When online insurance company Lemonade Inc. first published its prospectus earlier this month, it presented a slightly troubling image. Skimming through it, one got a sense of déjà vu on account of its new-age spirit, reminiscent of one of the most infamous prospectuses in history, that of shared real estate company WeWork, which eventually canceled its initial public offering on the New York Stock Exchange (NYSE).
In early 2019, my co-founder and I began the process of selling our startup. We had some success. We had a handful of customers in both the US and Canada, bringing in a few hundred in revenue each month. Compared to many other startups, we were “successful”. However, we weren’t successful in our minds. To put it simply, we didn’t have ‘product/market fit.)‘. In the following post, I will share what I learned selling a startup.
Ignore the Tire Kickers
We decided to list our startup on a popular marketplace called Flippa. I believe we paid a few hundred to list our site on their page. We then took their online questionnaire to get a general idea of the price to list at. Luckily we sold relatively close to the list price.
Flippa is very popular and is a good place to put buyers and sellers together. Unfortunately, our low price attracted a ton of ‘tire-kickers’. Buyers go through a process to engage sellers. During that flow, they ‘suggest’ a few questions to start the conversation. 75-85% of the messages we received from Flippa contained these simply ‘suggested’ questions. These people rarely responded to a follow-up message. After a while, I learned to simply ignore these messages. My thinking was that if they can’t put the effort into a proper introduction and write their own questions, they won’t be able to follow through on the long process of selling a startup. Ignoring these messages allowed me to focus on the users that showed genuine interest.
Set Your Price
In addition to listing our startup on Flippa, I came across a few other niche sites to list on. These were much smaller and likely didn’t get a ton of traffic. We decided to pay one site that claimed to have a good mailing list of interested users. Being a small site, they assessed our software and revenue and suggested a price to list at. This price was 50% higher than Flippa. I figured, “What’s the harm of asking for more?”. This backfired on me when a user contacted us from this niche site and I mistakenly thought they had come from Flippa. I confused the user when I provided a link to the Flippa listing which was cheaper than the listing he/she had seen. Needless to say I didn’t hear back from them. So set your price and stick to it!
Keep Track of Your Accounts
My biggest take-away from my previous startup was to keep track of your accounts and use a password manager! Over the course of 3 years, my co-founder and I had signed up for many services. Each time used a different email address. Depending on who signed up, they would use their own personal email account or sometimes used our admin@ account.
I highly recommend that you pick a single email address and sign up for all accounts with that email address. Otherwise, you will have to spend a bunch of time searching through various email archives trying to find various accounts you have registered for. Additionally, when signing up for accounts with a personal account, if the new owners delete that address, you won’t be able to do a password reset on that account. We lost access to one service because of this problem. I highly recommend that you register with an administrator email for most services.
If you do one thing in your startup, do this! Use a password manager! When the sale finally went through, I spent hours and hours finding all of our passwords and putting them together in a password manager for the new owners. I wanted to hand over the passwords in something other than a word document. The ideal way is to hand over a single password to a password manager. However, we hadn’t started to use one until the sale went through.
I recommend using Bitwarden as it’s easy to use, has Chrome/Firefox plugins (both desktop and mobile), and is free for small groups. When I launched PrestoText, Bitwarden was one of the first services I signed up for. The password for all other services has been generated by Bitwarden and is stored in my vault. No two accounts have the same password. If I ever sell PrestoText, I simply hand over a single password for Bitwarden and the new owners have access to all my accounts! Seriously, if you aren’t using a password manager for your startup, stop everything right now and sign up for one! It takes some time to register your passwords and transition, but it’s well worth it!
I hope you were able to take something away from what I learned selling a startup and apply them to your work. Putting in a little effort now can have big payouts later.
At the end of the quarter each of the eight teams give a final “Lessons Learned” presentation. Unlike traditional demo days or Shark Tanks which are, “here’s how smart I am, please give me money,” a Lessons Learned presentation tells the teams’ stories of a 10-week journey of hard-won learning and discovery. For all the teams in a normal year it’s a roller coaster narrative of what happens when you discover that everything you thought you knew on day one was wrong and how they eventually got it right.
But this year? This year was something different. 32 students were scattered across the globe and given a seemingly impossible assignment- they had 10 weeks to understand and then solve a real Dept of Defense problem – by interviewing 100 beneficiaries, stakeholders, requirements writers, et al while simultaneously building a series of minimal viable products – all while never leaving their room.
Watching each of the teams present I was left with wonder and awe about what they accomplished
Here’s how they did it and what they delivered.
Our keynote speaker for this last class was ex Secretary of Defense General Jim Mattis who gave an inspiring talk about service to the nation.
If you can’t see the four videos of General Mattis click here for the entire talk.
How Do You Get Out of the Building When You Can’t Get Out of the Building? This year the teams had to overcome two extraordinary pandemic-created hurdles. First, most of the students were sequestering off campus and were scattered across 24 time zones. Each team of four students who would have spent the quarter working collaboratively in-person, instead were never once physically in the same room or location. Second, this class – which is built on the idea of interviewing customers/beneficiaries and stakeholders in person – now had to do all their customer discovery via a computer screen. At first this seemed to be a fatal stake through the heart of the class. How on earth would customer interviews work via video?
But we were in for two surprises. First, the students rose to the occasion, and in spite of time and physical distance, every one of them came together and acted as a unified team. Second, doing customer discovery via video actually increased the number of interviews the students were able to do each week. The eight teams spoke to over 945 beneficiaries, stakeholders, requirements writers, program managers, warfighters, legal, security, customers, etc.
A good number of the people the students needed to talk to were sheltering at home, and they weren’t surrounded by gatekeepers. While the students missed the context of standing on a navy ship or visiting a drone control station, or watching someone try their app or hardware, the teaching teams’ assessment was that remote interviews were more than an adequate substitute.
We Changed The Class Format Going remotely we made two major changes to the class. Previously, each of the eight teams presented a weekly ten-minute summary of; here’s what we thought, here’s what we did, here’s what we found, here’s what we’re going to do next week. While we kept that cadence it was too exhausting for all the other teams to stare at their screen watching every other team present. So we split the class in half – four teams went into Zoom breakout rooms where they met with a peer-team to discuss common issues. The remaining four were in the main Zoom classroom; one presenting as three watched and listened to the instructor comments, critiques and suggestions. We rotated the teams through the main room and breakout sessions.
The second change was the addition of guest speakers. In the past, I viewed guest speakers as time filler/entertainment that detracted from the limited in-class time we needed to listen to and coach our students. But this year we realized that our students had been staring at their screens all day and it was going to fry their heads. They deserved some entertainment/distraction. But in true Hacking for Defense practice we were going to deliver it in the form of edification and inspiration. Joe Felter and I got out our rolodex’s and invited ten distinguished guest speakers. Their talks to this year’s Hacking for Defense class can be seen here.
Lessons Learned Presentation Format Each of the eight teams presented a 2-minute video to provide context about their problem. This was followed by an 8-minute slide presentation describing their customer discovery journey over the 10-weeks. All the teams used the Mission Model Canvas, (videos here) Customer Development and Agile Engineering to build Minimal Viable Products, but all of their journeys were unique.
By the end the class all of the teams realized that the problem as given by the sponsor had morphed into something bigger, deeper and much more interesting.
All the presentations are worth a watch.
Team Omniscient – An Unclassified Imaging Analyst Workbench
If you can’t see the Omniscient 2-minute video click here
If you can’t see the video of the Omniscient team presenting click here
Mission-Driven Entrepreneurship This class is part of a bigger idea – Mission-Driven Entrepreneurship. Instead of students or faculty coming in with their own ideas — we now have them working on societal problems, whether they’re problems for the State Department or the Department of Defense, or non-profits/NGOs, or for the City of Oakland or for energy or the environment, or for anything they’re passionate about. And the trick is we use the same Lean LaunchPad / I-Corps curriculum — and kept the same class structure – experiential, hands-on, driven this time by a mission-model not a business model. (The National Science Foundation, National Security Agency and the Common Mission Project have helped promote the expansion of the methodology worldwide.)
Mission-driven entrepreneurship is the answer to students who say, “I want to give back. I want to make my community, country or world a better place, while solving some of the toughest problems.”
Team Protocol One – Ensuring JTAC to Pilot Communication
If you can’t see the Protocol One 2-minute video click here
If you can’t see the video of the Protocol One team presenting click here
If you can’t see the Protocol One slides click here
It Started with an Idea Hacking for Defense has its origins in the Lean LaunchPad class I first taught at Stanford in 2011. I observed that teaching case studies and/or how to write a business plan as a capstone entrepreneurship class didn’t match the hands-on chaos of a startup. And that there was no entrepreneurship class that combined experiential learning with the Lean methodology. Our goal was to teach both theory and practice.
The same year we started the class, it was adopted by the National Science Foundation to train Principal Investigators who wanted to get a federal grant for commercializing their science (an SBIR grant.) The NSF observed, “The class is the scientific method for entrepreneurship. Scientists understand hypothesis testing” and relabeled the class as the NSF I-Corps (Innovation Corps). The class is now taught in 9 regional locations supporting 98 universities and has trained over 1500 science teams. It was adopted by the National Institutes of Health as I-Corps at NIH in 2014 and at the National Security Agency in 2015.
Team SeaWatch – Maritime Security in the South China Sea
If you can’t see the SeaWatch 2-minute video click here
If you can’t see the video of the SeaWatch team presenting click here
Origins of Hacking For Defense In 2016, brainstorming with Pete Newell of BMNT and Joe Felter at Stanford we observed that students in our research universities had little connection to the problems their government was trying to solve or the larger issues civil society were grappling with. Wondering how we could get students engaged, we realized the same Lean LaunchPad/I-Corps class would provide a framework to do so. That year we launched both Hacking for Defense and Hacking for Diplomacy (with Professor Jeremy Weinstein and the State Department) at Stanford.
Team TimeFlies – Automating Air Force aircrew scheduling
If you can’t see the TimeFlies 2-minute video click here
If you can’t see the video of the TimeFlies team presenting click here
Goals for the Hacking for Defense Class Our primary goal was to teach students Lean Innovation while they engaged in a national public service. Today if college students want to give back to their country they think of Teach for America, the Peace Corps, or Americorps or perhaps the US Digital Service or the GSA’s 18F. Few consider opportunities to make the world safer with the Department of Defense, Intelligence Community or other government agencies.
Next, we wanted the students to learn about the nation’s threats and security challenges while working with innovators inside the DoD and Intelligence Community. And while doing so, teach our sponsors (the innovators inside the Department of Defense (DOD) and Intelligence Community (IC)) that there is a methodology that can help them understand and better respond to rapidly evolving asymmetric threats. That if we could get teams to rapidly discover the real problems in the field using Lean methods, and only then articulate the requirements to solve them, could defense acquisition programs operate at speed and urgency and deliver timelyand needed solutions.
Finally, we wanted to familiarize students about the military as a profession, its expertise, and its proper role in society. And conversely show our sponsors in the Department of Defense and Intelligence community that civilian students can make a meaningful contribution to problem understanding and rapid prototyping of solutions to real-world problems.
Team AV Combinator – Autonomous Vehicle Safety Standards
If you can’t see the AV Combinator 2-minute video click here
If you can’t see the video of the AV Combinator team presenting click here
If you can’t see the AV Combinator slides click here
Mission-driven in 35 Universities What started as a class is now a movement.
Team Election Watch – Open Source Tool to Track Political Influence Campaigns
If you can’t see the Election Watch 2-minute video click here
If you can’t see the Election Watch video of the team presenting click here
If you can’t see the Election Watch slides click here
What’s Next for These Teams? When they graduate, the Stanford students on these teams have the pick of jobs in startups, companies and consulting firms. Recognizing the ability of these teams to produce real results, 38 members of the venture and private equity community dialed in to these presentations. Every year they fund several teams as they launch companies. This year a record 6 of the 8 teams (Anthro Energy, AV Combinator, Election Watch, Helmsman, Omniscient and Seawatch) have decided to continue with their projects to build them into dual-use companies – selling both to the Dept of Defense and commercial businesses.) Most are applying to H4X Labs, an accelerator focused on building dual-use companies.
Student Feedback While Stanford does a formal survey of student reviews of the class, this year we wanted more granular data on how remote learning affected their class experience.
While we had heard anecdotal stories about how the class affected the students perceptions of the Department of Defense we now had first hand evidence. The same was true for the life-changing experience of actually doing customer discovery with 100 people. The results reinforced our belief that the class, scaling across the county was helping to bridge the civilian/military divide while teaching students a set of skills that will last a lifetime.
It Takes a Village While I authored this blog post, this class is a team project. The teaching team consisted of myself and:
Pete Newell retired Army Colonel and ex Director of the Army’s Rapid Equipping Force and CEO of BMNT.
Joe Felter retired Army Colonel and former deputy assistant secretary of defense for South Asia, Southeast Asia, and Oceania
Steve Weinstein 30-year veteran of Silicon Valley technology companies and Hollywood media companies. Steve was CEO of MovieLabs the joint R&D lab of all the major motion picture studios. He runs H4X Labs.
Tom Bedecarré the founder and CEO of AKQA, the leading digital advertising agency.
Jeff Decker a Stanford social science researcher. Jeff served in the U.S. Army as a special operations light infantry squad leader in Iraq and Afghanistan.
We were lucky to get a team of mentors (VC’s and entrepreneurs) who selflessly volunteered their time to help coach the teams. Thanks to Todd Basche, Teresa Briggs, Rachel Costello, Gus Hernandez, Rafi Holtzman, Katie Tobin, Robert Locke, Kevin Ray, Eric Schrader, Mark Rosekind, Don Peppers, Nini Moorhead, Daniel Bardenstein.
We were privileged to have the support of an extraordinary all volunteer team of professional senior military officers representing all branches of service attending fellowship programs at Stanford’s Hoover Institution, and Center for International Security and Cooperation (CISAC) and Asia Pacific Research Center (APARC) at the Freeman Spogli Institute (FSI) as well as from the Defense Innovation Unit. These included COL Smith-Heys, COL Liebreich and LTC Campbell – Army, CAPT Sharman, CAPT Romani – Navy, CDR Malzone – Coast Guard, LT COL Lawson, LT COL Hasseltine and LT COL Cook – USMC, LT COL Waters and LT COL Tuzel – Air Force and Mr. Smyth -State Dept.
And of course a big shout-out to our problem sponsors. At In-Q-Tel – Mark Breier/Zig Hampel, U.S. Army – LTC Leo Liebreich, U.S. Air Force – LTC Doug Snead/ MAJ Mike Rose, Joint Artificial Intelligence Center – Joe Murray/MAJ Dan Tadross, Special Operations Command Pacific – MAJ Paul Morton, United States Africa Command – Matt Moore, and from the Office of Chairman of the Joint Chief of Staff – MAJ Jeff Budis.
I have been a very active reader in this community, I have noticed some things that many seem to have an issue with, but it became more clear during this month when I started looking for a new position as Vice President of Engineering in startups. So I'm writing this.
(Please note that the content written in here is solely based on my experience as, and have proven to be very successful, specially with teams working remotely)
Understand a few things.
Understand that you will have to sacrifice your time.
Other than usual corporate jobs, working on your startup will require more than your 9 to 5 work. Of course you can work that way, or even less, but you will have a really hard time trying to succeed in the market you are trying to target when other startups are putting 10-15 hours a day.
Understand that you might push your loved ones (or those close to you) away.
If you are putting the extra amount of hours on your idea, you will realize that you won't have much time to spend with those close to you. Specially your girlfriend/boyfriend.
Personal example: during my first startup, I was leading a team of 38+ people and would work 15 hours a day on average. During that period of 2 years and 7 months, 3 girlfriends told me they couldn't continue dating me as I would see them only a handful of times per month.
Understand how hard leading a startup is.
Running a startup in a competitive market feels like you are in a knife fight in a prison yard. If you are a weak leader, your startup will be weak. Not just physical strength, but mental strength too and most importantly, your strengths/skills in leadership and negotiation.
Understand that you need the most excited people to work with you, on board with you.
This might be confusing, so let me explain. When you are recruiting your co-founders, if their answer is not "FUCK YESS!" then its a no. Co-founders are the basement of your startup. You and they are the foundation on where your startup is built. If the thought of working with you and your startup doesn't generate a response of FUCK YESS! then it it should be a no. Don't waste your time dealing with someone that kinda wants to add value to your start-up.
This also can be applied with advisers and investors.
With that being said, here's some things you can apply to your start-up.
Goals and Objectives
Always have goals and objectives for everything you want to develop. Lacking objectives and goals will make developers disorganized and they will lose interest in the development very quickly.
Having goals helps to maintain developer presence and keep them busy with their own tasks. It cements the path for a goal-driven development for the future.
Having long-term goals without small goals and objectives in between will lead to the exhaustion of the developers involved. (This is risky and can break the development and push your team apart)
Objectives should be specific, measurable and have a short time frame. Their purpose will be to achieve your goals.
By setting a deadline, it gives the people involved a sense of urgency, which makes all the members more productive. It also allows newer members a way to prove themselves and be useful.
Deadlines should be strict but reasonable. Their purpose is to help you reach your goals and objectives, but they shouldn't be final. As everyone can get caught up with life and can't reach them in time. If that happens, then try to understand what was the reason for their delay, try to be affectionate with your developers. See if you can help to reduce their stress or work overload. They will recognize this and love you for it.
Manifesto and your start-up virtues & spirit.
Write your start-up manifesto to specify your company's intentions, motives or views. This way you can attract like-minded people and form a stronger bond with people working with you.
Know what the spirit and the virtues of your start-up are and apply them. You will create a better work environment for your co-workers, and they will love you for it.
What, Why and How
Always know What you want to do, Why you want to do it, and How you will do it. This will make your vision stronger, and make you be seen as a strong leader who knows where he's leading the team in the long run.
Simon Sinek has a very good video about this. (Not sure if I'm breaking Rule nr.2 with this, but please let me know if I am so I can edit it out).
Mentor your people
When mentoring people, don't show them how they can do it, but help them to understand the issue better, and how they can solve it.
If you are mentoring a group of programmers/developers, NEVER give them the solution in a plate, but instead try to appeal to their solution solving skills with ideas on how they could do it, and let them figure it out. You might be the best programmer in the company and the solution is easy for you, but they won't learn it good that way. Teach them how to solve the problems, not how to write the code for it, as you can find many things online who have a better solution on how to fix your bug, but they more than often, don't teach your developers how to figure out the solution is.
Personally, I would hire someone who is a 3/10 programmer/code writer, and a 8/10 problem solver than a 8/10 programmer/code writer and a 3/10 problem solver.
Never micromanage your development team.
Just don't please, you won't be helping your developers.
I could write in this on-and-on for days, but I think these are some good examples.