#6 | The road ahead: how to hire, grow and pivot

Welcome to How to Be a Founder, where we'll explore the challenges behind early-stage company building, and I hope support some founders along the way. I'm Matt Clifford, co-founder of Entrepreneur First, and I'm here with my co-founder and now co-author, Alice Bentinck. Alice, hello.

Hello, Matt. Together, we've worked with thousands of founders to build companies now worth over $10 billion. Over this podcast, and with our newly released book, How to Be a Founder, out now, please do go and buy a copy, we'll be sharing with you the insights and knowledge we've learned while working with real-life early-stage founders on their questions. You can think of us as your startup agony aunt and uncle.

So sit back and get listening, and we'll try and answer your burning questions on how to be a founder.

This week, we're doing a special bonus episode on the road ahead. Our book, How to Be a Founder, is primarily focused on the initial stages of founding a company, but we do also cover what happens once we're in building mode. Finding a co-founder, an idea, and raising your first funding round are just the first steps of what's often a 10-year-plus journey, and one with a continually steep learning curve. Matt, as founders ourselves, we know just how much can change in 10 years. When we first started EF, we were just a few people in a basement, and now we're over 100 employees all around the world. When you look back, what have been the biggest learning moments or even maybe the biggest surprises of that journey?

I think the big sort of meta surprise about learning is that it really is the constant as a founder. And I think the thing that means that, what are we, 11 years into this journey, it's still fun, it's still interesting, it's still, I think, the most important thing I could be doing with my life. It's partly that I think the power of the mission is enduring. But it is because the learning never stops. And every year it feels like my job, I know you feel the same, your job is just substantially different from the year before because we're constantly having to learn. And some of that's the learning that comes because as a company scales, the challenges change. Some of it's because what we do is so dynamic, but the kinds of founders we're working with, the kinds of problems that they're working on change all the time. And so I think there's been inflection points. I think when we first started raising and investing other people's money, that was a big change. When we first expanded outside the UK, there was a ton of learning to do there. When we leveled up and started having to really think like a global company, there's a ton of things to learn there. But really, I can't think of a 6-month period at EF in the last 11 years where it hasn't felt like, wow, I've got so much to learn to do this job really effectively.

In the book, we talk about this a little bit. We talk about mentors, and coaches, and advisors. And I think I reflect on the learning journey that we've been through. Actually, the role that those people have played was very different to what I thought mentors, and advisors, and coaches were like. The constant, I suppose, for us was that we had the same coach for the majority of our time building it, 7, 8 years. And actually, mentors, who I assumed would play that role, very much found that mentors were for a time and a stage. And because the startup journey is so varied and changes so quickly, actually often found a mentor would be great for 3 months, 6 months, 2 years, but it's very rare that we've had anyone who's actually mentored us the whole way, the whole way through.

I think maybe it's worth just taking 30 seconds to define those terms, because I think it's one of those things that I know you and I have a specific thing in mind, but quite often those words are used interchangeably, aren't they? So let me try a definition, then you can say if this is what you mean. So I guess we think of a mentor As someone who is bringing some sort of content or subject matter expertise to help you either a specific problem or a set of problems related to building your company. Whereas a coach is someone who works with you, usually I think for a sustained period of time, to help you understand your own strengths and weaknesses and to try and be the best, become the best version of yourself. And so it doesn't actually matter if that person doesn't have a lot of content knowledge about your business. Their job is to make you more effective as a leader and an executive. Does that feel about right?

Yeah, and I suppose the other one that we should mention is advisors, because I think often when I see first-time founders building the team of people that are going to support them, one of the things they're very keen to do is say, oh, I've got all these amazing advisors and I've given them some sort of equity grant to reward them for their advice. Whereas actually, I'd say most of these people probably could be mentors, you know, people who are just willing to support, pay it forward, you know, support the next generation of entrepreneurs, and who probably don't necessarily need any upside or payment in your company. I think it's reasonably rare, particularly in healthy startup ecosystems, to have to pay for that sort of short-term mentorship. Whereas with coaching, that is something that you do pay for. And, you know, I would encourage people to get a professional coach rather than somebody who self-styles as a coach.

Yeah. And crucially, you pay for coaches typically in cash, as in they— the whole point is that they're not necessarily a shareholder. You're not selling to them that the company's going really well. Not that I think the right way to communicate with your shareholders is always to be selling, but that's the temptation. The advisor, I guess the distinction maybe we'd make there is an advisor is someone where you want their time on a regular, maybe even on a scheduled basis, to perform a particular advisory role. And so that you usually do pay for and is something that is a little bit longer term.

Interesting, because advisors are often, well, and typically should be on vesting schedules. This is something that we talked about with the co-founder conversation as well. So this is that if they leave, or if they come to the end of their useful period, whatever you have agreed upfront as their ownership in your company is actually prorated against the time that they spent with you. I would encourage you to look at— if you're listening to this and wondering what we're talking about, I would encourage you to pick up a copy of How to Be a Founder, because it's one of those things that shouldn't feel like a stumbling block for early-stage founders, but actually often is and can be very expensive.

Yeah, maybe the final thing I'd say on that is, if you've got a vesting schedule, which means that the advisor gets equity in proportion, as you say, to the amount of time they spend with you, you shouldn't be afraid to use it. I mean, when I think about the people that have helped us out, over the years, a little bit like startups themselves, they follow a power law curve, as in that our most helpful mentors have added just enormous amounts of value. I literally think would've been worth tens of millions of dollars of value. And then there are other people who've been awesome, but I think when you really think about what was the incremental value, it wasn't that big. And so I think just being really clear-eyed about that is super important. Today we're joined by a founder who is coming to the end of the full-time program at Entrepreneur First and is thinking about the road ahead, and in particular how they build the culture at their company. Hello, Gerald.

Hi, thanks for having me.

Great to have you, uh, with us today. So maybe you could just kick off by introducing yourself. Tell us a little bit about what you're building and, you know, what you'd like to talk about today.

Sure, cool. So I'm Gary. I'm one of the co-founders of Blocktorch. I actually used to be a professional rower in the Austrian national team, then went on and became the youngest corporate employee of Apple in Europe. And after that, decided to leave the corporate world behind, do a master's in London and Shanghai, and then switched into the startup world. And after the pandemic and extensive kind of like self-study on software development, especially Solidity, I decided to switch sides and join EF to build a company and leave a dent in the universe. And that's what I'm doing with my co-founder, Amine. We built, or we are building Blockforge, a multi-chain observability platform for logs, metrics, and traces in any smart contract. So think of Datadog, but for Web3. And we are giving engineers the right data and insight at the right point in time to ensure that their decentralized application is running smoothly, performing well, and they're not running into any security risk.

That sounds great.

You have a co-founder. It seems to be going pretty well. How did you know they were the right co-founder for you?

Yeah, so I think one of the most important parts of building a company is culture and team culture. And as we are now moving into like the next stage of actually the pure ideation into like building the company, we are thinking about who should be like the first team members to onboard and especially how to craft a culture that is going to attract talent from the very beginning that is inclusive and diverse, but at the same time high-performing. So when Amine and I met at the kickoff weekend, which actually was the point in time where we also already formed our team, we very quickly realized that We have a very common ground in terms of values and culture. And one kind of like red line that went through both of our lives, which was that we are beating the odds over and over with not like the classical background, but like Amine coming from Morocco and he went on to move to Germany to study computer science without speaking any German and without having studied computer science before. And me coming from the first generation of uni grads in my family, we were like, okay, We somehow have like the underdog roles maybe, but we're extremely passionate to build something. And I think it was good common ground from the very beginning.

We talk a lot about productivity being one of the key indicators about knowing whether a team is working or not. What were the indicators for you around productivity that showed you that Amin was the right pick?

So I really enjoyed the conversations early on with Amin already, where I saw that he has kind of like that hands-on mentality. And we very quickly went from like the pure Like thinking about hypotheses and models towards actually trying to validate them, and speaking to potential customers and experts in the field. And I think that was an important sign from early traction, and which gave us also more tangible ideas about which direction we were moving into.

It's such a good point. It's so easy to get stuck in that talking phase. But the only way to test that co-founder relationship is to get into the, into the doing phase, if you like. So now you're, you're thinking about building your, your team. How are you thinking about doing that? Or what are your big questions around that?

So one part definitely is that we really want to build like a very diverse team with diverse backgrounds, but still being kind of like a high-performing culture. And I think it's really tricky maybe at the beginning without a name, without employer branding to attract the right talent, especially in a maybe rather niche tech market of Web3 dev tooling. So definitely one question is like how to attract like the best talent if you're like just 2 guys trying to get something off the ground.

Yeah, I think one of the things that we've found is that for culture to be an attraction for talent, for culture to be a way that you can compete and win for talent that's scarce, it has to be really authentic. And I don't mean that in some sort of touchy-feely, like, oh, authenticity is what matters. I mean, I do think authenticity matters, but I more mean that it's very hard to create a culture that sticks that doesn't directly flow from the founders' characters, their motivations, their actual ambitions for the company. And so I think one way I would think about this question is to go back to the why. Why did you end up working together? You've covered a little bit of that on what you had in common, but maybe it'd be helpful to hear a little bit more about how did you come up with your idea? How does the idea come out of your backgrounds? I think that might help us tease out a little bit about what's going to be unique about the culture of your business.

Totally. So basically, the way how we came up with the idea was a lot about us believing in the impact of Web3 on society in general, in terms of decentralizing power, decentralizing resources, but with that huge obstacle that Web3 isn't mass market ready. And we were thinking about how can we actually overcome that and what can we do to help Web3 to become mass market ready. And reliability was one of the 3 key pillars that we defined on top of accessibility and usability. And from the EDGE framework, we were like, okay, like reliability is something we can actually have a right to win in and that we can also excel in. And that's how we started to build around reliability. And that was the main why. It was like unlocking the power of Web3 for the masses.

What's the sort of vision like? Where do you see it going? And particularly, I guess the thing that I'm getting at here, because I think it It starts to touch on one of the big threads within culture, which is mission. What's the reason that you feel the company needs to exist?

So a lot of people are scared of Web3 because they think it's like a scam, and there are scams happening and bad things are happening. But at the same time, there are just like kind of immature engineering practices out there today due to immature tooling stacks. And we believe to become mass market ready, engineers need the best tooling to build the best products. And that will then also ensure trust is there and that the masses can actually use it. And we want to build like the standard of reliability and observability in Web3. So if any new team thinks about building in Web3, they should think about Blocktorch as the tool in their stack that they need to actually ship a really reliable product.

It sounds like you have a lot of clarity around what you're trying to build. And you have a really exciting mission as well. How much have you codified this. So, written it down, made sure that you and your co-founder are 100% aligned. Because I think one of the mistakes that we see people make with culture, and that makes it very hard to pass on to employees and to early team members, is if you don't codify it, agree on it, and repeat it all the time, it's very, very hard to build a solid, consistent culture. One of the challenges at the very, very early stages is that if you are 2 co-founders and you add on to employees, you've just doubled the size of the company. And if you don't have clarity around the culture that you're trying to build, actually adding those 2 people, particularly if you add them simultaneously, can very, very quickly change culture. I remember there was a point at Entrepreneur First, Matt, when we were a tiny team, and I think we were 4, and then we added 2 people simultaneously, like on the same day. And the culture just completely changed because we didn't have critical mass, and we hadn't codified enough of our values and norms and beliefs that actually adding 2 more people meant that They could just bring their own culture and their own norms and shift how we believed about it or what we believed. So, Gary, have you taken the time to write this down or codify it in any way?

Totally. So, what we wrote down was, of course, like the mission and the vision that we have, and we kind of redefined it along the way during the last weeks with like running into spikes. But I think it's an extremely good point to maybe also actually codify more of it in terms of the culture. In a broader sense of what we want to build. Maybe one question back to you, Alice, do you have like best practices around like tooling, for example, like just making a Notion page or some kind of like guidelines around it?

It's whatever works for you and your company. Notion pages, doing a Loom, which is where you record a video and kind of speak to camera. There's lots of different ways to do it. The most important thing is actually just alignment between you and your co-founder. It's amazing how often if you get co-founders in separate rooms and ask them the same question, they think they're giving the same answer. And there's probably a 60 to 80% overlap. But actually, particularly as you're thinking about scaling, it's that 20%, it may not even be a disagreement, but 20% misalignment that then can permeate throughout the rest of the company. I remember one of our advisors sitting me and Matt down years and years ago, when we were probably only about a company of maybe 10, 12 people. And Matt and I were saying, like, yeah, we're totally aligned, totally aligned on the culture and the vision. He's like, cool, okay. Write it down. We wrote it down. I'm like, cool, it's exactly the same. He was like, no, no, no, no, no, this is where you're overlapping, and this is where the gaps are. That was a really, really useful forcing conversation to have. And actually having somebody external, either an advisor, maybe an investor, maybe a mentor, come in and say, tell me, and then being able to point out where there may not be sufficient overlap could be a really, really useful forcing function.

That's a great idea. That's a great idea.

I would add here that I think it's really worth thinking about early is that I won't name names, but I remember once visiting a bank, not as in a big corporate investment bank, not long after the financial crisis. And all over all their walls were painted integrity, trust, honesty, transparency. And I was like, it's very easy to paint your values on the wall and it's very hard to live them. And although you are not a big corporate investment bank, I think the same challenge applies to startups. Sometimes I think that founders get sucked into the formal codification of their culture through values and vision and mission. All those things are important. We've done that at AEF. I think they're great investments to make for all the reasons that Alice just said, and they're a great way to compress the extremely complex thing that is a company culture down to something that you can share with people, and it sort of reduces the cognitive load. But where it fails completely and just doesn't have any of the positive impact that it could do is if what you've written down, what's on your walls doesn't match how people see you behave. And one of the things that we talk about in the book and that I think we're both very passionate about is what you do as a founder is so much more important than what you write down in your employee handbook. And it's things that are non-obvious. And to be candid, we made a lot of mistakes about this early on, which is like you think you're doing a good job on culture because you're writing great documents. But if you praise things that are actually not behaviors that you want to see, or you don't criticize things that are things that you don't want to see, or the way that you visibly respond to setbacks. Do you cover them up? Do you talk about them publicly? Founder behavior is such a driver of culture. People will, even people with like strong views of their own, people will find it really hard not to just imitate the founder's behaviors. And so I think thinking of as well about the alignment of what you do With what you say you want to be is really important.

It's such a good point. The codification is necessary, but it's not sufficient. One of the most important ways this comes up, and maybe it goes to your earlier point, Gary, is who you hire and who you fire is the most visible display of culture. So, if you bring in someone whose values or culture or behavior is contradictory to the startup's culture, That says a lot. And if you don't fire someone who is very, very counterculture, is behaving in a way that you've said is against your company culture or company values, again, it shows that it is just writing on the wall. So, one of the hardest things I think we find for early-stage founders is often people remove early team members far too slowly from their company. It is hard, particularly when you're at that stage where things do feel like a family. And we always encourage founders not to talk about being a family. You should be talking about being a high-performance Team, the better analogy is a high-performance sports team rather than as a family, because you do need to make the tough decision as a founder, that if somebody isn't a culture carrier, if they aren't behaving in the way that aligns with how you think the company should behave, you do need to move them on, and fast. Because the longer they stay in the business, the more it okays other people's behavior that may be similarly countercultural.

Yeah. What was, like, the biggest mistake, or biggest, maybe, let's say, challenge that you faced in building the culture?

I think if we focus on the very early stages, I think frankly, the challenge changes as you scale. And I think one thing we could probably talk for a long time about, but probably isn't as relevant today, is the challenges of maintaining culture as you grow internationally. I mean, today, EF is very distributed. But if we focus on the early days, I think the biggest mistake— well, let's talk about some things we did well, and then some things we did that maybe undermined it. I think The biggest mistakes you make, I think, are when there's a misalignment between what you say you want and the way you behave, which is sort of what I was talking about before. But to bring it to life, I think one thing we did really well at EF was be very clear early on about having extremely high standards around— and I mean that both with the cohort, which I think we've maintained really well, and the team, which I think we've maintained really well. But I think early on, When we first started scaling, and by scaling, to be clear, I mean, at the level Alice is talking about, like going from 5 to 10, so not big. I think we completely changed the way that we did selection for the team. Up until then, Alice and I had been deeply, deeply involved in hiring, and we made this decision that we should basically just give the other members of the team the opportunity to do hiring. They were very good at aspects of it. But of course, one of the challenges you have when you delegate something like that, particularly early on, is that the incentives are maybe not perfectly aligned. If someone's overwhelmed with work right now, the pain is very great. Filling the hole is a really, really big challenge. But what they may be, if they're not one of the founders and it's very early, what they may be undervaluing is what is the impact of hiring a person who can functionally maybe fill the hole today, but doesn't reflect what you want the company to be overall. And I think we made that mistake early on. We had a flurry of hiring to fill very painful holes that we were overwhelmed. And we ended up just sort of in a position where a significant chunk of the company, it wasn't that they were not talented or not smart, but they didn't have that very deep mission alignment. And I think EF's superpower early on, we had no money, Couldn't afford to hire experienced people, but we just had the most extraordinarily mission-aligned, dedicated team. We let that drop at one point in order to fight these fires and fill these holes, and it took a long time for the culture to to get back. We reset it, but it was very painful, and it would have been much better to have a candid conversation with the team that was very mission-aligned about the trade-offs that that you face in deciding: Do you hurry to fight the fires and fill the holes, or do you like? take some of the pain from not doing that immediately, in order to get the gain of maintaining that mission alignment. Alice, does that resonate with you?

I think that really resonates. And it's so hard, because in the early days, everyone is— well, I mean, always, people are so time-pressed that this feels like a— delegating that feels like a good way to fast-track through certain problems. My other sort of observation, to your point, Matt, thinking about the importance of in-person, and I know now that the world has changed post-pandemic, more and more teams are working remotely. And, Gary, I would love to hear actually about your plans About whether you're going to build a remote team or an in-person team. But the early EF team, we were in a tiny, tiny office. I remember when we moved to our bigger office, I was surprised that I didn't have people touching my elbows anymore. You know when you're so packed around a table that you're basically touching elbows with your colleagues every day? And that was so helpful for culture transmission because you can observe and your team can observe you every day and how you're behaving. Are we working? Very, very long hours, working weekends. And just the culture transmission felt in some ways quite fluid and easy, because we were literally, literally arm in arm together. How are you thinking of— are you thinking about building a remote team? Or how are you thinking about location?

So in general, building in Web3 is kind of like building a community that is extremely distributed, also in terms of like the customers that we're speaking to, they're extremely distributed around the globe. What we at the very beginning already said is that We're probably going to move towards a certain kind of like remote setup, but I've spoken to other founders that kind of started that you see each other one week a month versus 3 weeks a month on remote. And it might be something that we're going to try out. And I think the most important part that Amin and I agreed on is we can try out such things if we both believe in it, but we will give each other very radical, candid feedback whether we believe it works or not. And then we have to shift it as soon as possible if we realize it's not working the way we would imagine it to work. Yeah.

I mean, when we— so, we shifted to not full remote work, but we opened our first international location when we were about 4 or 5 years old, and then very rapidly opened up a lot of international locations. So, we had small teams on the ground, but functionally, the company still works almost as a remote company. And so, particularly as the founder, one of the things that I think Matt and I have had to do is work out how do you display your beliefs and your behaviours Through we use Slack as our company communication platform. You know, how do you use Slack as a way to display what you're thinking and what you're doing? I think as a founder, you're always really, really busy, but actually seeing part of your job as a founder as being present on whatever your internal communication platform is, whether it's Discord or whatever, but making sure you're responding to stuff, praising stuff, critiquing stuff publicly, so that you can actually continue so that you have that sort of equivalent as if you were in the room with them.

But I think that's something often very early stage founders forget to invest in, particularly if they're Have the two of you split the roles with that regard intentionally, or is it more like you go as basically availability is?

Well, EF is now a 24-hour company in that we cover so many time zones, so actually having us both sort of mildly covering everything is useful. I mean, Matt and I have quite separate and split roles, but that did happen over time, as in, in the early days, both founders should know everything that's going on because you're such a small company. So, it's important that both of you are present, both of you are seen as leaders, both of you are visible. Because it can't be the culture of Gary, it has to be the culture of Gary and Amin. So I wouldn't split it early on.

As a founder, every stage of your business, you have always 2 roles, or rather you're wearing 2 hats. You're wearing whatever functional role you need to play, like what are you executing on? You are an executive, but you're always wearing your co-founder hat. And in some ways, I mean, Alice runs our products and for a long time ran all our operations. I've largely at EF focused on the capital side of our business, how we raise and deploy money into companies. But throughout, however functionally focused we were, you can't take off your co-founder hat. People will— by people, I mean your team will absorb culture, whatever your functional role is, by watching what you do. And we spent a lot of time in 2018 and '19, pre-pandemic, traveling to each office at EF, not to do functional work. Oh, I need to be there for capital reason or product reason in Alice's case, but because it's important as founders to be visible and to be telling the story. Now, actually, the pandemic posed a challenge in how do you take that online? And we did invest a lot of time in that. But I think the thing I would really emphasize here is that you do need to actively invest time in this. It's really easy to think of that as something that's like not your day job. Like, oh, well, you know, I'm the CEO and my top priority is sales or whatever. Cool. But if you want to scale your impact beyond what you can personally do, you need to be communicating constantly what the company is about, why it exists, how you want to see things happen. And that is also your day job. You can't delegate that as a founder. And I think sometimes, and I think probably I've done this as well, you can get really almost tunnel vision around your functional role and leave off that very, very important co-founder guardian of the culture role as well.

Cool. So one final question. What I would really be curious about is like, when as a founding team, we have a really great relationship and we're very open with each other, how to kind of like also transfer that to new team members that like, no matter what is on their mind or like what they would like to communicate, they always feel that they can voice anything that they would like to voice with the founding team.

Again, it comes back to role modeling. So much of what we're talking about is basically role modeling and recognizing that as a founder, you will always, to some extent, be on that podium being looked at. If you want your employees to be vulnerable with you, you need to be vulnerable with them. And I sometimes find it useful thinking proactively, what can I share in this meeting that shows this is what I'm worried about, or this is where my mind is at the moment, or this is what I'm focusing on, that maybe it wouldn't come naturally? I'm probably quite a private person naturally, and I probably wouldn't naturally think to share those sorts of things. But if the culture that you want is one of a degree of vulnerability, you need to role model that. Now, I think there is then also a question about what is the right level of vulnerability, and how much do you want to get into, for example, your employees' personal lives? And this comes back to the kind of challenges of an early-stage founding team can sometimes feel like a family. The problem is, though, that the more that you engender that family feel, It is very, very hard to performance manage people because you remove a family member and the rest of the family, so to speak, will freak out because families don't remove people. Family's for life. So I think there is this careful balance that you should have vulnerability and transparency with your co-founder about everything. And Matt and I, for example, we spend 2 hours together every Friday. And to be honest, the first 40 minutes is usually us talking about our children, how tired we are, like, you know, whatever happens to be going on in our lives. And that connection, I think, is really important. But I do think, if you want vulnerability, role model it, but also think about what is the right level of vulnerability for the context of the, the kind of professional relationship you want to have.

Thank you for joining us, Jerry. We're very excited about this next stage for you and for Blocktorch.

Cool, thank you.

When you raise funding, it's normally against a specific product, but you'd be surprised how often that product changes dramatically as the company progresses. and as the founders learn new and different things about their customers. Founders often have to pivot on their ideas even after that first investment, and today we've got a letter from an anonymous founder who's currently assessing whether or not that's the right move for their company. Over to you, Matt.

So this founder says, dear Matt and Alice, my co-founder and I have recently raised our seed round for a consumer fintech product aimed at Gen Z. When we were building our MVP, we got a huge number of signups to our waitlist and a lot of early enthusiasm from customers. However, now that we've launched our beta, we're finding that a lot of our customers are using the app for a couple of weeks, then not coming back again. We've done a bit of customer discovery on this. We're finding that they like the product as an idea, but building a continued habit is just hard. They don't like to spend masses of their time on their banking. We tried a few tactics like push notifications and incentives to improve this, but none seem especially effective. We know this foundation isn't good enough to monetize from, but we know we've got a good partnership, and we don't want to let our investors down. Is it worth it to pivot, or should we try harder with our existing product? Is it going to really annoy our investors if we do? Thanks very much. Hmm, this is a, this is a classic question. And I think maybe to introduce it, Alice, I wonder if it's worth you talking about one of the ideas that we discuss in the book, which is the idea of linear ideation. We normally bring it in earlier, but actually it feels like a prime example where that's the key question.

Sure. So linear ideation is something that we came up with having observed just many, many founders going through this exact challenge. Now, I'm sure if you're listening to this podcast, you've either heard of or have read The Lean Startup. You understand the lean movement. This is the idea that you come up with an idea, you very quickly build it, you get it out with customers, you test, you see what they think, and then you pivot based on what you've learned. I think one of the misinterpretations of that is often what we see, particularly first-time founders doing, is they get their product out there, customers use it, and then the customers don't like it. They don't use it as much as they expected. They aren't as engaged. They don't refer, whatever it may be. And often what happens then is instead of using that learning to build the next iteration, often what we see founders do is completely scrap the idea and go back to the beginning. The concept of linear ideation is saying, what have I learned through this instance of getting my product out there? What have I learned about the market, the customer, the technology? And how can I use those as building blocks for my next idea? The assumption has to be that If you're a founder, you are gonna become the world expert in your idea. No one will know as much as you do about your particular idea. But that only happens if you keep on building on the learning that you are developing in whatever space you're going after. So for these founders in this letter, I think the temptation here would be to, well, one of two things, either to keep going and flogging this horse when it sounds like actually the horse isn't working, or as worse, to completely rip it up and to sort of throw a dart at a dartboard to decide what their next idea should be. What I would push these founders to do is to step back and say, well, what have we learned? It sounds like they might actually have the beginning of an insight there around— what did they say?

This idea that people don't want to spend a lot of time on banking.

Yeah, exactly that. That sounds like that actually might be the beginning of an unusual and unique insight. And so what would happen if they went deep on that?

Yeah, I think that's exactly what came to my mind too, is that the worst thing here would be to say, our investors want to believe we're making progress, therefore we must make progress. therefore we must keep going. Investors want to make money, and they broadly, they've bet on you if they're investing at seed or pre-seed. And so they want you to do the thing that you think maximizes the value of the company. Now, obviously, it's fantastic when things just work from day one and go up and to the right. But when that's not the case, investors are actually pretty aligned with you. They'd much rather that you worked on something that's going to take off. And so I really like this thing you just said, Alice, because when I think about the EF companies that have had the most successful pivots, often it's the anomalous thing. It's the thing that meant that the first idea didn't work that provides the crucial insight to allow the company to thrive. And look, I don't know enough about fintech for Gen Z to know whether there is a product insight in the idea of how do you absolutely minimize the amount of time that your customers spend on banking. But it does remind me a tiny bit of maybe the most successful EF pivot story, which is Accurix. I know we've talked about Accurix on the podcast before, so I won't labor the point, but they were absolutely determined that they wanted to build software to help lead the fight against antibiotic resistance. And one of the reasons it wasn't working was that doctors kept saying to them, the problem isn't the complexity of prescribing. The problem is getting the patients to take the medicines or indeed finish taking the medicines. And that's where the idea of medicine as a communication problem, health healthcare is a communication problem came from. And it was because they were willing to go all in on that insight and see where it took them, classic linear ideation, that they ended up building what's become a really big company. And so I suppose my takeaway here is, again, context is key. And I don't think you or I would say we can tell you exactly what to do here, but it certainly feels like neither should they try harder. It doesn't sound like effort is the problem, but nor should they be afraid of their investor reaction. They should follow that. Like, what is their thesis here? Like, what do they believe about this market? What are their customers telling them? That's what their investors will want them to do.

Might just be worth talking a little bit about how the investors will think about this and respond to this. Both Matt and I outside of EF do angel investing, and one of my angel investments recently went kaput, and the founder was visibly nervous to tell me this, visibly nervous to say, actually, it's not going to work out. And ideally, you've taken money from the kind of angels and the kind of investors who say, My job as an investor is to take bets and to know that there is significant risk attached to that, and also to assume that a large proportion of my angel investments or ADF, a large proportion of our investments, aren't going to work out. And that is part of the game. Now I know that there are taking money from friends and family is always tricky because I think often if they aren't an experienced investor, that that can be harder to stomach. But you should ideally be taking money from people who have done multiple investments where. They are expecting and acknowledge that this is part of the not game that they're playing, but part of the industry that they're in. And particularly if what your message is is not I'm giving up, it's hey, I don't think this is working. I have a sufficient evidence intuition to say it isn't working, and I'm going to try something different. This is what I've learned. This is what I'm going to do next. Most investors will say great, and even potentially here's some more money because what you're doing is now a more informed. Bet on a, on an idea.

You know, we talked earlier, didn't we, about coaches? And one thing that the coach that you and I are working with right now says to me quite often, which I think is fantastic and it's really stuck in my head, is for many founders, the very worst decisions they make are when they think they're trying to avoid some absolutely horrific catastrophe. And very often when they zoom out and they're with someone like a coach that maybe has more perspective, they realize that the really terrible thing they're trying to avoid is one, maybe not that terrible, but two, certainly not worth making equal and opposite mistakes to avoid. And this sort of feels like a classic example of that. There are some people that work— some founders, I mean, that work themselves into real terror of telling their investors that actually it's not all up and to the right, and actually it's not a smooth journey. And so in trying to avoid having to tell that story to investors, they twist themselves into a stickier and stickier place with the company by persisting in a direction that's not going anywhere. And actually, I think, realizing that hopefully you've raised from, as Alice says, people that understand startups, then actually this is going to be a completely different kind of conversation to have, and hopefully a helpful one, where what they're trying to do is exactly what you're trying to do, which is make the investment valuable.

So, Matt, this is the last in this series of the How to Be a Founder podcast. And we should say a big thank you to everyone who's taken the time to both write in their founder problems letters, but also to the founders who've actually come on the podcast as well. When you reflect back and think about, I suppose, all of the topics we've covered, what's the piece of advice that you want to make sure our listeners take away with them?

Well, obviously the first is that everyone should buy a copy of How to Be a Founder. But I mean, I think this episode is the road ahead episode. It reminds me of one of the things we talk about in the book, which is the reason we wrote the book was that so much of the literature out there on startup advice is focused on once things are starting to move, once you've got a co-founder, once you've got an idea, once you've got a company. And most of How to Be a Founder is about the bit running up to that, the bit before that happens. But I think one of the hard things, one of the hard lessons, I suppose, for founders is Almost wherever you are in your journey, the real work starts now. And this is something we say to all the entrepreneurs we work with at YEF is when we're doing the preparation for the global reveal, the sort of big culmination of the program, we remind people that it feels like an ending, but it's actually a beginning. And I think that's a constant feeling as a founder that you are constantly coming up against milestones that feel so important and they are important, But once you achieve them, you get to get as your prize the ability to have another harder milestone at the end. And I suppose what that makes me think of in terms of the most important advice is to go right back to the beginning of How to Be a Founder. We talk about the founder mindset. And one of the things we talk about a lot is resilience and willpower. And I think that for me, that's been a theme through these episodes is every time we've had a founder letter, every time we've had a founder join us to record, There's always a tough question where it would almost be easier to just say, ah, I give up. And I think probably my biggest message to the people listening is founding is all about keeping going. And actually, one of the things I've learned is if you keep going and you have the right approach to your customers and you have a good co-founder, actually good things do happen and resilience is rewarded. Not always. There's no guarantee of fairness in startups, but willpower and resilience are really your friends to see you through this.

I mean, that's so true. And we're 11 years into the journey of building EF, and the need for that resilience and willpower doesn't diminish. And I suppose that's why I encourage everyone to read How to Be a Founder, because if you can get the right founding team, if you can get the right idea— and when I say right, I don't mean the perfect way, it's the right one for you, your preferences, your ability, your behaviours, that gives you just such a well of resilience that is kind of hard to deplete. In that, I think I get a lot of my resilience from working with you and have worked with you now very closely for 11 years, and a lot of resilience from the idea. I want EF to exist. And I think when we reflect back onto what we were originally trying to create with EF, we've done it. We could tap out. We've created way more than we ever thought we would. But I suppose that's the wonderful thing about having a big, enduring mission for your for your idea, for your startup, that as you achieve each hurdle, it still feels like you're just getting going.

Yeah. Well, and, you know, I think one thing that we've seen in our own journey, and also in the journeys of a lot of EF companies that have gone on to be very successful, is that actually, if you do have the right co-founder and you do have a mission that inspires you and your team, For the long run, startups are actually quite resilient to making a lot of mistakes. I mean, we have made a lot of mistakes along the way, and we're still here. And I think we're here because we've got a great team and a great mission. And I think we say this in the book, that in a way, although stops can feel brutal and difficult, and they are, the weird thing about them, and in some ways the encouraging thing about them, is that You can be wrong about a lot of things as long as you're right about a couple of big things. I think one of those things has to be your co-founder and the founding team. The other has to be something to do with the mission, some insight about the customer, but it can survive a lot of other mistakes if you have those things in place. Thank you for listening to How to Be a Founder. To take a deeper dive into the topics we discussed today and more, take a look at our book, How to Be a Founder. It's out now and available online and in bookshops.

We have also put together a website called howtobeafounder.com, which has even more resources on fundraising, including practical documents that you can download and take a look at. So do check out howtobeafounder.com.

Co-fruitition.