Dharmesh Shah

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Things Entrepreneurs Never Confess To Their VCs

By Dharmesh Shah on February 22, 2012

Note: This is intended be a light-hearted piece that hits just close enough on some counts to (hopefully) be funny. Please don't take it too seriously.  (Oh, and for the record, I've actually said more than one of these things myself).


Things Entrepreneurs Never Confess To Their Investors

1. You know that candidate you introduced me to? Well, he was kind of a schmuck.

2. We had our management team meeting yesterday and we've concluded that we're kind of screwed.

3. I know I should know this, but I have no idea what participating preferred means — and who should prefer it.

4. We've got a big launch of our mobile app scheduled for April 1st, we've lined up some great PR and everything is ready to go. Just one minor detail: We have no idea when Apple's going to approve the app for the AppStore. We wisely refrained from putting an early version through the process, because we're in “stealth mode”.

5. It finally hit me that revenue and cash are not the same thing. Customers provide “revenue”, employees want to be paid in cash.

6. I'm wondering if I should worry that the 10 year Oracle sales executive we hired for VP of Sales hasn't really sold anything yet. Oh, and I think he wants my job.

7. My co-founder had a major life event come up (the event was that he decided he wanted one). He'll be leaving us but is happy to continue to contribute as a strategic member of the board of directors. I didn't know he had a lawyer, but the lawyer assured me that my co-founder would “Vest In Peace”, which sounds like an amicable parting.

8. Learned from tech guy yesterday that our entire back-end runs on a single “virtual” Amazon EC2 instance. Also learned that “virtual” means that it can virtually disappear whenever it wants. That's why the engineering team has been working for months on this horizontally scalable, self-replicating, auto-healing architecture so that when we start getting some paid customers, we'll be ready.

9. Had to execute some “executive leadership” yesterday. At the last management meeting, our VP Marketing was telling me we were getting crushed in the market because of two big missing features. I told her that on the startup battlefield, wars are not won by features. Besides, we're investing in our future, not our present. That's why the entire engineering team is working on building a scalable, self-replicating, auto-healing architecture.

10. We have 11 months of cash left in the bank. Adjusted for inflation. But, not adjusted for the fact that we have no idea if any of our large, enterprise deals that our VP of Sales sold is ever going to pay us in a form that can be used to pay bills and payroll. Our landlord is clueless and doesn't understand the importance of the strategic deals we're doing and the raw brand-value of the logos we're collecting for our website.

11. Our VP of Sales keeps saying “land and expand, baby, land and expand”. I don't know what that means exactly, but we've been doing a lot of landing and not a lot of expanding.

12. I'm super-excited! We had our first acquisition offer yesterday. Well, it wasn't really an offer. And no, they didn't really use the word acquisition, or M&A or “buy”. But there was some high-level, strategic talk about how we could work together. And, he paid for lunch, so there must be some interest.

13. We're planning on throwing a big, bad, holiday party. It's not one of those crazy launch parties. We want to treat it as a “recruiting” event. Yes, yes, I know that there's no additional head-count in the budget, but we to be proactively filling the candidate funnel. Startups are “all about the people”.

14. Back in college, when you “audit” a course, it meant you just tried it out and see if you liked it. Why does “auditing financials” have to be so intense?

15. We've found new office space. To be consistent with the 5 year pro-forma we showed you at the last board meeting, we'll be signing a 5 year lease that matches the space needs based on those projected numbers. It's nice when things just work out, isn't it?

16. I woke up this morning with this really big idea. It'll make the idea you invested in pale in comparison. The good news is that we can reuse the work the engineering team has been doing. Not only have they been building something that's horizontally scalable, self-replicating and auto-healing, they had the foresight to build something infinitely flexible too. Now I know the importance of hiring great people — ones that have the vision to see your vision and can adjust their vision based on your new vision. This is going to BIG!

What do you think?  

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Why FastCompany Gets "The Lean Startup" Almost Completely Wrong

By Dharmesh Shah on February 20, 2012

Normally, I don't like to criticize someone else's content — particularly when it's from a source like FastCompany, which I respect and enjoy reading. But, today, I came across this article that talks about the values of the “Not-So-Lean” Startup. It caused a visceral reaction in me as I was reading it. Not that it didn't make a few good points (like the importance of sales and marketing and the value of inbound marketing and content creation), but it seemed that the author was attacking the lean startup method, popularized by Eric Ries in his best-selling book “The Lean Startup” without actually understanding it all that well.  Also, I'm a self-proclaimed Lean Startup fanboy.   [Note: The link to the book is an Amazon affiliate link. I donate all money I make from Amazon to non-profits — I figure the non-profits need the money more than Amazon does].describe the image

The following are some direct quotes from the article about the lean startup method and my reactions.

1. “In life and in business, failure can mean certain death, without a chance for another loop.”

Sure, failure can mean certain death — but one of the ideas behind the lean startup is to not only make loops short and fast, but try to maximize the odds that you can iterate enough times to get to product-market-fit.

2. “…another Riesian commandment that equates to plowing through "build-measure-learn" feedback loops until one discovers that special (and monetizable) moment when a product and its market interest collide.”

If you met Eric Ries or read what he's written, you'd know that he doesn't deliver commandments. He's scientific and thoughtful. He delivers ideas. He has a theories, and he argues for his theories — pretty well, I might add. To refer to a “Riesian commandment” misleads readers into thinking he's some arrogant know-it-all — which is simply not true.

3. “Indeed, too many startups have died (or are doomed to) by applying this method to their businesses, especially as their investors watch in horror.”

Really? How about some examples? Most startups die. How does the number of startups that have died (or are doomed) by applying the lean startup method compare to the number of startups that die because they didn't apply the method? By the way, as an angel investor myself (30+ startups), I will say that I am more “horrified” when I see startups not follow the lean startup model.

4. “you only get one shot to make a real splash with a product launch and truly impress the world, right?”

Actually, wrong. If your strategy is to bet it all on a single product launch and the hopes to get the magical ingredients “just right” to make that big splash and impress the world, odds are, you've already lost. In any case, it's at least sub-optimal. Why put so much emphasis on this “big bang” lauch model? Why not try and learn from early users, iterate and maximize the odds of market enthusiasm when you do think you're ready?

5. “Yes, the lean startup movement is correct in saying you shouldn’t throw wild parties and give Teslas to all your new employees--but isn’t that just common sense?”

Yes, that is indeed, common sense — but it has little to do with the lean startup. Once again, I will repeat, with emphasis, being lean is not about being cheap, it's about being fast. Every time I see someone make this msitake, I wonder if they're ever heard Eric speak or read the book.

6. “You can’t be a startup forever. And you shouldn’t want to. The lean startup model only offers tools to get you so far.”

Right. That may be why it's called the Lean Startup Model. The idea wasn't to come up with the grand unifying vision for all that is good and true in the universe. The reason the lean startup exists is to reduce the rate of startup failure and the related loss of human time and talent. I think it does that really well, and frankly, that's plenty of value right there.

Disclosure: I didn't realize until reading the early part of the article that the author of the article was Phil Fernandez (hi Phil!), someone I know and respect and who is the CEO of Marketo, a company in the marketing software industry. (My company, HubSpot is also in the same industry).  Once I figured out it was Phil, I think I reduced my level of snarkiness.  :)

So, what do you think?  Did I over-react?  Are my points misguided?



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