An earlier budget mistake that will ruin your company


Ben Horowitz put out an informative post entitled How to Ruin Your Company with One Bad Process. It explains how a naive budgeting process--one where you empower department heads to propose their own budgets without global constraints--will create perverse incentives and result in sub-optimal outcomes. At the earliest stages, startups don't have this problem yet because they simply don't have the money and headcount to even encounter it.

For seed-stage startups, there is another similarly perilous budgeting mistake that unfortunately happens all the time. It's not budgeting enough for getting traction. This is the number one traction mistake.

Pre-order Traction Book

Traction Book.jpg

I'm happy to announce that you can now pre-order Traction Book on Amazon! My blog has been silent this year because I've been using all that time to finally get this book out the door.

Learn to think big

I often get asked to give advice to people starting on the startup career path. I didn't have an obvious starting point until now.

You should learn to think big. It's the precursor to choosing an ambitious startup idea, which I also strongly recommend.

Are you questioning your operating assumptions enough?


I have a hunch that one the key ways to maximize the probability of startup success is periodic and consistent questioning of operating assumptions.[1] For example:
  • What are the premises that underlie your vision/mission/strategy/etc.?
  • Are these premises still valid?
  • How valid are they?
  • How will you further validate them?
  • Are all underling assumptions fully enumerated?
  • Is current thinking on these assumptions in-line with your current vision/strategy/tactics/etc.?
Of the many wannabee and first-timer entrepreneur symptoms, a lot of them can be cured by periodically and consistently answering these hard questions.[2] It helps you steer your heat seeking missile towards success.

Ambitious but not aggressively competitive

I'm ambitious, but not aggressively competitive. A lot of entrepreneurs I know self-identify with both traits. I have no problem with that whatsoever; it's just not me.

Finding open space

In soccer there is a concept of finding open space. If you have the ball there is usually some way you could move from where you are into open space such that no one will challenge you head on[1]. You're much less likely to lose the ball if you are never challenged head on, which is of course why you pass or find open space in the first place.

Current market potential experiments

Suppose you're making a mass market product and overnight everyone in the world knew about you and heard your best product pitch. Maybe it came to them in a vivid dream. Maybe the instant they woke up it all flashed before their eyes in some sort of marketing osmosis. It is a thought experiment so take your pick.

The way business is done

Over the years society at large has gradually become more tolerant of differing lifestyles, e.g. in the last fifty years (at least in the US) we've seen desegregation, increased women's rights, etc. People ask all the time what are the intolerant things going on today that will fade away decades from now. Gay marriage is an obvious candidate.

Attracted to hard problems

As an ambitious person, I am naturally attracted to hard problems. I've had to train myself to ignore their allure so I can focus on the hard problem at hand. Incidentally, I think that is another reason rapid prototyping works for me as a burnout antidote.

There are a lot of hard problems out there. You can steer yourself in the direction of hard problems that also line up with your desired career path.

On the cusp of something big

Startups are a long-term game. My best advice is to treat entrepreneurship as a career path, but it is easier said than done absent some amount of success. For me, I had a taste of it three years in and some real success six years in. Then I started all over chasing at windmills and it was another four years before DuckDuckGo looked like it was turning into a real business. Now I'm entering year fourteen.

I get asked a lot what keeps me motivated, especially from the perspective of a solo founder. I never really had a good answer until now.

Dealing with a real life externality

I live about a half mile away from a nice volunteer fire department. They're great except for the fact that they blast a siren whenever there is an emergency reported. That's OK during the day, but they also do it in the middle of the night and it always wakes me up.

This is not a fire engine siren, but just a general notification siren. It is very loud. It goes on for a long time and wakes me up sufficiently that I have trouble falling back to sleep.

This situation is a negative externality -- a situation where someone is negatively affected by something they aren't involved in. The canonical example is air pollution from manufacturing. The pollution causes health effects to people in surrounding areas who probably aren't involved in buying or selling the manufactured goods.


I really needed some levity this morning, so we (at DuckDuckGo) matched some tech companies to memes.



Constructing a better startup pitch



When I'm thinking about investing in a startup, I first tell my wife about it and give her my version of their pitch. If we do invest, I often find myself doing the same type of pitch to other angel investors.

My pitch often feels very different than the company's pitch. In a previous post I encouraged people to distill their pitch down to a compelling story and get rid of everything else. That's what I do.

After another year and half of angel investing, I have a bit more clarity on how I think you should structure your story. You want to address the following questions in this order.

Apply to Open Angel Forum V

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Applications for the next Open Angel Forum in Philadelphia are now open! If you are involved in a startup that is looking for seed funding, please apply (there is no charge to apply or attend if selected):

Application URL:
Application deadline: Sun April 14, 11:59PM ET
Event date: Wednesday, May 8th (private event)
Event location: First Round Capital
Requirements: US tech startup with at least a demo

Which investors will invest in your startup?


I get asked a lot by founders which investors might invest in their startups (as I'm sure most investors do).

There are two sides to the answer. The first side is what investors are right for you? I'm not going to cover that side in detail here because it is a big topic and I want to cover the other side, but know that side is just as important. You want people that can help you but also that you really want to work with for many years.

The second side -- which investors will actually invest in you -- depends on your traction. I made the above graphic to illustrate this point.

Recent tasks I sent to my virtual personal assistants


I find myself recommending virtual personal assistants to people quite frequently (among other services). I personally use Fancy Hands. (No, they did not ask me to write this post.)

I don't think many people I've recommended it to have converted, however. It's a way of life change, and those are hard to make.

"What do use it for?" is the standard question. To answer that question more effectively, here are my last twenty tasks (abridged):

Reduce communication overhead through more dynamic channel choice

I routinely use these communication channels when discussing business stuff:
  • In-person meeting
  • Audio (e.g. phone)
  • Video (e.g. Skype)
  • Personal email
  • Mailing list
  • Instant message (e.g. HipChat)
  • Text message
  • Online task manager (e.g. Asana)
  • Public forum (e.g. Github issues)
Using the best channel for a given situation can significantly reduce communication overhead, to the point where channel choice deserves conscious thought each time. It sounds obvious but I see people making the wrong choices all the time. Sometimes it is a selfish choice. Sometimes it was a well-reasoned, but wrong guess. Sometimes it is inertia because that's the way it has been done in the past.

The depressing math behind consumer-facing apps

You just hit your millionth active user -- congratulations! Unfortunately, getting to that next order of magnitude (10M) is going to be very difficult, costly or both. Unless of course you're inherently viral. There is a reason Twitter, Facebook, Instagram, Pinterest, Dropbox, Snapchat, etc. all are. It's the same reason USV has their investing thesis.

If you're not growing significantly organically, you have to use a traction channel and either go out and reach people (ads, press, etc.) or set something up so that they are coming to you (SEO, content, etc.). Either way you will have to convert them.

Conversion ratios for viral are awesome. Conversion ratios outside of viral are not.

Some ideas matter, just not the ones you think


Startup wisdom holds that startup ideas don't matter too much because execution is everything. That's largely true, though I think markets do matter and the line between markets and ideas can sometimes be unclear. Also there are plenty of edge cases of ideas that do matter (powder-keg ideas, a deeply knowledgeable team that knows how disruption will unfold in 1-3 years, etc.). I'm not exploring these distinctions here though because I find this debate largely irrelevant in practice. Unless you have a track record, you generally need some traction anyway to get funding; and if you don't need funding, just go execute.

Within execution though, there are ideas that matter lurking. It is those ideas I want to unpack a little.

How will disruption unfold in 1-3 years?


I remember someone asking me six or seven years ago what was next for mobile phones. I said something to the effect of everyone's going to have a smart phone and be able to watch video on it. Prescient? Not usefully. It's like predicting the demise of newspapers in the mid-nineties or long-distance in the early-nineties.

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