How to Build a Unicorn in 8 Simple Charts with SafeGraph

Awesome. Thank you, Caitlin. All right. Good morning from San Francisco. I'm Oren Hoffman, CEO of SafeGraph. I'm going to go over how to build a unicorn in eight easy napkin graphs. We're going to have a lot of fun. I hope you can read my terrible handwriting. And we're also going to fly through this presentation, so hopefully we'll have a lot of time for questions. Please prep your questions. Extra credit for non obvious questions that make us think. Or also if you don't get to your questions, you can ask me a question on Twitter. I'm Oren on Twitter and if we don't get to your question during the session, I'll just answer them over the next 24 hours on Twitter as well. So great to Now a lot of so many sides are controversial and dare I say, contrarian. So this advice comes with a warning, which is never take advice from somebody who's more than 10 years older than you. And that's probably me. So with that warning out of the way, let's just fly. Okay. The most important advice that I can give you today is to avoid good opportunities. Avoid good opportunities. Like you work to avoid the coronavirus, good opportunities must be avoided at all costs. This is true if you want to build a company, but it's also true in life. The more successful you become, the more good opportunities are just going to start coming at you. Soon you're going to be swimming in good opportunities. Again, this is true for companies, but it's also true for you individually. Let's first dive into this advice individually and show how it applies to building a business as well. Let's say you're 22 years old and you don't have a lot of money. Well, you're likely going to see very few opportunities to invest, and most of those opportunities are going to be bad. But as you gain wealth, you're going to see more opportunities to invest. And many of them will be very good. But even the good opportunities will take time and effort to review. So it's in your best interest to do everything possible to wait only for the great opportunities. And this is also true when running a company. The possibilities of the number of things that you can do to grow your business are endless. You can launch new products, you can be better at recruiting, you can speak at Saster, and so much more. My advice is to have some sort of rubric that allows you to ID the good opportunities and do everything possible to avoid them. Now, you may have a question. Okay, how do I know when an opportunity is Just good and not great. Well, my simple heuristic is that if the opportunity has very few downsides, it's almost certainly not a great opportunity. All great opportunities have very big and very obvious downsides. Of course, just cause an opportunity has obvious downsides does not mean it's a great opportunity. I could jump off of a building that has some obvious downsides. It's probably not a great opportunity to go do. But if you see something with no obvious downsides, it's almost certainly not great. And this is also true with people you hire. If you want to hire a 10x er, that person will almost certainly have glaring faults. Anyone that you could hire without glaring faults will be at best good. They will not be great. So in summary, avoid good opportunities like you avoid COVID 19. All right, let's dive into delegation. Most people advise us to delegate things that you're not good at. They advise us to surround yourself with people that have different strengths and different weaknesses. This is the conventional advice. Maybe somebody on your board has given you this advice. Most of us have heard this advice many times over the years. This is terrible advice. Don't listen to it. Ignore it. Take it outside the backyard. Bury it, stab it and kill it. Just do the opposite. Instead, delegate things that you're good at. This sounds really strange, so let me explain. The things that are the easiest to delegate are the things that you're already good at. You know how to do these things really well. You might already be an expert in them. You can break these things down really well. You can also hire for these things really well. So delegating these functions will for sure have the highest success rate. If you're a great engineer, who do you think you're going to be better at hiring? Other great engineers or great salespeople? The answer is obvious. You're going to likely hire super engineers and very mediocre salespeople. So the first thing you should always delegate are the things that you're best at. I cannot stress this enough. You can even see this in companies. They rarely get great at the things that are not the traits of their founders. For instance, Marc Benioff is one of the world's best software marketers. He was an amazing software marketer even before he started Salesforce. He's incredible. He's hired great marketers and he's delegated to them. And Salesforce continues to be great at marketing. But Marc Benioff is not a great UI UX person. While he's been able to acquire great UI UX people through acquisitions over the years. Stuart Butterfield, the CEO of Slack, is one of the greatest. The Salesforce product still suffers from having one of the worst UI experiences. But guess what? It hasn't mattered at all. It's better that Benioff focused on his strengths. And you should focus on your strengths too. You cannot be all things to all people. Focus on being great at just a few things. Now let's go to the napkin graph. On the Y axis are things that you're good at and things that you're bad at. On the X axis is things that you love to do and things that you hate doing. When you get a chance offline, fill out these quadrants for yourself. The easiest thing to delegate as much as possible are the things you're already good at. Build systems to make delegation easier. Hire super talented people and work on up leveling them. But now you've got these two other buckets left. You've got the things that you like to do, but you're not yet good at. In that case, work on investing in yourself. Get a coach. Read, learn, try a few different things. You're going to fail a little bit. And while it's unlikely you're ever going to be great at those things, you can get yourself to good. And once you get yourself to good, you can better effectively delegate or hire for those things. Now there's these things that you're bad at and you just don't like doing. My advice on this quadrant is to do everything possible to get leveraged through either APIs or software. Or maybe don't even do them at all. Remember, you don't have to do everything to be a super company. There could be many functions you either outsource or honestly just not do at all. The great thing is that the number of vendors that you can choose from, these API software vendors, et cetera, has been growing exponentially. Many of them are here at Zaster. You have amazing choices and the number one skill to have over the next 20 years is the ability to select and manage vendors. Almost every company today has more vendors than employees. So this is so important and I'd love to dive in more during the Q and A. Now let's listen this Napkin app. Let's look at what the smart people around you are doing and let's do the opposite. Many most smart people optimized for the midterm. They delay gratification in the short term. They're experts at passing the marshmallow test. But while they think they're optimizing for the long term, they're actually usually optimizing for the midterm. And this explains why so many smart people go to law school. If you're going to law school, go because you have a true love for the law. Don't go because of optionality. Don't go because you're getting your ticket punched. Most people who go to law school don't love the law and they certainly don't love the first few few years out of law school where they're really in a grind. They go because they're optimizing for seven years out of law school when they hope to make partner. They're optimizing for the midterm. Never do things just to get your ticket punched. Never do things to gain optionality. Optionality is bad. You need to really have a purpose driven life. The smartest people never optimize for the midterm in the short term. They optimize for learning, for growing in areas that are very non obvious. They might do things that are a little remote. They are certainly not being conventional in college. They're probably not choosing a popular major. They're being different. Smart people stay in jobs with bad bosses. They deal with bad things in the short term. But the smartest people would never have a bad boss. They would get out of that situation immediately. Smart people are always thinking 10 years out. The smartest people are always thinking 10 days out and 30 years out. So don't be like the smart people. Be one of the smartest people. And I'd love to dive in with any questions that you guys have at the end of this session. Okay? It's a lot easier to choose which companies to invest in than to choose which companies to start to make money. As an investor, you need to be both unconventional and right. It's not enough that you are right, because if it's already conventional, it's already priced in. You need to have a different view of the world than other smart people. When you start a company, you too need to be unconventional and right. But you need a third element which is the true ability to get business done. If I want to start an energy business, it's not enough to think the future is going to be super small nuclear fission reactors or something like that. And it's not enough to be right about that prediction eight years later. I also need to have some unique advantage to start and run that business. In this case, I personally have no such unique advantage. So it'd be really folly for me to spend the next 10 years of my life on this vision. Given that you can start a small number of businesses in your lifetime, this is a very good Venn diagram napkin chart to consider before diving in headfirst to anything. Okay, in the next two napkin graphs, we're gonna dive into fundraising. First, let's talk about when a venture capitalist turns you down. The reason that they give you for turning you down is usually a lie. It's kind of like Leo Tolstoy's first line in Anna Karina. All happy families are alike, but every unhappy family is unhappy in its own way. The reasons that VCs give you for wanting to invest in your business are usually true. But the reasons they give you for not investing are usually lies. And the number one reason why a VC will pass on your business is that they don't like your team. This is especially true for seed and series A deals. And of course, they're just not going to tell you this. One reason that most VCs will give for not investing in you is that your total addressable market, your tam, isn't big enough. And that's pretty much never the actual reason. VCs will happily invest in businesses with small TAMs if they think the team is good enough to move to an adjacent TAM once they're no longer growing at 100% percent year over year. So while getting advice from VCs that pass would be super helpful in theory if it was true, in practice, the advice is not worth considering because it's rarely true. And so you can often discount that advice. Now, let's say you're lucky enough to get a term sheet from your favorite venture capitalist. Okay, you're going to have a lot of options to negotiate many different terms. You know, like there are certain rights and there's valuation, there's a lockup period, there's board seats, and there's so many more terms to negotiate. But most of these terms are win lose and they're very contentious to negotiate. You should still negotiate them, but it's going to be a little bit of a contentious back and forth when you are negotiating them. The most non obvious clause to negotiate is the amount that you're supposed to reimburse the investor's legal counsel. You're actually doing your investors a favor by negotiating this. This is an actual win win to negotiate. The time it takes you to go from term sheet to close is a function of how many dollars there are in this clause. This is also the first thing that your lawyer and your investor's lawyer are going to look at. They're going to look at this clause before they look at everything else, this is going to tell them how much they're getting paid. And this is also a core signal to the lawyers of the investor's view of the complexity of the transaction. The more complex, the bigger the fees. Remember, investors do not want to pay legal fees out of pocket. Assuming your company is pretty vanilla, there's no need to signal to the lawyers that this transaction is complex. Remember, both law firms are going to take their cues from this one simple number. If the number is large, they're going to justify their fees by adding work and nitpicking on your very small on very small points. And that's going to result in a significantly delayed closing. Remember, from that time from term sheet to close can be quite variable if the number is smaller, if those dollars are smaller, the nitpicks are going to be less prevalent and the time to close are going to be much, much speedier. In addition, it's a real win win because it's going to one, take less time for you and the VCs to close so you both can focus on much more important things to do. And two, the company is going to be able to use its treasure for more important things than covering legal nitpicks. Now, in the next thing, let's talk about planning in startups. Doing Trump's planning. Planning is really important at the very early stages of companies when figuring out your market and figuring out what company to start. Remember that fourth graph with the Venn diagram that we talked about? That's the real planning piece. And planning is really important at larger companies because larger companies can really only effectively do one or two new things per year. But small companies win by doing. They win by moving super fast and reorienting themselves and moving again. Air Force pilots learn about this. They call it the OODA loop, which stands for observe, Orient, decide and act. And it's really about moving fast. My favorite quote from Jeff Bezos is being wrong might hurt you a bit, but being slow will kill you. And it's like Maverick from Top Gun. You really must feel the need for speed in startups. Okay, and we're on our last napkin graph, so get your questions ready. We're gonna hit some of the questions pretty soon. This one came from one of my discussions with Jason Lemkin, who's the founder of Saster. The better the person, the less time it takes to manage them. That's the obvious thing, but that's only up to a point. The true 10x ers actually take more time to manage than the average performers. If you happen to have a 10x ER on your team, you really are going to need to make sure that you're giving them quite a bit of your time and your love. These people are going to require a lot more time. They're going to probably require more time to even hire, so they're going to find more time to interview and they're going to require much more time to manage, but they're going to give you so much more in return. They take more time, take much more investment than typical high performers. So let's do a recap before we get to the questions. So what did we learn today? Okay, we learned eight things today, so let's recap them. The first one is avoid good opportunities. Avoid them like the plague. Second, delegate things that you're good at. Do not try to delegate things that you're bad at. Third, do the opposite of smart people. Think for the short term and the long term. Don't optimize for the midterm. Fourth, remember our Venn diagram on how to start companies. Make sure that you start a company that's both non obvious that will be true and something that you actually have some sort of core reason that you're going to win at. Fifth, the reason that most VCs give you a no is lies and especially the reason of total addressable market in your TAM. 6. Decrease the time from term sheet to close by negotiate on legal fees. 7. In startups doing always trumps planning. And the eighth thing that we should always remember is that true 10x ers really need significant active management. Okay? Lastly, as I mentioned at the start of the presentation, never take business advice from people who are over 10 years older than you and that might be me. They're not going to understand what you're going through. And that might just include everything I just told you, especially if you're under 35. So definitely do not do what I say. Also, never listen to your parents business advice either. They're just coming from a different era. Businesses are moving too fast. While some truths are enduring, the truths that are the most those are the truths that are most obvious and conventional and your parents are just not going to be able to help you with hidden truths. Of course there's another piece of advice that you might want to ignore from me, especially if your parents are Bill and Melinda Gates. Oren, thank you so so much. Such insights and so much fun. So again, make sure you follow Oren on Twitter. If your question didn't get answered, please tweet them there, continue the conversation, and until next time. It was so great to have you. Thanks so much. Thank. You, sam.