Guy Kawasaki: The Top 10 Mistakes of Entrepreneurs

Thank you all for coming tonight. Look at this crowd. This is great. This is a fantastic event that we're really happy to be introducing. My name is Alex Loa. This is Slava Balter. We're the co chairs of the B Plan Competition, the UC Berkeley Startup Competition. And we're really happy to present this event today. Just a few things about BPlan, how we're doing. First of all, this is our 15th anniversary of B Plan here at UC Berkeley. Pretty great. And it's going to be an exciting competition. Already we have signed up some really recognized mentors and judges from Silicon Valley. And this year there are over 160 teams that entered. And we have already selected the 39 teams that will go to semifinals.

So quick, brief before we get to Guy Kawasaki, it's about where we stand with the competition. Out of the 160 plus teams that did submit this year, the 39 that entered, they're now getting battle ready. So they're going to start competing through the next few months and they're going to start iterating on the process and using some of the techniques. Potentially a lot of them are here today learning some wisdom from Guy and trying to get through the process of what does my idea mean? And how to actually bring it to a prototype in April. So really excited about some of the teams that have come out of the process this year. We'll continue to learn from them and they'll continue to learn from some of the mentors that we have on board. So wanted to also give a quick round of applause for the Lester center and Kirsten for putting on this event tonight. Some of the fabulous work as well as the B Plan executive committee. So if you do have a chance to say hi, quick round of applause for them as well. Tons of work. And last but not least, the hard work of one of our own executive members, Antonio Silva. He's been working diligently, very hard to get Guy Kawasaki to come on campus. And here we are. So Antonio, come on stage. Want to give a quick introduction? We'll pass it off.

Thank you. So presenting Guy Kawasaki is kind of sometimes nonsensical for a group of geeks like all of us. He's very well known and he's also going to be a semifinal judge for this year's B Plan competition. Guy was born in Honolulu, Hawaii. He, he has a BA from Psychology from Stanford and an MBA from UCLA. He's the Apple evangelist since 1984, a term that in coined evangelist marketing started with him. He's now an advisor for Google and Motorola. So that's an interesting shift. If we have time for questions, that would be something that I would like to ask. He is a profilic writer, as you can see here, has written for more than a dozen books, and he's going to talk to us about top 10 mistakes of entrepreneurs. I would like to say thank you, Guy Kawasaki, for coming here today and welcome.

Thank you.

Thank you. Thank you very, very much. This room, I have very good feelings about this room because my son is a freshman here at California. And yeah, so this is. This is the room where during Cal day, we got the pitch for Cal for Haas. And so I have a very warm feeling about this place. And I went to Stanford, but I focus now on Cal. Can I just say that? So if any of you start companies and you need an intern, my son is available. And if you combine the number of followers that my son and I have on social media, it's 5 million. I have 4,990,099 and he has 1,000. So, yeah. So I'm very happy to be here and it's going to be a lot of fun. I am going to present something about the top 10 mistakes of entrepreneurs. Let me give you a little bit more about my background. I worked for Apple from 1983 to 1987. I was Apple's software evangelist. So it was my job to convince people to write Mac software. This meant that I worked in the Macintosh division, which meant that I worked for Steve Jobs, which meant that, let's just say I had a very interesting career. He was not an easy person to work for, but he definitely got the best results out of people. And so I learned a lot from him Back then. The Macintosh division was probably the largest collection of egomaniacs in the history of California. And we held that record until last year when Facebook broke it. But we held it for a good 30 years just to show you what bad people we were. Back then, the company was the Apple division and the Mac division. The Apple division was shipping boatloads of Apple IIs and making tons of money. The Macintosh division was still in R and D, so we were burning money. So if you looked at the Apple P and L, the P was Apple II and the L was Macintosh. And yet we would not let people into the Macintosh division buildings, if you can imagine. And if you ever become CEO, don't ever let this happen. Where one part of your company cannot go into the other part of the company. That is not good for morale. And then, especially after the Apple ii People figured out that they were paying for the building they weren't being let into. As you can imagine, that really pissed them off and quite logically, so. So they came up with a great joke. I love to tell this joke, great joke about the Mac division, which is how many Macintosh division employees take the screw in a light bulb? The answer is the Macintosh division employee holds up the light bulb and expects the universe to revolve around him. There's a Microsoft version of this joke, and the Microsoft version is how many Microsoft employees does it take to screen a light bulb? And the answer is none. Because Bill Gates has declared darkness the new standard. Early in your careers. I'm kind of late in my career. I started in technology about 1983. And so for about 25 or 30 years, I watched high tech speakers. And I'll tell you, with the rare exception of Steve Jobs, most high tech speakers have two salient qualities. First, they suck as speakers. And the second quality is they go long. And that is a really ironic and dangerous combination because if you suck and your speech is short, it's okay. And if your speech is long and you're great, it's okay. But if you suck and go long, that's like being stupid and arrogant. You know, it's just not a good combination. And so what I did early in my career is I embraced the top 10 formats. I always use a top 10 format for my speeches, but I have to tell you, this is a speech I have never given before. And so I just realized that I forgot to put numbers on my top 10 points. But there are 10 points tonight. And the reason why I use the top 10 format is that in case you think I suck, you know approximately how much longer I'll suck because I have 10 points for you. So, with no further ado, if you'll let me talk about the mistakes of entrepreneurs. I have been an entrepreneur. I have worked for a Fortune 500 company like Apple. I. I have been a venture capitalist. So I have funded companies. I've been an advisor for many startups. So I've sort of seen it from all sides. The investor, the entrepreneur, the advisor. And so this is really what I've picked up after 25 or 30 years of working in technology. Okay? So. And let's just say that I'm not known for subtlety. So we're just going to cut to the chase, okay? Because you should hear it straight from the bottom line, actually. So, number one mistake is many entrepreneurs make the mistake of taking a large market and multiplying it by 1% and saying, how hard could that be, conservatively speaking? So we'll just walk through a hypothetical case. 300 million Americans, one in four owns a dog. That's 75 million dogs. Each dog eats two cans of dog food per day. That's 150 million cans of dog food per day. How hard could it be to get a mere 1% of 150 million cans of dog food? Total addressable market, that's 1 1/2 million cans of dog food per day. Let's say you make $2 per can. That's $3 million a day. And now you know dogs. This is not like enterprise software. Dogs eat every day. They don't take Saturday and Sunday off. So this is 365 days a year. We could worst case make $3 million a day. So conservatively speaking, worst case with our rock star programmers, we, we should do a billion dollars in the first year. I can't tell you how many stories I've heard like that. You take a large market, you multiply by a small number and you say, how hard could that be? So there's two fundamental flaws with this. First, getting 1% of any market is not that easy, number one and number two, which sort of contradicts number one. Number two is no investor wants to hear that you only are going to get 1%. So in one sense you're saying 1% is easy, but the investor is also hearing that they're predicting they can only get 1% of this market. So you're betwixt and between. So don't use this kind of logic, okay? Don't take this large. 300 million times 0.25 equals 75 times 2 equals 150 times 1% equals 1.5 million. It just doesn't work like that. That's lie and mistake number one. Mistake number two. Sort of the flip side of this, which is you scale too soon. So this is how this goes. So we go through the 1%, right? So conservatively speaking, you should be selling a million and a half cans of dog food per day, worst case. Okay, so now you think, oh my God, you know, we're going to need at least three facilities to ship this and we're going to need co location because our servers can never go down as these millions of dog owners come to our site and order dead cows in cans. And so we need order processing, we need fulfillment, we need customer service. So let's start ramping up because our rock star programmers who have never delivered a piece of software in Their lives, they are going to be on time, okay? And with our rock star marketing people and our rock star, you know, BMW, cornflower blue, pierced ear, business development vice president, he's going to deliver all the partnerships. So we need to ramp up, we need several locations, we need co location of servers, we need customer service people. And so what happens in the real world is of course your rock star programmers turned out to be total bozos, right? And so your software is late, your website is late and the dogs, no pun intended, are not eating the food. It just happens that not that many people want to buy dog food online. So your software is late. These, these people are not buying your product. But you've already ramped up. You have several facilities, you have all this automation built in, you have customer service, you have people, you know in Bangalore just waiting to take those calls of people who need tech support for opening cans of dog food, right? So then what happens? So then what you do is you have a board meeting and you tell the investors, well, we were wrong. Our programmers have hit some limits using Visual Basic that they didn't foresee. And so now we really got it right. Now we're going to go to Python or we're going to go to PHP or maybe we'll go to MySQL, but Visual Basic just didn't work out. Okay? So investors are used to hearing this, that you're going to miss your first mark. So of course they understand. But then you say, but you know what, we've been really great at recruiting. So we have this great IT staff, we have this great support staff, we have this great fulfillment staff, and those people are rock stars. And so we know that our rock star team of programmers is going to be a few months late. But it would be a crying shame that we recruited all these great other support people to let them go now, because in three months we're going to have to hire new people again and bring them into the company and train them again. We have so much invested in these great rock star people that we shouldn't let them go. And so what you do is you keep those people on board because now you know you're going to ship in three months, guess what? Three months come by and you don't ship again. And now you have to go back to your board and you have to explain again, well, we're not shipping, but we still have these great people we've invested in. We need to keep them because we will just have to hire people like them again and start from scratch. So that's what happens. Scaling too soon. In my career, I have never seen a company die because it didn't scale fast enough. For once in my life, God help me, I would love to have a problem where I advise or invest in a company that couldn't scale fast enough. That would be, as we say, a high quality problem. Dear God, give me this problem once in my career. The company is growing too fast. Too many orders are coming in for dog food. They cannot handle the volume. Please God, give me that problem. I know how to solve that problem. Usually what happens is you scale too fast in anticipation of a conservative 1% with the programs created by your rock star engineering staff, it doesn't come true, you're stuck with big overhead and you run out of money. That's mistake number two. Mistake number three is an obsession with partnering. Okay, let me tell you something. Partnering is bullshit. Partnering is bullshit. There's only one thing that counts in a startup. It's sales. Partnering is bullshit. Partnering means two organizations try to compensate for their weaknesses by partnering with another. Two plus two will equal three. In this case, partnerships mean nothing. Just don't get me started on this. You know what entrepreneurs should focus on is sales. Sales fixes everything. You want to be left alone by investors. Meet your numbers. That's as simple as that. Nobody cares about partnering. Partnering is total bullshit. You only use that word when, whenever you don't have sales. Partnering is bullshit. Number four. I think a lot of entrepreneurs are focusing on the pitching process. How do we pitch to raise money? How do we win business plan contests? How do we perfect our PowerPoint skills? And I'll tell you something, Listen, I can help you win a business plan contest. I can help you perfect your pitch, no question. But in the real world, the key is not the pitch. The key is the prototype. If someone gave me a choice of having a team come in with a great PowerPoint pitch or come in with a prototype that is working, I would pick the working prototype all day long. Because in a few hours I can help most of you fix your pitch. I cannot in a few hours help anybody fix their prototype. Prototyping is the key in a perfect world. In this VC world, it's changed completely now. And it used to be that you tried to raise money because you had to build a team to write software. You needed a year, you needed $2 million. You need something like that, right? But now, if you think about it, all the things you need for a tech startup, they're free or cheap. Let's go down through the list you need infrastructure, okay? Infrastructure today is free or cheap. You use Rackspace, you use Amazon Web Services, you don't buy any servers anymore, you don't buy buildings, you don't lease buildings. You use Amazon, you use Rackspace. Thousand bucks you get a terabyte in the sky. Marketing. Before you had to throw parties, you had to hire PR firms, you had to do all this kind of stuff. Now you, you have Pinterest, you have Twitter, you have Facebook, you have Google, you have LinkedIn, you have all this social media. The marketing is free. Before you had to have commercial real estate, you had to have a team physically in one place. Now many teams are virtual. You don't need as much commercial real estate. Before, you had to buy a license for SQL from Oracle. Now everything is open source. So if you go down this list, everything is kind of free or cheap. So this is a completely different world. And in this world you are expected to show up with a prototype. Not just a pitch, a prototype. Because with 25 or $50,000, which is money that you should be able to get from your parents, from your credit cards, shaking down people you know you should show up with a prototype. It's completely different expectation and it works to your advantage. Because when you show up with a prototype, you have significantly reduced one risk, which is that you can actually deliver a product. Before with PowerPoint you had a much lower valuation because PowerPoint is total bullshit. You're making stuff up for PowerPoint. So let me tell you, I've been lied to so many times, you could not possibly tell me a lie that I have not heard. So the PowerPoint pitch is fundamentally a lot of bullshit, right? But a prototype is not bullshit unless the person you're showing it is so stupid that doesn't understand that you're using mock ups. But then if the person is that stupid, arguably you wouldn't want that person's money because that person is too stupid. You don't want stupid money. So the point is prototype, prototype, not pitch. Okay, next lie. Next lie is if you are going to pitch. Excuse me, not next mistake. This is called the Guy Kawasaki 10 20, 30 rule of PowerPoint. I hope that you will trust me on this. The optimal number slides in a PowerPoint presentation is 10 10. You'd be lucky to get 10 thoughts across 10 cogent points across. Okay, the time you should be able to give those 10 slides in is 20 minutes. 10, 20, 30 rule. Now you may ask, well, why would you limit yourself to 20 minutes when you have a one hour meeting? Well, probably not in this audience, but in most audiences, roughly 95% of the world is still using Windows. And so that 95% of the world, they need 40 minutes to make their laptop work with the projector. So if the whole world, if the whole world was using Macintosh, the rule would be 10, 60, 30. Okay, but it's not true. So it's 10 slides, 20 minutes and then the ideal font size is 30 points or larger. If you use 8, 10 or 12, you're going to be tempted to put too much text. Then you're going to read the text. And one slide into the presentation, your audience will figure out, this bozo is reading his slides. This bozo is reading verbatim. I can read silently to myself faster than this bozo can read them to me. I will just read ahead. Okay, so if you remember nothing else from this presentation than in the business plan context, 10 slides. Do they even have 20 minutes? Do they even have 10 slides? Even better in the real world, 10 slides, 20 minutes, 30 point font. A good rule of thumb for the font size is figure out who the oldest person is in the audience. Divide his or her age by two. 60 year old VC divided by two, 30, 50 year old VC divided by two. You know, 25. Someday you may be pitching a 16 year old VC. That day, God bless you, use the eight point font. But until that day, 10 slides, 20 minutes, 30 point font. The next mistake of entrepreneurs is they believe that they should do things, things serially, which is to do things one at a time. First you raise money, then you build a team, then you write the software, then you ship, then you collect. Okay, that's a serial world. The serial world in entrepreneurship does not exist. Unfair as it may seem, if you are an entrepreneur, you are going to have to be raising money, writing software, prototyping, selling, recruiting and collecting money all at the same time. It is all these paths moving down the road at the same time. It is not a serial process, it is a parallel process. You need to understand that's how the world works, that it is all about moving multiple things down the road. In a perfect world, I grant you, it would be nice if all you could do was focus on money and then all you had to do is focus on hiring. And then all you had to do is focus on programming, and then all you had to do is focus on selling, and then all you had to do is focus on collecting. That is not the real world. The real world is you have to do all that at once. Next mistake. Many, many Entrepreneurs believe that as long as they and their buddies own 51% of the company, they are in control of the company because they believe. In board meetings, things come down to a vote and 51% wins. I have never seen anything come down to a vote in a board meeting. It's either everybody wants to do it or nobody wants to do it. And the fact that you retain 51% of the company may make you feel better and make you think you are in control of that company. But the truth is that the moment you take outside money, you have lost control of the company. It never comes down to a vote, 51 to 49. This is not the U.S. senate, okay? God help us. There's no such thing as a filibuster in a venture capital board meeting. But this is an illusion. The moment you take outside money, you have a moral, ethical and financial obligation to the outside money. If you cannot deal with that, don't take outside money. 51% is an illusion of control. The next thing is that you believe that patents. Patents equals defensibility. The ideal number of times you should use the P word in your presentation is one, we have filed patents. That's it. If you say it twice, we have filed patents and it is going to create a defensible position for us. That's two, you're wrong. Patents realistically will not help you if you are acquired someday. Yes, the acquiring company will love that you have patents. That's a good reason to do it. Another, probably the most compelling reason to file for patents as a startup is that it will make your parents proud. That they can say that my daughter or my son has a patent to her name, to his name, that is worth something. Okay? But if you believe that you patented something and that's going to make you defensible, you are deluding yourself. Because it takes about five or six years to file this patent and get it done. And then let's suppose you do this. You file it, you get it done. And let's say Microsoft steps all over your patent. So now you have to ask yourself, do you have the time and the money to out litigate Microsoft? And the answer to that is no, you don't. You never will. Now every once in a while you hear this great story that some file compression utility company in Calabasas, California has won a 60 million dollar suit against Microsoft. Okay, you would hear that. But you know what? Getting infringed and suing Microsoft successful is not a fundable business model. The reason why there's headlines when Microsoft Loses a lawsuit like that is because it hardly ever happens. If it happened every day, it would not be used. And then they never follow up that story to see if the thing was appealed and if the little company in Calabasas, California ever really collected the $16 million. Okay, so file the patent. God bless you. But don't think that it makes you defensible. And for sure, for sure, don't tell a sophisticated investor that the reason why we are defensible is because we filed a patent. Because a sophisticated. In fact, that's a very good test. If when you say that the investor laughs and rolls his or her eyes, that's a smart investor. If the investor says, yeah, that's true, walk out of that room, that person is an idiot. Patents do not. I hope there's no patent lawyers in here. Now, I would say the exception to that is probably biotech, where you can patent a drug. Okay, but you know, if you believe that you can patent a method to sell dog food online using crowdsourced referrals, let's just say that I wish I could short privately held companies. Next mistake is to hire in your own image. You know what, if you're an engineering person, you need to balance off or balance out your engineering prowess. So an engineering person should hire a salesperson. A salesperson should hire an engineering person. Many times companies like to all hire the same kind of people. And when that happens, you'll have glaring weaknesses. You're totally engineering or you're totally sales or you're totally biz dev. You need to hire people who complement your skills. Fundamentally, what you need in a startup is you need someone to make it, you need someone to sell it, and you need someone to collect it. You need those three people. Okay, I didn't mention biz dev. I didn't mention anything else. I'm saying make it, sell it and collect it. That's what you need. And so the danger is that, you know, if you're a sales and marketing oriented guy, you hire sales and marketing oriented people. But you really need to balance off all the talents in a company. So remember, make it, sell it and collect it. You need all three skills. The next mistake is befriending your venture capitalists. The way this works is you get funded by a vc and the day that they say yes or the day the check clears, you say, wow, you know, I heard VCs are assholes, but not this one. This one really understands what we're doing. This one really likes us. This one said that he's never Seen a team as good as ours. And this one said that he's going to stick with us. And this one said that he has such confidence in our ability, having hired all these Visual Basic programmers, that basically he's gonna leave us alone. You know, we're not one of his problem portfolio companies. We're one of the most promising ones. And you know what? He also said that they don't invest in technologies, they don't invest in markets. They invest in people. They invest in people, and they invested in us. So no matter how much we screw up, because they invested in people, they're gonna like us, and they're gonna give us more chances to get it right. Because they invested in us. Not the prototype we showed, not the market forecast we showed none of that. It's people. They're our best friends. They said that they'll always be available. Call them anytime, pick up the phone. They'll even come in and roll up their sleeves and work with us. Because they're investing in people. They're my friends. I mean, I. I think I'll take up golf and start playing golf with them, you know? Let me tell you something. Nice shirt up there. I like that shirt. Yeah. VCs and investors are not your friends. I'm not saying you should hate them, okay? But I am saying that it is a business. They are in the business of making money. They're not in the business of making friends. Angel investors, maybe, but venture capitalists are not in the business of making friends. They would rather hate you as a CEO, but see, you go public and make them rich, okay? Don't believe that they're your friends. Don't try to become their friend. Just make your forecasts, okay? That's all that they really care about. And I've seen time and time again where the CEO really believes. So here's like, what happens. So you raise money. You miss your first ship date. The board knows you're going to miss your first ship date, because everybody does that. Everybody does that. But, you know, they invested in you, so they still support you. You miss your second date, and now they say, well, you know, you really have to be careful. We're going to give you another five million bucks. But now, you know, we're really going to hold you accountable. Then you have one more meeting, and to your utter surprise, they're saying, we want you to step aside. And you say, but last month you said, you're going to stick with us because you still believe in us. What happened in the last 30 days and the VC will say, well, you know, every Monday I was going to our partner meeting, and every Monday I was telling them, well, they slipped, but they look really promising. They have rock stars, you know, 1% of all these dogs eating food. You know, how hard could that be? So I kept telling this story Monday after Monday after Monday. And then finally we had this partner off site, and I just got tired of defending you guys, and I just, you know, it's not worth my bandwidth because my time and my mental faculties are so important. So we're going to take you as a loser company in our portfolio, and we're going to take this other loser company in our portfolio, and we're going to sell your assets to the other loser company and we're going to declare victory that you were acquired. So everybody's happy, except you have to step aside. You are now gone. And then the CEO goes home in a state of shock and he says, freaking vc. You know, last month they love me. This month they don't love me. They're throwing me out. I don't understand what happened. You know, we own 51%. We're going to take it to a vote. Yeah, right. So, okay, again, I'm not. I don't want you to think I'm full of anger, okay? But I just don't try to befriend your vc. The key to managing a VC or any investor is to just meet your projections. Okay? Meet your projections. My advice to you is that you set projections that you are 80% confident you'll make 80%. That's the minimum confidence you should have. 80%. God bless you. If you do 100%, you will make history because you're the first person who met your forecast. If you do 120%, you're a God or a goddess. Not to be sexist. So you need to under promise and over deliver. Under promise and over deliver. Okay? Now you might ask, well, what happens if our realistic projection doesn't make the company interesting enough to get funded? Like, what's the bottom end? And that is a real problem. And I will tell you that venture capital is not for everybody. That venture capital is playing a game. Every venture capitalist wants to fund the next Google. So lots of companies are just thrown out of that. There's no way that a new chain of restaurants is likely to be the next Google. It could be the next McDonald's. Don't get me wrong. But the likelihood is very low. It's unlikely that a consulting practice is the next Google or that a web design company Is the next Google. There's some things that are just not applicable for venture capital. There's only several thousand deals happen for venture capital per year of the millions of companies that start. So don't set yourself up for failure. They're looking for the next question. Google. They will settle for $100 million exit, but they want the next Google. That's the game you've decided to play. Okay, so don't befriend your VC. And then the last one is don't assume that VCs truly can add value. At any given moment, a VC is on 5 to 10 boards of directors. They are also looking at companies every day. They are very, very busy people. They are. They're a touch ADHD. They're certainly egocentric. It's very difficult for most VCs to separate causation and correlation. Right. That they invested in a certain company and it did so well that it must have been them who made that company succeed. It would be interesting to ask the CEO what his or her version of that success story is. So, you know, a VC can pick up the phone and introduce, you can send an email to introduce, you can help you recruit, but you shouldn't think that they're going to do a lot of heavy lifting. Fundamentally, what you want from a VC is, is money. And you want two or three hours a month of their bandwidth. That's about it. Should be happy with that. If you get that, you're doing well. And the irony is that the more successful you are, the more bandwidth you'll get, which is kind of unfortunate because the less successful, the more you might have needed the help. But what happens with these things is the venture capital game is a game of hindsight. So what you do is you invest in 20 companies. One or two become successful, maybe it's a mega success, but let's just say it's a moderate success. And so you have invested in 20 companies. Let's say one is successful. So people ask you about the one company and you say, I knew there was a good team. I knew there was rock stars. I know they were in a great market. Millions of dogs, more dogs coming out every day. I knew this was a good business model, that we were going to disintermediate this very inefficient way of getting dead cows into cans to dogs. Why was there a pet food store in the middle? So stupid. The pet food store is grabbing 25% margin. What value did that pet food store add? You had to get in your car, drive to the Pet food store. Find a parking space, go into the pet food store, and then what? It's dead cows in cans. Did you do any point of purchase analysis? Did you do any taste tests? No, they added no value. So it was so obvious that of course there had to be a better way to buy dead cows in cans. So I knew that. I knew the team was rock stars. I knew the great business model, I knew there was a great market. So I invested in that company. Then asked the vc, so what about the webvan that you invested and put $400 million in so people could buy broccoli online? Why did you invest in webvan? Why did you invest in webvan? And the VC will tell you. My partners did that deal. I told them that was a stupid idea. Not nearly the potential of selling dead cows in cans to the 75 million Americans who own dogs. It's a very retroactive business. I'm not saying that all VCs are like this, but I'm telling you have realistic expectations of venture capital. That's a mistake that many, many entrepreneurs make. And so believe it or not, that's 11 mistakes that entrepreneurs make because I believe in over delivering. So with that questions? Yeah, thank you. Thank.

Is Mike on for any questions? By the way, step up to the mics because we are having a video recording. So if you do have any good questions for a guy, please step on up.

So guy Ajay Bam here. I'm faculty here at Haas in entrepreneurship. And my question is we hear a lot about Lean Startup. Lean Startup. Lean startup. And I want to hear your take on that. And are you seeing more companies actually following that path? Path. And are you actually working with a company that is doing that? Well, in a sense. Well, first of all, I love the concept of a lean startup. My experience is that too much money is worse than too little. Because when you have too much money, you start thinking in very sloppy ways. You start thinking, we need to scale. You start thinking, well, they gave us $5 million. They didn't give it to us through to collect 1% interest as a CD. They gave it to us to invest. So we need to invest. We need to invest in thousand dollar Herman Miller chairs so that our rock star customer service people have comfortable seating arrangements and we have to have a rollout party because we need to make a statement. And so if you didn't have money, you would not have such statements. Stupid conversations. Okay, so too much money is worse than too little. When you have too little, you really have to think hard. You have to do guerrilla things. You have to, you know, you have to host your website on the UC Berkeley server and not tell anybody here. I mean, you need to do stuff like that. That's just the way it is. You know, don't feel bad. You can always, always endow a chair later. So right now, do what it takes. Yeah, so I heartily endorse that. And I went through my dialogue of marketing is free tools are open source virtual teams. So you don't need commercial real estate. I mean, we're getting, you know, I mean, that's why Y Combinator is so interesting. For 25 grand you can do a lot of damage. And arguably, if you cannot do a lot of damage with 25 grand, maybe you're not such a great entrepreneur. So if it, you know, if it takes you $2 million today to get to a prototype. Now, of course we're not talking biotech, we're not talking, you know, I'm obviously talking about a certain kind of startup that's a good test that you need too much money. So I love the concept of Lean startup.

Yes, yes. So I started an incubator last year. It's called Go Startup House. It's a residential incubator. And there we have speakers coming in, it's here in Berkeley. So one of the guys was called Alex Mann and he's doing a company called clicktime and he owns the company with his brother. And then they also did something called Mann Consulting. So they were able to fund.

With the consulting?

Yeah, with the consulting. And then of course a lot of disputes with his brother, but they worked it out like four years. So now 12, 13 years later, he's getting like two calls from VCs every week wanting to invest in his company. Okay. But he did tell this one story where they were getting this competitor that was VC funded and he was like devastated. He thought that this is it now the whole clickdam thing is going to be out competed by all this VC money. But within 18 months, they weren't able to get a new round of funding and they just had to shut down. So he's in a very good position right now, but you don't hear much of these stories. So there was a startup fear here like a week ago and there was a company called Guidebook and they've been able to do this.

You really need to, you need to embrace the 10, 20, 30 rule because. Unless you're in the freaking Transamerica Tower, this elevator, I'm off the elevator, I'm.

Gone.

I'm in a Cab going to Union Square already, but. Okay, so continue.

Yeah, yeah. So.

So I'm taking my son to Safeway to shop for groceries tonight. It's open 24 hours. Keep on going.

So, so Alex Mann, he started in the 90s when, like, intel was brand new, but guidebook, they started like a year ago, and now there are 20 employees and they've been able to grow this organically and they have so much cash now that they have to double their employee rate. And still all this without VC funding. But again, I don't hear much of these stories and I've been studying entrepreneurship.

Thank you for your question.

For 15 years. So my question is.

Oh, there is a question. I hope he's not in your contest because I can tell you right now he's not getting past the semifinals. Yeah. Okay.

I'm doing a PhD in entrepreneurship, so this is kind of broad. But basically my question is, do you hear a lot of these stories where companies grow organically and are successful? And.

Jesus, I'd like to pay you for what you just did because you just proved everything I said tonight. You know, I think that the organic lean way is the way to go. It's a harder way to go. It is. When you do it that way, you have to prototype because you need to sell, right? You don't, you know, you're not just doing PowerPoint slides. You have to sell something. Nobody buys a PowerPoint slide. So I think that is very good. And, you know, if you look at, if you look at something like Microsoft or Apple, you know, they didn't start off with venture capital. They started off with two guys in a garage, two gals in a garage, and they built something that they wanted to use. They did it organically. They didn't go and raise millions of dollars. They didn't do PowerPoint. And so I think a lot of these things that start organically, it really serves a need and it takes off. And one day you're Microsoft or Apple. And I love that story. I think if Sequoia ever comes to speak to you like Michael Moritz, I think he'll tell you that the richest vein for Sequoia Capital has been two engineering students building the product that they want to use, which is very different than a group of people who saw some kind of Jupiter or IDC or IDG or McKinsey or Accenture report about the market forecast and decided that because the McKinsey report said that the pet food business would be a five billion dollar business, we should have a pet food online store. So I love the organic path. Okay, thank you. Yes, Hi.

I'm not sure how much this question applies to this talk, but I work for Lawrence Berkeley National Lab and there's talk of perhaps starting a non profit company to educate the youth in Richmond, say like inner city.

Educate the what?

Public health education and youth education to promote that. And we'd be interested in. It'd be a non profit. We wouldn't be selling anything. Right. So would you have any recommendations of how we could. Would there be people, companies that would be interested in funding that, starting something like that?

Venture capitalists or even angel investors? I would say they are trying to increase their financial returns as opposed to do good. If they do good, it may be by accident, it may be a natural outcome. I mean if you build the most successful solar panel company in the history of mankind, you will arguably do good. You'll reduce the carbon footprint of homes. But they did it because they wanted to sell a boatload of solar panels.

Right.

So if I understand your question correctly, it is not going to be very successful for you to go to professional venture capitalists to try to raise money for a not for profit, if that's what you're asking. The way you should do that is what you want is you want rich people who have made money through various means to give you the money for philanthropic reasons. But it's not an investment. So it's very different.

Yeah. Yeah. You answered my question. Something.

I'm sorry?

You answered it.

Okay. Okay, thank you. I'm one for one there. Yeah. Yes. Yes. I'm seeing a trend. You know, if you ask another 15 minute question, I'm going to shut you down, so.

Well, yeah, I actually had a 20 minute presentation I wanted to give if you guys. Well no, my name is Ameca. I'm co founding an incubator slash accelerator program called Spartups out of the South Bay and I wanted to see what the increased rise of incubator and accelerator programs. Also with those not giving any upfront investment, what is your take on them? Also with them disrupting the B.C. world?

I'm sorry, my take on the incubators.

On the rise of incubator and accelerator programs and also your thoughts on them.

Disrupting the BC world? I really have mixed emotions about those because I love visiting them, I love the energy, I love the sort of banding together that we're all in this. I love the sort of shared space, huddling together for warmth, sharing expertise, sharing Xerox machines, sharing Trixie, the front desk receptionist. So I love or it could be Biff doesn't have to be a woman. So I love that aspect. But having said that, I think that just because you have free space and you have shared resources, that doesn't necessarily make you more successful. That to me, the most important thing is the prototype. And if it advances your prototype, then I would be all for it. But just hanging around other people in shared space is fun. Ping pong table, all the good stuff, but that doesn't necessarily increase the chances of your success. So the key is, I keep coming back to that. It's the prototype, man. Build a freaking good prototype and get to market. Which is one of the beauties of not having a lot of money. Because if you don't have a lot of money, you cannot dick around making a lot of crappy prototypes. You have to get it right.

Right.

Which is a good outcome of not having money.

So you also mentioned about VCs or the false perception of entrepreneurs thinking that VCs can add value to their companies.

Yes.

In most instances, these accelerated incubator programs don't give you as much money, but may have different value adds. So at what point does non financial kind of overtake, you know, larger investments?

At what point does non financial overtake larger investments? Wow, that is so much of a case by case basis. I hate to, not that I have hesitated to generalize tonight, but I don't know how to answer that question. I mean, someone like Paul Graham and Y Combinator, you know, he may just, in a five minute conversation may add so much value to your company that it fundamentally changes your company. Whereas you could be in another incubator where, you know, the blind lead the dumb and you know, just hanging around there for years, you won't gain anything. So it really, it's kind of just a crapshoot. But you know, again, I mean, just keeps coming back, get a prototype and put it out there. Because either the dogs eat it or they don't. I mean, that's, that's the key. That's the key. Data point. Okay, thank you. Okay. Yes.

Hi, my name is Romy.

I'm a full time MBA student.

Okay.

And you mentioned before that one to two out of every portfolio of 20 companies actually succeeds.

Yeah.

Looking back, is there any characteristics or things that you can highlight, if there are, that really make those stand out, like those teams? Is there any or is it just a crapshoot?

Well, first of all, you know, in a rare moment of humility, let me say I'm not exactly proven as a VC because I Haven't. So you could take everything I say, you know, guy, you're wrong. So you could make the case you do everything opposite of what I just said, you might be successful. Well, I think when most people look back on their successes, they will say that they, quote, knew that it was a good team. The problem is that you really have to ask, well, if you knew that one was a good team and that's why you invested in it, why did you invest in the 19 other losers? Because at the time you scored squeeze the trigger, you knew they were good too. Unless you were purposely investing in losers. Right. So it's not rational. So at the time you squeeze the trigger, all 20, you thought they were winners, otherwise you wouldn't have squeezed the trigger. So why is it that 1 succeeded and 19 failed? And it's not as easy as saying, well, I knew that team would succeed because what about the other 19? So I, you know, as I get older and older, I have come to believe that it's better to be lucky than smart. So, you know, because just imagine from a VC's perspective, these are some of the pitches you would have heard. Right? So we're PhD students at Stanford, and we're in this computer science class, and we're working on this new search engine that measures, you know, inbound links. At that point, there were five search engines. Did the world need a six search engine called Google? Hmm, maybe not. Right? Or my buddy and I, we want to have a business model where we need infinite server space in the sky with infinite bandwidth so people can upload their videos that they stole. Okay. And what's going to make our company tip is when people start dropping Mentos into Diet Cokes. Okay. Raise your hand. Who would invest in YouTube? Okay. None of you. Right? Okay. So we're going to enable people to send 140 character text messages. Oh, what a concept. Have you heard of chat? Have you heard of email? Have you heard of text messages? But you want to send tweets. And what's your business model? Oh, we don't know. But, you know, lots of people, lots of people want to tell everybody on the Internet that their cat rolled over. You know, if just if just 1% of the cat owners use Twitter to tell the Internet that their cat rolled over, you realize how many tweets that would be per day. And so if you look at these things, so you have to sort of go back in time. So at that moment, you could invest in Twitter, you could invest in Webvan, lots of broccoli is sold all those people need broccoli. They don't want to drive to save for you. Imagine if you could just go online and order broccoli. If you just get 1% of the broccoli sold in America, you realize how big that would be. And so at any point, or at the point that you had to squeeze, squeeze the trigger. Wow, I squeezed the trigger wrong many times. I have false negatives and false positives. I think if you're honest, you just have to say you got lucky. Now, clearly, Kleiner Perkins and Sequoia gets lucky all the time, so they must know something. But wow, I'm gonna sneeze. One second.

Bless you.

Bless you.

Allergic to cal went to stanford. Yeah. So it's very difficult to say, but if you look at trends, I really think it's the two guys in a garage, engineering background, building the product that they want to use. Another sort of retroactive story was my girlfriend wanted to sell her PEZ dispenser collection online, so I started ebay. Great story. Total bullshit story. Pierre wanted to make a perfect market online. But it's a great retroactive story. So if you're successful, man, you can just reinvent history all the time. You could just interpret history anywhere you want. And if you fail, well, nobody's heard of you, so it doesn't matter. So in that side, you have nothing but upside. Right? So, yeah, I wish I could tell you. You need to get another speaker to tell you that, because I cannot. Yes. Oh, we'll go back up there. Hi, my name is. And thanks for a good talk and advice. I'm a foreign student from Korea and trying to start up here. North or South, Just in case we get nuked, I want to know. When I try to start here.

I found it quite hard for foreigners.

For, like, we just tough.

And I also have no connection here. So can you give me any special comment or advice for foreign entrepreneurs?

You know, I have to admit that I think the acoustics for this is built for the audience, not the speaker. So I could not understand your question. Can somebody. Do you have any advice for foreign entrepreneurs? Oh, do I have any advice for foreign entrepreneurs in the U.S. you know, I actually think that you have an advantage as a foreign entrepreneur in America because I think one of the richest veins for investing, in particular using the Sequoia theory, is two engineers who are first or second generation American. And if you look at it, Andy Grove from Hungary, Sergey from Russia, look at all the Indian entrepreneurs that built this valley, all first or second generation. And I think that poverty is a very motivating force. And so if you gave me a choice of investing in a startup where the CEO is the fifth generation American, you know, his great, great, great, great grandfather came over in the Mayflower, started the largest, I don't know, you know, farming supply store in Connecticut. Built that up. Built that up. Billionaire. And this person's name is, you know, Jonathan Sebastian, I third and father, has endowed a chair at Yale and Dartmouth. And coincidentally, he went to Yale and Dartmouth, total trust fund baby. And now sees that while there are 75 million dogs in America versus, you know, versus Ashmeet who one generation ago, his parents were in Bangalore and they put him through Iit and he came over here, or his parents, they caught the last helicopter out of South Vietnam and they landed in Sacramento. And so his mother became a maid and his father started running a liquor store. And they saved everything they could and put their son through Sonoma State and that kind of thing. And I would invest in the immigrant all day long. All day long. Because if you just look at the history of entrepreneurship, it's poor people who made big companies. It's not fifth generation trust fund babies. So I think, you know, as one of, don't get me started in politics, but if I were the president of the United States, God help us. First of all, Macintosh would be a standard computer. If I were president, I would say we should make the most flexible visa program in the world. Right? Basically, I would say if you want to come to America, we have the greatest education system in the world. Cal is now ranked ahead of Stanford as of yesterday. So you come to the United States, you get the best education. You will be in a legal system where it might be flawed, but it is not criminal. You don't have to pay people off to get permits. You don't have to pay people off to get your money out of the bank. You don't have to pay, pay people off. You know, there's a common law system here and you don't have to fear for your life. You don't have to worry about the mafia. You don't have to do all this, come to America and start a great company. I would do, I can solve the housing crisis. If I were Obama, I would say, all right, so this is the deal. If you buy a house that costs more than half a million dollars in America, you are now a citizen of the United States. You know, our housing problem would disappear in one day because all these rich people from all over the world, they say, our son, our daughter can be a citizen of the United States, buy him a house. That would fix the housing problem, right? And then, you know, my strategy would be instead of using drones, let's use the visa system. What we will do is if you want to come to America to study and work and start a company, we will give you a visa. Come on down. And because we want to create a brain drain, we want all the countries of the world to be pissed off at America. Not for killing them, but for draining their best people. We want the best people from every country to come to America, start your company, create jobs, do all that kind of great stuff, Move back, send the money back, we don't care. But just come to America. America is the land of opportunity, I think, man. Because if you look at all the great companies, it's immigrants that do it. And so, so I think this is like Ross Perot. Well, if we have people from Mexico come across, they're going to take American jobs. I don't think so. Those are the hungry people. They're the aggressive people. The intelligent people should bring them all down. I'm third generation Japanese American. What would have happened if they said no more Japanese Americans because Japanese Americans are taking away the maid jobs and the gardener jobs. No more misunderstood Miyagi. We want Americans to do the yard work. Right. I would not be here. Right. I would like be working Starbucks in Hiroshima right now. So I don't, don't get me started on this. I really, I think we should create a reverse brain drain. We should just suck the brightest people around the world. You could have a test, you know, just give everybody the SATs. If you get 2,400 on your SATs, you get a visa in one day. You get 2,000. It takes six months, you get 1500. You know, stay in Russia. What else do you want to know? Yes, Great. Hey, guy.

Thank you so much for your time.

My name is Anthony Beldor. I'm a first year MBA student here. I wonder if you have advice for prototyping in industries that have higher capital expenditure requirements. Consumer products or biotechnology stuff where the infrastructure for creation is not free, like in tech. Wait, say this again. You want what? Do you have advice on prototyping in industries that require a higher capital expenditure where the infrastructure is not in place? Yeah, that's kind of where my whole pitch for prototyping breaks down. Huh? My advice would be change industry. How's that? Yeah, I mean, that is, that is a flaw in what I'm saying that, you know, it's hard to build A quick prototype of a new kind of mini nuclear, you know, power plant. Right. But, you know, I guess, okay, so you can't build a prototype of funding for your new neighborhood nuclear power plant. But I mean, the message is you just got to, you got to have something tangible to show people. More tangible than PowerPoint. Whatever you can do. I mean, point to a similar company in France that has neighborhood nuclear power plants. I mean, do something, but don't just talk about, you know, the 300 million Americans who own 75 million dogs. You have to do something more tangible. There's the expectation in this lean startup world where most resources are free or cheap these days that you show up with more than PowerPoint. Before I forget, do any of you speak Hungarian in this audience? That's too bad because I just got the Hungarian version of my book and I don't know what to do do with it. So if any of you know anybody who speaks Hungarian, I think it's Hungarian, please help yourself to this book. I also, I brought some of my Art of the Starts, which is the book that I wrote about how to start companies. So I have this many here. I don't know how we're going to give them out. People who ask the shortest question, maybe. So that. And then one more pitch. My most recent book is the book called Ape, which is why I singled out that guy wearing the ape shirt up there. And Ape is a book that explains how to write a book. And so if any of you are interested in how to write a book, grab one of these cards because this is an innovation in the book business. So this car card, these cards on the back have a place where you scratch off a specific redemption code. So you go to a website, you get this number, you type it in, and then you can download the e book version of this. So for an author, this is probably 200 cards. If I were to bring 200 books, they would be stacked this tall. I would never do this. So this is a way that I can fulfill orders. This is a much better way to do this. So if you're interested in a book about self publishing, this is my latest book called Ape and help yourself. I do this for my love of Cal that I. Because. Okay, so last two questions. Okay. Hey, guy. Last three. Three. Okay. Nobody else come up though. Yeah. I would vote for you any day if I could. I'm a first generation immigrant from Vietnam and this is my question for you. So we didn't get into B plan. I was trying so hard for four or five months to get funding from angels. Yeah. So when is the time for you to give up? Give up, pivot or just find something else? Well, that is a difficult question because, you know, in a sense, it's. What's worse, giving up too quick or staying too long?

Right?

And there is no simple answer to that. You know, they're allegorical stories. Stories about how Fred Smith was on his last payroll and he went to Las Vegas and he made 10 grand and he saved Federal Express. Right? But you never hear of the people who didn't make ten grand in Las Vegas and missed their last check and went out of business. You don't hear about those. So. Well, listen, for one thing, how old are you? 23. Okay, so, you know, it's not like you're at the end of your life yet, right? Yeah, I hope not. So, you know, you're 23 years old and you try to raise money for six months. I mean, you know, you got lots of time, pal. I mean, you know, I would. Don't sweat it. Don't do anything stupid. Don't kill yourself. You know, don't do any of this Asian kind of crap. You know, you gotta commit hardship. I am Asian. Yeah, yeah. Don't sweat it. Are your parents here or still in Vietnam? No, they're in Vietnam. And are they running liquor stores or are they, you know, like. No, actually, my parents. Premier. My parents are not the poorest people, but I don't want to ask them for money for some reason. Yeah, but, you know, they're like. They're so proud that you're a cow. Right? They don't.

Yes.

All right, so now they're so proud that you're a Cal. You know, they would probably really happy if you went into dentistry or medical or lawyer. Marry a nice Vietnamese girl. You know, maybe. Maybe if you filed for a patent, they would be happy.

Wow.

You know. You know what I mean? I gotta tell you. So, like, obviously I'm Asian. I went to Stanford. I graduated in three and a half years. And I have to tell you, one of my biggest regrets in life is that I was this freaking driven Asian, right? So, you know, you gotta, like, take as many courses as you can, go to summer school because, you know, you want to. You're in a rush to get out there and work, and then you get out and you work and you find out you got to work for bozos for the next 60 years of your life, right? And so I would encourage all of you, undergrad or graduation, that you live off your parents as long as you can. No, my son is not in the room anymore. I think he inherited that perspective. But you know, because like your parents, right, and they're like, you know, they've been working hard and they're so proud of you, and they're telling all their relatives, you know, our son is at the fifth best university in America. Well, that's what the ranking says, you know, what do you want from my life? This ain't Harvard. So, you know, they're so proud. They're telling all their friends and all that. And you know, I've been to Vietnam and there's a lot of scooters in Vietnam. You get 1% of those scooters you get. So, so, so I guess this is a long way of me telling you, you know, don't sweat it. I mean, just, just float. Listen, I'll tell you another story. So I'm full of stories. So after I graduated from Stanford the next year, I entered law school at UC Davis and I went to law school for two weeks. And I could not, not stand law school. I just hated law school, basically, back then, anyway. Basically law school was they tell you that you're a piece of shit and they're going to remake you. And I had a real fragile ego at that point in my life. Hard to imagine, but I had a real fragile ego. So I just could not handle the concept that they were going to remake me because I was a piece of shit. So I left law school after two weeks and. And that's the first time I quit something in my life. And I thought this was the frickin end of the world, right? So Asian American quitting law school. Oh my God, you know, like I thought, oh, so there's like, you know, 20 generations of Kawasaki, they're like working in rice paddies and they're cleaning the homes of white people and they're doing all this. And so finally, you know, one of you breaks through and you get into law school and you stay there for two weeks and then quit, right? So like, bringing shame upon the Kawasaki name for the next 20 generations going forward. Yes. What is it? Suicide? What should I do? You know, should I run away from home? So I call up my father, I said, you know, dad, I just hate it, I just can't, I gotta quit. And so I thought, he's gonna like disown me, right? Or, you know, whatever, right? And he tells me, that's okay, as long as you make something of your life. Well, why the hell did you force me to go to law school? Why didn't you tell me that before you forced me to law school? So anyway, that's a long story to tell you to relax. Thank you. Okay, you. Hi, guy.

First of all, I want to thank you. This has been a great, informative and very entertaining talk. So. So my question is, what's superior? Mac or PC?

Well, that is a dumbass question.

Okay, so the reason why I asked that is so I could get that book. So now onto my real question. That was a strategy play.

That's a stupid question.

You said the shortest question gets the book. Right.

That's like, you know, you go up to the Pope and say, well, what's better, Catholicism? Or you know what?

Right. That's not. That wasn't the real question though. So my name is Roy. I am a founder of an education startup. And so this question pertains to the.

So it's not a short question.

No, no, that was a joke. I was just trying to get the book.

I didn't say multiple questions.

Okay, well, this is the main one. This pertains to your lesson about the 51% equal in control of a company. So right now I'm starting an education startup and I'm trying to bootstrap it as much as possible. While I understand that's the ideal situation, what is a reasonable amount or what, what is the maximum amount of equity you might be willing to share or give to VCs with a reasonable expectation that you can maintain control?

Well, as I said, there is no reasonable expectation of maintaining control. The moment you take an outside investor, you are kind of fiduciarily working for that investor, whether it's 1% or 51%. Just get that it's not exactly true, but it is a better model to be thinking that way, that you're losing control. But on the other hand, you're really not losing control. You are getting capital to make it a bigger pie. That's what you're truly doing. So also, you should disavow yourself of the concept that you are giving part of your company to the vc. You're not giving part of your company, you are selling part of your company. It is an arm's length transaction. You're not doing them a favor any more than they're doing you a favor. It's a mutually beneficial arm's length transaction. Okay, so having said that, you know, generally speaking, you try to sell about 20 to 30% of your company per round. So then the question becomes, well, how much is your company worth? And so if your company is worth 4 million pre money and you raised 2 million, so now it's 6 million post. So 2,6 is a third. So you sold off 33% of your company for 2 million. That's kind of about right. If you're selling 40 or 50% of your company, you're diluted yourself too much. If you try to only sell 10% of your company, most VCs will not be interested because it's not lucrative enough for them. So it's kind of in that range. Okay, last question.

Hi, my name is Daniel. I'm undergraduate here at Haas. Just re entering. Grew up in a family with both entrepreneurs as a mom and dad. Being second generation American.

You're making me cry.

Hahaha.

So having the knowing that my parents have always driven me to be innovative and push to the next edge and believing in like making a solid product that's going to last and something that you would want that somebody else would benefit from. Yeah, I have and I've built prototypes that are working prototypes with patents. I had a problem where somebody had stolen these.

Stolen.

They stole the patents from me.

Yeah.

But the prototype is still workable. Okay. I'm trying to figure out how did.

They steal a patent from you? They copied what you did.

They copied what I did.

Okay.

But I have the originals.

Okay.

When's the best time to introduce this to my venture capitalists?

No, no, no, no.

Not that, not that they stole the, not that they stole the patents. They seen these prototypes and they are workable. When's the best time to introduce these patents and these products to the market? When you see there's other viable solutions on the market. But you know, well.

My advice is that you should always deliver bad news early.

Yeah.

And so, you know, it's a very good acid test of how much the VC really believes in you. If you tell them this and they say, okay, forget it. I just think that if you are transparent and honest from the get go, it just takes less mental energy to maintain that. I have come to the conclusion that when you lie, it takes too much energy to lie. Because when you start lying, you need to keep track of what lies you told because you need to be consistent with your lies. Whereas if you tell the truth, and there's only one truth, you don't have to remember which version of the truth you told. There is only one version. So I would be honest. And if the VC or the investors are truly believers in your company, and first of all they would probably become stronger believers because they now know that you have the Integrity to deliver bad news, which is a very, very useful thing. Integrity is a very useful thing. And arguably, if they just punt and turn around and run away, you know, they didn't really believe in you anyway. So I think earlier is better. I would also make the case that even if someone copied your idea, the way that a company becomes defensible is the first company to scale, as opposed to the first company to file the patent. So I think even in a race, the race is to scale to build a successful company as opposed to that the reason why we're defensible is a patent. There are many. I would rather have a company with a prototype that is not patentable, that has thousands of people using the service and joining every day, than something that has rock solid, airtight patents that no one is using.

Absolutely.

You want something, the dogs are already eating.

I've seen the need for this product. Nobody else had this product. I built the product, built the working prototype. People have seen it. And then I patented that and then they copied the patent, but I still.

Have the original prototype. Well, I'll tell you another perspective on this, which is if simply seeing your product and copying it renders you non defensible, then you didn't have a good enough product anyway. It should take more than seeing the product and copying it to make you vulnerable to that. It should take more. If that's all it is. If just hearing what your idea is. I'm going to sell dog food online, but I'll tell you that under non disclosure, you're a loser because that's just not. Even if you had a patent for selling dog food online, that's just not defensible. It doesn't matter. So it's the first to scale, first to succeed, and that's what makes it successful.

Well, I guess I better start packing a lot of dead cows.

And that's right. Thank you very much. Thank you very much.

On behalf of B Plan and the UC Berkeley student body, I want to thank you guy for taking the time to come with us and have a conversation.

All right, thanks.

Thank you very much.

Thank you. Take care.