Steve Hoffman, Chairman of Founders Space
Everything You Wanted to Know About Starting a Business
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In this week’s episode we sit down with Steve Hoffman, Chairman & CEO of Founders Space.
Founders Space is one of the world’s leading incubators and accelerators. He’s also an angel investor, limited partner at August Capital, serial entrepreneur, and author of several award-winning books. These include Make Elephants Fly and Surviving a Startup.
Hoffman is a serial entrepreneur, founding and exiting two venture-backed startups, in the areas of games and entertainment.
Hoffman went on to launch Founders Space after his own successes, with the mission to educate and accelerate entrepreneurs. Founders Space has become one of the top startup accelerators in the world. Hoffman has trained hundreds of startup founders and corporate executives in the art of innovation and provided consulting to many of the world’s largest corporations, including Qualcomm, Huawei, Bosch, Intel, Disney, Warner Brothers, NBC, Gulf Oil, Siemens, and Viacom.
Show Links
https://Twitter.com/CaptainHoff/
Books (Aff Link)
The Five Forces That Change Everything — https://amzn.to/341F1V3
Make Elephants Fly: The Process of Radical Innovation — https://amzn.to/3ypCnpZ
Surviving a Startup — https://amzn.to/33W2Xcv
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Talking Points
00:00 — Steve Hoffman, Chairman of Founders Space
08:34 — Lessons learned from working from entrepreneurs around the world.
14:43 — How to start a business, with just an idea.
19:45 — How to hire your first employees.
25:38 — What do you do with bad hires?
29:42 — How to bootstrap a company.
34:14 — What to think about when looking for investors.
42:37 — What is growth leadership?
Success Story Podcast
Stories worth telling.
Welcome to the Success Story Podcast, hosted by entrepreneur, business executive, author, educator & speaker, Scott D. Clary.
On this podcast, you’ll find interviews, Q&A, keynote presentations & conversations on sales, marketing, business, startups and entrepreneurship.
Scott will discuss some of the lessons he’s learned over his own career, as well as have candid interviews with execs, celebrities, notable figures and politicians. All who have achieved success through both wins and losses, to learn more about their life, their ideas and insights.
He sits down with leaders and mentors and unpacks their story to help pass those lessons onto others through both experiences and tactical strategy for business professionals, entrepreneurs and everyone in between.
Website: https://www.scottdclary.com
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Read The Transcript (Machine Generated)
Scott: [00:00:00] Welcome back to another episode of the success story podcast. I am sitting down for the second time with captain Hoff, Steven Hoffman. He is the founder of founder space. It is one of the leading fastest growing startup incubators in Silicon valley. He works. With entrepreneurs globally. I brought him back on the show because the first time we just spoke about his career and we, we started to dive into entrepreneurship and some of the things that he’s learned, but now we really, really go deep.
He speaks about everything from a fundraising versus bootstrapping. What to look for when you’re bringing on VCs, how to scale your company, how to take a product to market, how to market your company, your product, how to sell your product talks about exiting IPO, growing selling. So he really goes through everything.
It’s a great podcast. I was actually. Super super happy with how in-depth he goes and how tactical he gets. So if you have ever thought about starting a business, this is a podcast for you. Also I just want to say thank you to the sponsor of today’s show. Be K a content. They are one of the best sources to go for content for your website, your blog.
Your business again, they have a special offer stick around until around halfway through the podcast. And you’ll hear the special offer from BKA content. Anyways, stay tuned, Steven Hoffman. This is an entrepreneur master class. All right, let’s get right into it.
thanks again for joining me. I am sitting down with. Captain Hoff, Steve Hoff, Steve Hoffman, excuse me. We’ve we’ve chatted before he’s been on the podcast. This is actually you’re the first repeat guest. So I’m excited about this for a couple of reasons. Number one you have a new book out and a lot of guests do have books, of course, but what we’re going to be talking about today is the work that you’re doing with founder space.
Entrepreneurship startups. If you have not listened to the first podcast, so Steve Hoffman, captain Hoff he is the he’s the captain, isn’t the founder, captain and CEO of founder space. Founder space is one of the world’s leading accelerators. He’s a venture investor, serial entrepreneur. He is the award winning author of several books.
Last time when we spoke to him, I think we were speaking about make elephants fly. And now we’re speaking about surviving a startup. You work with entrepreneurs all day, every day, you invest in entrepreneurs, you help entrepreneurs grow scale, their businesses. I’m going to, I’m going to just ask a brief, a brief, like overview of how you got to where you were today.
Cause I know last time we went through all of your time in production and working with different studios. And then eventually I think you had an app or several different companies that you exited and then now you’re doing this. So. Well, if this is the first time people have ever listened to you, speak on the show, give us a little bit of a rundown of where you’re from and and what you do.
Steven: [00:02:56] So I have done a lot. So I’ve been an entrepreneur for decades, and that is why I wrote this book. Really putting everything I learned in doing three venture funded startups, myself, plus working with investing in and mentoring hundreds of startups around the world and seeing all the problems they run into and figuring out, you know, how do you solve these problems without.
You know, destroying your company without thinking, because honestly, like 90% of startups fail. So I’ve been there. I’ve had very successful startups and I’ve had failures and I have tried lots of different things. And for me I, you know, my mission now is really to empower entrepreneurs around the world and to help them learn from each other.
Scott: [00:03:44] So let’s first tee up founder space. There’s a lot of different incubators in the world. There’s a lot of different groups that support entrepreneurs. What is founder space? What does it do? What type of entrepreneurs do you attract? What do you help them with? Venture funding, growth scaling, whatever
Steven: [00:04:02] founder space was actually one of the early.
Incubators and accelerators in Silicon valley. So we started back in 2011 working with entrepreneurs so a decade ago helping them with everything they needed and really it started just with me helping out my friends and then expanded from there and grew globally. Our format is a little different from Y con Combinator, 500 startups or other.
Accelerators here in Silicon valley in that we are truly a global accelerator. So we have over 50 partners in 22 countries. We are working, we have like multiple incubators, you know, in China and other places. And I am constantly traveling. So right now I’m a digital nomad. I have no home. So I go, I, my goal is not to originally my goal founder space goal was to bring all of these entrepreneurs to Silicon valley, you know, and help make them successful.
Now, our goal is to bring Silicon valley to the rest of the world. Really bring our teaching, our knowledge, our resources, our venture capital to cities that are often underserved to countries that really need to tap into this, to grow. And
Scott: [00:05:21] so I am now not understand. So you are evangelizing startups and what are some of the lessons that you’ve learned going to cities that aren’t obviously considered the traditional startup hub?
Steven: [00:05:33] It’s been, it’s been an amazing experience because every culture is different. Like, if you work with startups from Romania or the UK or Indonesia or China or Japan, it’s all different, right? Because it’s rooted in the culture. So there are a lot of decisions. People make how they communicate, how funding is done.
That’s different in each of these kinds of countries, but there’s also fundamental thing, you know, we’re humans and, and we’re functioning in a, in a capitalistic society. So these elements remain the same. And I’ve learned a lot of things. For example, China’s a very different country in terms of doing business and in China, you have to do business based on relationships.
So Chinese entrepreneurs spend an inordinate amount of time working on building deep relationships. With their peers with investors, with the government, with everybody, it’s a network and it’s the, your network is so powerful. It’s not as individualistic as here in the United States. And. In China, you have to understand that what you write in a contract doesn’t matter.
It’s what your relationship is that matters. If your relationship is strong, you don’t even need a written agreement. Things will just happen and people will do what they say, but if your relationships are weak and this is where most Westerners stumble going into Eastern culture, then you can have all the legal docs you want and it doesn’t make any difference.
Scott: [00:07:12] Now, these are, these are interesting, very interesting insights because I don’t think I’ve ever spoken to. I’ve spoken to a lot of individuals that support startups. I spoken to a lot of people that have built companies in north America. I don’t think I’ve ever really spoken to somebody that builds or, or really focuses on building companies overseas.
I’m curious, and maybe you can dovetail this into lessons also for, for north America as well. When. You’re starting a company. And like when I was looking through the table of contents of your book, I like how it sort of structured because you’re literally going through. The different phases of growth of a company you speak about launching venture capital growth marketing, gorilla marketing, growth, hacking, whatever you wanna call it finding your emojis on guess scaling and then building a billion dollar business, which could be, you know, exiting, scaling, IPO, whatever it may be.
So starting at the beginning, that’s, that’s sort of my concept for, for chatting with you. If you want to go into something else, that’s fine. But that was sort of my concept. So starting at the beginning, Do you find that the lessons learnt overseas for, for, or the, the motivations for starting a startup are similar?
Steven: [00:08:18] They are, and they aren’t. So America, we tend to have this idealism. So a lot of people in the United States and it’s true of Europe too. They will latch onto an idea that they believe. Means something personally to them, you know, it could be a social value. They have like climate change and they want to make a big difference or helping the homeless or education, or it could be something personal to them that they just love.
They’re they’re crazy about. And they will pursue that idea, even if it seems like it’s not going to work. Like even if all of the odds are stacked against them, even if everybody tells them it’s impossible. If they believe they can do it, they will do it. And a great example of this is Elon Musk. So we look at Elon Musk and he decided he was going to take humanity to Mars.
Why do we need to go to Mars? Well, in his mind, he sees himself as the savior of humanity, right? We have to get off this planet or we stand a chance of being hit by an asteroid and wiping out a wiping ourselves, which would just obliterate the human race. So there’s some catastrophe that could, if we’re stuck on one planet, we’re vulnerable.
So he set this off and he, you know, all the scientists said it’s impossible, everything. Yeah. And he just keeps going. Right. He’s gonna, he’s determined to do it in his lifetime now. You go to other countries, a lot of them because of their culture B because of, you know, a lot of these are group cultures, especially in Asia.
So you look around you and you, you, most people do not go against the flow of the group. They stick with the flow because that’s how the culture dictates. You’re a good citizen and you get ahead and everything else. And in these cultures, they often discard those ideas. So they will try things that they are pretty sure will work.
And instead of taking huge risks so that and that are in line kind of with what other people are thinking. So that’s a big difference about how they approach business. Also in like South Korea is the hardest working country in the world. You know, people work more hours in South Korea than any other country, Japan, you know, people die working, you know, China, people work incredibly hard in the west.
We get weak and they tend to be hierarchical society. So their startups are structured around these hierarchies. You know, the, the boss is the boss, right. And you don’t contradict the boss and it’s very true of all these Asians and cultures and you get to the west and we have, again, a more individualistic streak.
Right. I mean, we still have a lot of the same pressures with the boss and everything. Yeah. Else. But on average, we tend to be. We tend to like to defy authority more. We tend to permit our employees to speak back, speak up, go another direction more often than you would find in, in Asian cultures. And this fundamentally shapes how startups operate now, you, there is no.
Right way. That’s what I’ve learned. We can say our way is basketball. We grew up with this way. There’s a lot of efficiencies to be gained by more hierarchical structures, where everybody bonds together and works together. And as a group, then more individualist, but in individual societies, people can be more creative, more expressive.
You can get more descent, more discussion. So both of them have their strengths and we kind of see it play out. As these companies grow into very big, you know, unicorns and beyond.
Scott: [00:11:41] Would you, so I guess these are things that you’d have to take into consideration if you’re looking to go into other markets, obviously.
Do you find that w well, actually, let me rephrase what would be the benefits of going into a market? That’s not your own at a startup stage when it’s, it is already difficult to find customers to grow to scale. If you’re already dealing with all these hindrances and pressures that a regular startup would face.
What would be the benefit to going overseas and to understand other cultures and to grow into other cultures and sell that those markets.
Steven: [00:12:13] This is what I tell entrepreneurs. Pick your market. Like don’t try to tackle the world. Don’t, you know, you have limited resources. You’re a small company. It’s hard enough to succeed in this single market.
Let alone in multiple markets at the same time. And we’ve seen this, you know, like Uber went into China and failed, right? Because it’s a very different market, very hard. They had to sell out exit the market. Many other companies have had similar experiences. Some companies couldn’t even get in like Facebook and even going abroad to a more similar culture.
Let’s say you’re in the U S and you want to expand to Australia or to the UK. It’s still, it’s a different system. So I always recommend to entrepreneurs pick a big market to begin with. Like, you know, the U S is great and just go all in on the U S ignore the rest of the world. I mean, usually when you build a product for the U S people, you know, because of the nature of the internet, you will get users from all over the world anyway, anyway, which is great.
But you know, if you’re from a small country like Taiwan, let’s say, or, you know, Cyprus or some other things country, you know, there’s no market there. Literally you have to pick a bigger market to go into. So even in Europe, which is a spoke, supposedly a single market, it’s actually multiple markets because of the culture, you know, in the language differences, you know, Germany and France and Italy, and all of these are different markets that you have to tackle differently.
So I always just say, pick a relatively big market and put all your energy into it. And only once you’re going really strong consider other ones
Scott: [00:13:49] summary. Okay. So let’s very, very smart. And let’s, let’s talk about some of those. So there’s like 19 different rules that you have to pay attention to when you’re, when you’re launching a startup or 90 different concept, they should look into it.
I like how you broke this down. So let’s, you know, at a high level, what somebody wants to start something, what, what should they think about when they’re, when they’re first starting a company? I would say it’s in north America’s, I’m, I’m almost positive. It’s like 90, 99% of the audience that would be listening to this, but what should they think about?
Steven: [00:14:19] So I tell entrepreneurs. You know, a lot of people have this misconception. They believe that when they start a company, the idea is it’s important and they should like spend all their time iterating on like, what’s the perfect idea I could launch with it. And honestly, You know, your idea is not the most important thing, because most likely that idea will change.
Like when you begin your idea, if it’s new, if it’s groundbreaking, it hasn’t been tested by nature, right. If it’s really innovative and it almost has to be by nature for a small startup to grow into a unicorn, you have to have something very special, very new. So if it’s that new, then you don’t have the data to know if it will work or not.
So don’t waste a lot of time thinking, you know, trying to come up with the perfect idea instead, pick a direction you’re interested in and then spend 80% of your time on one thing, one thing at the beginning. Building your team. People don’t think about this. Like they want to build the product. They want to raise venture capital.
They want to, you know, go out there and get press or whatever they’re going to do, but they don’t spend enough time building their team. They often so many entrepreneurs overlook this and I will tell you the team is going to define your success. Not you. You’re one person, one person never built a billion dollar company ever.
Like you have to, if you’re going to build a unicorn unique, if you want to build a small solo business, fine, you know, you can ignore the team piece, but if you really want to grow and scale a company, you need an excellent team to start with and you need a team with skills that you don’t necessarily possess.
So I tell most entrepreneurs, honestly, the reason 90% fail, you know, and this is why I call it surviving. A startup is I want to show you what you need to do. Every step of the way to survive is the reason they fail is because they CA they compromise on their team members. Like they’ll, they don’t know a lot of.
Let’s say they have an idea. They want to explore it, but they don’t know the right engineers. They will take whoever comes there with, you know, whoever, you know, it happens to be available. Somebody they know or somebody they bumped into, but they aren’t the best. Look, if you’re going to build the best company in the world, if you’re going to be number one in your market.
Which is what you have to be. If you’re going to be a unicorn, you have to be the market leader. You’re going to need absolutely the best team, which means the best people in every area, you know, technical area, design, business, and sales. If you can’t get top notch, people forget, it don’t even start. If you get top notch people, I guarantee you, you will come up with the right idea.
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so how do you find those? So follow up question. Very good points. How do you find those people? What do you, what do you look for? How do you. How do you, as a, as a first time entrepreneur, a lot of noise out there, a lot of resumes are going to come your way. Right? If you put up some job adverts, where do you go to find these people?
What do you look for?
Steven: [00:19:21] That is a question I get asked by every entrepreneur, after I tell them, I tell them, you know, your team is subpar. You know, I try to be honest with them, but, but kind right. I’m like you, you guys, you know, you don’t have a killer team. You’re never going to produce a killer product or, you know, beat out your competitors, focus on this.
They’re like, but I can’t afford it. I have no money. Like I can’t, you know, I can’t even pay people. And I tell them the number one test. Have a great CEO, and this is what I look for. Like if I’m a, I’m a venture capitalist. So when I fund entrepreneur, I say, the first test you have is defined a great team without any money.
Like if you can’t do that, why should I trust you with millions in some dollars, you know, or any amount of my money? Because if you can’t even, you know, convince people to join you. At the beginning because they believe in you, how are you going to get investors to believe in you? How are you going to sell customers?
How are you going to sell the world on your vision? You need that ability. So that leadership ability. So I tell them, first of all, it’s not going to be easy. Like there is no magic wand. I could pretend I’m going to give you a magic wand for, you know, that will make all these people here. But honestly, what it is is it’s getting out of your shell.
It is engaging with other people. Not at the beginning. You don’t have money most likely, right? Unless you’re already successful, like, you know, mark Zuckerberg or somebody like that, you have as much money as you need. You don’t have money. You, you don’t have other resources, but what you do have is your ability to communicate as a leader.
So you need to go out and you need to engage these people on a deep level, like the belief in your business, and you need to be receptive to their ideas. Remember if you’re going to attract super smart, ambitious people, they want to feel like they’re contributing to a project that they. Believe in that they take ownership of, if you want them to own the idea, you have to let them contribute.
You can’t just say, this is my idea. You know, I don’t want to hear what you think. Do you want to join or not? That just doesn’t work. You have to truly for your core team, right? You have to truly make them a part of the thing. And this is why you don’t need a fully flushed out idea. You need a direction that you think is very promising.
You need to find people who believe in that direction and then together, you can start to iterate. But by bringing that you’ll find it’s absolutely amazing. Bye. You mean the door and saying, let’s build this together. I want to hear what you think, what ideas do you have? Where could we take this? Suddenly these people who are excellent and they may get, be getting a job at Google or Facebook or something, they’ll quit those jobs because they think, oh my God, because as soon as they start investing their time, all of us do it.
We fall in love with it. Like that’s what is meaningful to us. So you have to have a meaningful engagement with them and then they will. You know, often it’s their project, too. At that point, they will just work for you for equity and commit fully. And that is the start of a great relationship. And that is the beginning of a great business.
Scott: [00:22:21] I’ve always heard. I heard the saying, I think it was from one of the founders of buffer. He said, if you’re hiring for a startup in the first question, one of your hires asks is, you know, how much vacation time am I getting or whatnot, nothing wrong with those questions. But those aren’t the people that are going to really love.
A startup environment. They’re not going to love it. And that’s where you hit that’s. You have to have at the beginning, you need to have that love that passion. That probably is an abnormal amount of passion that most people don’t have for a company or for their work. Right. You have to find people that can even emulate like a 10th of a percent of the passion that the founder would have.
If you can find those people, that’s when you win. But it’s very
Steven: [00:23:00] difficult. That is true. It is difficult, but people have that pack a lot. Oh, the people you want have that passion and those people are out there waiting for somebody to approach them. So often I heard horror stories and live through horror stories of entrepreneurs.
I’ll give you an example. There’s an entrepreneur I was working with. I’m not just one, this happened many times, but this entrepreneur brought somebody on to their team to do the coding, right? The person was from Google crack coder, like. And this person was so excited about the project at the beginning.
You know, this passion was there, but the person, when he asked the person this, this coder did not want to give up the Google job. Right. They, they were like, let me, I want to be safe. Right. When this takes off, I’ll do it. But I’ll do your project on the side. Well, they started off great. And then over time when things just didn’t take off right away, the person got distracted.
Like at Google, it’s not an easy to work at Google. I mean, they, you, they expect a lot out of you. They hire super smart people and they want them to work. So this person got distracted by other obligations he had at Google. And all of a sudden it’s productivity when prune and the entrepreneur’s waiting, like, where’s that passion what’s going on?
You know, weeks go by, should I cut the person and start all over, find somebody else don’t want to do that. Then they’re in this conundrum. You know, they don’t know what to do. Eventually after several months they had to cut the person and start all over. So they wasted several months. I, to your point, I say, don’t commit to someone unless they’ll commit to you.
Right. So if you want if you want to get it’s one thing, anybody can say they have passion and some people are truly passionate, but unwilling to commit, like they’re passionate for a brief period of time, but there’s a litmus test. Like, okay, quit your job at Google and let’s do this. Full-time no, I want to do it on the side.
Okay. Then you’re probably not the right person. You just have to say that and move on.
Scott: [00:24:58] And my, I guess the, the follow-up, cause I know this is asked of you a lot would be when you do have the wrong people in your organization, is there a way around it or do you just have to cut them and rebuild? Is that the only solution?
Steven: [00:25:10] So in a big company, it can afford some. Some dead weight, you could afford dead weight if you’re Microsoft or any of these huge companies. You know, if people, they just, you know, if somebody isn’t working out because it’s often hard to fire people the bosses just shut them off to a corner. I can ignore that in a startup, you cannot afford an ounce of dead weight.
You have to be a lean mean fighting machine. Like you cannot have any dead weight. And that means that you have to make a decision. Now I myself have stumbled in this area, my early startups, like I had this engineer who was good friends with my other engineers and they recommended I bring this engineer on, but the engineer.
Actually, it was not good. Like, he was very arrogant. He talked a good talk, but his implementation was buggy all the time. It kept crashing. It was a nightmare. But we, again, after I only found out how, how inept he was, you know, six months in, because we had already we needed, I didn’t, I trusted. And I thought he would build, they, they liked him because he was.
Because they were friends. Right. But he wasn’t the right guy. And, and, but we’re six months in. I felt like we can’t go back six months. It’s insane. Right. We spent six months on this. So I stuck with the guy another six months and then another six months. And I will tell you the day I fired him, thinking all hell would go loose.
Every I got this new engineer and they just, oh, this the system is crap. Totally redid it in a month in a month. And it worked better than it ever had. So I will tell you, you know, cut your losses the day you realize somebody isn’t working out as a startup, you cut them, you literally cut them right that day.
And you go in, even if you think your whole company is going to implode and it will set you back six months or whatever it is, just do it and find the right person. Yeah.
Scott: [00:27:15] Very good advice. It’s very, it’s very hard. And I guess that’s why if You know, I’m sure this will come up at some point, but if you are an entrepreneur and you’re having to deal with these very difficult personal discussions with people that you’ve hired on it can be easy to default to literally what you just said.
Just keeping them on keeping their own, keeping everybody happy. So I
Steven: [00:27:36] was also worried about my other employees who liked him, but it wasn’t a question of whether you like somebody it’s like, are they performing? You know, I didn’t want to lower morale. I didn’t want to do. Honestly, you can’t worry about those things.
You just, and the difficult discussion. You just have to be totally honest. You like, you just have to say that, you know, first of all, you have to give them a warning right away when you first see the problem, like, don’t ignore it. Like just state it upfront, put it in writing because that protects you legally and just stated up front, you know, these are the problems.
Then you warn them twice, third time out the door, like literally
Scott: [00:28:08] we’re cutting the launch. It also you’re right. I like that though. It shouldn’t be a surprise. I guess you’ll never be surprised
Steven: [00:28:14] and you shouldn’t worry about lowering their productivity by telling them they’re not doing a good job. If they’re going to, honestly, if they’re going to be offended by your words and not step up to the plate, then they aren’t the right person for the job.
So you just it’s it’s you just need to be totally honest, but not in a mean way. Like you don’t like, you don’t have to be mean. You just have to be firm. You just have to be, this is what I expect of you. This is what we need to get done. If we’re not going to hit that goal. If the system goes down again or you don’t hit your milestones, then we’re going to have to review whether we can keep you on period.
Scott: [00:28:49] Yeah. Good, good advice. Okay. Let’s move on to let’s move on to growth. Okay. So next next two chapters, two diff very different ways of growing bootstrapping versus raising venture capital. We can have a quick point about either, or, but I’m just curious your perspective. When should you bootstrap, when should you raise venture capital?
Steven: [00:29:11] So, first of all, often you have to bootstrap at the beginning, no matter what, because like I said, most VCs won’t jump in and fund you until you have something to show them. You know, unless you’re already famous or you get super lucky, you’re not going to get the capital until you’ve made significant progress.
So you’re going to be bootstrapping. The real question is when do you, when, and if you decide to accept venture capital, now there have been a lot of unicorns created. Strictly on bootstrapping. Like you can look at Pluralsight, you know, this education for, you know, tech for coders. You know, they, these guys went public on bootstrapping.
You can do it. You know you can look at a lot of other stores MailChimp, for example, they didn’t raise capital until much, much, much, much, much later. You know, they didn’t have to really bootstrapped it all the way to success and only raise capital to add fuel to the fire. So you do not need venture capital and for a lot of entrepreneurs, honestly, you should never get venture capital because your business isn’t a right fit.
So unless you are going to be have exponential growth, like, like we see, unless your business is prime to become. You know, a multi-billion dollar company don’t waste your time. You’re only going to frustrate yourself and frustrate your venture capitalists, and it will probably end up not succeeding because you guys will be divergent on your plans.
So it w if, if you want complete control, that’s another reason not to go. You could have a big business, but you just don’t want to have, when you take on venture capital, you are taking on partners. But these are your partners. It’s like a marriage and marriages can end in really awful divorces. So I tell entrepreneurs just for, you know, Do you don’t get married unless you’re sure, like it’s not just getting the money.
It’s like, do I want this person on my board of directors? When somebody hands you money, even if they’re not on your board, he can make your life miserable. You know, I had an investor that we brought on and at a certain point they decided they wanted to take over the company. And I said, no. And then they threatened lawsuit.
You know, Watson’s things like, do I want to be involved in a lawsuit, running a startup is hard, enough luck having your investor. You know what I did, I ended up doing a deal where I gave back the money. I’ve literally like, look, I’m giving you back the money because I just don’t want the headache. It’s life is too short.
I want to focus on building something, not fighting over something that we have haven’t even proven works yet. Like we’re still trying to figure out, you need to make sure your efficiencies are aligned. All those things. If they aren’t. Didn’t just bootstrap it and honestly pick a business that you can bootstrap.
There’s certain businesses out there that are much easier to bootstrap than others because they bring in revenue early. You know, they have customers early because they scale at a very low cost. You don’t need millions or billions of dollars to scale. Well, those are the businesses that you may want to consider in.
A lot of it honestly comes down to your personality type. So, you know, some people. Are are primed as entrepreneurs to grow big businesses. You know, they are, they are that type of person. You know, they, they thrive in that environment. Other people really want a business. They can wrap their head around that smaller.
That’s more personal and there’s nothing wrong with that. Like I’ve run both types of businesses. I need to bootstrap businesses and honestly it’s a great experience and it’s a totally different experience and it’s just as valid and it make, and you can become. Wealthier than you ever need to be on a bootstrap business.
Like, you know, if your business is pulling in $10 million a year and you have a very high profit margin, whew. You’re making multi-million dollars. You know, how much money can you actually spend in your life? Like there’s only so much. So do you need a unicorn? Not necessarily to live a great life. You need to decide.
Yeah.
Scott: [00:33:08] Good, good advice. Okay, so I still want to, yes. I think that. For most people, if they’re just getting started, of course they’ll have to bootstrap. And that could probably be a very very sustainable way to grow your business and probably a less stressful way to grow your business, but still some people will want to raise a venture capital money.
So if you’re looking for investors, just some best, best tips for looking for investors, you have to go too deep. There’s a lot there, but at a high level, what would be some key takeaways for looking for venture capital money?
Steven: [00:33:37] So I’ll give you a few things. Number one, research, the venture capitalists, like, are they investing in your space?
Like, you know, most venture capitals already have what they call a fetus, an idea of where they want to invest in what is a good investment at this period of time. If you align with their thesis, what’s in their head. When you walk in the door, You know, if you do a halfway decent pitch to them, they will fund you.
Like literally they are waiting for certain types of companies to come walking in their door. If you are off their radar, if you’re in an area that they are not hot on right now. Almost always, they will shut you down. So you’ve just, you won’t get anything, like, no matter how good a pitch you do, because they don’t believe in the sector you’re in or in, you know, that assumptions you have, they in your assumptions and sector might what you figured out might be really valid, but they know people have these built-in biases.
They have these ideas that they’ve already formed about the market. So the key is finding people are hot on what you’re doing and approaching them. Number two, vet them. Like you, you know, you want to make sure go to their website and all VCs. Almost everyone puts their portfolio of companies on their website and angel investors.
You can just ask. And literally when you contact them, before you set up a meeting, before you divulge all your inner secrets, ask them, do you have any companies that are directly competitive with what we’re doing? You know, you have to give them some idea at a high level idea. And if they do, they will tell you like, there.
They don’t want to waste their time. If they’ve already made an investment in their job is not to rip you off. Like that’s not their job. Their job is to invest and, and they have a reputation. They have to be straight with them. Entrepreneurs are, the word gets out. The next thing is Google do a search to see what their reputation is like, have they screwed over other optimists?
Most of them haven’t, but there are a few them add apples out there and you want to weed them out. So go to their portfolio companies and you may contact them and ask, you know, is this person great to have, have around? Is there, are they a great investor? These are really important things. And then finally, when you go into pitch your investor, Don’t do all the talking.
A lot of entrepreneurs feel like they have to get all this information and part it to this investor in a short time. So they’re blah, blah, blah, blah, blah, blah, blah, blah, blah. You know, downloading all of their information. You know, think about it. If you go to buy a television, a big screen TV and you walk into the store and the salesperson is just blah, blah, blah, blah, blah, every feature, and every trying to sell you on their debt TV.
You know, you’re like, Ooh, you know, like, you know, you get, it’s a hardcore sales. You do not, you, you want to walk out of the store, do really good salespeople. Listen, they listen. And they engage with the investor and they let the investor ask questions. So you want the investor’s brain turned on, you don’t want them turning off because you’re the 20th pitch.
They heard that day and they’re tired and you’re just spewing out stuff that they’re not interested in. You want to get them interested. And that’s why I always say pitching an investor is a dialogue, a dialogue. And the more you can get them asking you questions, the higher, their chance of closing.
Scott: [00:36:48] Good.
Very good. Can you do a top, can you do like another top five for bootstrapping too? That was very good. And it’s right off the cuff. Like we didn’t, we didn’t interrupt this stuff. That was
very,
Steven: [00:36:58] very good bootstrapping. So when you’re bootstrapping always. There are a couple of things you need to do right away.
So before you build a product and it depends on the size of the bootstrap, I still think a team is really important, even when you’re bootstrapped. So building a great team from the beginning when you’re bootstrapping. Great. But if you want to do a smaller business, you don’t have to do that. But remember an entrepreneur’s job is not to create, oh man, like nobody, this is what people get confused about.
They think. As an entrepreneur, I am supposed to build this incredible new product, this incredible, innovative product that will all of a sudden, when anybody sees it, they will fall in love with it. And they will come to me. You know, I create demand. I pull them in, but honestly, 99% of the businesses that succeed that succeed of the successful ones are actually filling a demand that already exists in the world.
You don’t, you know, you don’t create a demand out of nothing. Like people have these needs. And you are coming along with something that feels that it could be a need for entertainment, like a new form of entertainment. Oh my God, this is so new and fresh. I love it. You know, but they were already looking to be entertained if they weren’t looking to be entertained.
They’re not your customer. Like let’s face it. They’re they’re doing other things. They don’t want that. If, if, if. Customers out there in the business have a problem that they’re dealing with. A lot of times they won’t even know it’s a problem because this is the way they’ve always done it. Like, it’s always been a lot of work to do this and they don’t, they won’t, they, if you went to them and asked them, you know, what should I build?
They wouldn’t be able to tell you because they’re like, no, we’ve we do our business like this all the time. We’ve done it this way for the past 10 years, you know, we don’t have any problems, but actually when you, when you figure out something in their business, that’s really difficult for them to do.
And then you build a much simpler solution and show them all of a sudden that demand is there. Right? It’s that demand is already there because they’re like, you saved me all this time or you’ll save me all this money or you’ll bring me new customers that I never could target before. Okay. I will, I didn’t know it was a problem, but now I can see, like, this is something I want solved.
So I tell entrepren, of course, you know, when you’re bootstrapping be super flexible, Super flexible, super low costs. Don’t build anything ahead of time. Go. The hardest thing you have to do is not building the product is never building the product. The hardest thing you have to do is figuring out what product to build.
Like that’s the hard part. So you don’t spend all of a sudden building a product when you don’t know what’s right. You’re going to have to, if you’re in the restroom, if you’re trying to use technology to enhance the restaurant business, You need to go into the kitchen of a restaurant. You need to like work with the chef, work with the owner, find out what headaches they have, what, what really annoys them, that they might not even know.
There could be a second Ellucian too. And then you see if you can come up with using new technology. That’s why new technology is so valuable because it can do things that have never been done before. And these people may not know it. You can bring that into their business and say, well, what if we did this?
Or what if we did that? It doesn’t cost you any money. Just your time. That is the way. And then if you, if there’s real demand, honestly, they will start. They will, you will know it because they will want to pay you right away to get that solution. They’ll be like, can I have that tomorrow? Like, honestly, that’s going to make my life so much easier, you know, or that’s going to help our business be so much more profitable if you, when you hear them that they really absolutely need your product, then you build it.
Scott: [00:40:29] The only, so I just wanted to go through the next few steps and I appreciate also on the, on the bootstrapping component, very, very useful information for entrepreneurs, because I think that they actually do get that backwards. I think they do try and build a product and just push it, push it, push it.
It’s almost like a square, you know, what’s, what’s the saying that the square peg into a round hole. And it just doesn’t, it doesn’t go, it doesn’t work and they’ll spend it. Tons of energy and time and resources trying to do this.
Steven: [00:40:58] And once you build it, you’ve made an investment. You don’t, most people like they make it, they don’t want to give it up.
Like they, they, like, I spent six months building this. We’re going to make it work. So no one did
Scott: [00:41:10] no one to quit to no one to quit. Yeah. Yeah. Okay. So then, so those are, those are sort of the after reading through like the outline of the book, those are the, the chapter titles that made sense to me without.
Reading through all of it. So there’s a few more that I’m curious what these topics go into. So for example finding your mojo growth leadership, following your own path, I’m curious what these mean and why they’re important for entrepreneurship. There is one I didn’t mention, which is building a billion dollar business.
And I feel like that’s a lot of the lessons that we probably already spoke about. Just summarize. So the other three, like the, the finding your mojo, the growth leadership following your own, what do those mean?
Steven: [00:41:50] So in the book, I it’s literally filled with everything I’ve learned over the past 20 years, like being an entrepreneur working.
So each section is actually you get a lot of information, like, you know, there’s some books that have one big theme and they just kind of repeat it and give examples of that theme in this book is really like, it’s something that you can use. So each of these sections has, but like you say, finding your mojo, it has a lot in it there, you know, of, of different areas that entrepreneurs need.
Now I will give you some advice. One thing that is, and I can’t go over the whole book because there’s so much yes. But no, no, no. I know one thing that’s really important that many foreigners fail at is they don’t know their own limitations. Like, we all want to believe we can do anything. And I, of course am somebody that believes that entrepreneurs aren’t necessarily born, but they can also be made.
Now. I think it’s like athletic ability. Like some people are born with great athletic ability. Like amazing athletic ability, but they have no desire really to be an athlete. And they end up not being a great athlete. You know, they’re just, it’s just not in them. Other people are born with no athletic ability and if they work really hard, they might become a mediocre athlete.
You know, they just have done, most people are born somewhere in the middle. So, if you were born with some ability to be an entrepreneur, you can actually grow in that area. You can actually train yourself to become much, much better. Now you still will have deficiencies. None of us are great at everything.
So in a company you need to learn what you’re really good at. And you need to put 90% of your energy into what you are the best at like the best in the world at, because that is how you outperform and then you need to do, you may be able to do a lot of jobs, right? So you may have some graphic art ability.
You may have some coding ability. You may have, you know, some project management ability, right. And you may be decent at this. But when it comes to sales, you are kick-ass right. Like you can sell anything. So I’m telling you, are you going to spend an hour or five hours or whatever a day working on things that you aren’t good at?
What, what does that mean? So I’m S I’m like building my website. I’m, you know, doing I’m coding on the side, you know, I’m, I’m not that great at either of those, but I’m passable, but you aren’t selling. Right. And really what you’re great at is selling. If, if you are great at selling, you should be putting 90% of your time into selling and then getting other people to do all those other chores in your company.
Now, this is really hard for a small company. Like when you’re just beginning, you have no money, but I’m telling you need to find those people. First you need to sell those people, get them onboard, get them doing what they are really good at what they are. Why would you have a mediocre Lee coded site? Why would you have a mediocrely designed site?
Why would you have, you know, all these things at a mediocre level, when you could have somebody much better than yourself, strictly focused on that. So this is a really important. The next thing like in growth leadership that I really want to talk about is that teams, you don’t, like I say, you need an incredible team, but you know, you’re never going to get the superstars of the world.
Like, you know you, you, you, what you need are highly competent people, you don’t need like the best person in the world at doing something. What they found is that the startups that actually outperform the ones that outperform. They are not necessarily the startups with the all-star teams. Like some there they’ve done experiments and they’ve had teams where they have put like the best sales person ever with the best engineer ever, like with the award-winning engineer, with the greatest, you know CT you know with the greatest marketing CMO ever, you know, all these amazing people to get, but those teams, if they lack one ingredient, They will actually not work.
They will become dysfunctional. And that ingredient is trust. Trust in the other people. Sometimes when you get all stars, they want to get all the credit for themselves. They want to be the big person. They stab the other people in the back or undermine them, or don’t communicate because they feel like they’re in competition with them.
But when you get a great team and this is like sports, You don’t have to have to all the best sports players on your team to win the championship. Now I found this out and literally like I was in literally, we had the worst team ever. So the first year of literally we came in last place. The second year, we came in second to last place.
The third year our coach quit. So we had no coach and we were just awful. But by the third year we all jelled, like we loved each other, every player on that team, like we were such good friends, right. We didn’t care if we’re going to lose, we’re stuck on this loser team. And somehow. By magic. We all came together.
We just came together and these teams with much better players, we not only made it to the championship, we won, like we won. And so I actually, and you see this in sports all the time. You see these teams, they might not have a LeBron James there’s, you know, somebody incur incredible on their team, but somehow they come out of nowhere and the team really bonds.
This is what great coaches do as a CEO. You are the coach. You want to you, your job is to create an environment where people trust each other. They know they have the back and communication. They can communicate, they can work together. These teams that work together as a whole really, really well. You just need competent, really competent people, not the superstars.
And you can outperform superstar Queens.
Scott: [00:47:45] That’s good advice. Very good. I appreciate that. We went into almost every chapter in, in your book at a high level. So. But I wanted to do, what I really wanted to do is just sort of give people a little bit of a taste of all the different components that you line up.
Cause you really, like you said, you really go through the entire journey that an entrepreneur will have to go through at some point in their, in their career. Right. When, whenever I finish these off, I asked a couple of rapid fire questions just to bring stuff out from your career. Was there anything else that you wanted to go into that we didn’t talk about or didn’t touch on?
Steven: [00:48:17] So there’s so much like I could, I could do you
Scott: [00:48:22] can’t you can’t, you can’t talk yourself out of a book sale, right? So you gotta leave. So
Steven: [00:48:29] yeah, no, but I could, I, I, first of all, I want to say, I love working with entrepreneurs and I’ve now hit the road because our companies, you know, we’re, we’re, I’m going to be permanently traveling.
So I’d love to come here and Toronto. I’d love to come and visit you Scott. And maybe COVID will be over by the time I get there and we can do something in person a big, but if there are other of your entrepreneurs out there, your fans out there that want me to come to their city, give a talk, you know, work with you.
Just go to founder space. Founder space.com. Reach out to me. I am also on all the social networks like I’m now on clubhouse. I’ve found I’m on Instagram. I’m on Facebook, LinkedIn, Twitter, you name it. I am there just search for founder space, reach out to me and let’s engage because really what I want to do is I I’m so happy that the pandemic is winding down because I love face-to-face interaction.
Scott: [00:49:26] Yes, I agree. I think that’s probably been my biggest biggest not setback, but an unfortunate circumstance of the pandemic is I can’t do any of these in person. I would love to, you know, I’d love to, of course the people in Toronto, but a lot of people in New York, a lot of people in California that I’d like to sit down with and just do like a face to face check.
Cause I like face to face. It’s more personal, right? Like for podcasts, it’s one thing, but also for networking, for meeting founders, for hearing their stories, it’s just so much more meaningful when it’s in person versus. Well over zoom or over, over some sort of
Steven: [00:49:57] zoomed out, but you know, it’s good for now.
And I love podcasts because I can listen to them as I do other things like it’s awesome. So I do that all the time and you know, I love your podcast. Can’t wait to meet you. Can’t wait to meet other people. You know, all, all your fans out there. Yeah.
Scott: [00:50:17] Well, thank you. I appreciate it. Okay. Let’s do some, let’s do some rapid fire questions.
If somebody’s if you’re going to dispel one myth about entrepreneurship, what would it be?
Steven: [00:50:29] I would dispel the myth that that everybody can be a great entrepreneur. So a lot of people say, you know, just work hard enough, just do, do everything you could do. You know, you, you can be great. You could totally transform yourself. I will tell you honestly, there are some people who should not be entrepreneurs and you know, it, it’s not for everybody.
You know, you may be a brilliant, brilliant scientist, but if you try to be an entrepreneur, you just made. Fall on your face. You know, it may stress you out. People can’t deal with uncertainty, people who can’t deal with finances going all over the place. People have trouble relating to other people.
Like they may be really good at their field, but being an entrepreneur is about being with other people, relating to other people, motivating other people. So there are things. There, I say, pick an area that’s a natural fit for you because if you’re fighting a bench against your core, and I see a lot of entrepreneurs who shouldn’t be entrepreneurs, it is going to be really difficult.
Scott: [00:51:33] Good, interesting advice since it’s actually, I’ve never, I’ve never heard that advice before, but it makes, it makes a lot of sense. What’s one piece of advice that you would tell your younger self.
Steven: [00:51:43] Ah, so I, you know, I remember where every time I did accompany, every time I, you know, was involved in the process, you know, when things are getting a little crazy, I would think it could be the end of the world.
Like you take these things so seriously. So if like right now I don’t care if what I do succeeds or fails. Like, I don’t think it reflects on who I am, because I know I am whoever I am, like whoever I am with all my flaws. And I know my flaws now and all my abilities, I know my abilities. That’s who I am.
I can’t change that. I can work harder. Yes. I can try to do many, many new things, but I should not. Blame myself when things go wrong, I should not, we are our own worst enemies. Like we stress ourselves out. We play this tape recording in our head. You know, that it’s our fault. We’re failing or everything’s going to go wrong.
You need to stop doing that. Like if you’re really going to be, I became really successful. Honestly, when I, when I stopped doing that, when I stopped pushing. Myself too hard. When I started to laugh at myself, laugh at the problem and just take them as they come. And if wow, this whole thing goes to hell and it doesn’t work out well, I’ll do something else.
If I’m still alive, if I’m still breathing, if I still have energy, I there’s always something I could do. And if I’m not alive and I’m not breathing and I don’t have energy. So then so be it. I don’t care at that point. So that’s what I tell people.
Scott: [00:53:24] Good. What’s a, what’s a resource. It could be a podcast.
It could be a book that you would suggest people go read or listen to.
Steven: [00:53:32] Well, of course your podcast, Scott,
Scott: [00:53:36] it has to be, it has to be something else though. And
Steven: [00:53:39] joking around. There are so many great resources out there. I love You know, I love the book shoe dog by the founder of Nike, Phil Knight, which tells his personal story of everything he went through to be an entrepreneur.
Really great. We also I have something special to offer your listeners. Like if, if you know, my book is just coming out now from Harper Collins, surviving startup, if you go to founders face and you’ll see it there. If you buy the book, now we will give you our online startup program. Which includes our startup kit, which has all these resources for entrepreneurs.
And it seems all of these videos, we created all these business lessons, all of that free, like you just pay what you would pay normally for the book. And we D we give this to you. So all they need to do is go to founder space.com/promo P R O M O. And that they can. Okay.
Scott: [00:54:37] I’ll link that below. I didn’t know you were doing that thing.
Yeah. That’s very kind. And I’ll put that in there. I’ll put that in the show. And I’ll, I’ll make sure that like, when I blast this out on social I’ll link that as well. So people go actually get the book and get that deal cause that’s very nice. Awesome. Very good. And last question that I ask everybody what does success mean to you?
Steven: [00:55:00] Well, You know, it’s hard because we all define success, success by how society defines it. Right. And by how our peers define it, unfortunately, most of the world is very money obsessed, right? So you measure everything in terms of how many dollars you bring in, but I have to learn that there are a lot of other ways to define success that can, will allow you to feel a lot better about yourself and make better decisions.
So, first of all, when you’re just defining it by money, it takes out all the human element, right? Like how you treat people, what type of company culture you build about how your products are used in the world? You know, the end result of these products, it takes all that out. It’s just like, what is a cash in your bank account?
And honestly, at the end of the day, when you’re not taking that cash with you, like when you die, you may leave it to somebody else if you want. But honestly, always somebody richer out there. There’s always somebody ahead of you about how much money you earn, unless you just happen to be the richest person in the world, which is very unlikely.
So my advice to you is if you truly want to be independent, if you truly want to be the master of your own destiny, Start with success. There’s no better way than to define success. According to your values, what do you value in life? Besides just get, you know, making money, do you value creating great jobs for people you value, giving them a great place to work?
Do you value putting products into the world that make it a better place? List these out and they can become not just, they can become your guide for your company, right. Your philosophy. And they can inform the entire company and they can help you actually achieve a much deeper, greater, longer lasting success.
Scott: [00:56:55] Very good. And then the most important, where do people actually go to reach out to you? Connect with you social and website.
Steven: [00:57:01] Yeah. So founder space. You just type in founder space.com. You can go there. It has everything you can also like on every social network, founder space. I made it super simple.
