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StartupRob

Hi I'm Robert Johnson. I help founders to grow great businesses. Former Managing Director @Techstars. Cofounder @makersacademy

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Rob Johnson

Where does cynicism meet genius?

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“Whenever you find yourself on the side of the majority, it’s time to pause and reflect.”

– Mark Twain

I love this quote.

It seems strange if you really think about it. Many people are inspired by such phrases that try to instill the spirit of individuality, while trying to do everything they can to fit in.

Over the last few weeks I’ve noticed how much I really admire the ability to go against the grain for an extended period of time. In startups, the ability to see what others don’t see is invaluable. Paul Graham says that all you have to do to avoid a failed startup is just to not die. It’s that simple.

How many startups have been rejected by partners, investors or mainstream customers for years to eventually become “overnight” successes?

Did Airbnb think that they were going with the flow?

I doubt it.

This ability to have vision, conviction and belief so strongly that one can sustain headwinds of negative feedback is undoubtably valuable.

But at what point does this “vision persistence” cross the line into just being cynical?

It’s obviously not a black-or-white issue as an infinite number of independent variables can act as an input into the equation, but it’s important to realize that cynicism for cynicism’s-sake is likely a recipe for disaster.

London & San Francisco Startup Scenes

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Right now I’m flying back to London from San Francisco after a week-long trip with the LDN2SFO group, a collection of entrepreneurs and VCs from London. We toured places like Sequoia Capital, Singluarity University, YCombinator and Pivotal Labs with the purpose of building relationships and strengthening the ties between the London and San Francisco tech startup ecosystems.

I thought it valuable to document my experiences and observations while they’re fresh in my mind. I make no value judgements, simply objective and personal perceptions.

Reinforcement

The first two observations are nothing new and will likely just reinforce what London entrepreneurs already know:

1) London has far less investment activity than San Francisco

Many people make seemingly plausible explanations for why this is, such as the fact that London hasn’t had any runaway successes or IPOs that mint hundreds of millionaires overnight thereby fueling the angel investor community. In addition and for whatever reason, the UK seems to be more risk averse than the US.

Some people have speculated that this risk aversion partly comes from the fact that the UK still attaches a bit of a stigma to a founder that fails, but if this is the case, I haven’t noticed it.

Lastly, the investment process requirements are starkly different. I spoke with several entrepreneurs this week who said they raised up to $150,000 without even showing a pitch deck. One guy said that he raised $1.5 million with 10 slides. The attitude seems as if providing five-year financial projections are laughable and could actually prove detrimental.[1. I’m definitely not advocating for this type of investment behavior as it seems just as noxious as requiring a 100 page business plan. There is a middle ground.]

All of this being said, I do know that the advent of crowd-funded equity solutions such as Seedrs in London are making the process significantly easier. I spoke with one UK-resident who raised a nice pre-seed round in the matter of a couple of weeks by using the Seedrs platform and said the process was painless.

2) London has fewer acquisitions

This is connected with the first point but does play a critical role in the investment market dynamics between the two locations. When we spoke with organizations that work with startups in both London and San Francisco, they mentioned the increase in the number of London-based startups that are placing small teams (usually marketing and/or sales) in San Francisco not merely for the access to the larger market the US provides, but because it increases their visibility to potential acquiring companies.

These two points don’t illuminate anything new as they are already highly discussed among London entrepreneurs.

New Discoveries

While those things were expected, the following subtle points were new to me:

1) Extreme Optimism

By definition, an entrepreneur needs to be optimistic. They need to be able to see what doesn’t already exist and believe that the future can become a reality.

Silicon Valley entrepreneurs however, really take this to the extreme. When presented with a problem, they tried to reason possible solutions as to how they could overcome it. They actively searched for ways that things could be done, regardless of the obstacle.

It’s fair to say that extreme blind optimism is just as bad as extreme pessimism, but it makes for a very different community dynamic. It’s a small difference, but seems to have a cumulative and exponential impact on the ability of that ecosystem to think big.

2) Pay it Forward

This was mentioned by nearly everyone I talked to who had experienced both the Silicon Valley and London startup ecosystems.

Silicon Valley entrepreneurs really want to help those around them. At each event we attended, I noticed that people weren’t just networking with the end-intent of gaining something specific for themselves out of it, but were legitemately interested in helping those around them.

Chris McCann (Startup Digest) put it to me best by saying that a Silicon Valley entrepreneur’s reputation was truly the most important currency available, so it fosters a system of really wanting to help those around you. Once a system like this is put in place, it’s self-perpetuating.

While I’m not saying that there aren’t those individuals in the London startup scene who actively look for ways to help (Here’s looking at you Matthew Stafford), that mindset doesn’t seem to be as prevalent.

Because I think that these two discoveries could potentially prove valuable, I’ve decided to run an experiment. I’ve set up a Meetup group called Startup Karma and I’m going to hold an event later this month with the underlying premise of “Think Big” and “Pay it Forward.” I’m requesting that each individual who attends, shows up with the intent of helping at least one other person. It could be something as simple as providing 20 minutes of specialty-role consulting or making a key introduction.

It’s obviously unenforceable, but I’m hoping that the underlying premise proves beneficial for people and eventually, the ecosystem as a whole.

You can sign up for the group at http://www.meetup.com/StartupKarma/ and I hope to see you there.

Most Ability is Stickability

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Persistence is a common theme that continues to reveal itself in my thought processes.

I’m an entrepreneur so I’m naturally competitive and I want to win. This is precisely why I’ve spent so much time trying to figure out how to work efficiently, productively and effectively.

But as I explored in my essay on Persistence, it is not a sufficient condition of success. I can’t remember where exactly I read about it, but there was a science fiction writer who wrote something like forty novels without a hit. He consulted with everyone he knew because he was determined to be a successful writer.

The problem was the this writer used the same formula for creating each novel. He didn’t test different strategies or explore creative ways of doing things. He had persistence and was determined.

The missing ingredient in this equation is experimentation.

Most successful people will tell you that a large portion of their ability comes from stickability. (i.e. persistence)

But keep in mind that if something doesn’t work – you need to experiment. It will drastically increase the probability of finding your secret formula.

Use the right tool to test your startup hypothesis

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I’ve written before[1. Persistence] about the natural tendency we have to want to focus on those things that come easiest to us. It feels good to perform well at something.

 

The problem with this is that often what one is good at can actually end up sending them down the wrong path.

 

This couldn’t be truer than with testing hypotheses.

 

I’m naturally a business person so, it’s easiest for me to set up meetings and leverage my network to try and test something.

 

I have friends and colleagues who are marketers are heart. Their natural tendency is to set up A/B tests and drive traffic.

 

The most detrimental, however, is the developer. While this is far from a universal truth, many developers would rather code up an MVP than conduct a customer development interview.

 

There is value in all three of these methods of hypothesis-testing, but I challenge you to be aware of what your subconscious is pulling you towards. Know when a customer development interview is more appropriate than an A/B test. Fight the urge to create an MVP if there are easier methods of testing your hypothesis.

 

As my dad told me when I was hitting the back of a screwdriver with a crescent-wrench, “Use the right tool for the job and you save yourself a world of headache.”

Extrapolation from Value

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It probably seems obvious if you sit down and think about it, but for some reason I see more and more entrepreneurs with ideas that are far extrapolated from contributing value.

This can be a great exercise as most of our strongest scientific advancements have been made by discoveries where the immediate value and impact were unknown.

 

I had a crazy idea while studying to get my MBA to develop an algorithm that could look at a Twitter user’s feed and attempt to identify their personality traits. (You can read about it here.)

 

It was a fun project and an interesting experiment, but just like any business student, as I received external interest, I was determined to build a business around it. I spent at least 6 months jumping from industry to industry, looking at hiring, then recruitment, then sales and on and on. The exercise was valuable as I learned a lot from a variety of industries, but the most valuable lesson was that the further you extrapolate from directly visible value – the harder things get.

 

I don’t regret working on the algorithm and perhaps there is significant value somewhere I didn’t look.

 

But if I could go back in time and tell myself that not every project needs to be a business, I would – some stuff is just fun.

Avoiding Fight or Flight

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Our normal thinking takes place in the prefrontal cortex portion of the brain. This is where all of our rational and critical thinking takes place.

 

When our bodies get stressed, the prefrontal cortex slowly shuts down and the amygdala takes over. The amygdala is one of the inner-most portions of our brains and is where our evolutionary history is held. Our instinctive reactions to run away from danger are stored there. It’s our emotional center. It’s where fight or flight is triggered.

 

For the most part, we would like to be using the critical thinking prefrontal cortex and not the fight or flight center, if not merely for comfort purposes. (Being in fight or flight mode isn’t fun.)

 

The problem is that our critical thinking center is what allows us to be proactive – as we get more reactive our thinking shifts to fight or flight.

 

This can be a serious problem when running a startup.

 

If you can be disciplined about taking the periodic break and give your brain the chance to zoom out and see the big picture of how the day is going, it acts as a guard to the natural shift to the fight or flight center. If, on the other hand, you have one of those days where you’re bombarded with a string of circumstances that require you to be in a reactive state, you have almost no control over letting your amygdala take over. Stress accelerates the shift from critical thinking to fight or flight.

 

Be conscious of how your brain is working. Guard against stress. Be productive, but take breaks and reflect.