We are in a product cycle business. Which is to say that every product in tech becomes obsolete, and they become obsolete pretty quickly. If all you do is take your current product to market and win the market, and you don't do anything else-if you don't keep innovating-your product will go stale. And somebody will come out with a better product and displace you.
The other thing you can do is space the board meetings out further. So may- be have a board meeting every three months, and then do an update call every month. And keep that call short. I'm a bit of a jerk with my companies, when I'm the entrepreneur, in that I set the expectation very, very early on that I'm not going to do a fancy PowerPoint deck. I'm going to have a sheet of paper with the big points on it and the big numbers on it, and then we're going to get together and have conversation. a
Naval: Yeah, actually the most successful class of people in Silicon Valley on a consistent basis are either the venture capitalists-because they get to be diversified, and at least used to control a scarce resource, although it's currently not a scarce resource-or people who are very good at identify ing companies that have just hit product/market fit. They have the back- ground, expertise, and references that those companies really want them to help scale. And then those people go into the latest Dropbox, they go into the latest Airbnb.
Elad: It's the people who were at Google, and then joined Facebook when it was a hundred people, and then joined Stripe when it was a hundred people.
Naval: When Zuckerberg is just starting to scale his company and panics, he's like, "I don't know how to do this." And he calls Jim Breyer. And Jim Breyer says, "Well, I have this really great head of product at this other company, and you need this person." Those people tend to do the best risk-adjusted over a long period of time, other than the venture investors themselves.
Elad: Are there any other CEO distractions that you see a lot? One thing I've noticed. for example, is that a lot of founders equate press with success. So you see these CEOs chasing press, when that's really not the most important thing they should be doing in many cases. Unless it's a product like Twitter where the press is really the customer acquisition mechanism very early on.
Sam: Yeah, I think it's almost always a huge mistake. Twitter is one crazy example—as far as I can tell, Twitter's best users are still journalists. If your customers are the press, then yeah, go after the press. But most of the time press feels great and delivers nothing. There are exceptions; that's a little bit of an overstatement. And it's usually somewhat easy to get press if you're doing something interesting. But I think most founders—actually, I'm pretty confident in saying almost all founders-overweight the importance of press. So you should do it. It definitely can be helpful, and there's clear value in it. But you see far more startups make the mistake of orienting their entire company around press than making the much smaller mistake of not focusing enough on press.
Elad: Speaking at events, too-it seems like people will end up on these speaking junkets versus being in the office and focusing on the business or meeting with customers.
Sam: Yeah, a lot of founders fall in love with that. It's not that hard and you get to travel and your company pays for it. And you feel special. The point that I always try to make is that it's important to do very small amounts of that. Less is more. If you look at the most successful founders, they re not the ones that are on the circuit.
The other big missing variable in all of this is pricing. I've talked in public about this before. What I don't hear from companies is, "Oh, we don't think we have a moat." What I hear from companies is, "Oh, we have an awesome moat, and we're still going to price our product cheap, because we think that's somehow going to maximize our business." I'm always urging founders to raise prices, raise prices, raise prices.
First of all, raising prices is a great way to flesh out whether you actually do have a moat. If you do have a moat, the customers will still buy, because they have to. The definition of a moat is the ability to charge more. And so number one, it's just a good way to flesh out that topic and really expose it to sunlight.
And then number two, companies that charge more can better fund both their distribution efforts and their ongoing R&D efforts. Charging more is a key lever to be able to grow. And the companies that charge more therefore tend to grow faster.
That's counterintuitive to a lot of engineers. A lot of engineers think there's a one-dimensional relationship between price and value. They have this mental model of commerce like they're selling rice or something. It's like, “My product is magical and nobody can replicate it, and I need to price it like it's a commodity.” No, you don't. In fact, quite the opposite. If you price it high, then you can fund a much more expensive sales and marketing effort, which means you're much more likely to win the market, which means you're much more likely to be able afford to do all the R&D and acquisitions you're going to want to do. And so we always try to snap people into a two-dimensional mindset, where higher prices equals faster growth.
to get all the value. All the investment returns, all the employee compensation flows to that company. And then number two, that company then accretes resources so they can work backward. In a lot of cases, they end up buying the company that got the early adopters for a small percentage of their equity, and then they just take the whole thing
Our heroes today as entrepreneurs should be [Bitcoin creator] Satoshi Nakamoto, who built a multibillion-dollar enterprise single-handedly, or just two people, whoever he or they are, anonymously. Or WhatsApp, 50 or so people, bought for $19 billion. YouTube, when it was bought, was probably under 60 people. And most of those people were working in datacenters and doing servers. In an AWS world, I'm not even sure they would have needed that many people. Instagram, when it was bought, was just a few people. So it's possible to build something of huge value today with very few people.
One example of this I really like is the story of when YouTube launched a mobile product in 2012 that allowed people to upload videos from their cell phones. They saw that about 10% of videos were being uploaded upside down, and they ultimately found out that that's because left-handed people hold their cell phones differently. There were no left-handed people among the product or design team that worked on that product. I think we're just better able to design for a broader group of people when we have people with different perspectives designing products.
So in Stripe's case, when we hired our COO-she was previously a senior leader in Google's sales organization-people were worried that she would change the culture. We had to be explicit and clear about the fact that she would. That was the job. And I think the changes she has helped bring have been very healthy and beneficial for the company.
Sets the overall direction and strategy of the company and communicates this direc
tion regularly to employees, customers, investors, etc. • Hires, trains, and allocates company employees against this overall direction while
maintaining company culture. • Raises and/or allocates capital against this overall direction.
Acts as chief psychologist of the company. Founders are often surprised by the extent to which people and organizational issues start to dominate their time.
as the founder(s) should have great rapport with the independent board member. He ore should be someone you feel you can trust—who you woul feel good about calling at midnight on a Friday—and someone you think will be able to help you grow the com and, ideally, grow personally. This board member should someone who, if circumstances were different, you would excited to start a company with.
However you choose to learn this skill, you'll also need to watch out for key signs that you are not delegating the way the CEO of a high-growth company needs to:
You tend to leave meetings with many action items for yourself.
Someone now "owns" an area you used to run, but after 4-8 weeks you find you are still doing most of the work or weighing in on every decision, however small.
You feel the need to jump in on every email thread or attend every meeting across the company.
I wrote a document back when I was at Google called, “Working with Claire.” And when I first got to Stripe, I adapted it slightly, but it was pretty relevant. I shared it with everyone who was working with me closely, but I made it an open document.
One of the things you see crystal clearly in VC is how much competition emerges whenever anything works. Every single time we say, “Oh, this startup is unique. There's some unique product here and there's not going to be competition," invariably six months later there are 20 venture-backed competitors doing the exact same thing.
Marc: I am shocked by the absence of M&A relative to what I would expect in the environment. And I would say there's no question that the big new tech incumbents are not buying enough stuff just on the math.
Thank you to the founders and entrepreneurs I have worked with over the last decade either formally or informally. Your dedication, creativity, curiosity, energy, and hope to have a lasting impact and to make the world a better place has been inspiring.
The VC has worked with her a lot in the past or sits on her board, or she is an executive the VC has placed in a company before.
She has worked at multiple companies backed by the VC
She sits on a few boards with the same VCs.
She does not have relevant experience, does not understand your product, or makes generic comments rather than insightful ones.
She is likely to get placed in her next job by the VC le.g., a VP of Sales who wants to become CEO).