Mark Suster Talks Startups At Innovate Pasadena
This morning at Innovate Pasadena I got to see Mark Suster speak on startups. Here’s my report.
Funding
For those looking for funding, he recommends his one coffee per week method. This where you have coffee once per week with someone who can increase your chances of getting funded. His recommendation is to identify VCs in your area who would be a good fit, then find who they have funded. Those are the ones you want to ask out for coffee. Well, the ones who have time for you – you can probably skip the ones running a $1B company. Tell them about what you are doing and ask for honest feedback. If the entrepreneurs like you and value you what you are doing, they will pass your information along to VC. Emailing the VC directly is right out.
The Team
It seems I’m not the only one who has seen crazy startup teams in the LA/OC area. By crazy, I mean they have 5 managers and nobody to build the product. I get approached by people like this all the time and my thought is that they’ve already sliced up the equity 5 ways, so I’ll be working like a slave for a fraction of the company. No thank you, best of luck.
Mark believes this happens in LA because individuals are afraid to fail. In a group, it’s not “I failed,” it’s “we failed.” Safety in numbers. Mark’s ideal team is 3-5 engineers and a product manager, the latter of which is probably the CEO. If you’ve read Paul Graham, Joel Spolsky, or Founders at Work, you’ve heard this before.
He also says that sales people are coin operated, meaning they’re mercenaries. Good ones are worth a certain salary and if you don’t have the sales to support it, you’ll pay them outright or they’ll leave. For startups, he recommends instead an evangelical business development person.
He also recommends you don’t outsource your development. Now, I run a company that builds software for other companies, including startups. So of course I believe it depends on your product. He recommends that if you can’t convince developers to work for you for free (and that is exceedingly hard in this market), you try to hire them perhaps off Elance or Odesk. That’s one route, if you are confident in your ability to qualify developers and manage them directly, but that’s much harder than it sounds. In fact, one piece of advice I’ve heard lately is firing bad hires quickly. And I’d say that’s in part due to not having the ability to interview and qualify them.
I humbly suggest that – if done correctly – it’s quite possible to outsource the MVP and bring development in-house when revenue can support it. Some, like Klout and Fab, have taken it much further. That said, if you’re going for VC funding, not having a technical cofounder can be an impediment you’ll need traction to overcome.
Is It In You?
Mark got into the slog of being an entrepreneur and referenced his most popular blog post. It’s not nearly as glamorous as the press makes it out to be. I think the best analogy for this is it’s like being a professional athlete. Maybe .02% of the population is cut out for it. You have to ask yourself, are you really a Pau Gasol? Because this is the majors. It’s an incredible amount of work and it doesn’t slow down until you succeed or fail.
Speaking of which, he addresses age discrimination. It’s absolutely rampant in the VC world. He’s not a part of it; he’s invested in those in their late 30s and 40s. Those are the people most VCs see not as experienced, but as old.
Why is that? It’s their goal: a billion dollar company. That takes 8-11 years to build, going at a full startup pace. A lot of life changes can happen in that time. You sure aren’t getting more energetic as the years go by. Your personal and financial responsibility is probably increasing over time. While he isn’t an ageist, he does say that the earlier you can do this, the better.
Or don’t. One can take 8-11 years to grow a damn fine business while actually enjoying life. This is absolutely a reasonable thing to do. In fact, one could argue that a VC-backed startup is completely unreasonable – practically insane – way to live your life.
Further Watching
Mark recommended the following two interviews for further startup education:
Mark interviews Bill Gross, founder of Idealab
Mark discusses “entrepreneur math” with Kelly Hwang