25 Lessons in 25 Years

What's up, everyone? Welcome back to another episode of Founders Journal. I'm Alex Lieberman, co-founder and executive chairman of Morning Brew. Before we hop into the episode, I want to share an exciting update related to the podcast. Since day one for this show, my goal has been to document the entrepreneurial journey in order to increase your odds of success while building your business. That goal has not changed, and as I've said countless times, I look to you, my listener, for feedback and ideas to help inform the content of the show moving forward. Well, in recent weeks, there's been a very consistent theme in the emails that have been shared with me, whether it was a note about my episode breaking down the Lex Fridman conversation with Jeff Bezos, or my recent episode summarizing and analyzing 2 great startup essays that talk about spending your money wisely. This idea of curation and analysis continues to surface. You all feel like there's a ton of business content on the internet, And you're right, there are tons of podcasts, tons of people to follow on social media, tons of books, tons of blog posts, tons of essays. But you don't have the time to search every corner of the internet to find the best, most important content for entrepreneurs. And that is what I'm making my job now. Starting this week, I'm going to act as your startup Sherpa, curating the best content for entrepreneurs in the world, summarizing it so you don't have to read it yourself, and analyzing it so you have actionable takeaways to apply to your business. And for today's episode, I'm going to be breaking down a 45-minute video by one of the greatest startup minds of our time, who quite possibly you've never heard of. Bill Gross is the founder of Idealab, considered by many to be the world's first venture studio, modeled after Thomas Edison's lab, which was a place where many ideas and inventions could be tested under one roof. Idealab went on to find 5,000 startup ideas, launch 150 companies, and successfully IPO or exit 50 businesses. Idealab hit its 25-year mark in 2021, and Bill Gross shared an article titled My 25 Lessons Learned from 25 Years of Creating Companies, which is an absolute goldmine for any business builder. So what I'm going to do is walk you through all 25 lessons in a way that saves you from watching all 45 minutes of his video. But you still have a sense of why each of these lessons matter and how to apply them to your company. So let's dive in. Number one, challenge the status quo. Challenging the status quo means to pick something that other people aren't doing right now. And while zigging when others zag has its challenges, it also improves your chances of success in many ways. Successful businesses that challenge the status quo typically go through three phases, as made famous by Arthur Schopenhauer. First, your idea is ridiculed. Then, your idea is violently opposed. And finally, your idea is accepted as being self-evident. Number 2: Find great timing. Bill Gross looked back at the 150 companies Idealab has started, as well as other hyper-successful startups. As he looked at them, he was trying to see which of 5 factors most predicted a company's success. And the factors were timing, Idea, team and execution, business model, and funding. He found that timing was most predictive of a startup success or failure, and the ideal timing for a business is being early so what you're doing is considered bold and ahead of its time, but not too early or what you're doing will require too much friction and behavioral change. A great example of this is Uber coming out right after the iPhone, and for the first time ever, mobile applications were taking advantage of GPS. Without GPS and mobile apps, Uber would have never worked. Number 3, learn to say no. In a startup, your time is most scarce yet most important. When you say yes to something, there is a huge invisible opportunity cost of all of the things you implicitly just said no to. Figure out what you can actually say no to and have it be crystal clear to everybody in your company so that everyone understands and is fully aligned on what truly matters. Number 4, be success sensitive. Don't worry so much about diluting your equity in your business. Worry more about involving partners, investors, and employees that are truly invested in your and the company's success. And likely the way to do that is by giving people significant upside in your business. This is especially true with investors. It is way more important to choose people who align with your mission and who you can see being there for you long-term through the good or the bad, even if you're accepting a slightly lower valuation. Number 5, find product market fit. If more than 50% of your customers tell you that they would be angry if your product was no longer in their hands, then you are probably onto something. Product market fit is one of those things that you almost never have right out of the gate, which means your job in the early days of your business is to constantly figure out what it would take to achieve it. And when you don't have product market fit, it feels like you have to push your product onto a customer rather than them pulling your product From you. Mike Tyson said, everybody has a plan until you get punched in the face. And Bill Gross feels that in business, you get punched in the face by your customer when they do not feel product-market fit. Number 6, become a great storyteller. Telling a great story has a massive halo effect. It allows you to hire the best people, get the best investors, close your customers, and motivate your team. Your story acts as the forward propulsion to push your company forward. Your story and your storytelling abilities are also constantly evolving. Bill mentioned that he had to give 15 presentations on a company, and he saw how much better his presentation was on the 15th go rather than the first, which means you should always be looking to get feedback and learn how to make your story sound and resonate better. Number 7, be lean. Read The Lean Startup by Eric Ries. The basic idea is you should run your business with the scientific method. Have a hypothesis of what thing you want to learn, develop the simplest experiment to test that hypothesis, get feedback from the experiment, and then take that learning and formulate a new hypothesis. If you remember, this is exactly how I said Jeff Bezos built his culture when running Amazon. And the beauty of running a lean startup is it gives you something that big competitors don't have. Bigger competition has more money than you. They have more brand than you. They have more resources than you. But you have the ability to outlearn them by testing and learning with hypotheses at way tighter iterations than is possible for larger companies. Number 8, be remarkable. As Jonathan Cohen said, advertising is a quote unquote tax on being unremarkable. Makes me think of Tesla, which has never spent on advertising, or they haven't spent for all of their history up until maybe recently. You need to find a way to make your offering exceptional. You need to find a way to make your offering stand out. And that's important because it is expensive to advertise, sometimes to a point where you wipe out any profit that you would have made from the sale. Number 9, try again. Bill had a few companies fail, and he vowed to never try a similar company to the ones that failed again. But then he went to a conference where Reid Hoffman, the founder of LinkedIn, was speaking, and he was talking about how LinkedIn was something like his 4th social network. He tried one and it did work. He tried a second one in a different way and it did not work. But he was really passionate about social networks. And he thought they were really important. He then tried a third social network. It didn't work. And then he finally had the right angle with LinkedIn. He had the right idea with LinkedIn on how to build virality with your phone book and your contacts. He had the right value prop and potentially had the right timing. And Bill was impacted by this talk, especially where Reid talked about how each one of these tries at startups and specifically social networks was an at-bat. And he thought of it like if you strike out in baseball when you have an at-bat, You don't just never play baseball again. You try and assess what happened with the pitching. What did you do with your swing that you shouldn't have done? How could you go back and have another better at-bat the next time? If you think about it, in baseball, if you're batting better than .300, you're absolutely crushing it. And I think the same goes for building a business. Number 10, build a complementary team. You need a company made up of people who view the world differently. Diversity of thought is wildly important. Bill shares how until he was 35 years old, he had been hiring all people like himself, which is something that I absolutely have been guilty of in the past as well. I've always biased to hiring extroverted, well-spoken employees because they feel most like me. Bill goes on to say that there are 4 caricatures of people in a company, and you need all 4 of them for a company to function effectively. E is the entrepreneur, the dreamer who can start the company but needs help to build it. P is the producer. The producer, as the name implies, produces and ships your product. A is the administrator. The administrator keeps the trains running on time and puts all the systems in place to keep the E and the P running properly. And finally, I is the integrator. The integrator is the skill set that resolves conflicts and brings together A, E, and P to work successfully despite their differences. Number 11, be persistent. There were dark swamps of despair for almost every great entrepreneur. Steve Jobs got fired from Apple, then NeXT didn't work out. He came back to Apple. It was weeks away from being out of cash. He got Hail Mary financing from Microsoft to keep the company alive. Walt Disney mortgaged everything to make Snow White the first full-length animated feature. He then mortgaged everything again to make Disneyland happen in 1955. This is par for the course when building your business. The emotional journey of creating anything great oftentimes requires crossing a chasm of doubt, a ton of work, a fear of failure, and despair. Understand that this chasm is normal. Number 12, protect your IP. It is very important for a startup to have something novel and something protectable. Bill says, quote, it's going to be useful for recruiting, it's going to be useful for fundraising, and it might be very, very useful for growing your business and protecting yourself later. I'm even thinking about this from the standpoint of never ever having to take anybody to court over your IP, but I'm just thinking about making your core offering stronger and the thought process that goes into thinking about that differentiation. Number 13, ignore downturns. Downturns suck for entrepreneurs, but they are great times for entrepreneurship. First, downturns offer those surviving businesses less competition. Second, the only thing that typically goes down during downturns are valuations. Typically, users, usage, and dollars spent actually go up. Stay focused on the customer and what you can offer them. That's something that you can control. Worry less about the economic climate, and if you have to raise capital, don't be dilution sensitive. Get the capital you need and be success sensitive. Number 14, use Moore's Law. Nothing has ever gone down as much in price or as fast as the cost of computing power, and businesses that can smartly harness this effect will win. Look carefully at your business opportunity and see if there's some way to embed more computation in than your competitors. Because the computation is going to approach free. And if you can embed more computation, although that might take a lot of software development to execute the first time, each incremental time it will be almost free. Number 15, iterate like crazy. You never get it perfect out of the gate when launching a business. The idea you launch with is just step one. What is actually important is constantly adapting based on what you learn from customers, and you win by getting the most learning from customers per unit of time. Bill goes on to say that he should have called Idea Lab Iterate Lab because his initial idea was only ever the starting point. Of all of Bill's lessons up to this point, I think this is number one for me. Iteration is far more important than the starting idea. Number 16, be frugal. Make the money you have last as long as possible. And when you do spend your money, spend it on your product and your customer. Save money on all of the things that don't directly drive product-market fit. And Bill gives the best example because it's one that I recently talked about when reading through the 1997 Amazon shareholder letter. There's a famous picture of Jeff Bezos in 1999 working at his little desk, which is a door that was taken off the hinges. The CEO of a public company is literally working off of a makeshift desk. Building this culture of frugality early in your business is important because it becomes harder and harder to act frugally once you've raised a lot of money or gone public. Number 17, find your purpose. Finding your purpose and your passion is super important when building startups because this will be the set of skills and heart desires that push you through tough times. It'll also give you a sense of where you should focus your time and not delegate responsibilities. I recently talked about finding your passion and purpose in the Zone of Genius episode, which I'll link to in the show notes so you can explore this concept further. Number 18, culture eats strategy. Peter Drucker had a famous quote in business that said, culture eats strategy for breakfast. The concept here is that you can have the best strategy in the world, but if the culture of your company is not conducive to executing on the strategy, the culture will win and the strategy will not. Culture is best built through repetition, repeatedly talking about what the culture is, repeatedly talking through scenarios so people can make smart decisions, and repeatedly behaving in ways that are culture-aligned. That way, people can ultimately make decisions like you, even if you weren't at your company one day. Number 19: Have laser focus. Focus is how startups beat big competitors. By being focused, you can outdo much larger companies by specializing in one particular area. Choosing what to focus on is very hard and very scary. You want to try more things naturally to keep more opportunities open, because that's what feels safer. It feels like you're hedging your bets by having more balls in the air or more chances to win the customer. But in fact, it's the opposite of that. It's always hard to choose the right focus. But what Bill learned is that if you have a choice between 3 things, it is even better to pick an inferior focus than try to do all 3. Even the wrong focus is better than being unfocused. Number 20, make investors money. There's the obvious reason to do this, which is to be fair to the people who bet on you. And you want to be able to work with people in the future and not burn bridges. But less obviously, striking a deal with investors that shows you care about making a great return for them in addition to yourself and your employees is a great way to build a partnership that will work for everyone long term. Number 21, be a learning machine. It is impossible to be good at everything as an entrepreneur. It's a tough pill to swallow at first, but it is the truth, which means your best bet is to humbly accept this truth and always look to improve, learn, and solicit feedback to uncover your weaknesses and blind spots. Bill calls this idea closing the gap. Rather than focusing on a skill you don't have and assuming you'll never have it, think about it as a gap between where you are and where you want to be. And just think about closing the gap little by little through learning and feedback until that gap is closed. And then guess what? Move on to the next skill gap. Number 22, always be fundraising. What Bill means by this is you should always be improving your story as an entrepreneur. In his words, you as an entrepreneur should always be thinking about improving your story, making sure that you use that to get the capital you need to achieve your long-term objectives. And also, at closing around the financing does not mean that it's over. It just means that it's enough for the next hill. Even after you close a round of financing, you should be thinking about your next step in growth. You should be thinking about how do I tell my story better? What do I need to do next? And always be meeting people that could be helping you for that next round. Number 23, be transparent. Transparency wins, but it comes at a cost of extra care. Being an open book about your wins and losses internally, sharing more about your finances and your strategy will lead to a team that trusts you and can make better decisions beyond you. The price of this openness is you have to take the time to explain everything to everyone, but you have the added benefit of people who feel like owners and can act like owners because they have most of the information that you, the owner, has. Number 24, ignore sunk costs. Said simply, you should make decisions based on what the information tells you, not what you're emotionally attached to. You have to be able to change direction with new validated info, even though it's hard to do because we have a deep fear of sunk costs. You should ignore those sunk costs and agree that those costs were a valuable learning to get you to where you are, and now you're equipped to move forward in a different way with new information. And finally, number 25, embrace diversity. Think about a Venn diagram with 3 circles. A homogenous team will give you the 3 circles that just sit on top of one another. A diverse team is a true Venn diagram. It is 3 circles spread out where there's a little bit of overlap in the middle, but a lot of surface area on the outside. And a diverse, inclusive team gives you the sum of the 3 circles with all of their surface area and no overlap. So it's not enough to just have broad ideas or diversity. You need to build an organization that's truly inclusive and listens to all of those ideas to get to the best outcome. And so those are 25 lessons in 25 years by one of the great entrepreneurs of our generation. Now, I would love to hear from you, and I will 100% email you back. Shoot me an email to alex@morningbrew.com and share your favorite lesson of the 25 that I just shared. In return, I will share my favorite with you and why. Thank you so much for listening to Founders Journal, and I'll catch you next episode.