There are two interesting (to me) books on Pixar - one is by the (tech) founder Ed Catmull and is good on the storytelling and hard work side, and a really good "other side of the coin" is by Lawrence Levy who Jobs brought in as "the money guy" to find a way to make Pixar profitable as they tried to land Toy Story - it goes from a little way into the pre-production of the film all the way to the IPO - and it really shines a light on the inner thinking. No one really had a clue how to monetise things, the IPO was a huge risk etc etc.
Fascinating all of it, But for me the big thing to contrast is how Ed Catmull described the IPO (how did Steve plan this, how did he know? I am axed at his business acumen) versus Levy (we were all terrified, movie studios refused to give us their business models, the IPO could have failed at any moment).
In short there is always several sides to a story, and if anyone is confident of a future plan but has not done it twenty times before, they are faking it !
> a really good "other side of the coin" is by Lawrence Levy who Jobs brought in as "the money guy" to find a way to make Pixar profitable as they tried to land Toy Story
I don't buy the whole premise about storytelling being the big thing. In particular I think doing the thing is much much much much much more important than telling the story. If you do the thing then the story tells itself.
I was 1 of a team of 2 or 3 on every pitch in 2 or 3 separate processes to raise over 1bn dollars and make the company I worked for (OakNorth) the most valuable fintech in Europe at the time. We did about 30 investor meetings covering everyone in the PE world, some of the big tech investors, some key VCs, some family offices etc. We ended up massively oversubscribed so and picked the investors we thought were the best fit. In every single pitch the most important things were:
1. your company should actually do something important/valuable. Solve an important problem etc.
2. you should have a plan for a future where the unit economics work, and you should know the plan inside and out
3. you should have thought through something about how what your company does intersects with *this particular investor's* interests, and be able to articulate that clearly
4. You should have clear asks - not just money for valuation but what else you're looking to get from them (strategic advice, intros, synergies with other companies in their portfolio etc).
The deck, pitch itself etc are much less important than doing something important and actually knowing what you're talking about. In particular, avoid the thought that you can hack the process with a slick pitch and a cool-looking deck. It may take you to a first meeting, but it's not going to get you to close with anyone of substance.
A good pitchdeck condenses a complicated subject to its essence, just enough text to convince and short enough to avoid wasting time. It informs rather than overwhelms, and stays clear of hyperbole. It's the equivalent of a telegram, it conveys information, and every word has a cost.
A bad pitchdeck is one that focuses on form over function, wastes the readers time with unnecessary detail and extrapolates into an unknowable future with too much conviction that things will really play out that way (they won't).
> 1. your company should actually do something important/valuable. Solve an important problem etc.
There are for sure examples of companies who are not 'solving an important problem' (at the time of the company being formed). It would be interesting for someone to compare funded companies that met this criteria that were successful (that would have to be defined as well) vs. not and 'pie in the sky maybe maybe if it works will hit it big'.
But right off the top Airbnb as envisioned and as it started was not solving any important problem or really doing anything valuable. At the start I mean (when pitched to investors note Fred Wilson famously passed on this after Paul Graham even pushed him to invest) not what airbnb became (which is what many investors go on).
The Automobile when it started to be popularized didn't solve an important problem that problem was already solved by horses and the early automobiles had to develop over many many years into a state where they became valuable. At the start they were not and investing on that basis would not have been wise (other than 'maybe they will end up allowing people to do this and that vs. using a horse').
Uber ditto (but less so) than Airbnb that problem was solved by cabs in most places. (Will agree this is a weaker point than Airbnb).
That said with respect to the above points 1 to 4 probably a fifth is needed. That would be being able to explain to an investor why your solutions works for a problem they don't even agree is a problem or understand. Once again using airbnb many investors (including Fred Wilson and for that matter myself) couldn't understand why in the world someone would let a stranger use their house makes no sense you have person items and what not just didn't seem to fly. However people of a different age group think differently so how do you explain to the investor (who is not the same peer) why the idea makes sense?
Those are good points, which would usually not be communicated outside the context of a specific VC pitch after which the 'story' has already been told as an introduction.
The 'narrative' is something that you tell to partners, customers, on the speakers panel at the tech show, in articles.
In a nutshell, the 'story/narrative' is the foundation of the pitch, which can be expanded from 10 seconds, to 2 minutes, to 5 minutes to 1 hour, with varying levels of detail.
The CEO, or 'someone' at the company will be telling this story over, over and over, and this is how the company is communicated.
The 'VC Pitch' is just one small part of telling the story.
That way of boiling down Finding Nemo seems to miss why the story is designed that way. It doesn’t describe anything about what happens to Marlin as a character, just a few basic plot points, and then in the end he somehow learns that “love depends on trust”. Uh, ok.
If you actually want to understand why Finding Nemo “consistently tugs at heartstrings worldwide”, Craig Mazin used it as his primary example in “How to write a movie”, episode 403 of Scriptnotes[1]. (TL;DR: the purpose of everything that happens in a movie is to expose the hero to as much agony as possible, so that the change they’re forced to go through feels real. I don’t know what that means for your startup pitch, though.)
> don’t know what that means for your startup pitch, though
The hero is your customer. If they aren’t in agony sufficient to prompt change, i.e. to your product, maybe your pitch is off. Or maybe your target market or product need tweaking.
To my kid who was three at the time, it was a straight-up horror movie. It had been a while since I had seen it as an adult and didn't realize how scary it was.
Finding Nemo as as a live-action film with people would be amongst the scariest concepts imaginable.
A young couple is expecting twins and moves into a respectable neighbourhood.
In a home invasion the wife is killed, one of the twins are lost, and the surviving child is born physically impaired.
Flash forward, the child is now ~10. He's a happy, normal child (minus the physical impediment). The father is wracked with anxiety at all times and emotionally suffocates the child.
The child wants to be independent (like any 10 year old) so in an act of rebellion with his friends he goes someplace a little bit shady.
He's kidnapped! All of the father's worst fears are realized.
Nobody can help him except a mentally handicapped outsider
This seems obvious to me. I think ultimately they are choosing the story given to them. If you tell them a story and they buy that, they also don’t care about what product you make but what story your product tells.
If it tells a good enough story it is a story they can then sell to consumers.
Profit isn’t to be made by meeting basic survival needs, but once people have their basic survival needs met, then it can become profitable to start selling the story that this product lets you be a participant in.
On a different note, I like the Rick and Morty one as well. Not sure if this is going to fit investor pitches except in very esoteric cases. I used this during a cyber security session though with success.
As with any sensible advice about structure, the takeaway here is not that you must slavishly adhere to a set formula or risk ruining your story. This story circle, along with other popular story structures like the three-act structure, are simply tools based on observations of stories that have managed to resonate with readers over the centuries.
So story theories are stories themselves. How meta.
I began noticing a pattern in recent popular startup founding stories. It goes something like this. Protagonist is the founder here.
1. I wanted to do X.
2. But I couldn't Or it was an extremely frustrating experience.
3. So I took a step back and thought, f***k it I'll build it myself.
4. So here we are; our vision is to democratise X and uplift millions out of their misery.
Examples of the top of my head:
1. The concept for Uber was born one winter night during the conference when the pair was unable to get a cab. [1]
2. ....they were having trouble paying their rent and were looking for a way to earn some extra cash. They noticed that all hotel rooms in the city were booked, as the local Industrial Design conference attracted a lot of visitors.[2]
3. The idea for ZopNow came when founder Mukesh Singh was standing in a queue at a grocery supermarket. The idea flashed in his mind that something could certainly be done to save people from the hassle of waiting in long lines at grocery supermarkets [3]
4. He was motivated to start OYO Rooms so that he could be in control of the TV remote, which wasn’t possible when he stayed with relatives when he was a child.[4]
I think humans have enjoyed framing stories in this 'stroke-of-luck' genius protagonist style for a long time.
In startups the initial moneybag investor needs a brilliant story to repeat to everybody in their network. Later, everybody who works in that risky venture wants to repeat that story to explain the risk they're taking to have this adventure. Finally, consumers who are initially convinced to buy the thing also need to tell themselves stories of how this product is somehow special, unique, made by brilliant people.
It's like the origin story is an accumulation of all the narcissistic energy accumulated in order to swallow the uncertainty felt by everyone involved.
I would question the importance of focusing on the story - it should naturally follow and result from all the work being done, not be invented ahead of time to fit in with expectations.
Is that surprising? Basically everyone says that you should solve a problem you yourself have if you want to start a business, as that's basically already validated from the start.
This is just a consequence of people taking that old adage to heart
That's the myth. The reality is "a problem you see some people have" (where problem is defined as "anything real or imagined or incepted need that someone can be persuaded to pay for").
I was starting to get hungry while playing cards, and desired something that could be eaten without using a fork, or without getting my cards greasy as a result of eating meat with my bare hands. So I asked one of my servants to bring forth slices of meat between two slices of bread. So here we are; Eat Fresh! -- John Montagu, 4th Earl of Sandwich
Something about the images and formatting makes this look like one of those “Buy my book for $20 and find out how to be a billionaire by selling books for $20” Tai Lopez type things.
It is hard on my eyes and the use of emoticons and images seems juvenille, but this type of article and formatting seems to be a popular trend on LinkedIn, Substack and Medium.
As to the content of the article itself, I am curious how many of the hundreds of the founders Ashwin has worked with have used this approach to acquire funding?
> As a startup founder, 90% of your job is storytelling.
How can we fix that?
To the extent that this is true, startup funding will go to the best storytellers, like Stephen King or John Lasseter (or, perhaps, Elizabeth Holmes), instead of the people working on the most important breakthrough technology they could most easily bring to market. How could you run a VC firm that funds the best hackers instead of the best storytellers? Or a company that works on the best ideas instead of the ones advocated by the best internal storytellers? Or a trade publication that touts the best ideas instead of the ideas with the best storytellers?
One way to think of this is that storytelling is an attempt to hack investors' evaluation function; as pg says in http://www.paulgraham.com/lesson.html:
> But wasting your time is not the worst thing the educational system does to you. The worst thing it does is to train you that the way to win is by hacking bad tests. This is a much subtler problem that I didn't recognize until I saw it happening to other people.
> When I started advising startup founders at Y Combinator, especially young ones, I was puzzled by the way they always seemed to make things overcomplicated. How, they would ask, do you raise money? What's the trick for making venture capitalists want to invest in you? The best way to make VCs want to invest in you, I would explain, is to actually be a good investment. Even if you could trick VCs into investing in a bad startup, you'd be tricking yourselves too. You're investing time in the same company you're asking them to invest money in. If it's not a good investment, why are you even doing it?
Investors want to invest in the companies that will make the most money. As Ashwin points out, the founders' storytelling ability is a component in making money, because it affects company morale and public relations, as well as future funding rounds. But there are a lot of other components to making money, as Theranos found out. If Ashwin is correct that 90% of a startup founder's job is storytelling, then investors are vastly overvaluing storytelling ability when they make their investment decisions, and there should be a lot of startups out there with mediocre storytelling and genuinely great technology that investors could get exposure to for a much lower price.
The information asymmetry here is a real problem, though, because how do the investors find out about the great technology? The people who are working on it have to tell them about it, and if they're bad at communicating, it's going to be hard to understand what they're saying. Maybe "due diligence" should start earlier on, with proactive due-diligence teams going out and scouting out ideas that could turn out to be big. Linux Weekly News, of all things, is the closest approach to this I've seen in the real world.
Sounds pretty hard. But better than investing in Theranos and passing on Dropbox.
I've heard it claimed that you aren't selling a product, you are selling a story.
If true, there's nothing to 'fix' with VCs. If you can't sell a story to them, how are you selling a story to the customers?
Look at all of the companies that we admire. The tranparency we get from some? Literally stories. Products that last or 'just work'? More stories. Hell, even my hobbies are mostly full of stories.
There's a significant extent to which we live entirely in worlds of our own imagining, unable to perceive objective reality. You can't perceive your girlfriend, only your understanding of your girlfriend.
But objective reality does actually matter, and that's what eventually sunk Theranos. Similarly, if your girlfriend is objectively planning to empty your bank account and run off with her other boyfriend, that objective reality will eventually impose itself on your understanding, perhaps some time after she executes her plans. (Unless her own understanding of the situation changes in a way that makes her reconsider her plans.) Your "products that last"? You'll change the story you're telling yourself if they fall apart in your hand enough times.
And that's why we're using TCP/IP and not IBM SNA or DECNet or Tymnet or Minitel or even OSI to have this conversation; TCP/IP objectively worked better, even though IBM and CCITT had better stories.
But I'm not saying that stories don't matter. That's not what I'm saying, man. I'm saying that reality also matters.
But then the whole sector is fed and reinforced on story telling and substance get produced but pop tech driven by fads. I don't want to be on a timeline where we distract each other and ourselves with frivolity. Let's solve real problems, not blow smoke.
1) I think more business relationships are two adversarial. And big companies get big to own their supply chain, including labor. If we were nicer to each other, paid better overall and were dependable partners, many things could get farmed out to other orgs.
We need an economic model that isn't in a war with itself.
2) Sales folks, the story tellers get too much money, make it big, become VCs, only see themselves in the world. Funding for folks creating the future should be predicated on the whims of this weird positive feedback loop.
In this way, storytelling isn't fundamental. Storytelling is an exploit. It's how you break a thing. Storytelling is the bad data you have to test against, the overflow you have to trap.
Nobody ever said stories are GOOD.
Stories are BAD. (thanks to Terry Pratchett, well known for telling cautionary tales)
The measure becomes the target [1] and now the entire product is just a story. But not in an accidental way, if you can sell the snake oil to your customers and your funders in an obvious way, you don't have to do the rest.
Our tech bubble is overfitting. Selecting for characteristics that don't affect the outcome we claim we want.
I am not anti-story. But in the context of startups and investors, stories can't be the only thing we have. If we cross the great filter, maybe someday we can go back to a mostly stories reality. Hopefully.
"One way to think of this is that storytelling is an attempt to hack investors' evaluation function."
Or maybe story telling is more useful than you think? Plot holes represent real business problems. Suspense of disbelief can allow you or investors to see the value just behind a hurdle. Giving employees a role to play keeps their focus, even if a plot twist is around the corner.
And remember that founders don't do most of the work. A good startup has lots of people who do real work. But a founder does need to tie it together into something coherent and show the endgame. And that does appear to work a lot of the time, so there seems to be lots of evidenxe that founders telling stories is valuable, and little evidence that it's not.
> there seems to be lots of evidenxe that founders telling stories is valuable, and little evidence that it's not.
Just to correct this misreading, I'm not saying that founders telling stories isn't valuable. I'm saying that the value of founders telling stories is already taken into account in the existing funding process, and if Ashwin is correct, it's overweighted. Theranos, Juicero, and Animats's example of Better Place are evidence that Ashwin is correct.
> there seems to be lots of evidenxe that founders telling stories is valuable, and little evidence that it's not.
Storytelling is common to successful startups and to the mass graveyard of failures. The question isn't whether storytelling is necessary given the way things are done currently (it is necessary, therefore it is necessarily effective), but whether the gap between storytelling and the ground truth is necessary.
Maybe not every business needs to tell a story. I recently bought an enamel pan that I absolutely love. There was no story involved in the transaction. I looked at the pictures, checked the price and the size, and ordered it. I'll buy a smaller one before long, that's how good it is.
Some businesses will need a story (I would consider my own an example). For others, the products do speak for themselves. The initial generalization, that 90% of a founder's work is storytelling, tells me more about the limited, silicon- valley-centric perspective of the author than it teaches me about business.
One was is to make a product so compelling to your customer that solves such an impactful problem for them that it doesn't need to be conveyed to them through pablum and/or obfuscation.
Something is usually "compelling" when it reaches the level where the customer can figure out the story themselves. Story doesn't equate pablum/obfuscation. It's a narrative presentation of the vision of how the product will impact the customer's life.
Referring to the original link, I don't think the Pixar way it to tell stories using pablum and/or obfuscation. I agree with what I think is your point--the product matters most. If your product truly is great, it should be easier to craft a straightforward, compelling story.
Obfuscation is only halfway to the Pixar way to tell stories; the central point of Pixar stories is that they are false from beginning to end. There is no fish called Nemo, fish don't talk, fish don't organize rescue missions, fish fathers don't take care of their fish children after they hatch, and the good guys don't always win in the end.
Yeah, at some point you need to be good enough at communicating to sell a product. But, for example, Google was riding entirely on the actual reality of its products instead of its ability to tell stories to its users from its inception at Stanford (in 01997?) until at least the Gmail launch in 02004. And there are a significant number of companies that survive for many years with less than ten (big) customers. You'd be surprised how many companies will continue to buy a product that works in preference to a product that doesn't work but has a great story.
I don’t think I understand the point you’re trying to make. By that time, Google, with their undeniably charismatic founders, had pulled in north of $30Mio from investors, so they’re hardly a counterexample to the article. Clearly they knew how to sell their vision. Or are you arguing they did not need the money and would have succeeded ‘on the reality of their product’, whatever that means when you need to scale like that and have no income until figuring out Adsense in 2003?
I think this is interpreting the story at that time two one-sidedly.
At that time the dot com boom of the commercial Internet had just started. They also had very good credentials - I mean, two PhDs at Stanford still is a pretty good background for investors to take you seriously. It also was about an interesting problem, which in addition looked solvable with enough brains and brawns.
The storytelling itself had a big mountain as a base to jump higher form there. You can't claim the height reached was due to the storytelling as a major factor. Everything else contributed much more, the right idea, people and external conditions at the right time.
There were many companies at the time that had received investor money with horrible stories from today's point of view. Some of which I could see more closely because I accidentally applied for a job (I switched jobs in 1997), to see people with a huge ego, no idea what they were doing getting a few millions for ideas that made you scratch your head. We saw how it ended at the end of the dot com boom.
Your reality becomes the story, when handled properly. This is pretty fundamental to marketing: see Guy Kawasaki.
The danger is of course shown with Google: when the reality shifts or evolves, the story tends to stay put, and then you're building a trouble machine.
You asked, "But what do you do with a company, even with good tech, when they’re not able to sell a product?" My inference was that this was intended to be relevant to my comment, to which it was posted as a reply. To make it relevant, I needed to infer some sort of unstated premise; I guessed that your hidden premise was that, if a company is mediocre at storytelling, it won't be able to sell products, because storytelling is an essential part of the sales process. Did I misunderstand your unstated premise?
I rebutted what I guessed to be your unstated premise by pointing at the example of Google, which, as I remember it, spent 7 years without telling its users almost anything at all about its products, much less engaging in the kind of masterful storytelling exemplified by the Chrome launch comic book. (They did have revenue before Adsense; Adwords was already in place in 02001.) They had no advertising campaigns of their own; they made almost no public statements at all. Yet they overwhelmingly dominated online search by 02004, having unseated well-known established incumbents.
So I think it's possible to get wide adoption without engaging in storytelling to users about your product.
I also think it's possible to be profitable without getting wide adoption. There are a lot of companies, mostly with fairly unique products or services, that sell to a small number of long-term customers, so their sales next year depend much more on the quality of their products this year than on the quality of their storytelling to their customers. That's actually where Google got revenue pre-Adwords: Yahoo outsourced search to them. I'm sure there was some storytelling involved in that sales process (I wasn't part of it) but I suspect that the more significant factor was that the people at Yahoo knew by experience that Google's search was really good, in fact, better than the crap Yahoo's portal was using at the time (maybe HotBot?).
I definitely don't mean to deprecate Google's founders or imply that they were mediocre at storytelling to investors or didn't spend a lot of time on it. On the contrary, I was simply rebutting what I took to be the unstated premise behind your response: that if a company is mediocre at storytelling, it won't be able to sell products, because storytelling is an essential part of the sales process. In fact, storytelling is not an essential part of the sales process (although it certainly helps), and so companies that are mediocre at storytelling frequently do sell products. How much investment Google's founders had raised is completely irrelevant to that question.
If that wasn't your unstated premise, then how was your comment, "But what do you do with a company, even with good tech, when they’re not able to sell a product?" relevant to my original comment? Because I'm evidently not smart enough to figure it out on my own.
But we don’t know that Google’s storytelling was bad , all we know is that they were quite successful in pulling in money, pointing towards the opposite if anything.
The article is meant as a how-to of how to win over investors. So your rebuttal of my comment is ‘just be Google, then you won’t need Storytelling (maybe, because maybe they were pretty good at it after all)’? It’s like telling budding school bands ‘just be Beatles/Nirvana/Beyoncé’. How that is helping the average guy trying to build their pitch deck?
I notice that you haven't answered my explicit questions to you in the comment you're replying to, which makes me wonder if you're trying to play some kind of mind game with me. I will repeat them: Did I misunderstand your unstated premise? If that wasn't your unstated premise, then how was your comment relevant to my original comment?
Moreover, you seem to be attempting to rebut the proposition "that Google’s storytelling was bad", as if that were something I had said, when in fact I specifically disclaimed that interpretation in the comment you're ostensibly replying to: "I definitely don't mean to deprecate Google's founders or imply that they were mediocre at storytelling to investors or didn't spend a lot of time on it." Then, you summarized my comment entirely incorrectly as "just be Google, then you won’t need Storytelling (maybe, because maybe they were pretty good at it after all)".
I cannot tell if you are astoundingly incompetent at reading or intentionally lying about what I'm saying, which would make you astoundingly dishonest.
Now you’re trying to weasel your way out with ad hominems.
- the article suggests storytelling as a way to increase your funding chances.
- you say that’s stupid and needs to be solved
- I say it seems like a good idea if you want founders to be able to sell
- you say that’s not valid, giving, of all possibilities, Google as an example of how storytelling is unnecessary, regardless that (1) you don’t know how good they are in it and (2) they obviously were very successful in fundraising, the very topic of the article (did you even read it?) You also claim they did not tell their customers about what their product is, yet you also claim that their product was enough to keep them growing, apparently unbeknownst to their customers.
I don’t know man, if you can make sense of your arguments, good for you.
I think this is only true for your Series A and B - that's when actively losing money (and barely having anything to show, like growth numbers or a go-to-market strategy) is to be expected. Although I suppose once you hit a series C you're not necessarily considered a startup.
In many ways, storytelling IS a key part of a founder's job. You're often pitching your company to someone: a prospective customer or employee, an investor, a journalist, a vendor, etc. The better you are at this, the better your company will do. This isn't a hard rule, and there are lots of counterexamples on both sides, but this has been mostly true in my experience.
FWIW my venture fund is an investor in ~150 companies, and I've run correlations for company success vs. a bunch of company attributes. "Founder's ability to pitch and sell" is one of a very small number of positive correlations that I've found over the last decade.
I had this realization somewhere in life. Many jobs (not just CEO) are highly dependent on "story telling" in a general sense. Which is a stylish way of saying, "being able to explain yourself and your motivations."
In grad school (molecular biology/genetics), various lab members would return from scientific conferences and the most common comment was "You should have heard <so-and-so's research talk>. She had a great story."
It made an impression on me. You can do the best research, make the best product, write the cleanest code, etc. But you will suffer if you can't tell the story.
Kind true. There are only two jobs of the CEO: hire and sell. Sure hiring and selling need some storytelling but that is just a very small part. There are things like integrity, vision, etc.
So I agree but I’m concern that focusing solely on “pitch and sell” is what gave us Nikola, Theranos, …
> Sure hiring and selling need some storytelling but that is just a very small part.
I beg to disagree -- storytelling is the main part of hiring and selling.
Hiring is convincing the employee you want why this company is the next chapter in their personal story, and how they fit into the story of the company and the product. Storytelling is the creation of meaning, and people take jobs because of what they mean for your life. For some people, that meaning is about making the world a better place, while for other's it's about how this job will generate more cold hard cash than you could anywhere else.
Similarly, selling is telling and justifying the story of how this product will change the customer's life for the better.
Integrity? Vision? Technical specifications? All part of the story you're telling.
Not all jobs involve story. If you're building an algorithm, story doesn't really factor into it. But convincing people is always done through a story -- "here's why X is better than Y". So to whatever extent your job in convincing people, it's about communicating story.
CEO's do other things too. Deciding which strategy they want to pursue isn't story, it's strategy. But then convincing everyone else to go along with the strategy -- that's story.
I guess I have much broader definition of sales and hiring. So I think we are saying the same.
Selling includes includes finding market, indetifing right people to sell to, product market fit, should we sell X or Y, etc. But the goal is to make money. If CEO does only storytelling then it is a scam.
Hiring is also much more complex then just convincing some person to join your company. Which person? How to find them? Location? Are they too expensive? Can they recuirt more?
Anyway my grandfather always told me that is you want to understand how companies work just like how the oldest profession in the world works. So what is responsibility of the pimp? Sell and hire.
> I beg to disagree -- storytelling is the main part of hiring and selling.
If your goal is to hire a person or sell a product, yes. I think what the OP was saying is that they are a small part because of other ethical concerns. Like, the OP was saying that selling many units of snakeoil is a failure because it's a scam. Or hiring contractors and motivating them to work hard and then using fine print to screw them out of their profit sharing (e.g. Hollywood accounting) is a failure.
> Sure hiring and selling need some storytelling but that is just a very small part.
I’ve always known storytelling to be fundamental to sales. So much so, that when I first went through sales training a decade ago it was predicated on “customer centrism” (as in customer centric selling) and punctuated by days worth of storytelling foundations.
They have one job important job. Keep the company funded. If that involves selling, great. If that involves opening up their own bank account to make it happen, great. Leveraging relationships, great as well.
That's so last-cen, when stuff actually had to work.
Pixar's story approach is all "I am the chosen one". It's not about someone who worked to make it happen. This came from George Lucas, whose stories are all about "the chosen one". His success changed film storytelling. Too much. Before Lucas, there were more "clawed their way up from the bottom" stories.
I've seen "I am the chosen one" pitches. The CEO of Better Place (electric cars using battery swapping stations) comes to mind. He was a really good speaker, he was really good looking, he knew several national leaders, and his business plan was total bullshit. Better Place went bankrupt.
Chosen one is good enough if investors can successfully bootstrap a ponzi scheme based on your persona.
The trick seems to be to create a dream, let the perceived company value increase based on that dream, and then pull out at the right moment, leaving the losses to investors who came too late.
It does. But in practice you'd have people trading their 6+ year old battery for a nearly-new one (even if it took them a dozen tries) to avoid the $12k expense of replacing it. You'd have to build that scenario into your business model somehow.
I think a better business might be battery pack refurbishment. Buy dead/worn out packs from mechanics, replace any bad cells or fuses, reseal them, and sell them with a 90 day warranty.
Why not treat it like a propane tank exchange? The company owns all the tanks(1); you don't own the tank(1) and aren't paying for the tank(1) (other than maybe a deposit to ensure you'll return it someday). When you swap it, you pay only for the propane(2) inside; you're just buying more of the contents.
You'd need the deposit to be the price of buying a battery, because unlike a metal tank a high capacity lithium battery is pretty useful if you never use that company's charge facility again, but if the status quo is that the company only swaps their own serial numbered batteries within certain time frames, the whole notion of swapping an old one for a new one is meaningless. Sure, sometimes people will wreck a battery but return it anyway, like any lease business, but there's no way of using them as a general bad battery disposal service
Swapping old for new IS meaningless and not the goal. In fact some swaps would inevitably be new-for-old. The company would own both, so who cares. This idea is only about swapping depleted for charged, so you don't have to wait around while it charges. Obviously the only way it would work is if swapping were made easier and faster than charging. As for abnormal or unusual occurrences, if a battery is nearing end-of-life the customer can do the company the favor of reporting it, or the company can find out themselves by testing it. If you demonstrably wreck one, or just keep it, the company has your deposit (which I agree should be close to the price of the battery), and you just bought a battery.
It's early and people still fetishize the batteries a bit, but they're really just containers for the thing we actually want - the charge.
A propane tank can have a useful life over 20 years, while a battery pack will wear out quicker than that. Or become obsolete because new technology is developed, or the vehicle manufacturer changes the design making older ones incompatible. So you'd have to account for that possibility in what you charge.
Battery swapping could have been a good idea, if instead of telling a story:"We'll replace all the cars in the world, we are already talking with heads of state", they've said:"As a first step, let's concentrate on a small niche best fitting for battery swapping, like Taxis[1], Build a network/business, and expand from that".
[1]Taxis drive a lot, so the savings from battery swapping are much more compelling compared to the car costs. And many taxis drive only within city range, so no range anxiety.
Tesla beta tested this in California a few years ago - between LA and Santa Barbara. I received an invite to try it out but never did. They shut it down a year or two later.
I think they are making good strides on fast charging and decided not to lean into the swap.
I suspect that for every problem there are dozens of teams capable of solving it, but only one or two will receive enough funding and attention to reach the escape velocity. Investors know it so they want to bet on the team that other investors will want to bet on.
Ergo your job as a founder is to convince the investors and the journalists that you are the chosen one. Either that, or bootstrap.
There's a large body of people, particularly here, who measure success by how much money you can raise, and nothing whatsoever about actually running a viable business.
I think part of the problem is motivation. I equate the people that strive for VC approach just want to get rich. They don’t care about their employees or their users; they are a means to an end. Raising money assures them no matter what happens to the company they will have a payout even with liquidation preference. Not all VC raises are bad given the right motivation, but more often than not greed comes into the calculation.
I mean, the alternative is to grind out an eking existence on nights and weekends until you're bootstrap profitable and then a "Chosen One" gets funding, or a FAANG comes along and eats your little niche for breakfast...the motivation for raising funding comes from survival instincts.
The CEO of my old Fortune 500 laid out our Foundations thusly:
"Make money". This isn't the most important thing, but it is the means by which all of these other things are done... then he listed the "things that are important"
That is what we're told before entering academia and small business/non-profit ownership. But lo and behold in reality most of one's time is spent chasing grants, contracts, and other funding.
I have worked with founder-CEOs who saw their roles as solving all the problems. The message was, if anything is ever not going by the book, call me, I'll come look at it myself. Not only does this alienate smart employees, but it grinds the company to a halt once it's at a scale where two or more of these situations can happen concurrently.
The best leaders I've worked with have (implicitly) spun narratives about the problems we're solving, the ways we're approaching them, the kind of people we are, etc. which lead everyone to find within themselves the (mutually agreeable) answers about what to do next.
Problems have lots of solutions. Often a company looking for say “SaaS application to streamline expense processing” has 50+ options. How they pick one from that 50 has more to do with how memorable the company is (storytelling) than the features (engineering).
Define 'startup' and 'founder'. These are not necessarily useful things compared to 'inventor' or 'coder'. But the job is most definitely founding a sort of cult around whatever you say you are, and getting other people to imagine pretty things about what you haven't done and maybe never will do. That's a startup founder.
In a sense, this too is a real problem. People will burn a lot of money, time and resources as long as their fundamental motivation is to chase a pipe dream.
Both options work, but you have to choose one style depending on the stage and type of the startup.
If you are founding a new coffee shop, or a trading company, probably you should spend more time working on the actual problem. But if you are founding a future tech (eg SpaceX at its beginning) or anything that requires huge capital or fast scaling in team size, you should spend more time on getting everyone buying the story and provides you with talent and capital to actually solve it.
Effective leaders tell the stories that attract and retain key people, enable them with resources and put their works into the world. This is a key difference between ventures and small businesses. If the CEO thinks that is beneath them, they’re micromanaging a glorified one-person shop.
The technically-superior badly-coördinated solution losing to a well-communicated one is a Silicon Valley, business, political and military trope for good reason.
There are plenty of "real problems" whose solutions failed not because they didn't work, but because the founders couldn't communicate effectively.
A great solution without good communication is just as worthless as an aspirational pitch deck with no solution. Both result in a problem not getting solved.
What "real problems" are these? Speaking from the side of software Product Management it is far, far harder to make a pitch deck into a solution. Orders of magnitude more brainpower, effort, discipline. Easiest thing to do is sell tech that is already working and solving a pain point.
Vincent Van Gogh. During his own lifetime, he failed at communicating or expressing the features and techniques and genius of his own work. But later artists and critics recognized and acknowledged it, and could effectively communicate its genius and importance to curators and the public. The work itself, obviously, didn't change, only the story around it did.
It’s remarkable how many real problems can be solved with a good story. Storytelling is how people who don’t do things themselves can direct larger numbers of people to do what you need.
100% guaranteed success in fundraising. You only need one of these options:
- Be a friend or acquaintance of the fund manager.
- Be the child of an important client of the investment bank.
- Study at a prestigious university together with other children of the bank's clients
- You have sold your previous business or already own a very successful one.
It is a fallacy to think that your pitch will be of any use in 2021. It is 90% personal relationships, 5% narrative and 5% luck. Not even the business plan is relevant anymore (WeWork and many others)
I think this downplays things quite a bit. I grew up as a middle class immigrant in Canada. My parents have office jobs, but basically 0 connections (certainly not the ones you're implying you need to raise).
In university (which I paid for myself through internships + loans), my cofounder and I just started coding on an idea, which got us into YC, which helped us get in front of a bunch of VCs, which allowed us to raise $3m in seed funding. No connections, just lots of googling and talking/pitching to anyone that would pay attention to us.
It could've been the 5% luck you're talking about, but certainly don't think that coming from a well-connected family is the only way to fundraise in 2021.
You used YC's connections. You applied were accepted and now are part of that network.
Leveraging YC's rep for selection is one way to break in. You were part of the lucky 1% who make it through the program from application to funding,congrats!
It's not the lucky 1%, it's the carefully selected 1%.
The other 99% is where the random rejection component amounts to more like "bad luck".
IOW good luck on its own isn't even enough, but bad luck can set you back years.
And since there's realistically at least another 2% out of the 99 who would have been equally performant if there was actually room for them to be accepted, the greatest pool of most promising candidates are among those whom have been the most unlucky.
> In university (which I paid for myself through internships + loans)
So you got a loan that your family backed and you were able to work as an intern in various places. You also went to a prestigious university. You were a privileged 1% and after entering YC you are part of the 0.1%. This would not have happened if you had been born in Namibia.
My complaint is that by using the leverage of the 0.1% you try to convince the 99,9% that: if you work, think and play hard you can achive your dreams. This is no longer the case. Maybe it was like that 10 or 15 or 35 years ago. Today the wealth difference and inequality is abysmal because of the network effects. So basically you don't need to be good or bad business, you just leverage your network and keep going.
This is also the case with government contracting. Just like how VCs ignore most pitches that come in cold through the "front" door, so too does the government ignore most responses to solicitations. 90% of deals go to those who are connected to the original source through personal relationships of "back door" deals. 5% of the deals go to those who know how to persistently work the system. And only 5% go to those who actually have the best product at the best price.
When the worlds of venture capital and government contracting collides, it gets even more murky. There are many deals in that government folks are closing with silicon valley firms where someone within the government then ends up working for that same silicon valley firm. It's such an I scratch your back, you scratch mine world.
I don't doubt that VCs tend to prefer those they know to those they don't for the very same reasons.
There are people whose job is to just write grant proposals. Someone told me they had a guy who was making almost twice as much as the developers, just because they were afraid he would leave. Which means the company decided it was better to get contracts even if it meant 1-2 less people available to fulfill them.
Isn't this pretty much true of any bidding process? The people already know who they want, but go through the mandated bids just to say they did while ultimately picking the group they already intended to use? From my experience that's the SOP for ad/creative agency bids, so I just extrapolate that to the rest of the world ;-)
It's worse when the VCs put their own people specifically in positions of control in the government to funnel deals to their portfolio companies, and then those people in positions of control leave to then work for those portfolio companies that now have dozens or hundreds of millions of dollars in government funds. It's much dirtier than just building relationships with people before the offer goes out.
Or Peter Thiel using his personal relationship with the Trump admin to make his crony Kratsios the US Federal CTO and Undersecretary of Defense with a huge budget, who then pumps Gov money to Thiel investments (Palantir, Scale, and others), and then leaves the government to join one of the Thiel portfolio companies (Scale). What a sham it all is. I can provide links to all the above, but these are easily searchable.
I'm just curious how this works. Here are the two possible scenarios I came up with.
Scenario 1: Fund managers are altruistic and not particularly interested in making money. So they give money to people they know personally.
Scenario 2: Fund managers are greedy, but success is essentially random. So they are indifferent to their investments, so they invest in friends and people they know personally
Is there some scenario in which fund managers are both greedy but also invest in relatively crappy ideas just due to happenstance of having a personal relationship with a founder?
Scenario 3: Fund Managers are very interested in making money, and also realize that (1) advancing the culture of and maintaining their position in elite backscratching networks has payoffs for that outside of portfolio returns, and.(2) the same networking and nepotism factors are at play for many of the other business deals besides venture capital that a new business will need, so just from an investment perspective weighing those factors heavily makes sense.
The fund can spare losing investments, as well as have investments where they sell all the shares at a greater price even if the business doesnt do anything revenue-positive
So the fund is basically a charity where it invests according to merit and uses those gains to subsidize the investments in their buddies funds. But at least some decisions are made on merit
> have investments where they sell all the shares at a greater price even if the business doesnt do anything revenue-positive
Who are they selling to at a higher price? Do the other investors have to have a relationship with the investor as well since they're investing in sub-par companies?
Instead of answering your specific questions, let's address the fundamentals here: the entire private equity sector is based on relationships. There is little to nothing that occurs organically. You'll basically never land an investor at a startup conference or pitch contest or any "my idea/execution is going to be more lucrative than other people that you also don't know" scenario.
private equity funds "subsidize" all their losing equity investments with the winning ones, as well as additional investor capital - subsidize only being a useful term if they participate in an additional financing round for one of their poorly performing companies. The rest just fade away into nonexistence. It is not uncommon, unheard of, or odd that the founders of some of those companies has a personal relationship with a fund manager. And more likely the founders at all the companies have a personal connection to one of the private equity firms that invested in the funding round, who then convinced other firms to invest. One triggers the other, but the first one was a relationship.
Most ideas work with infinite money invested, and infinite budget to convince people to purchase or otherwise buy into that idea. Typically ideas work long enough for the same organization to pivot to another idea, or have enough money to buy the better executed version of the idea they originally wanted to do. It doesn't matter. The only thing that is a waste of time is being extremely good at a discipline and hoping that translates into financial investment. It is not an important part of the puzzle.
> You'll basically never land an investor at a startup conference or pitch contest or any "my idea/execution is going to be more lucrative than other people that you also don't know" scenario
Every startup I know or have worked at went through a pitch contest that was pretty boring and not at all based on relationships. You often speak to multiple funds, they kick the tires, interview the team, size out the market opportunity, look at revenue or users, or growth or whatever you have, and they choose to invest. My wife's company also had a PE firm invest in her company and they did the same process and are focused on growth. No one is doing favors for anyone else.
What are you basing your answer on? No offense, but it sounds like you're just going off a caricature of how a very young inexperienced person thinks business happens.
> The only thing that is a waste of time is being extremely good at a discipline and hoping that translates into financial investment. It is not an important part of the puzzle.
I guarantee you if you build a product w/ a high growth rate or engagement, VC will be kicking down your door to give you money.
> I guarantee you if you build a product w/ a high growth rate or engagement, VC will be kicking down your door to give you money.
Why I need a VC then? Did you understand why the Venture Capital industry was created in the first place on the United States in the 60's? If I have a working product with high rate and cashflow, I just use the private debt markets and keep going and expanding. We are not talking about that.
While those things may be helpful, they aren’t good advice because they aren’t easy to do nor are they actually required.
Investors want to make money and they very frequently invest in people who do not meet that criteria. So it’s helpful to too how people were successful without the nepotistic criteria you outlined.
In general your post just complains about privilege without being helpful or insightful.
Funny, of all the investments I've done to date not a single one would have any of these attributes.
And of all of the investments of all of our customers I think I might be able to point to one or two cases where one or more of these were true but I highly doubt they were the deciding factor because the bulk of those did not go through, mostly because having such a relationship - and having it declared - would cause a lot more scrutiny on the fund managers than would happen otherwise because they'd be open to claims.
Now of course it is possible that a bunch of them passed under the radar without being declared.
WeWork - and SoftBank in general - are weird outliers, there is very little logic (to me, maybe they do understand) to their investments.
Actually things have never been easier. You have access to cloud computing, infinite free tools and learning resources. Social platforms to spread your product. If you fail its not your fundraising. Build something better. However when all else is right, a good story helps. Hence this article.
If you don't have any of these then you might try to compensate with better skills or by being better at communicating with investors / being better at telling stories.
Will we ever stop repeating this tiresome and obvious complaint that rich people have easy access to capital?
Yes, it’s true. It is tautologically true. You haven’t come up with some clever indictment of the system, you’ve only described it.
That doesn’t mean nobody who comes from a modest background succeeds and it is not at all helpful to anyone in that situation to just harp on how other people have it easier.
bad investors will eventually go broke in 7 years when they have no actual exits, but what’s insane is that bad investors aren’t going broke, the insanity is insanely profitable, presumably due to the macro climate, which makes them good investors (or selection bias but what’s the difference)
Basic seed funding. Every x years anyone who an complete a detailed business plan can get a 50k (adjust ad desired) seed grant. Part of that could be an automatic second round grant application, where the govt takes some shares if they hit some standardized cash flow target. After that let the private ventures in.
Govt shares go into a citizens wealth fund and are setup to require a standard dividend formula that triggers based some formula of certain revenue or funding trigger/ramp up threshold.
That’s just a proposal for basic income with some weird paperwork involved. It’s trivial to stamp out detailed business plans when you don’t have to convince people they are feasible.
Have you ever heard of an SBA loan? The difference here is that it becomes an grant, and has a exit gateway of demonstrating cashflow (or some other merit) to get to higher stages of funding.
When you look at numbers of new business starts - even with venture capital and the yc model becoming popular, the numbers are at a multi decade low. The people who our current system selects to take a risk with look far too uniform from far to homogeneous an outlook. This would be a way to setup a monkey throwing darts at random, but the non randomly pick up the next stage winners to position them for private investment. But with society reaping benefits of wins.
Yes, that’s what makes it basic income. What’s to prevent people from copy-pasting the same “local restaurant” business plan every year and just going “whoops, it failed”?
Also, remember that banks have a license from the state to create money at their will from thin air, so it's really free money that we're talking about.
I am sorry that you seem to be in the Trough of Sorrow at the moment [0]. Sending you good vibes so you can prove to yourself that you have more power over your destiny than you currently realize.
I wonder if future archeologists will endlessly ponder the meaning of emoji similar to the way we in the current age try to understand ancient Egyptian hieroglyphics. perhaps a new age Rosetta stone should be carved
ancient hieroglyphics also depict common objects and expressions. their combinations carry even more meaning. the understanding of an eggplant, a thumbs up, or even a smile could be drastically different in 5000 years
How does that affect the quality of the article in any way? It's not like they're expressing through emoji, they're just there as bullet points
I get that emoji get a lot of hate on reddit since emoji only comments were low effort and that's justified
No emoji at all in any form, that's just a stupid ask
Practically, you can get browser extensions that remove the emojis. The fact that brightly colored symbol blocks interrupt flow will not change as the culture changes because saturation = attention, contrast = attention and uniqueness = attention are all fundamental principles of perception.
In the same way if there were using a purple script font. It's just unnecessary decoration and I'll gladly pass even though the content is good (usually it's not).
Scribd has something like that, but it just renders the PowerPoint into a PDF and lets you scroll through that. Looks awful.
Something that really did translate a slide show into a blog post in a semi-intelligent manner would have value.
Agreed. This trendy new use of emojis everywhere, even in somewhat serious articles is quite off putting. It just seems juvenile and doenst add any substance or information to the content.
I'm way old, and I didn't mind the emojis, and I'm not a big user--I write words more often than use an equivalent emoji in Slack. OTOH, I 'read' :+1: (the actual sequence of chars) as 'like' and it isn't disruptive either.
Fascinating all of it, But for me the big thing to contrast is how Ed Catmull described the IPO (how did Steve plan this, how did he know? I am axed at his business acumen) versus Levy (we were all terrified, movie studios refused to give us their business models, the IPO could have failed at any moment).
In short there is always several sides to a story, and if anyone is confident of a future plan but has not done it twenty times before, they are faking it !