Reflections on Startups

In the summer of 2022, I was thinking about going to business school, but it just didn’t feel right. I wanted to do something different, so I decided to take what would have been my tuition money and invest it in startups instead.

The idea here (inspired by Tim Ferriss) was that I would probably learn more by being around real businesses than reading case studies in class, and I’d also have more fun being ‘in the arena,’ or at least being close to it.

After 18 months and 18 investments, I’m grateful to have learned a little bit about a lot of different things, but there are 10 ideas across business, investing, and building companies that I seem to come back to again and again.

Here they are, unfiltered, and in no particular order:

1. The Innovator’s Dilemma is very much alive and category leaders in different verticals can and do lose their lead by being too risk averse, especially given the creative destruction of global, 24/7, open-source industries like crypto. Innovate or die is so real.

2. Management consultants tend not to be good entrepreneurs. They’re good status quo operators, but their mindset and skill set has to do with understanding a system and executing within the constraints of that system, not breaking the bounds of it (which is required to create net new things).

3. Teams in Asia tend to work harder than anyone else. There is a team I advise in India that will often reach out and say something like: ‘yo when can we talk next? we’d like to get your feedback on something ASAP.’ And I’ll throw out some options… it’ll be 2:30 a.m. their time, and they’ll take the call no questions asked. Good luck competing with those guys.

4. Startups that outsource everything to a studio or a consultant or to a venture builder tend to struggle. When teams bring core competencies like design, engineering, marketing, and so on in-house and align incentives to make sure everyone is committed to the company… they simply execute at a much higher level.

5. Most things fail. Most projects never find product market fit. Most teams don’t make any money and don’t acquire any real users. It’s hard out there.

6. Running a service-heavy business like a consultancy or advisory shop can be a good way to build brand before shifting toward making products. You establish a bunch of relationships and track record this way versus trying to roll out a product starting from scratch with a brand no one has heard of before.

7. Founders who can play in the social media arena have a huge edge. Being active and developing a personal brand are force multipliers in winning over customers/users. I think this is especially relevant in crypto as an industry, which is so driven by Twitter (and now Farcaster).

8. VCs mostly fall for all the same traps that retail investors do, just with more size. FOMO for new projects and themes? Check. Lack of conviction at the market bottom? Check. Buying the top? Check. And so on.

9. Teams that are very targeted in what they’re trying to accomplish tend to win. Most folks in startup land either go too broad or try and do too many things at the same time and ultimately accomplish nothing. If you can have a single goal, a single niche, a single metric to focus on that often leads to success. A guy with one spear will always win in a fight against a guy with a dozen little darts.

10. Investing in early-stage startups is more qualitative than quantitative. You’re essentially analyzing people: Are they well-suited to build something in this area? Do they have a unique vision? Do they have strong ways to tell their story & gather people around them? Are they committed? There are not a lot of Excel spreadsheets involved in answering these questions. The game is about betting on people, and whether they’re able to solve problems when things inevitably go sideways.

Thank you to several friends for feedback and review.