Richard: You’re one of those few entrepreneurs that has also sat on the other side of the funding table. In fact you’ve switched from entrepreneur to VC and back again more than once. Having seen both sides of the equation what’s your advice to early stage entrepreneurs seeking investment on prioritizing the things that get the biggest return on their fund raising efforts?
Jason: Closing a financing in a timely fashion is all about creating catalyzing events that move investors through the process. Left to our own devices, investors can come up with an infinite number of questions and diligence items. There is no better catalyst than real business progress. Rather than philosophically debating “will customers buy,” show traction. In the absence of revenue, show users. In the absence of users, show a community. In the absence of a community, show uses cases based on real world potential users.
Richard: Your current position at Perkstreet has you wearing a few different hats . This type of multi-tasking role seems to be hard for first-time. How do you keep focused and aligned with the bigger picture without getting caught up in the infinite “to-do list” vortex?
Jason: I’ve modified the GTD process to meet the needs of a role with more hats and then resources and often little clarity on how to prioritize. It’s pretty simple actually but works well: I carry a Moleskin and thin Sharpie with me everywhere. Notes, follow ups, random thoughts and all get thrown in; action items requiring follow up have a box in front of them, questions a question mark and conclusions a dash. On a semi-weekly basis I split a 5×8 index card into 4 quadrants representing how I think about my work and fill in to do’s from both the Moleskin and thinking through the week ahead. On a daily basis, I select the 5 most important, value creating tasks and put them on a Post It attached to the card. If I make it through all 5, I pick more from the card. Partway through the week, I assess what’s been crossed off and what’s been hanging around on the list because it was never important enough to get to the Post It treatment. Occasionally I spin through the Moleskin (typically while waiting for a meeting to start or in line at Starbucks) and fill in the box associated with tasks that are completed or no longer relevant.
Richard: As another import from another city you’ve had to build your business network in Boston from scratch. If I compare my time in New York City with Boston, I’ve noticed that New Englander’s sometimes have a hard time making new connections. What’s your experience in networking been and do you have any advice on how a young entrepreneur might build their network?
I love so many things about New England including the tight knit community even though it can seem hard to break in and make connections. Becoming an effective networking is a skill that needs to be cultivated and is deeper than finding friendly people. The most important part of building a strong network is recognizing that a business relationship, like any relationship, is made up of two parties that have different needs and expectations. I find it startling the number of times that I’ll meet someone new and all they want to talk about is what they are doing. Inevitably it is followed by a LinkedIn request and then shortly after that a request for an introduction to someone else, typically a VC.
Building a network requires investment. Like many investments, it can take time to see results so you are better are off starting well before you need the payout. Building a network also requires an investment of time to get to know the other person in the relationship. Finally, it requires an investment of something valuable to that other party. This last part is where the rubber meets the road. Why should the other person in this networking relationship invest in you? This is more subtle than “what’s in it for me?” but not totally unrelated. There are only so many hours in the day and we each need to choose where they will go. Will you be seen as a positive reflection on me? Can you provide valuable insight into my business or introductions to potential customers? Is this a mentor relationship and if so, are you committed to learning? Will you be making investments into my network that even if it doesn’t directly help me, you’ve paid it forward?
Richard: As an investor and active entrepreneur you get to see a lot of cutting-edge business ideas. Are there trends you’re noticing that we should all be aware of and thinking about as we build our new businesses?
Jason: The one trend that I see that every entrepreneur needs to pay close attention to is the amount of noise in the marketplace. It’s not great insight to for me to comment that barriers to entry continue to fall and that there is an increasing availability of seed capital from angels, super angels, micro VCs and seed programs from big funds so more companies are out making noise which is competition for mind-share of customers, talent, funders and partners whether you are in direct competition or not. To succeed, businesses need a laser focus on what REALLY drives value for their customer to break out through the noise. It is easy as a “believer,” which includes founders, company members and existing investors, to see how a feature improves the life of the customer. From the customer perspective, that improvement might not translate to value because the customer doesn’t know they have that problem or in that area isn’t worth the cost of doing anything about it. When I was a VC, one of my partners and I used to call it the “7 minute ab syndrome” (based on the scene from Something About Mary). We’d end up with entrepreneurs in the office who were good, well meaning people but they’d gotten so wrapped up in the concept as game changing that they lost sight of does it meaningfully change the life of the target customer. As an entrepreneur, it is something we obsess about and one of the reasons we focus so heavily on LEAN’s test and learn approach. Things that are awesome in our own minds can fall tremendously flat when released to the wild because they don’t solve a problem the customer has or the benefit doesn’t outweigh the cost. You can tell when you’ve found something the customer values because suddenly it takes a lot less energy to get to the desired result – sign up rates go up with additional investment, attrition goes down, usage is up within an identifiable segment, it doesn’t matter the metric, you can see the step changes in output and know that you’ve created some value.
Richard: There has been a trend in venture backed companies to replace the founding team with a “hired gun”. I personally don’t like that approach and prefer to see investors backing the founders through all the stages of growth. What’s your perspective?
Jason: I’ve been on all sides of the replace the founder discussion. I’ve been replaced, I’ve replaced myself, I’ve been involved at the board level as an investor where we needed to make a change and I’ve had members of the senior team approach me to say they thought it was time to bring in someone new. In all these changes, I can’t say that there was one universal right answer like “always replace the founders”. I do know that there is an evolution to the leadership requirements of an organization and there are several traps founders can get themselves into at each stage that makes bringing in a hired gun a necessity. In many cases replacing the founders isn’t a judgment that they weren’t successful, but a mutual understanding that in order to be the right leader at each stage, it will require the team to grow. Personally, I’ve found that I’m best in a certain sweet spot of a company’s evolution and would rather get really good at playing that stage than follow a Steve Jobs or Bill Gates career path.
Here are the challenges as I see them facing entrepreneurial teams:
What you believe vs. what you know: an entrepreneur is born when an idea takes hold of a person’s mind for which no one else has a solution and the person is so compelled by the gap, they must fill this gap. The strength of this belief is so strong that over rides the sensibility of keeping a paying job or that surely someone else smarter/better funded/more insightful has already tried this and failed. It provides the passion to enlist others in the pursuit of the great vision and the steel in the belly to keep going when it going gets tough. Somewhere along the way, this great strength turns into a liability as the actual business takes a shape that is different than the original vision. Some founders do a great job evolving in this regard while for others it is a stretch.
Founder as a title: the early tribe of passionate employees often think of themselves as founders whether they were there on day one or not. This can be tricky to scale, not because having people feel a strong sense of ownership is bad, but because the title “founder” also implies others are “not founders.” Those who feel like “not founders” can have their voice and enthusiasm curtailed because without the founder status, they don’t feel empowered. For many early employees it can also be hard as the organization grows because it often means greater specialization and narrowing of roles. The early stage star that was an active voice in all the big decisions can feel confined and that the organization has become less fun.
Build vs. operate: Another rather dramatic change for most members of a founding team is the shift from doing things for the first time to iterating on the same set of actions over and over. It’s the difference in personality between an architect and a contractor. Some prefer to start with a clean sheet of paper, some panic at the idea that the sheet is blank.
Management style: Early stage companies tend to be very fluid and rely on a level of charismatic leadership and a very consistent vision held by the team. Maintaining the depth of this consistency gets more complicated as the organization grows. There are fewer and fewer times when all members of the team can afford to be in the room at the same time to work out ideas. In order to be effective, the organization needs processes to succeed and the depth of these processes will only continue to increase as the company grows. The management team must both recognize the need and change their style to bring the appropriate amount to the organization before it suffers.
Read the full line-up and entrepreneurial interviews here: We Love Boston Entrepreneurs