective. Burnout is like overdrawing on your credit card — once you’re in the red, it takes a long time just to get back to break even.

4. Long term planning suffers

When all of these burnt-out employees are working at capacity, it can result in not being able to think clearly. Even worse, there’s so much immediacy felt throughout the organization that no one has the breathing room to plan for the long term. Instead, people micro-optimize and only think short term. Without long term planning, the company lacks vision and direction.

5. Missed opportunities

If a great opportunity arises but you don’t have the bandwidth to pursue it, you’re forced to miss out — whether it’s a chance to become a launch partner with a large company, a revenue opportunity or something else. If we ran too lean, we wouldn't have had the bandwidth to develop our API, which has been a huge source of growth. That would have been a missed opportunity.

6. Mental Exhaustion

Ever talk to someone on a Friday night after six consecutive 14 hour workdays? They give you a blank stare and talk like a toddler. It’s just not an effective way to work, nor is it healthy for the employee. This can also lead to employee turnover (see #3).

7. Diminished endurance

Always running at max capacity means people won’t have energy for when you need to push harder. This means a lot of missed opportunities.

8. Slow growth

If everyone is maxed out and you have a chance to grow, you’ll first need to grow the team to meet current needs before meeting growing needs. That can slow you down as a company.

In 2008 a startup called Modista created a great new way to display goods on eCommerce sites. Investors were excited. In 2009, the founders decided to raise and had $600k in commitments from investors.

Before the founders collected the money, Like.com sued them for alleged patent infringement. Patent litigation can cost $1-$2 million. Their investors decided against transferring the money and the company was shut down. Their founders had a vision, but never had a chance to execute it.

If you have a vision for why your company should exist and how it can change the world, it's worth thinking about how to protect it. The business world isn't run by fun, innovative, well-meaning entrepreneurs. It's run by people who protect their bottom line. Innovating isn't always sufficient. Raising money or making money is one way to increase your hit points to make sure you have enough time to execute on your vision.

I think lean companies don't always realize the risks of being small. There are protections that companies gain by being big, which aren't afforded to the small. Big companies like Apple and Google can spend years in patent litigation without impacting their bottom line. Small companies can't play that game.

Here are some things to think about when you decide to stay small:

Fighting a monopoly is difficult. Some have their interests tied to government legislation. Taxi drivers in San Francisco filed a class action lawsuit against Uber. Uber has also faced legal challenges in New York, Chicago and elsewhere. Instead of shutting down the company, the company was able to afford the lawyers to fight back and even change legislation. Uber is projecting $26 billion in revenue in 2016.

When you have money, you can operate negative margins in order to prioritize growth. PayPal spent $20 for each new signup. At one point, they were losing millions of dollars per month. If you were a new, less capitalized company in the payments space it would be extremely difficult to compete with them. PayPal was ultimately acquired for $1.5 billion.

Patents were intended to protect independent investors, but they often have the opposite effect. Many patents have been granted to non-unique technology. It can cost $1-$2m and two years to reach some kind of outcome. Modista was small and folded. Hipmunk was 'big,' having raised $15m, and sued their patent troll.

Big companies sometimes think they can get away with treating small companies badly because they don't think small companies can afford to fight back. Best Buy violated an NDA and stole a partner's technology. The startup wasn't able to use that revenue to scale their business, so they had to sell. The founders had a vision. I'm sure they would have preferred to execute on it.

When I think of these examples, I realize the importance of raising more than you need, growing revenue and moving faster than you would have otherwise. Whether intentional or not, I think the founders that survive are those who know how to protect their vision; they make sure they have enough capital on hand to deal with the inevitable problems.

Related reading:

Ben Horowitz has a great post on the fat startup.

Warren Buffet talks a lot about investing in  "economic castles protected by unbreachable 'moats.'"

Jessica Livingston wrote a great piece on things that can prevent your startup from succeeding. She talks about a tunnel of monsters along the way that try to prevent you from succeeding.

Before we launched HelloSign, I remember showing HelloFax to a family member. This person was normally supportive, but he took a glance and walked away. He wasn't the only one. A lot of people wouldn't even look.

I was the only believer.

Belief is the most important component for a startup. Most companies are born and die with one believer. Maybe they had zero believers, since even the founders didn't truly believe.

Great companies have many believers. Dropbox has over 100 million believers. Google has 1 billion believers.

When you start a company, you only have one believer: you.  

Your job as a founder is to create believers.

You have to believe.

When a friend pitches me a startup idea, I recently started asking, “do you really want to work on this?” I learned that it doesn't make sense to dissect the idea first. It's belief that will keep the company alive and create other believers.

The Airbnb founders maxed out their credit cards, then sold cereal to stay afloat. For 999 days they didn't see traction. But, they believed.

You need customers that believe.

Customers invest time and money — their most precious resource — into your product. They need to believe that you'll add value to their lives.

Evernote ran out of money. They had a customer that believed so much, he invested and saved the company from bankruptcy. He believed.

The press has to believe.

What separates the companies that get press and the ones that don't? The press believe in the former more than the latter. It's that simple.

The press loved Twitter. They believed in it before I did, before most people did. The press believed and made me believe.

Investors have to believe.

To compensate for losses, the potential return on each investment has to be high. You need to have the potential to become a billion dollar company.

YC often talks about how Dropbox wasn’t the top pick for a lot of investors, but they found a few that believed.

The team has to believe.

The people you want to work with can work anywhere they want. Great developers, marketers, salespeople and other talent look for something worth building.

Pandora ran out of money in 2001. Their 50+ person team deferred $1.5 million in salaries. For two years. They believed.

Your partners have to believe.

Business development can grow your company to a massive scale. You need to show that you can add value to their users, that you'll be around for a year. They need need assurances before sending thousands or millions of customers your way.

Bill Gates licensed software to IBM before he owned it. This became a company making partnership. IBM believed that Microsoft would add value to their users.

This all goes back to the beginning, when you are the only believer. You don't have any customers, the press won't write about you, investors won't talk to you, employees don't apply and partners don't know you exist.

Your job as a founder is to create believers.

There’s always talk that we’re in a tech bubble. I heard about it when we raised our first round. Then, heard it again when we raised our second round.

It’s never easy to know if we’re in a bubble — if we were, all of those people writing about it should be shorting tech stocks. The bubble writers would be the richest people in the industry. I’d love to read an article like this: 1) We’re in a bubble and 2) I’m shorting tech stock.

Since not everyone wants to short stock there’s a less dramatic way to hedge against a bubble.

Grow revenue.

Many companies raise enough money for 18-24 months of runway. If capital becomes unavailable for two years, all of those companies will likely get wiped out. If you have enough revenue, you won’t be one of those companies.

Revenue means that you can weather a storm. Capital markets dry up during market corrections. In 2008, even amazing companies couldn't get capital. But, if you had capital from revenue, there was amazing talent available to hire, ad campaigns you could cheaply buy, plenty of inexpensive office space and cheap Aeron chairs on craigslist.

Revenue means that your customers are your investors. You don’t need the capital markets — your customers are the capital markets. You add value to your customer's lives, so they give you money.

Revenue means that your company is going to look really good to investors in a capital downturn because you’re one of the few companies that looks like you’ll weather the storm. Ironically, the companies that need the money the most will be the least attractive to investors.

It’s certainly possible that we’re in a bubble now — I wouldn’t know. If I did, I’d be shorting tech stocks and writing articles about how to tell the future. But, if you’re just slightly concerned funding won’t be around like this in the near future, grow revenue. At least you can get a head start. If you’re looking for tips on how to start growing revenue immediately, here’s a post I put together: 43 lessons growing from $0 to $1+ million in revenue, twice.

Good luck!

Guest post. Originally posted on The Next Web. 

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When we went out and raised the first time (four years ago), we hit our fundraising goal. We had additional investor interest and almost closed the round. Instead, our advisor pushed us to keep going and we raised two times that amount. The second time we raised, we took on three times our target.

It took our advisor serious effort to convince us the first time around (Investors and advisors: the crowd, the ringside, and your corner). We were worried about dilution and thought we had more than enough money to grow. Plus, like many founders, I wanted to get back to work since fundraising is a full time job.

Not only do I not regret raising that extra money, I’m insanely happy we did. The extra capital funded the development of HelloSign (after HelloFax) and got us to cash flow positive. If we hadn’t raised, I would have had to go pitch investors during one of our most important inflection moments, when we were building and launching HelloSign.

I continue to see founders stop raising when they still have investor interest and momentum. I’m not talking about tens of millions of dollars, but the difference between $500K and $1M or $2M. It’s the kind of difference that gives you another try when your first hypothesis doesn’t work out or allows you to scale your company during a financial crisis.

Here are some reasons to raise more than you think you need:

1. Your startup is generally a binary outcome – success or failure

Within reason, dilution doesn’t matter as much as just succeeding. Having enough time to solve the problem you need to solve is the most important. Everything else is secondary.

2. Think of the money in terms of how much it can increase the value of your company

If $1M dilutes you by 10 percent, can you add another 10 percent or more value? If yes, then raising is a no brainer. (Paul Graham: The Equity Equation)

3. Chalk up $500K to a pivot, the discovery process, being a first time founder or making dumb decisions

Fully loaded (monthly salary, insurance, office space, office cleaning, gear, snacks, and more), some of our investors say you should estimate each employee costing $10K-$20K per month. I thought that was BS, until we looked at the cost of office space and the tons of other expenses.

Regardless, at the lowest end of the spectrum consider this: 10 people, on zero revenue, spending five months working on the wrong thing, will cost you at least $500K. So whatever you calculate as what you need, build in another $500K.

4. If your company does well, growth capital doesn’t hurt (and hugely helps)

If you’re killing it, you now have extra fuel to put in the fire. You can take advantage of a game time opportunity, rather than needing to immediately raise more capital, which takes time. Plus, you may be in a financial crisis and not be able to raise growth capital even when you’ve built out the metrics proving that additional money would have an immediate ROI.

5. If your company doesn’t do well, you have time to fix it

If you’re in the middle of a pivot or still searching for the right users, extra money means extra time to fix things.

6. Even $1M on zero revenue doesn’t last long

Eighteen months goes faster than you’d imagine. If you’re raising for the first time, $500K or $1M seems like a mind-blowing amount of money. Then you calculate salaries, insurance (health, office, E&O, D&O), office space, legal fees, nice Apple cinema displays and other expenses you’ve never considered — on zero revenue. You may wake up one day to realize you’re out of money and your company has failed (Don’t be the startup that accidentally runs out of money).

7. You can acquire users with longer payback periods

If you have a profitable campaign with a six month payback period but not enough money to invest and wait for that money to come back, you’d have to shut down profitable campaigns. That’d be frustrating, since you’d literally have a profitable campaign on hand, but wouldn’t be able to take advantage of it. This is similar to number four.

For example, Box has the opportunity to invest in a really long pay back period since they raised a huge round and can afford the impact it has on cash flow. (These Numbers Show That Box CEO Aaron Levie Is A Genius)

8. The economy is like your crazy uncle — you never know what it will do next

In 2008 funding dried up. That was it. The financial markets took a dive. It was a bad time for many companies trying to raise. It was a time when investors with sterling reputations decided not to wire the money, even after committing. It was a time of huge uncertainty and a really bad time to raise.

The difference in a few days separated those who could raise and those would couldn’t, despite any company merits. It would have been nice to to have cash on hand to weather that kind of storm. Being unable to raise at these moments can kill your company and it often does. Never experienced a financial crisis? Talk to the founders that raised in 2008.

9. Your next raise is going to be harder

Each time you attempt to raise another round things get more difficult because the expectations increase and the valuation of your company is also supposed to increase.

One of the most jarring cut offs is between angel rounds and A rounds (The Series A crunch is hitting now. Have we even noticed?). Angel rounds are about the vision. The following rounds are about your numbers. Vision is significantly easier than having the numbers.

The only thing that matters between the angel round and VC round is having enough runway (capital) to make sure you get your numbers. Raising without the numbers is extremely difficult.

10. Lots of small angel rounds are distracting and demoralizing

Fundraising is highly distracting and fundraising every few months is even more distracting. I’ve seen companies in the middle stages where they’re not quite at the A round stage, but continually raising smaller amounts like $200K or $500K only to have to raise that amount again.

There are better ways to spend your time like running your company and making sure you hit your numbers for the next round. Constant fundraising may prevent you from hitting your numbers in the first place.

Just as important, having to continually raise can actually make it more difficult to raise altogether. It’s like a self fulfilling prophecy. If it looks like your company is having a hard time raising because of the repeated effort, it sends the signal that your company isn’t worth the investment. The more it looks like you’re struggling to raise, the harder it will be to raise.

11. Consolidation of legal costs

It costs a lot of money to raise. You may spend up to $30K or more on legal costs. That’s pretty painful, but it’s less painful when consolidated into one bigger round versus multiple smaller rounds.

12. With one caveat

Don’t be these founders: Too much funding, not enough action

Just like our advisor made the case to raise more, I’ve made the same arguments to founders. I usually just get a polite nod. We did the same polite nod, but we have an unusually insistent advisor, which is exactly what we needed. So, this is me being unusually insistent as well. Raise more than you think you need.

Read Next: 43 lessons growing from $0 to $1+ million in revenue, twice

Image credit: Shutterstock

I’ve interviewed a lot of jacks of all trades, masters of none. The problem is, they can’t do the one thing we need done really well, so we always pass. I’m starting to realize that we’re looking for the Jack (or Jane) of all trades, but master of one. They have at least one function that they focus on and absolutely kick ass at. 

At a startup, employees perform a lot of functions. I think that people oftentimes confuse an employee like that as a jack of all trades, master of none. But in reality, when we hire someone we’re looking for the best candidate for a specific role. In a scenario where both candidates are good at hustling, we’ll always take someone who’s specifically very good at marketing, for example, over someone who’s okay at a lot of things, but not great at any one given thing.

It’s important to ask yourself these questions:

“Who’s going to be the best at growing your userbase? An average marketer or the best marketer you can find?”

“ Who’s going to be part of a marketing team you’re building long term, someone who loves marketing or someone who just likes it?”

“Who’s going to build you the best possible product? A product manager who just dabbles in product, along with everything else, or someone who absolutely loves and kicks ass at it?”

If I were thinking about my career in the startup world, I’d think about the one area in which I could be the best. Would I be a great marketer or a great product person or something else? Then, I’d do the everything I could to be the best at that role. Whenever we interview someone who’s jumped from product, to marketing, to something else, we’re not sure how to think of how they’d fit in our company long term. At a certain point, the Jane of all trades need to focus on something, and when that happens, will she be the best person for that role? Just like most things, focus is really important. If I were getting started in the tech world, I'd think about where I could truly excel and focus on that. 

Going into a long weekend, I thought I'd share some of the books I've enjoyed reading recently. 

Let me know in the comments if there's anything you'd recommend!

Business / tech books
Zero to One: Notes on Startups, or How to Build the Future

The Score Takes Care of Itself: My Philosophy of Leadership

The 7 Habits of Highly Effective People

High Output Management

The Five Dysfunctions of a Team: A Leadership Fable

Good to Great: Why Some Companies Make the Leap...And Others Don't

Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future 

Lean In: Women, Work, and the Will to Lead 

The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

Guest post. Originally posted on The Next Web. 

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I realized the other day that we’ve grown from $0 to $1 million with two separate products (HelloSign and HelloFax). This happened a long time ago, but I was recently reflecting on the lessons.

I found a lot of growth truisms to be false. We’ve learned a lot. Some lessons were painfully won, which is why I may sound strongly opinionated about them. They also may be slanted towards B2B products, but I wouldn’t discount them if you’re not in that space.

Here are our lessons:

1. Charge for your product as soon as possible. Really.

Every founder I talk to has a good reason for not charging for their product and it’s usually a bad reason. I remember office hours with Paul Graham. We explained that we were focusing on product now, but would focus on revenue later. He was confused, that somehow we saw a tradeoff between focusing on product and focusing on growth. Building product should equal growing revenue. People show they value your product by paying for it.

2. Revenue tells you what features to focus on

Charging is a powerful indicator that you’re building something people want. If you’re not charging, you’re likely spending money (development time = money) building features your users don’t really want. People who pay you have opinions about what to build next. Making them happy will lead to more people like them paying you (with this caveat: Don’t build a Galapagos product)

3. Focus on the right customer

YC and Paul Buchheit often say find one user and make her happy. I’d amend that. Find one user in a big market that has the highest LTV, lowest churn, and focus on making her happy. Otherwise, you may be boiling the ocean.

4. ‘You have a distribution problem, not a product problem.’

After one board meeting, our investor said, ‘you have a distribution problem, not a product problem.’ It’s a lot easier to change your message and re-focus on a different target market than completely changing your product. Do that before pivoting or rebuilding your product.

5. “Cheaper and better” doesn’t necessarily lead to higher conversions

Cheaper and better is another truism I found mostly false. Customers often doubt a product is better, because it’s cheaper. Strange, I know. I remember one of the Wufoo founders explaining the notion of being more expensive and better. Plus, if you charge more, you can invest more in product and truly make it better.

In fact, I met one CEO who deliberately priced his product higher than his competitors, just to get them to ask, ‘why’. Then, he’d pitch why his service was better than the competitors. When we split tested our pricing, just being cheaper didn’t lead to higher conversions.

Maybe there’s some scenarios where cheaper and better could make sense, but I think this truism needs to be questioned and perhaps the default truism should be reversed: be more expensive and better.

6. Being too cheap or free can lead to less growth

It turns out that distributing to businesses takes money and effort. They don’t just show up. Since we had cheaper plans, we couldn’t afford to reach out to more customers. But, with more expensive plans and a higher LTV, we can spend significantly more to acquire customers.

Being ‘cheaper’ and ‘better’ really just makes it so you can access less people.

7. There isn’t a strong correlation between beautiful design and success (in the early days)

Let me preface this by saying, we love design. I’m a huge fan of design and we’re making a big investment now. I think it’ll help us get to the next level.

I remember meeting with Garry Tan, who is an incredible designer. He mentioned that he hasn’t seen a strong correlation between good design and success of startup companies. So, if you have to choose, pick great user experience, then add great design later.

Conversely, focusing on pixel perfection in the early days may even prevent you from getting the revenue you need.

8. Free plans often make business leads feel uncomfortable

A huge customer wanted to use us for thousands of seats. Instead of being excited by our free plans, they just got confused. We lost them. That was painful. Not paying means that you may not be around forever. Paying money for software signals that they can depend on you for this really important function in the future.

Startups underprice all the time. As a business, we signed up for a $15 / month tool. I would have paid $100 / month for the value it provided. I had an unusual moment, where instead of getting excited about how inexpensive it was, I got nervous about using a key piece of software for only 15 dollars per month.

9. Don’t listen (too much) to your users on pricing

Innovate on your product, not the pricing. We’ve tried all types of innovative pricing models, often driven by our user-base, which have resulted in a lot of custom development. Ironically, when we switched back to industry standard pricing, the plans performed significantly better.

10. $5 / month is too cheap

If you’re a business tool and charge $5 / month, you’re likely leaving a lot of money on the table. Justin Kan said that we were running a charity. He was right. We doubled our prices. See #9.

11. Split test pricing early and often

Two years after launching, we doubled our pricing without an impact on churn or conversion. Since we grandfathered all of those users, we have two years of paid plans that could have been paying us $10 / month versus $5 / month. If we had done this split test earlier, we would have effectively doubled our revenue.

To visualize the impact, imagine a company with 1,000 paid customers:

$5 / month = $5,000 MRR (monthly recurring revenue) and $60,000 in ARR (annual recurring revenue).

$10 / month  = $10,000 MRR and $120,000 in ARR

That could be the difference between succeeding and failing as a company.

12. Try to be profitable, at least once

I often meet with founders who tell me that they’re working on free user growth. I’m going to say something controversial: with rare, rare exceptions, you should never just focus on free user growth at the expense of revenue unless you’ve previously been profitable or run a profitable company. I don’t think most new founders know how to make the optimal tradeoff between free and paid user growth.

I remember having office hours with Emmett Shear. I explained that we were focusing on user growth, at the expense of revenue growth. He asked if our company would be harmed by focusing on revenue for six months? From that moment on, we started one of the biggest revenue ramps we’ve ever had.

If you’re not convinced, you should read this amazing article by Mark Suster on revenue.

13. Your number of paid plans will gets messy, and that’s ok

I remember being reluctant to split test pricing plans, since it’d produce more paid plans to support. Then, we did it. Sure, it’s extra work to support them, but it’s well worth it to double your revenue.

14. Prosumers have higher churn

Yep, and the difference is dramatic.

The only way for prosumers to potentially work is if they have an extremely high frequency activity with your product – something they do so often, they see so much value, that they pay, like Evernote or Dropbox. Plus, there really needs to be a massive number of people that could use your software. However, that type of mass market prosumer software is few and far between.

15. The Dropbox referral page is amazing for Dropbox, but does it work for you?

Dropbox has an amazing referral page, where users can perform actions, like inviting friends, in exchange for free storage. It’s been a big source of growth for them and I’ve seen a lot of other companies try it. Of all of the companies I’ve met, I’ve never heard of it becoming a meaningful source of growth.

16. “I don’t use it enough” or “It’s too expensive” means they’re the wrong customer

Some founders react to this feedback by lowering their prices. That’s typically the wrong thing to do. If someone doesn’t use a product often, she’ll always complain about the price, because she won’t see the value in it.

That just means she’s the wrong customer. Instead, find people that use your software often or fix a bigger pain point. See #3.

17. Startups will probably be your first users and complain the most about pricing

Be careful about listening to them, otherwise you may start developing your product or pricing in unnatural ways, which have nothing to do with the real market. We’ve done that and regretted it.

18. Free users make the most noise, but pay the least

We certainly give the best support possible to our free users, but we take their feature requests with a grain of salt. If you listen too closely, you may take your product in suboptimal directions. Build features for the people that pay you.

19. Month on Month (MoM) growth is key

I can’t emphasize this enough. This is what separates lifestyle businesses and startups (PG: Startups = Growth). Build 20 percent+ MoM growth and you could be the next Dropbox.

20. It takes years to stack revenue

Even with high growth, revenue takes time to grow. Average IPO is 7-13 years. It takes time to stack paid plans every year. But, if you have high MoM growth and minimize churn over time, revenue adds up.

Image credit: Pando

21. Eventually, you need marketing and sales

The danger of the product CEO is that when you love product, every solution is a product solution. Dropbox is one of the very, very, very few companies where this worked out – a group of MIT grads sitting in a room, building great product and viral loops.

However, in the more common world, word of mouth only gets you so far. Marketing, Sales and BD are what make companies grow. Great product just makes it easier.

I met with someone who buys startup companies at low prices that are running out of money. He then implements very standard tactics to make them grow revenue. None of these things are rocket science. These companies then turn into revenue machines. His impact is immediate and mind-blowing.

It’s unfortunate that the founders missed the chance to drive it themselves. Founders will often wait for a natural lift in growth and will keep changing their product until it gets there – even when changing the product no longer make sense.

22. Small variances in churn can have a massive impact on revenue growth over time

This is the best graph on churn I’ve seen. Small differences in churn has an exponential impact on your MRR over time. See below.

Unless you get control of churn, your growth will eventually stop, since churn will cancel out any new upgrades. It’ll become more and more difficult to replace churned users over time.

Image credit: dskok

23. Annual plans are amazing. Implement them ASAP.

You offer your users a discount for the year and in exchange, you get approximately 10 months worth of revenue right away (depending on how you discount), rather than one month of revenue each month. That can easily make the difference between being cash flow positive and burning money. It can also reduce churn and many of your customers prefer them. Win, win. Plus, when those renewals hit after one year, your revenue takes a big jump. If I were you, I’d implement annual plans ASAP.

24. Engagement is a leading indicator for revenue

Engagement is flat, but revenue growth steady? That probably won’t last. There’s only so much you can do before paid upgrades decrease.

25. Focus on a limited number of metrics

As much as I love metrics, focus your attention on just a few. I’d pick one revenue growth metric, one churn metric and one engagement metric to start. Then, grow your metrics dashboard over time. When you do, implement this one.

We started out with a metrics setup that was really complex and all we got was a lot of wasted time and an important lesson.

26. For fundraising, revenue growth slides are more powerful than free user growth slides

This may be controversial, but I completely pulled our free user growth slide from our deck and stuck it in the addendum. Investors were way more receptive to our pitch. Free user growth is just a proxy for future revenue. So, if you have revenue, just show that instead.

27. Hone in on ‘deal breaker features’, not feature requests

There’s something powerful about someone saying they won’t sign up unless you have X feature or canceling because you don’t do Y. Anyone can have a feature request. Few people will vote with their feet.

Building those deal breaker features will produce more revenue.

28. Always know your runway

I still meet with founders getting blindsided when they realize they’re almost out of money (Don’t be the startup that accidentally runs out of money). Knowing your runway allows you to make smart decisions about revenue and fundraising, early. Just knowing when you’ll run out of money is healthy, since it guides your daily decisions on revenue.

29. Your free users are for marketing

I remember an experienced CEO explaining to me that free users are just one part of the funnel. She thinks of supporting those free users as part of the marketing budget. They spread the word. They become engaged and upgrade later. But, think of them in that context.

30. Growth is not magic and it isn’t a black box

It’s something companies do or don’t. They do it well or don’t. There are tried and true tactics out there.

I see a lot of almost desperate innovating when it comes to growth. Sure, keep looking for the hacks and viral loops. Maybe you’ll come up with your own equivalent of the Dropbox referral page. But, while you’re doing that, there are a ton of sources of growth that are tried and true over the years. You just have to build those channels: BD, PPC, SEO, channel partners, PR, content, API evangelism, viral and more.

31. Business development can do wonders for revenue, if done right

We learned a lot of business development (BD) lessons, some of them were painful. There are a lot of pitfalls when it comes to doing BD when you’re a startup. But, it can (and has) become a huge source of growth. Here are some of the lessons I talked about at a talk at 500startups.

32. Doing paid advertising can improve your entire funnel

There’s nothing like paying money for advertising to make your entire funnel more disciplined. We changed our onboarding, emails, and pricing, all to make our campaigns profitable. The paid ads were only a minuscule part of our growth. But, the rest of the product hugely benefited from those optimizations.

33. Product market fit

Product market fit = entire team (product, bd, marketing, engineer) focused on one market & killing it, in a predictable way. That’s the end goal.

34. Do post mortems on every release

It’s humbling when you make a big investment on a feature, only to have no one use it or pay for it. Do this once and it completely changes how you think of every feature you build.

35. Customer development != growth

Do customer development to focus on the right users. But, don’t get stuck in customer development / research cycles. Customer development is important, but should have a completely different place in your mind as growth. I see lots of companies stuck in customer development cycles, but as a consequence, these companies might never focus on distribution.

36. All word of mouth growth makes some investors nervous

Word of mouth is nice, but it’s not predictable. You need predictable growth.

37. If you build it, they won’t just come

I’ve seen companies go under, waiting for the users to come. They never came.

38. It’s less stressful when you generate revenue

Startups can be stressful. A lot of people have written about founder depression – it’s a real thing. Sam talks about how founders have a lot of weight on their shoulders. Having revenue can significantly ease that weight.

39. Put together a hypothetical pricing page with a spreadsheet and how it’d look when you fill it out with features

That spreadsheet will help guide product development, since everything is connected to revenue. Put higher value features on the higher plans.

40. Customers don’t price shop as much as you think

Our price, in relation to our competitors, doesn’t come up often. Sometimes we’re more expensive, yet we might still win the deal. So, don’t become too obsessed with your competitor’s prices. Just optimize for your users.

41. If you’re only winning on price, rethink the value you add

Unless you’re Amazon, a price war can be brutal. Instead of being cheaper, think about how to differentiate.

42. Consumers and businesses behave differently when it comes to money

As a company, we pay a huge amount of money for software and don’t flinch, but in my personal life, I’m still on a free Spotify account. Many founders don’t have real work experience before starting a company, myself included. Without being in a work environment, it’s hard for a founder can imagine how much companies pay for software, which leads to underpricing their product.

43. If you’re a SaaS product, read this post over and over again

This is easily the best SaaS analytics post I’ve read. 

Revenue isn’t a bad thing. Want to know what we do with revenue? We support a team of terrific people that help us build and support this product. Every day we make the product better, because we have revenue. The more revenue you have, the better you can make your product for your customers.

For some reason, the mental default for founders is that their product should be free – and charging needs to be justified. The inverse should be true – the mental default should be that your product should be paid and being free should be justified.

In fact, most pricing truisms should be reversed. Statements like “cheaper and better” should need to be justified, instead of spoken and accepted as truth.

Today is a good day to grow revenue! No reason to wait. I find it weird that I meet with founders and have to convince them that growing revenue is important. Then, runway decreases, they can’t raise, the game is over and everyone acts surprised. (Don’t be the startup that accidentally runs out of money)

In fact, if you this figured out, you may get to the mythical, ‘infinite runway’. Then, if you want, you can turn on the spigot and operate at a loss in exchange for revenue growth. That’s the moment increasing your burn rate for growth makes sense, but rarely before.

Years ago, I was interviewing a marketing candidate. I asked general questions about how she could meet certain growth goals and she talked about the marketing campaigns she would put in place for us, like SEO, social, PPC and more. 

After the meeting, I thought over whether she'd be a good fit. I realized that I had absolutely no idea how well she'd perform. The things I learned were too generic and nebulous to evaluate.

Anyone can suggest SEO, PPC, PR or any of a dozen other marketing strategies. Plus, it turns out that if you ask if someone can do something, 95% of the time they’ll say yes, which is very unhelpful in assessing a candidate.

Now I focus the vast majority of every interview asking about what people have done, rather than what they could do. What’s the best campaign you’ve launched? Was it successful? What metrics did you track? Did you make any mistakes? If so, what were they? What was your biggest management challenge? Then, I do a deep dive into each of these areas and try to understand what they did and how they interacted with others. I found that the great candidates really enjoy these deep dives, since it gives them an opportunity to really show their skill set and experience.

I remember office hours with Paul Graham in 2011, when we were giving yet another excuse for waiting to launch. We wanted to build x,y and z features before launching. Paul Graham advised - 

“Launch when you have a quantum of utility”

We launched and it was the best decision we made. Instead of building what we thought users wanted, we could talk to our users and ask what they wanted.

There’s a tendency of new founders to wait almost indefinitely before launching. I’m always surprised when I meet with these type of founders. Everyone has heard that you should launch fast, yet the founders I meet always have a reason why it doesn’t apply to them.

There's a company I used to know that went months and months without launching. It seems like everyone knows a company like this.

One month becomes two, then three, then four and still no launch. It makes me nervous. I wondered, what are you working on that absolutely needs to be built before launch? When I hear the features that they absolutely need before launch - none of them seem like show stoppers.

They were wasting money and time - the scarcest resources as a startup - on something they didn’t know their users needed. The more time that passes before you have a live product and you're talking to customers, the more likely you're building something you think your users want, versus what they actually want.

When I think of the massive lists of features that founders have to build pre-launch - I always have this image of the Coyote running on air. Last minute, he looks down and realizes he’s not standing on anything and falls. These founders have never launched a product before, so it isn’t their entrepreneurial experience that is telling them to wait. 

I can’t tell you how many times I’ve had this conversation. A founder is about to raise their first round and asking me how to value their company. [1]

There’s a reason it’s so difficult to figure out - valuations have little basis in reality for early stage companies. You evaluate the team, product, market and other variables - then, make a general guess.

Before I go on, if you read nothing else, read this:

Your #1 goals is to get your company funded, so you can build a big business. Funding lets you invest in growing your company faster than revenue growth would normally allow. Do what you can to get your company funded and get back to work generating value.

Here are some ways to value your company:

1. Market size

A big market determines the upside potential. In a world where only the 1000x companies make back portfolios, this is really important. [2]  This can often justify a higher valuations - and for good reason. For some investors, this is the most important attribute and they won’t invest unless it’s a huge market.

2. Revenue

Revenue is how traditional businesses get valued. Early stage companies often don’t have revenue or have revenue so low, it’s not a real indicator of future potential. Companies like Facebook and Twitter didn’t figure out revenue for a long time. This is the main reason the process of picking a valuation can feel so ambiguous. With that said, if you have revenue, this is something you should emphasize.

3. Month on month (MoM) growth

To become a big company, you need high MoM growth for years (PG: Startups = Growth). 20% MoM growth is the gold standard - the longer and more consistent you hit high MoM growth, the better. Even a product an investor doesn’t fully understand - for example, an app that self-destructs the photos it shares - starts to look really good with high MoM growth. This works for revenue or active users.

4. Active users

Free, engaged users are a proxy for revenue, as long as you understand when a free user is valuable and when it isn’t. The threshold is generally higher for consumer startups (Ten million users is the new one million). Moreover, the engagement of your paid users are also important, even though they’re paying you, since it’s a leading indicator of churn.

5. Team

Everyone talks about the Stanford / MIT teams. It certainly can help boost a valuation, but isn’t necessary. Domain expertise can also help.

6. Valuations of other companies like you

Relationally, you can compare your valuation to other companies on Angellist, Y Combinator, 500 Startups or elsewhere.

7. Acquisitions of other companies like you

This is helpful in determining a valuation, since it shows real liquidity for what companies will pay for a company like you, instead of what an investor will pay to invest.

8. Raising momentum / high demand

This method of valuing a company is further from reality than most attributes. If your company is in high demand, it drives the potential valuation up. Hopefully, it’s in high demand for good reasons, otherwise you risk a down round in the future.

9. Accelerator

Being part of an accelerator can help your valuation, since you’ve at least been partially vetted, which decreases some, but definitely not all, of the risk.

Things to note about valuation:

1. Your outcome will likely be binary

I spoke to a YC class about fundraising a few years ago and I still believe this - I’d rather raise $1m at a lower cap than $100k at a higher cap. The former will get us to the next stage as a company. The latter won’t be enough money to grow and without the capital to grow, could risk failing or a down round.

2. The valuation only exists if investors validate it

Traditionally, there’s a lead investor that validates a valuation, but a lot of companies now raise without a lead. By getting a few investors to buy in at a specific valuation, they’re effectively validating the amount. Either way, your valuation doesn’t truly exist until it’s validated.

3. Don’t risk a down round

A down round happens when the valuation of your next round is less than your current round. No one comes away from that undamaged. That can happen when people are too aggressive about their valuation in that first round. Don’t let that be you.

4. Terms often matter more than the valuation

For a higher valuation, you may be giving up some control, like a board seat. I’ve also seen people raise on 2x+ pro-rata, which means that the investor has the option of doubling their stake in the following round, which I think is generally a bad idea. I’d keep your terms as clean and standard as possible. [3]

5. Valuation pride

Why do people push super high valuations? It’s one of the few moments in your company’s history where you can get a stamp of validation. Just like good grades or good schools help drive your self-worth, a great valuation can do that too. It’s something you can tell others or use to compare. So, the bigger the stamp, the more likely you’re seemingly doing well. Don’t be tempted by this.

6. Map out multiple stages of financing

Take a moment and project out your equity over multiple rounds of financing. You need to make sure there’s enough equity to sell, while keeping enough equity for the founders and team. I hear of companies that sell 50% of their company for a few hundred thousands dollars. That won’t leave enough equity to sell for future financing rounds. (The Benefits of Building a Company in the Bay Area)

7. Drive for a ‘fair’ valuation

That probably depends a lot per company, but I kept that word in my head as I figured everything out.  

8. Make sure your valuation doesn’t exclude great investors

Even though it’s hard to know an investor’s value add in advance, make sure you’re not picking a valuation that prevents great investors from investing (Investors and advisors: the crowd, the ringside, and your corner). Note, if it’s a great company, not all great investors will walk away from a high valuation (Sam Altman: Upside risk).

9. Be nice

Invariably, you’ll run into investors that think your valuation is too high. The only right behavior is to be consistently nice and explain your thought process (Treat investors well when fundraising).

10. Valuation versus percentage ownership

Some investors are more interested in the percentage of the company they own, versus the valuation. In that way, you might end up with a higher valuation than you would have had otherwise. You can certainly take this approach to picking a valuation, but just make sure you’ll be able to at least grow into that valuation - preferably grow significantly past it - by the time you raise your next round.

You’ve probably noticed at this point that there’s no clean formula. Even though it’s inexact, investors will want to know the thought process behind the valuation you pick.

Certainly, there are bad valuations, but there’s a larger range of gradations of good valuations and I wouldn’t stress about small differences between the gradations in the good range.

Good luck figuring this out. The key is to not spend too much time thinking about it. Some incredible companies, like Dropbox and Airbnb, got valuations that would seem extremely low in this market for their first rounds.

In the end, it’s your ability to execute that will turn your company into a big one - not your valuation. It’s more important to close the round, get the money in the bank and get back to building.

Would love to hear what you’ve learned about valuing early stage companies in the comments.

—

[1] This is mainly about your first round. I think a lot of the lessons can apply to later rounds though.

[2] Articles on needing the companies with 1000x returns to justify your portfolio:
Black swans
Upside risk

[3] YC has standard docs you can use. 

We were comparing two SaaS applications. One gave us a better quote, so we asked the second if they would match it. They wouldn’t, but their founder, wrote us an email explaining: 

Subject: Re: demo follow up

No worries...  short answer is no, we aren't able to compete on price against FooCorp.

The FooCorps's of the world have spent a couple decades now in a the race to the bottom and it shows.  I have no doubt you can get their product (or a whole raft of others) for a few bucks cheaper than us.

Our product, Acme, is different.  We're designed to help improve your'e company's performance in the critical area of XYZ.  The ROI on doing that is enormous.  

Now, not every organization sees the value in investing in XYZ.  I get that.  But if yours does, Acme is one of the most leveraged investments you can make.

Assume HelloSign does 5-6 transactions in the [XYZ field], that's going to run 300-600k per year (so figure this is a $1-2MM investment over 3 years).  The value of each transaction will be maybe 2-5x that if they're done well, whereas a bad one we know can actually destroy value.

On the cost side, great transactions churn over at less than half the rate of low performing ones - which means if you do a better job at XYZ,  you'll save 10's of thousands in new transaction costs as they stay longer.  And on and on....  

So ultimately if you think Acme will help you do this better - even just a little bit - the whole thing is peanuts.  The cost difference between our product and the others, even less.  

Look, FooCorp's customers are switching to Acme in droves because we're investing heavily in great customer service and innovation.  Those things cost money but, as we see above, they drive tons of value so the market is happy to pay.  

We'd love to have HelloSign on board as a customer and I'd be happy to have another chat with you or them if you think it would be useful.  Let me know!

Regards,

Acme CEO

It’s a big year for HelloSign. We’ve grown from 11 people to 26 people so far this year and we’re looking to double again in the next year.

In 2010, I moved myself and the company from Minnesota to San Francisco. There’s no way we would have been able to build HelloSign in Minnesota.

Every week or so, I hear about a new city that’s trying to become the ‘next Silicon Valley’ or someone explaining to me that Minnesota is a great place to build a tech company.

You certainly can create a good company anywhere. You can also sprint at 20,000 feet. It’s just significantly harder and you’ll be giving yourself a handicap.

If you'd like to see this topic discussed at SXSW Interactive, vote for the panel in the SXSW panel picker. 

Here are seven reasons I moved:

1. Capital

There is a unique ecosystem of angel investors and venture capitalists in the Bay Area. It’s unparalleled for tech companies anywhere in the world.

Over the past 40+ years, the large exits and IPOs (Facebook, Google, Yahoo, eBay and more) have fueled and justified the next funds at VC firms. And they've produced a new batch of rich individuals who’ve become angel investors.

It’s this group’s unique understanding and affinity for tech that has helped produce incredible returns on investments -- which in turn has justified more capital entering the ecosystem -- which have in turn funded more great companies and so on.

We raised capital in the Bay Area in 2011. While we were fundraising and bloggers were calling the environment ‘frothy,’ the Minnesota Star Tribune wrote a long article about how angel investors in Minnesota were cutting back. These are two very different worlds.

2. High concentration of specialized knowledge

Knowledge is almost just as valuable as capital. Within walking distance of our office, you can talk to the people who built Twitter from the ground up and experts on viral growth. Want to learn about SaaS metrics? Reach out to the companies that set the SaaS standard -- like Dropbox, Box, Evernote and others. Even with their level of success, these people are remarkably open and accessible.

3. Culture of risk

My cofounder quit his full-time job at Tripit to take a risk building this company. In Minnesota, I’d be hard pressed to get anyone to quit their job to join a risky startup. Since there’s a lack of capital in Minnesota, starting a company is significantly harder for anyone with a family or any other life expenses.

3. Valuations

Valuations are significantly better in the Bay Area. Since there is a super high concentration of billion dollar tech companies, the returns justify the higher valuations. As one investor explained to me, it’s the Facebooks, Googles and Dropboxes of the world that make this possible.

Moreover, there is a high concentration of investors competing for the best deals, which produces a better market price on equity. Certainly, a too high valuation can also be harmful, since it risks a down round. With that said, over the course of multiple rounds, you need to maintain enough equity to fuel growth. If you sell too much, too early, it can stunt your future growth potential.

Outside of the Valley, one founder explained to me that it’s not uncommon to sell 50% of a company for a few hundred thousand dollars. If it’s a capital intensive business, it’s unlikely they'll have enough equity left to sell in order to make it into a big company. Investors, getting too much of a good thing, get a bad thing, which prevents their portfolio’s ability to grow.

4. Legal terms

It’s not uncommon to see companies move to the Bay Area and be stuck with crazy investment terms from a previous angel investor.

Let’s say an investor who’s invested $10k has the ability to veto an acquisition. Not only do custom terms cost a lot of money in extra legal costs, it can also scuttle a company’s ability to raise future rounds, since this small investor has an outsized impact on the future of the company.

Because of the sheer number of deals that happen in the Bay Areas, norms on what is reasonable and not reasonable have developed.

5. “Trust-based ecosystem”

Garry Tan explained to me once that Silicon Valley is a trust-based ecosystem.

Just like repeat interactions in the prisoners dilemma produce better behavior, so do repeat interactions in Bay Area. Founders and investors know that if they behave badly, they’ll get cut out of great deals in the future.

6. Community versus isolation

Ben Horowitz explains that the most difficult job as a founder is managing one's own psychology.

In Minnesota, no one understood what I was doing or why it was worth it. I constantly felt like a foreigner. I even remember demoing our product to a family member and the person just walked away. The day I moved out here, I demoed it for a friend - he was so enthusiastic about it that he then started introducing me to his friends. After working on the product for nine months in Minnesota, I never experienced that level of enthusiasm from anyone.

Starting a company is hard and doing it in isolation is even harder. In the Bay Area, you’re surrounded by a community of people who understand. That makes a huge difference when you’re building a company.

7. Business development and integrations (growth)

This is a huge source of growth for us.

The vast majority of the companies we work with are within driving distance. In the event there’s an opportunity, we can meet in person. I’m very confident that business development wouldn’t have been a source of growth from Minnesota. Here's a talk I gave last year at 500 Startups unSEXY conference about business development.

It’s hard to evaluate odds. Especially with outliers and a desire not to move. Groupon was based in the midwest (Chicago). Startups are generally binary. So, anything you can do to stack the odds in your favor, you should do. If it takes moving to the Bay Area to increase the chance that you’ll succeed, I would (and did) do that.

There are 33 more reasons to move, I just ran out of time. Vote for the panel and share your comments on SXSW Interactive's panel picker and I'll share more reasons to move! 

Photo credit

I mentally ran the math (# of potential investors, amount they could invest, potential conversion rate and time allocated) and there was no way he was going to close the ~$1 million round he intended.

Indefinite raising is also a negative signal. Just like a house that stays on the market too long, deals get old and become increasingly less likely to close.

Here are some checks to make sure you don’t set up your angel round to fail:

1. Do the math

• Number of investors you’re pitching
• Range they'd invest (i.e., $25k - $50k, $100k - $200k)
• How many people you could close - run several conversion scenarios

If you need a 100% close rate to fill 75% of your round, it won’t be enough. It’s highly unlikely you’ll be able to get a 100% close rate. Many investors passed on Dropbox and Airbnb.

Need to talk to more investors? I wrote a post awhile back that could help: 10 Places to Source Investor Meetings

2. Target a 1-2 month raise. No traction? Stop raising

You want to find out as fast as possible if your company is fundable or not. Consolidate all of your learnings into as short of a time period as possible, so if you’re not getting traction, you get back to work. Remember, it’s the work you do on your company that makes you more fundable - and permanently fundraising can prevent you from creating any value.

If it’s obvious you’re not getting traction, stop. It’s not only a waste of time and a company that raises indefinitely is a negative signal.

4. Have > 6 months runway when you raise

Make sure you have 6 months of runway left before you start fundraising. The number of founders I meet that don't know their runway is terrifying. (Don’t be the startup that accidentally runs out of money)

With > 6 months, you have a few months to raise, while also running a backup plan, which may be profitability or an acquisition. If you wait until you have 1 month left in the bank, you run a huge risk that your company will fold; if you do find investors, the terms will likely be bad because your BATNA is going under.

5. Set your minimum target carefully

Many founders give a range of how much they’d like to raise. For example, targeting $300 - $500k, $750k - $1m or some other target range.

What founders don’t realize is that some investors consider getting to the minimum as part of the investment deal. Investors may commit, but if you’re raising $300k and only get to $200k, they might not transfer the money. If you think about it, that logic sort of makes sense, since your company will need the capital to execute on the plan you pitched. They may want the money to be held in escrow or wait until for confirmation that the minimum amount has been transferred.  

Other investors won’t ask and will transfer the money immediately. For those that asked us, we sent a screenshot of our bank account to confirm that we hit our minimum.

6. Don't be sneaky

Sometimes I meet founders that try to game the fundraising process. One of our advisors explained that investors are pros at fundraising. They do this all the time. Founders rarely do fundraise. I always felt I was playing t-ball against pros - I sent that t-ball photo to one of our investors to show how it felt :).

It's unlikely that you'll out game or out maneuver anyone.  By trying, you may just end up burning bridges and scuttle a relationship that should be built on trust.

The solution is simple: don’t try to game anyone. Just be nice, honest and straightforward about what you're doing and try to find good partners.  (Treat investors well when fundraising)

7. The valley remembers

I heard Garry Tan say something that stuck with me - Silicon Valley is a trust based ecosystem. That’s great for people that are trustworthy, not good for people that aren’t. So, be the former.

If it seems like you’re setting your round up to fail, the good news is that you can fix those issues or just focus on building out your business. You can still build relationships with investors, but explain that you’re not fundraising - you’re just looking for advice (Meeting with Busy People). In the end, it’s a combination of good relationships and a good business that will help you get funded. [1]

--

People often advise raising more than you think you need. Years ago, we raised double what we intended and it had a hugely positive impact on the company. (Investors and advisors: the crowd, the ringside, and your corner)

• Raises a lot of money (3+ years of runway)
• Doesn’t focus on revenue and / or engagement
• Hires haphazardly
• Doesn’t have a board or external pressure [1]
• Doesn’t run projections (Don’t be the startup that accidentally runs out of money)
• Doesn’t execute on a plan or build deliberately

Stephen Levy recently wrote about a team of YC alumni, Google and others to help fix HealthCare.gov. They've made a huge impact. 

Over the last couple of weeks I've been talking to Todd Park and Jennifer Pahlka, White House CTO, and Deputy CTO respectively, about putting together a team to help address the technical issues around the Veteran's Administration, I'm sure you've read the news about how people have been dying waiting for treatment. Program would look a lot like the healthcare.gov rescue. I was trying to see if I could take 3-4 months off from Greylock to work on it, but it's just not possible right now. There are a couple things I would ask the group to try and help.

1. They need a talent leader who can help bring 20 or so folks, mix of professional services, design, engineering, data scientists and SREs. They'd also be working with companies like Facebook & Google who are looking at donating developer time to. Person should be pretty senior and be able to identify the right ICs and leaders.

2. Helping the come up with the 20 people who will actually be doing the work. Positions are paid, but they're in the 100-150 range, so the right person will probably already have made some money and want to work on something meaningful.

Happy to talk to anyone who's interested in learning more. Dan 

“I refuse to join a club that would have me for a member” - Groucho Marx

HelloSign had a big spike in support needs awhile back. The growth was great, but at the time, we didn’t have enough support people to meet that growth. Since we’re committed to closing out every ticket each day, the support team worked long hours to meet demand.  [1]

1. The team will be more effective

When people are at capacity, they can’t think of efficiencies and improvements. They can only solve issues on a case by case basis, instead of having the space and time to think holistically. Holistic thinking, not working until exhaustion, is what produces efficiency.

2. People stay at the company longer

Many of the resumes we see have people staying at companies a transient 1-2 years. Many of them were overwhelmed at their previous positions (see Your company should never be frantic). Finding the right people to join your company is a huge effort. Having a consistent group of people solving an important problem over a long period of time is what produces great companies, not a revolving door of burnt out people.

3. Team morale will be better

If a startup is doing well, it will hit capacity often. Startups are built for growth (see Startups = Growth). Growth creates issues, which is why people join startups - it’s fun and challenging. That doesn’t mean you accept all growth issues. It means it’s important to solve as many growth issues in advance that are under your control. That way, the team can more easily handle capacity moments when they come.

4. Customers will be happier

Imagine: you build a product, spend money on growth and when new customers email you -  their first interaction with a person at your company is a negative one. The team doesn’t have time to properly think through a customer question or replies several days later. Phenomenal, expedient support is a startup’s major advantage - an advantage that should never be ceded to competitors. We have an incredible team, but even the most dedicated people can only do so much over long periods of time.

I remember showing HelloSign to a family member. He barely took a look before getting distracted and walking away. Of all people, you’d imagine that family would be the easiest sell. Yet, working on a company comes with a lot of rejection, whether it’s apathy, passing on an investment, or a user not signing up (The rejection book). I see a lot of founders resent these people. 

I’ve grown to think of rejection differently: I collect my naysayers.  For some reason, I love these people. The bigger the group, the more I’m energized to prove them wrong.

I treat them well, stay in touch and often become friends (Treat investors well when fundraising). Over the years, some of them have even become investors or signed up as HelloSign users. My favorite naysayers are the ones that articulate why they don't believe. They take the time to call or write an email with their feedback. I often learn the most from these people. Then, if we raise, they’re often the first we talk to. 

I remember hearing about a company with an extremely charismatic CEO. The company wasn't doing well, but he was a compelling individual. He'd give a talk and the team couldn't help but believe in the vision. Investors believed too. Everyone got a jolt of energy. 

A few years ago, I met a founder with only two months of runway left. In two months, his company would shut down because he didn’t have any cash to support it. He wanted to discuss whether he should start fundraising for his second round. That’s some scary shit. We should have had that talk when he had 6 months of runway left.

• You don’t know how much runway you have left (i.e., you could run out of money in 1 month, 3 months or 9 months. Your startup death day is unclear)
• You know your runway, have less than 6 months of cash and you’re not executing a plan to fix the situation.  

When you have less than 6 months of cash in the bank, what do you do? The options are pretty simple:

1. Get profitable (increase revenue, decrease burn or do both)
   
2. Raise more money
   
3. Get acquired
   
4. Get blindsided when you run out of money because you didn’t have enough time to execute on 1, 2, or 3.
   

I remember meeting up with a new founder who was stressed about the fundraising process. Fundraising can certainly feel stressful, but I realized that most of the issues could have been solved by asking the right questions. When you’re less confused about the process, it makes the process more predictable.

Here are some questions I found helpful to ask when meeting investors:

1. What kind of companies do you invest in? 

If the investor focuses on biotech, it's unlikely she'll invest in your SaaS company. If you get a pass, you'll now know that it had nothing to do with you. 

2. Who else have you invested in? 

If she hasn't invested before, she may not be well suited to the ups and downs of startups.  The stress may make them want to become extremely involved; instead of being helpful, the investor may be harmful. There are few things I avoid more than having the wrong people permanently involved in the company.

3. How much do you normally invest? Is there a range? 

It helps you mentally map out your round. If everyone invests $10,000, it’ll take a long time to fill your $1m round. This also helps you determine if you are talking to enough investors.

If there is a range, you can always the take smaller amount if there is not enough room left in your round. 

4. How does your decision process work? 

If you understand the process, it’s less likely to feel like a jarring experience, since the investor will be doing what she said she would do. Even if she deviates, you will still know the general path. 

Angel investors often decide on the spot or will want to sleep on it. For VCs, it depends on the firm. Seed investments can be fast and often close in one meeting. Larger rounds are slower and often involve multiple partners. 

5. How much time do you spend with your portfolio companies?

It's helpful to know their expected involvement in advance, to see if an investor will be in the crowd, the ringside, or your corner.

You want to be careful of people who could distract you without adding value. 

6. How many boards are you on? (for VCs) 

This is important to know, because if the investor is currently sitting on a lot of boards, she may not be able to invest a lot of time in your company or may be unlikely to make an investment at all. It’s not necessarily a deal breaker, but just good to know.

7. Now that you know more about what we're doing, are there any other investors I should be talking to?

The investor might provide an intro or might not. Regardless, some great investors keep a low profile. Just knowing a name helps, since you can ask for an intro from someone else. 

I hear about investors or advisers as either 'helpful' or 'unhelpful'. I think that misses the nuance of the kind of people you need involved.

To get the support you need, it’s important to be deliberate about how you pull together this key group of people; the right individuals can have a significant impact on your outcome of your company.

Here are the categories, as I see them:

1. There's the crowd. These people will invest in your round. Some of them are incredibly accomplished people and it's an honor to have them involved. But, aside from the investor updates, you'll rarely stay in touch. That's completely normal; they might have even said they would be busy before they made the investment. Every financing round has investors that won't be very involved.

2. There's the ringside. These people have been in the game before. They have expertise - whether in user acquisition, product, sales or something else. They are helpful and you can reach out to them on a case by case basis. But, you don't want to ask too much or too often. They are busy people and not completely up to date on the nuance of what you're doing.

3. There are those in your corner. You can call them up a dozen times during your financing rounds. They reply to a Saturday night email in five minutes to talk about a time sensitive deal. They are up to date on where you are as a company; there is no background ramp up when you talk to them. That means they'll know what you've tried, what worked and what hasn't - so they can give up to date advice.

If it's not immediately obvious who's in your corner, it means you don't have someone there. Not every investor or adviser can be in your corner. That’s not even something you’d necessarily want; not everyone would fit.

A few years ago, I remember a late night, debating an investment offer. If we took it, it would close the round, but we had another offer coming in soon. Do we risk losing the first offer and wait for the second offer? I emailed our adviser and got an immediate reply. We talked it over and decided on an approach. We ended up raising twice as much money. That money allowed us to build HelloSign. He was in our corner. 

A few years ago, I remember talking to someone on the team and saying that we had to grow faster; the status quo wasn’t working. He mentioned that to another person on the team. When I ran into that second person on the bus, he was really stressed. I inadvertently created stress about a problem, but didn't communicate a solution. Everyone could feel it, even though I only talked to one person. In retrospect, I was setting us up for frantic effort; we were about to approach the problem in an unstructured, un-prioritized way. That’s no way to solve a problem.

I've seen companies with determined effort and companies with frantic effort. There’s a huge difference.

Frantic effort is when you have so much to do, you are not sure why you're doing it or why it’s better than other things you could potentially do. You haven't taken the time to prioritize. Instead of focusing, you jump from one thing to the next, like you're chasing a trail of shiny objects. It's a nervous energy that starts at the top of the company and works it's way down. People are confused about the right path, so their solution is to just work more and harder toward goals and for reasons that are hard to articulate. The team works hard without understanding, reflection or vision. It's scary to be part of a frantic company. It's also exhausting and demoralizing.

Determined effort is when you know what you're doing and why you're doing it. You know exactly what you are building and its trade-offs. Even the things that you're not sure of are calculated bets. Everything you do produces more data towards the vision of the company. If you notice something isn’t working and need to change paths, it’s a conscious change. Determined effort doesn’t mean you’re locked in - it just means you make decisions with purpose and not out of anxiety.

Ironically, determined effort and frantic effort can take the exact same amount of time and effort, but not produce the same results. Determined effort lasts longer, is more focused, is less prone to burnout.

How do I know when someone has been at a frantic company? You can see it in their eyes when you interview them. They have the glossy, unfocused look that we all associate with burn out. There's also a kind of discontent about how their effort has been used. That company used up all their willpower going in many directions that no one fully understood.