Saving Facebook, a Three-Part Strategy for the New CEO

Orson Welles Vintage GIF

Facebook’s self-inflicted wounds come from their founder’s obsession with growth, which at its core was based on three extraordinary tactics: removing friction, staying focused on global growth and stealing other people’s ideas.

[ Click to Tweet (can edit before sending): https://ctt.ac/NemMw ]

There is no debate over this.

If Zuckerberg had not set the tone of “move fast and break things,” the company would have been more thoughtful about their growth, and if they didn’t steal other people innovations so systematically — from Friendster to FriendFeed to Twitter to Snapchat — they would never have dominated the planet.

Of course, that obsession with speed and copying has resulted in — as Zuck himself instructed — the breaking of things, including our privacy and our democracy.

Well done!

In this three-part series, I’m going to outline what the new CEO of Facebook should do to reverse the massive ill will that’s built up with consumers, partners and governments. (At least the democratic ones; Facebook is well-loved by despots the world over.)

Step One: Share Revenue with Partners

When YouTube has PR issues, they have a large base of YouTubers — partners to whom they pay out billions of dollars — who will go to bat for them. These individuals are not happy with every decision YouTube makes, far from it, but they are loyal to the platform, even in the face of sometimes getting worked over.

Airbnb makes their share of mistakes and has been faced with crisis after crisis, but their Hosts are there to back them up. Heck, a portion of Airbnb’s customers feels so strongly about the company that they will fight for its very existence.

eBay and Etsy have their sellers to spread the gospel, and even Lyft and Uber have driver partners and customers who will sign petitions to bring or keep their services available in contested markets.

Apple and Google are “splashy cashy” with their App partners to the point of creating a category that, candidly, Facebook should own — or at least be a player in.    

Facebook?

Well, Facebook is so sharp-elbowed, that in addition to screwing users and our democracy, they have screwed over their developer and content partners multiple times over the past decade. Not only that, they’ve never built up a reservoir of goodwill.

Imagine if Instagram and Facebook shared revenue with their top users? How about if when you click on a new story on these services, it gave the publisher 70% of the revenue?

These partners would be out there saying “listen, I know Facebook has made mistakes, but Zuck is a good guy. I’m partners with Zuck, Instagram and Facebook, and so are over a million content creators. Trust us, we’re working with them to make this right.”  

Sharing revenue would be trivially easy for Facebook to do, certainly easier than reaching billions of users with their products.

Yet Facebook still has their wallet locked … Why?

It’s all top-down, Zuckerberg simply doesn’t want to share the wealth. We saw this when he deliberately screwed over the Winklevoss twins and his early partner Eduardo Saverin at Facebook (he settled those claims), and we see it now with his sinister pursuit of Snapchat at all costs.

The Snapchat pursuit reinforced Zuck’s “might is right” approach and has painted him as so cutthroat and arrogant — and perhaps clueless to this perception — that it is now easy to root for Facebook’s demise.

Instagram and WhatsApp founders criticizing Zuck on the way out only reinforces what we all know: business is personal and Zuck does not treat people well on a personal basis.

This needs to change when the new Facebook CEO starts, or when someone convinces Zuck to reboot his approach. The latter is a better solution, as you always want the founder to stay at the controls, but this requires the founder to evolve — something Zuckerberg hasn’t done (which reinforces the growing legion of “I’m quitting facebook!” and “I hope Facebook fails!”).

Easy solution: give Instagrammers and Facebook’s developers and publishers 100% of their year-one revenue to kick off the program, and then land on 55-70% going forward (like YouTube and the App stores do, respectively).

Can you imagine the goodwill that will grow out of Facebook sharing the wealth?

Zuckerberg can’t, but the rest of us can. Someone forward this email to Mark and say “something to consider, even if the messenger isn’t your favorite person.”

Bottom line: Sharing revenue with partners will give facebook amazing PR and those partners re-engaging the platform could reverse the “peak Facebook” and “Facebook is in decline” narrative.

A carry comp kerfuffle in Micro VC land

The SJW crowd piled on to a job posting for a part-time VC job at a micro VC yesterday. The job posting was for 20 hours a week and the compensation was based on a share of the carry.

[ Click to Tweet (can edit before sending): https://ctt.ac/4iUFB ]

Here is how carry works, briefly: if the Fund invests $2m on behalf of investors and turns it into $22M (11x, cash on cash) the gain would be $20M. The carry would be 20-30% of that gain, depending on the deal with LPs (limited partners), which means $4-6M in gain.

[ Note: A 10x fund is the outlier goal. ]

If the Fund manager gives this “Chief of Staff” position 20% of the carry it would be $800-1.2m for a part-time job. Note: 20% would be very generous if the person had cash comp, but if the person takes no cash I would say 20% would be in the ball part. Twenty percent of a 20-30% carry is 4-6% carry to the Chief of Staff.

If the micro VC did 3x “cash on cash” it would have $4m in gains and $800-$1.2m in carry. The individual in this back-end comp position would get $160-240k.

If this position vested over say four years, that would be something in the range of 4,000 hours of work for $160,000 to $2.4m — or $40 an hour to $600 an hour.

Of course, you wouldn’t have any comp today — that’s the trade-off you have the choice to make.

The argument here, of course, is that the micro VC, who is offering this partnership opportunity, and who gets zero cash comp himself, is taking advantage of the person who takes this part-time gig.

Oh lordy, lordy … I wish I had seen this job description when I was in my 20s! Please take advantage of me and take 10 or 20 years out of my career path.

The micro VC has since, under the weight of the social media mob, put the job up as cash and carry or just carry — at the candidate’s choice. CANDIDATES: take as little cash as possible and fight for every point of carry! The math above is going to change your life and the cash comp never will.

Seriously, if I were 25 years old and applied to this position I would rather sleep on my mom’s couch, drive for Lyft 40 hours a week and get all the carry I could. 60 hours a week isn’t a death sentence, and if you want to propel yourself to the next level the quickest way to do that is to get equity compensation.

Sure, a single parent with three kids is not going to be able to take this gig. Neither is a married couple with a $10,000 a month mortgage and three kids in private school — that couple needs to work at Yahoo! or IBM and take down big salaries — which is their choice for starting a family and buying a big house with a huge mortgage.

Certainly, my mom, who worked 4-5 jobs a week and clocked 70-80 hours a week to provide for our family, wouldn’t have been able to — but one of her three sons would have! That’s the American dream as far as it was taught to me: the parents bust their asses and give their kids the killer opportunity.

I look at an opportunity like this and compare it to spending $30,000 a year on college, or people staying at home playing video games/watching TV for 4-5 hours a day — which is the national average!  

Think about that for a moment, if your child presented you with the scenario of working 1,000 hours for no cash comp with lottery-ticket-level back end vs. four years of college and $120k in debt, which would you advise them?

If your kid is playing video games and/or watching YouTube/Netflix for five hours a day, getting them to pull the plug on that nonsense and invest in their career is a serious discussion some parents need to have.

Now, before you attack me as a cold-hearted capitalist (the latter true, the former only half true), you should know that we don’t do unpaid internships or free positions of any type. We don’t need to do that, as we have a modestly profitable business and, candidly, the risks around internships are too great these days (bad PR, a distraction for management and legal exposure).

Bottom line: the social media mob is giving really bad advice in this case. Trust me, someone who fought their way into the industry and became the GOAT angel: take the carry not the cash!

Why aren’t VC firms focused on slow/modest growth startups?

Yesterday’s post mocking the New York Times’ link-baiting story created a lot of debate on Twitter.

One thing that came up was, why don’t venture capitalists fund slower growth startups? Or, said another way, why don’t VCs invest in startups that grow at a normal pace?

[ Click to Tweet (can edit before sending): https://ctt.ac/sH8h8 ]

The number one job of a venture capitalist is to stay a venture capitalist.

This might sound cynical but, as a VC, if you don’t return enough money to your LPs (limited partners, a VC’s investors) you will not be able to raise your next fund. If you don’t raise your next fund, you’re not collecting management fees to pay yourself and your team, and you don’t have a chip stack to play in “the big game.”

If you want to STAY a venture capitalist you need to land these “dragon egg” investments — the ones that create enough value to give your LPs their money back. Dragon eggs are typically 20-40x your money back. So, you invest $7 million and get back $140-280 million.

That means, if you bought 20% of a startup for $7m, that startup was worth ~$35m, and then has to become a ~$700m to ~$1.4b exit for you to BREAK EVEN. Everyone makes money AFTER that investment, not before.

That is not easy.

VCs need to have double-digit returns every year (look up IRR for more on this) and essentially match stock market returns, with the chance of crushing them. If you match the stock market consistently, the thinking is you will eventually hit a Google or Facebook or Amazon.

“Stay in the game, stay in the game,” is the mantra.

The binary outcomes are just so yum yum, that you want to keep seeing flops (to use a poker analogy) and STAY. IN. THE. GAME.

So, the logical follow-up question is, why don’t LPs want to invest in VC funds that target slow growth startups?

That answer is even simpler, they have better options. If you want to return low single-digit returns, you can simply put your money in bonds, REITs or dividend-paying stocks — and not pay the significant fees associated with venture capital.  

What about you, Jason?

For background, I’m an angel and seed investor, so my job is much different than a VC’s. I invest in 50+ startups a year and 24 of 25 investments do not result in a meaningful return (i.e., zero to 5x).

I’m banking on hitting a serious return every 25 investments, with serious being defined as greater than 50x, cash on cash (REALLY HARD TO DO).

So far, after 200+ investments, I’ve got Uber, Thumbtack, Wealthfront, Robinhood, Desktop Metal, Datastax, and Calm.com as outliers, with a couple of dozen startups doing well to very well. I would expect one or two more of those to break out, putting me at eight or 10 outlier investments (one every 20 to 25 investments).

Bottom line: there are zero LPs interested in funding startups with modest to normal growth prospects, and candidly, I don’t meet many founders who don’t want to build large businesses (obviously some selection bias there, as a Mount Rushmore-level angel investor, people don’t come to me with dry cleaners and pizzerias that often).

WARNING: Venture Capital is for founders who want to grow fast (duh)

Once again, the press is here to remind poor, unsuspecting founders that venture capital can — GASP! — result in your startup trying to grow too fast. From today’s New York Times comes the link-baiting title: “More Start-Ups Have an Unfamiliar Message for Venture Capitalists: Get Lost:”

The V.C. business model, on which much of the modern tech industry was built, is simple: Start-ups raise piles of money from investors, and then use the cash to grow aggressively — faster than the competition, faster than regulators, faster than most normal businesses would consider sane. Larger and larger rounds of funding follow. The end goal is to sell or go public, producing astonishing returns for early investors. The setup has spawned household names like Facebook, Google and Uber, as well as hundreds of other so-called unicorn companies valued at more than $1 billion.

New York Times

[ Click to Tweet (can edit before sending): https://ctt.ac/96SIp ]

Wait, venture capitalists give you millions of dollars in order to get huge returns?! Capital can be used to grow faster than competitors — tell me more, New York Times!

But for every unicorn, there are countless other start-ups that grew too fast, burned through investors’ money and died — possibly unnecessarily. Start-up business plans are designed for the rosiest possible outcome, and the money intensifies both successes and failures. Social media is littered with tales of companies that withered under the pressure of hypergrowth, were crushed by so-called “toxic V.C.s” or were forced to raise too much venture capital — something known as the “foie gras effect.”

New York times

What!??! Startups burn through the money that investors give to them?! I thought startups were suppposed to put these funds in municiple bonds!

And social media is filled with companies that grew too fast … say it ain’t so, New York Times.

Everyone in Silicon Valley, the founders most of all, understand the deal: VCs give you the money to take a shot at changing the world. Most of the time it doesn’t work out and that’s OK because when it does work out the world’s greatest companies are built.

As far as I’m concerned, you live once and if you’ve got a shot at changing the world you should go big or go home — it’s not like VCs are going to ask you for their money back.

Can a great company be built outside of the venture capital industry? Of course!

Can a huge, billion dollar company be built without investment in a short period of time? It’s very uncommon.

If you want to bootstrap and/or build a boutique business, have at it, but the ground truth I see every day, and I invested in 50+ startups in 2018, is that founders love their angel investors and covet landing venture capitalists that will bet on them changing the world.

Venture capital is a giant, hard to understand and imperfect gift to humanity. It’s the best option for high-growth startups today, and while it might be hard to understand from the outside, it’s awesome that it exists.

When I travel around the world, everyone wants to rebuild what we have here in Silicon Valley, and many ecosystems are making serious progress.

If you don’t want venture capital and you want to grow slow, go for it. Use your credit cards, savings, revenue or bank loans (do those exist?) to get it.

If you do want venture capital in order to go big and change the world, gear up for battle, as you have to beat out hundreds of other founders to get it.

Bottom line: Founders are smart and it is no news flash to them that going big with venture capital is riskier than building a small business.

Podcast Recommendation: “Cafe Insider” & “Stay Tuned with Preet”

Yesterday I shared my personal theory on what makes a great podcaster and recommended “The Bret Easton Ellis Podcast.”

[ Click to Tweet (can edit before sending): https://ctt.ac/J3Ua8 ]

Today I’m recommending another person I think fits my three criteria, which are, as a refresher:

  1. They’re successful in their field, but not the most successful
  2. The have strong opinions and like to mix it up, but they know how to listen
  3. They don’t care what people think of them, but they want people to tune in

Preet Bharara was the former Attorney General for the Southern District of New York, was fired by Trump and is part of the composite that Brian Koppelman used for the brilliant and sharp-elbowed AG played by Paul Giamatti in the extraordinary “Billions”.

[It’s important to note the word composite in the previous paragraph, because as Preet hilariously told on an early podcast, he told his mother that the AG in “Billions” was based on him and — spoiler alert — in the first scene of the first episode of “Billions,” said AG is the recipient of a sexual act commonly referred to as being showered by a precious metal.]

Preet has two podcasts, the first is “Stay Tuned with Preet” and the second is “Cafe Insider.” It’s confusing, but stick with me. ST is a chart-topper, with the standard podcasting segments: news, interview and listener questions.

“Cafe Insider” isn’t available as an RSS feed but rather, on a landing page, and is unlocked for $5 a month or $50 a year.

In CI, Preet and Anne Milgram, the former AG of New Jersey, break down the news. Like Bret’s paywalled podcast, “Cafe Insider” feels more informal and freewheelin’. The hosts aren’t overproduced or edited, which is what makes for a great podcast in my opinion.

I’m not a fan of the overproduced public-radio style podcast, where the dual sins of audience manipulation (by audio devices, like music and pauses) and the shaping of narrative (with editing) often results in the obscurification of the messy reality of life.

Things just aren’t as [INSERT AUDIO DROP TO TUG AT LISTENER’S EMOTION, FOLLOWED BY A PAUSE] as simple as they seem.

I highly recommend listening to TuneIn and, if you like Preet’s soothing tones and front-line insights, pay for a year of “Cafe Insider.” Paying for content, if you have the means, is a vote of confidence that compels podcasters to keep going.

Links:

Yesterday: Podcat Recommendation: Bret Easton Ellis

Cafe Insider

Stay Tunned (on TuneIn)

Podcast Recommendation: Bret Easton Ellis

My theory of podcasting is that the best shows are hosted by iconoclasts who share three traits:

  1. They’re successful in their field, but not the most successful
  2. The have strong opinions and like to mix it up, but they know how to listen
  3. They don’t care what people think of them, but they want people to tune in

These people are unmanageable by the corporate entertainment complex, so you won’t find them on cable TV.  

[ Click to Tweet (can edit before sending): https://ctt.ac/bra99 ]

Sure, they would be great guests themselves, but only on a longer form talk show. If you run a network, you would never give them their own show, and if you did it would end in a barn fire.

One of my favorite podcasts is the Bret Easton Ellis Podcast, by the famous author of books like “Less Than Zero” and “American Psycho.”

He starts the podcast with a monologue, something he clearly puts a lot of time into. In these wonderful essays, he will weave together his thoughts on movies, directors and the culture we’re living in. He will get into his personal life, talking regularly about his video game playing, millennial boyfriend and his never-ending, career-long list of tv and movie projects that have failed to get off the ground (“Less Than Zero,” the TV series!).

Next up, he will talk to a guest for an hour or two, and maybe answer some listener questions from time to time. He recently had author Ben Fritz on (who I think used to work for me) and Rachel Kushner, as well as Andrew McCarthy and Nick Jarecki back in 2017.

He doesn’t care what you think of his opinion, and he is willing to change his mind. He appreciates talking to people he doesn’t agree with, and he frequently disagrees with guests.  

These days my movie programming starts with Bret’s suggestions, and then I go to Metacritic to fill in my programming lineup. (How do you make your picks? Comments are open below.)

He used to be on a podcasting network, reading ads half-heartedly (if not sarcastically), but now has a private Patreon feed. This means you have to pay for it, for $2-10 an episode, with higher prices getting you a couple extra minutes of content.

He’s controversial, non-corporate and articulate, and sponsors won’t touch him since he likes to touch the third rail. I don’t agree with everything he says, and sometimes he says stuff that is brutally candid and politically incorrect (his next book, non-fiction, is called WHITE), but he’s smart and entertaining and worth checking out.

Lean Management: The Power of the EOD Report

Wanted to talk to you today about a lightweight management technique I’ve developed over the years called “The EOD and EOW.”

When we hire someone, I tell them that we don’t have management at LAUNCH, that it’s a flat organization and our goal is to stay small but increase our efficiency.

[ Click to Tweet (can edit before sending): https://ctt.ac/Y3JIC

There isn’t a massive reporting structure and you have to manage yourself, and the primary way we do that is an end of day report called the EOD.

The implicit deal is that you’re not going to be micromanaged, or candidly, managed at all, but you will need to “put up numbers” and be accountable to the rest of the team.

The report format is simple and has the following characteristics:

  1. It’s a bullet point list of what you worked on today.
  2. It should take no longer than five minutes to write.
  3. It should include links (i.e., Google sheets, Asana projects, Squarespace, ad campaigns, video clips, etc.).
  4. It can include any blockers or challenging problems you’re facing.
  5. Bonus points if you include a graph, table or chart once and awhile.
  6. Bonus points if you educate the rest of the team in your email.

It’s at once deceptively easy and frustrating at times. If you’re in your email box all day, on social media or reading the news, you might find yourself with zero bullet points at lunchtime (we don’t put in stuff like “checked email” or “read the news” in our EODs).

If you’re not GSDing (getting sh@W$%t done) the EOD lets you know that. So, we now explain to new team members — especially “young guns” (people with under 10 years experience) — that if they are concerned about their EODs being light, to talk to some team members and say, “how can I help more? I’m concerned I’m not contributing enough.”

Ninety percent of the time the people we hire embrace this agreement and crush it. Ten percent of the time we have folks who “forget” to do their EOD, or they send their EOD the next day. Sometimes folks figure out that they’re not passionate about our mission and they’re not a culture fit for our company, and we part ways.

Other times managers realize that they made a bad hire because the person doesn’t have time management skills or, well, enough skills to GSD!

Senior folks in the organization (my top four people, whom I refer to as the “Fantastic Four”) do an EOW (end of the week, sent to each other and to me).

Folks in the organization added to the EOD process by creating a draft email at the start of the day with the top three bullets of what they want to get done.

This may all seem super obvious, but if you deploy the EOD/EOW system, at least in a small company, you’ll find out that performance increases and “lack of communication” errors and frustrations go way down.

You also inspire the ETBs (early true believers) and flush out the clock punchers.

The Ultimate Outsider’s Hack: Read All The Biographies

Something Like An Autobiography: Akira Kurosawa: 9780394714394: Amazon.com: Books

A waiter at Sugar Bowl this weekend recognized me from my podcast, and after a couple of meals in the dining room, got up the nerve to tell me he was a huge fan. This is, for the record, one of the most wonderful things a podcaster can hear.

If you see me out, even if I’m with my family, do not hesitate to say “hello,” give me a fist bump, take a selfie (if so inclined), and let me know what your favorite episode is. I like being a micro-celebrity and I love talking to people–don’t be shy!

[ Click to Tweet (can edit before sending): https://ctt.ac/3np2d ]

Anyway, he asked me for three book recommendations for a young person starting out.

When I was younger I wanted to be rich and powerful because I grew up poor and powerless. How anyone got rich and powerful was an enigma to me because I didn’t know anyone rich or powerful–until I started reading biographies.

Biographies are the ultimate outsider’s hack. They enable you to hear all the details of how powerful, important and rich people became those things. Often they will share what they learned, regret and would do differently.

I recently finished Mike Ovitz’s “Who is Mike Ovitz,” and I was blown away. I’m actually listening to it a second time, and he’s committed to coming on the podcast this year.

Ten other biographies I recommend:

  1. On Writing: A Memoir of the Craft by Stephen King
  2. Something Like an Autobiography by Akira Kurosawa (top three director for me).
  3. Born Standing Up by Steve Martin
  4. One of a Kind: The Story of Stuey ‘The Kid’ Ungar, the World’s Greatest Poker Player by Nolan Dalla and Peter Alson
  5. All Over but the Shoutin’ by Rick Bragg
  6. Creativity, Inc.: Overcoming the Unseen Forces That Stand in the Way of True Inspiration by Ed Catmull & Amy Wallace
  7. The Autobiography of Malcolm X by Malcolm X as told to Alex Haley
  8. Shoe Dog: A Memoir by the Creator of Nike by Phil Knight
  9. Hillbilly Elegy: A Memoir of a Family and Culture in Crisis by J. D. Vance
  10. Red Notice: A True Story of High Finance, Murder, and One Man’s Fight for Justice by Bill Browder

Some of these are amazing to listen to on Audible as well — get your free book at audible.com/twist (ohhhh…… auuuudible!).

Note: I realize I don’t have any biographies written by women on this list. Does anyone have a top ten for me to read next? I’ve got #Girlboss in my queue but could use some more. The comments are open!

The Three Vendor Rule

When I first started doing events in New York City in the 90s, the first one called “Ready. Set, Pitch,” I realized that vendors would give us wildly different quotes — often for the same exact thing.

That is when I came up with The Three Vendor Rule.

[ Click to Tweet (can edit before sending): https://ctt.ac/4Rbqa ]

I told my team to obtain three quotes for everything we did, from A/V to space to food to furniture rentals.

As anyone who has done any management will predict, I got pushback … but not from the vendors, from my own people!

Why do we have to do all this redundant work?

Why couldn’t we just use the same vendor as last year?

In my younger days I would simply say “do it” and walk away. Later on I would say “either you can do it or I will do it.”

Of course folks would take weeks to get this done, waiting on the third quote, melee fighting and more. “I love this vendor” and “they were loyal to us” and “this is a waste of my time.”

My team was fighting me on saving money. It was bonkers.

So, I re-stated my rule to be:

“Ask seven vendors for a quote, bring me the first three complete ones.”

The results were stunning across the board. We would have vendors we used last year charge us 2-3x as much for the same thing, a year later! Some vendors would charge us $1,500 to rent a monitor that costs … wait for it … $1,500! One vendor would charge $1,000 to rent a projector while another, $2,500 — for the same projector.

My team started to understand we were being ripped off and they started to join my team to work the vendors, as opposed to working their boss (me).

So, I further amended the rule to be:

“Ask seven vendors for an itemized, apples-to-apples quote, bring me the first three complete ones in a spreadsheet with the % difference in pricing highlighted.”

By doing this we immediately found a range of prices from, say … $15,000 to $50,000, for the same thing.

Then I would ask the team to work the quotes, pointing out things that were bonkers to the vendors. I would give them language to use that was non-accusatory, like:

“I notice that this projector is $2,500 on Amazon and you’re charging us $2,000 to rent it. Perhaps you can look into that for us?”

Or

“Right now your quote is amazing, thanks so much for the effort. As a final step I emailed you four items that are a bit outside of market pricing. If you could review them and make any changes before I submit my recommended vendor to my manager that would be great. Again, thanks so much!”

That’s called the shit sandwich in the business: say something nice, drop the bad news and then finish up with more pleasantries.

Of course, once vendors had completed two hours of work, they were more likely to come down on price because they were invested in working with us.

One time we had a surplus so I told the team “if we use that projector (or other item) 3x we can just buy it and own it. Look into that.”

Now we own our own video switchers and cameras. We can run our own events and we no longer have to ask for quotes on these items.

We could do this because we had the data.

As a final step, when we have two or three vendors in the same zone we simply ask them if they can do it for 10% less. This works every time, because we’ve created a competitive marketplace.

Now, the three vendor rule is a best practice more than a rule, stated as:

  1. Ask seven vendors for an itemized, apples-to-apples quote, bring me the first three complete ones in a spreadsheet with the % difference in pricing highlighted.
  2. Ask the vendors to update non-competitor parts of their quotes.
  3. Ask internally: Should we consider rolling our own (service) or buying this item outright?
  4. Have a second person ask the top 2-3 vendors to give us a 10% discount.
  5. Pick the most reliable vendor with the best product.

Now, when we onboard a new team member, we share the best practice with them and tell them “this is important work,” and they just do it.

This is the big lesson: Management is about explaining how to do things, why to do things and codifying everything. Then, refining it, repeating it and making your team feel 10 feet tall when executing.

When you become great at something and establish true understanding, you can name it well. In this case, my team will say “three vendor rule” at a meeting and we all know what that is and why it’s important.

Now that I’m older, and hopefully wiser, I try to focus some of my time on codification of the most important things we do. Writing is clarity of thinking, so being able to write this very post means I’ve obtained clarity.

This is why writing is such an undervalued skill in the world — and why I’m focusing on it so much.

[Wrote this on my iPhone, slopeside at Sugar Bowl in a blizzard. My daughter just showed up for breakfast, so I gotta bounce. Please say something in the comments, so I know people are reading and I keep the streak alive!]

Should I move my startup to Silicon Valley: the 2009 & 2019 answers compared

Often the best advice is situational, and the situation here in the Bay Area has changed dramatically in the past decade. Today I wanted to detail the two answers a founder would receive to the question, “Should I move my startup to Silicon Valley?” depending on if they asked it in 2009 or 2019.  

[ Click to Tweet (can edit before sending): https://ctt.ac/e9D6Z ]

Should you move to Silicon Valley: The 2009 answer

It was easy to give advice 10 years ago when founders asked me if they should move to Silicon Valley. The answer was a wholehearted “yes!” Given without reservation or consternation because:

  1. The sheer number of investors here
  2. The density of talented people here

High-growth startups, defined as the ones trying to hit $100M in revenue in under a decade (what you need to attract the elite investors and to achieve unicorn status), need talented team members and mountains of cash.

There is no place in the world with more of those two things than the Bay Area.

If you want to take over the movie business, you go to Los Angeles because that’s where the talent, money and distribution is. If you want to build a unicorn or decacorn, you come to the Bay.

It’s never really been a major debate.

Great founders can come from anywhere, but they build large businesses here.

Sure, we would see a Groupon (Chicago), Tumblr (New York) and Snapchat (Los Angeles), now and then, but we would see many more Ubers, Airbnbs, Facebooks, Googles and Teslas in the Bay.  

Supply and demand worked exceptionally well for Bay Area investors, who didn’t feel any FOMO by sticking to startups in the Bay Area. Candidly, most VCs still don’t want to get on planes and do board meetings in places that are more than 1-2 hours away from the Valley (read: Seattle to San Diego).

Should you move to Silicon Valley: the 2019 answer

Over the past decade the delta between running a business in the Bay Area and everywhere else expanded dramatically.

Apartments in the San Francisco and the Bay Area are two to five times that of other cities. Heck, I’ve been reading about American developers moving to Tokyo and Kyoto to work remotely while living epic, affordable lives in one of the highest-functioning cities in the world.

Compensation will vary 2-3x as well in many cases. Combine that with the short tenure of people in Silicon Valley, typically calculated in months/quarters, while talent in other cities settle in and stick around for years, and it’s no wonder that VCs themselves are changing their position on the location of your startup.  

Additionally, “remote work” has gone from a strange phenomenon a decade ago, to — at least for startups — commonplace today.

Add all this up, and I’ve seen the same VCs who insisted on founders moving to Silicon Valley in order to get funded, telling founders it’s great to come to Silicon Valley, but it’s also fine to stay where they are.

Often, the best advice is to split a startup’s office functions across geos, with corporate and product being in the Valley and everything else being “wherever makes things grow faster.”

I’ve seen startups raise $3m in the Valley with a plan to burn $250k a month, then move to Canada and have their burn drop by 75% — expending their runway by a couple of years.

If you do choose to be here in the Bay Area as a nascent startup, incurring the costs, you will be taken more seriously by most VCs — even though they will deny this. The thinking by some is that if you can’t figure out how to navigate the Bay Area you won’t navigate your business.

Talk about mixed signals!

Bottom line: Raising money is still much easier when your HQ is based in the Valley, but deploying capital across geos and embracing remote workers will stretch that cash meaningfully. Check back again in a year, if the economy and housing crash in 2020 the 2009 answer might be the correct one again!