Unfortunately, entrepreneurs get bad advice all the time. There are many misperceptions around success and the journey of building a company, such as ‘entrepreneurs take big bold risks’ (they, in fact, take very calculated risks) or ‘failure is good’ (there’s nothing good about failure, but sure you can learn something from any experience). I can’t address all of them here but the one I’d like to focus on is ‘never give up’ (we’ve all heard it before).

True, in theory, if you never give up, you technically can’t fail. But you can end up spending a lifetime pursuing the wrong dream or being blinded from the stark reality of what it is you are doing.

Source: gratisography.com

Entrepreneurs – or worse yet, people giving advice to entrepreneurs, like investors – often like to present themselves as heroes or villains. The ‘macho’ daring people who had the guts to do what others couldn’t. Hence, they like to keep hammering this ‘we never give up’ mantra while drinking their  own cool-aid. It boosts their ego.

The reality is that knowing when to quit is super important and quitting sometimes just makes absolute sense. ‘Quit while you’re still ahead’ is much better advice, in my opinion. And here’s why: everyone is capable of having bad ideas. Even the best entrepreneurs, like Richard Branson, did and still do. Virgin Cola was not a success, so he shut it down as one should. Would it be smarter to spend the rest of his life and valuable dollars trying to beat Coca-Cola just so that he could save his own ego?

Equally, even the best ideas may simply be attempted at the wrong time, or with the wrong group of people. There are so many ingredients that are needed to make a start-up work that no one (however smart) can predict or be in control of them all.

So the question then is when does one throw in the towel? For me, the acid test is these two questions:

1. Do your micro-fundamentals stack up?
2. Are the macro-fundamentals there?

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I caught up with a good friend of mine for brunch this weekend who is also building a tech company. We’ve both been at it for roughly the same amount of time and our businesses are roughly at similar stages.

We discussed the craziness that’s happening in today’s startup landscape with valuation off the roof and companies allegedly achieving hundreds of millions in run-rate revenues within 12 months. We’re both in it for the longer term, building long lasting, value adding businesses in growing markets, that deliver products and services people find useful (or useful enough to pay for!). Which in todays world makes us sound archaic!

Sure if you build a unicorn aka a disruptive rocketship that gets a billion dollar valuation within 12 months, that is ALSO delivering sustainable value, with scalable unit economics then it’s a great achievement. However entrepreneurs today mistakenly make that the goal neglecting two very important things in my view

1. The   greater fool theory

You want to build a billion dollar business overnight? It’s easy. Go on the street and sell a dollar for 99cents. You will find there’s a lot of demand for that! In fact it’s guaranteed to go viral. You will have a big and growing hole in your pocket but all you need to do is convince a few nitwits that its temporary and very shortly you will build a ‘brand’ and become a destination. The ‘go to’ place to buy a dollar. Build some hype so that your stock gives return to batch1 of nitwits through a secondary sale to batch #2 nitwits and you’re now hot and trending!

It’s called the greater fool syndrome: who cares that you’re only making 99c to the dollar, so long as there’s a greater fool to the last one to buy your stock?! And in todays’ world one thing that seems to be in abundance is greater fools.

In more tech talk: its unit economics stupid! If you cant make a profit on your customer acquisition with a reasonable payback that you can fund (the deeper pockets you have the more you can push that out) then all you are doing is building a ponzie scheme. At best.

With the latest news on even the best, the most disruptive unicorns around us, such as Uber, allegedly losing over half a billion per annum, there’s many other seemingly amazing & disruptive (aka unicorns) that have questionable unit economics. Right now the ponzie scheme is funded by virtually zero interest rates. Capital is free and needs to be deployed. Even a 99c dollar business seems sexier, especially if gift-wrapped with some wishful thinking around it, than money sitting in the bank!

Rates will soon rise though, how soon we don’t know but they will. They cant go lower. The froth will start coming off the cappuccino. Capital dries up or shrinks,   there’s now less greater fools in supply ready to scoop up the stock and alas we have a crunch.

Next thing you know is your investors turns up at the next board meeting and goes “say, can you send me a slide on your unit economics? I think we should turn the business profitable” Bam. You’re toast.

2. Building a unicorn is not a strategy

The above argument aside, some unicorns may have the right unit economics. However building one is not a strategy. It’s like playing roulette. To paraphrase Warren Buffet “its easier to ride the wave than trying to create it”. So, much like in surfing, preparing for and positioning yourself at the right place and the right time ready to ride the wave when it comes IS a strategy. Trying to create it is wishful thinking.

What we don’t see at the outset is that, aside of the fact that a lot of these seemingly super sexy disruptive businesses are essentially a 99c to dollar businesses, even the ones that aren’t were seldom if ever a concerted plan. They just happened. Uber was started as an app for Travis and his friends. Facebook and so many others were just apps that were hacked together by kids in a dorm room and caught fire. Whatsapp, Snapchat and Instagram arguably still aren’t businesses. They’re apps with a very loose idea of how to make money at best.

There’s nothing wrong with that if you have the time and capacity to play around enough till something catches fire, and so long as you can convince Zuck to buy it. But you have better chances if you just go to Vegas! Its not a strategy to building a business.

The only sensible strategy is to sit at that interjection between delivering customer value via products and services that are building for the future and keep innovating. Pick the right macro, build a great team and hang in there, surviving one day at a time. If you do you can’t lose. You may not get rich overnight but you will build a lasting business, and as Buffet showed will eventually make more money than those nitwits put together. By investing in long term value creation.

Fads come and go. Value stays.

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I recently wrote this article for Forbes as i feel that the nature, context and value that entrepreneurship brings to the world is evolving fast, and hence is its definition.  Read the full piece here: Rethinking the definition of ‘Entrepreneur’ 

Entrepreneurs are integral to the success of the U.S. economy. According to figures from Forbes, over 50% of the working population is at a small business, equating to over 120 million people. That’s a lot of competition.

Calling yourself an entrepreneur is to define yourself as many things: You are declaring yourself an innovator and a risk taker, and may find yourself pigeonholed with assumptions and stereotypes. However, an entrepreneur cannot be defined by a group of characteristics.

As the traditional route of finding employment has become increasingly challenging, the aspiration to become an entrepreneur has risen, making the original definition of entrepreneur problematic. Forty-three percent of Americans believe there are good opportunities for entrepreneurship, up by more than 20% since 2011. These days, you can be an entrepreneur if you’re a mother making wedding cakes during the school day, or a young horseback rider setting up a business introducing buyers to sellers of the finest dressage horses. You don’t need a flashy office or lots of space; 69% of new businesses in the U.S. start at home, and 59% of established businesses are home-based. So then the term entrepreneur — what does it actually mean?

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There are no certainties in a startup’s path, apart from one: you are bound to have a roller coaster ride, and a bundle of war stories to recount.  No matter how successful you end up being. It’s never a straight line to success or failure. Along the way, the true test of whether you have what it takes to make it is what you do in your lowest of low moments. When you are most vulnerable.  For make no mistake – they will come!

In my experience you can almost bucket people into two: those who stay down when they’re down or drift sideways, wither and die. And those who jump back up stronger.  My biggest successes, leanings and adventures always followed from such low moments. When I was weakest and most vulnerable. I’m one of those people who performs much better when things aren’t going my way. It’s like a slap in the face, it wakes me up, makes me more stubborn and determined to hit back even harder. Ben Horowitz put it perfectly in his last book ‘The Hard Thing About Hard Things’. He said ” there are two kinds of CEOs: peacetime CEOs and wartime CEOs”.  Peacetime CEOs are those who do well when things are doing well. They are typically the people who you hire to take a business from B to C and scale it up. They are smooth, political and great at blowing the trumpet. But the journey from A to B is definitely a wartime situation. You need to thrive in the gutter.

My first moment of vulnerability was when my first business – essentially a ‘brick n mortar’ version of PeoplePerHour.com – wasn’t scaling.  I was in my mid-twenties with no experience at all, no co-founder, partner or other senior member of the team, running what’s probably the hardest type of business to run – a service business.  I was essentially the head of sales, delivery, quality assurance, and the person everyone called when things went wrong. Which they did! Often! And in weird hours.
Exhausted and demoralized, with employees and clients jumping ship at an accelerating pace, I had to figure a way out.  Failure was not an option – I had friend’s and family money in the business and countless hours of sweat and anxiety. This being 2006 and in London where there is much more taboo around failure (decreasing no doubt but still much more than the US) I was petrified.  To make it all worse my then long-term girlfriend decided to split up with me because I was working too hard, so the one person I had close to me jumped ship too.

I felt like a brick had hit me on the head.  Fortunately my cost base was quite low  (and getting lower as more people were jumping ship) so going bust would take a while, but that’s like dying a  slow and painful death. It’s almost better if it’s a short sharp blow.  I kept racking my brain constantly  ‘how on earth will I scale this business up”. I decided to go away for a few days  (in the beautiful Cannes I recall) steam off and think it through (and in the mean time try and forget this ex girlfriend who ditched me at the worst possible time!). It was in that trip that the idea hit me. Why don’t I turn the business on its head, circumvent my own self by turning a service provider to a platform business that connects service providers (like myself) with customers and take a cut instead of delivering the service myself? That way it can scale. It was the eureka moment I was waiting for. PeoplePerHour.com was hence born.

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http://upstart.bizjournals.com/resources/advice/2014/09/18/3-defining-qualities-of-great-entrepreneurial.html

Great leaders may possess a myriad of attributes, not the least of which are intelligence, charisma and natural charm. All of these things matter. However, you can be a great leader and not be naturally charming or very intelligent. In my time at PeoplePerHour I’ve learned a lot about leadership. I have come to the conclusion that there are three key attributes a great leader must have.

Vision

The ability to amass a great team, motivate and inspire them is plain useless if you don’t have a clear vision of where you need to go. Leadership is first about seeing the future and then about being able to figure out a feasiblepath to get there. It’s seeing the iceberg before the Titanic hits it and taking fast and decisive action.

It’s doing the one right thing rather than doing many things right. It’s being different, not following the herd, being controversial, and seeing what others don’t see. It’s having a nose for what’s coming and the eyes and ears to react before others do. Without vision, you can empower people all you like but you won’t get anywhere. You’ll have a following but no direction. You may make a great motivational coach, but not a leader. Every difficult situation needs a visionary leader to point the way and make a tough decision.

Influence

Once you have a clear vision (but only then), you need a sting following. That requires the power of influence. Whether you are in an existing leadership situation or the creator of a group, this is very hard thing to do. In either case, you are new to the situation and the odds are against you. Why should people trust someone new? The vast majority of people are resistant to change, no matter the odds. In order to fulfill any grand vision, you need to drive change. Otherwise you are just a puppet master holding the strings waiting for the show to end.

Influence people across the board — explain to employees the benefit of leaving secure jobs and come join you; convince investors to give you money at the very beginning, get customers and fans to support you, your bank manager to give you an overdraft, your landlord to give you a lease and rent-free period; and your wife to put up with sleepless nights, cold sweats and no pay. Carry that burden of influence with you. If you go down, you take more people with you than yesterday.

Courage

The third element is the most challenging. You’ve clarified a vision and built a following by charming, coercing, schmoozing…ultimately influencing enough people. After all this work, you realize that it’s only day one. Now you have your boat (more like a raft) and your compass. But you still need to cross the ocean. This is the final and true test of great leadership. It ultimately comes down to courage. Intelligence and knowledge are advantages of course, but without courage they are wasted.

Courage alone could and would get you there, albeit slower and with more pain. So the key question is: Do you have the courage to keep going when everyone tells you to turn back; to know you’re right when everyone says you’re wrong; to stick to your instincts when people call you crazy; to carry other people’s weight when they fall; to set the tempo and beat the drum despite how tired you may be? It’s your job to keep people together when they are drifting apart and losing faith, to give them courage but not false hope, to let go of some to save many, and to weather the storm but not bask in the sunlight when it ends — because it never does.

Vision and influence will make you a well equipped captain. But courage is what gets you there. On the other hand, courage alone makes you a fighter without a cause. You may be good at creating lots of noise, but to paraphrase Sun Tzu’s “Art of War”: that’s just “the noise before defeat.”

Warren Buffet was once asked by Jeff Bezos a long time friend of his: “you are the second richest man in the world and yet you have the simplest investment thesis. How come others didn’t follow this?”  To which Warren Buffets responded: “because no one wants to get rich slowly” 

In a nutshell that’s what’s wrong (or rather what’s not quite right) with a lot of the investment community today, from public markets to private equity investors and unfortunately it trickles down into too many companies. You can’t time-box success. You can’t sprint a marathon. And you can’t measure success with speed but only by the  magnitude (and significance) of the end result.  Building to flip is easy. Building to last is difficult and you cannot take short cuts.continue reading »

The last decade or so has been paradise for entrepreneurs mainly because as the world shifted more online and on mobile devises there was so much low hanging fruit up for grabs.

Times are now changing. This is not to say that there’s no longer opportunities. There will always be. But now they are shifting to much harder problems to solve.

Much like any new revolution. When industrialization happened, anyone with a conveyor belt a-la Henry Ford’s could churn half-decent products out the door that would sell. Not for very long but they’d sell.

Today to compete in manufacturing you need state of the art equipment, R&D and people. And you probably need to be in China to compete on price.

The same is happening in technology I believe. The name of the game for the past two decades was getting content and inventory online and creating tools to make it discoverable. Starting with the browser, then directories like Yahoo and Craigslist, then search engines like Google, then social networks like Facebook and now Instagram.continue reading »

Possibly the worst piece of advice that keeps going round is that  ‘ideas are cheap, its all about execution’. It’s not.

This is not to say that execution isn’t important. But great execution on a mediocre or bad idea will get you nowhere. A great idea that’s radically different will give you room for error and even if you don’t execute perfectly – which you won’t anyway – the business will succeed.

Quite a few entrepreneurs come to me to tell me their idea and get feedback. I always end up saying the same thing. Which is first to be brutally honest with themselves. 99% are not.  They are wrapped up in their own chant. They drink their own coolaid.

Entrepreneurs in general have a knack for making their idea sound great. They can sugarcoat your own shit and sell it back to you without you realizing. They exude passion and get trapped in their own reality distortion field.  And suddenly a crappy product that adds no value to the customer looks like ecstasy. And thats the problem. Most entrepreneurs when starting are not sober (metaphorically speaking). They’re on ecstasy.

So what makes a great idea?continue reading »

It’s been a good year

2014 has began well. Partly because I was skiing with my family as I usually do in the beautiful alps. The fresh air and the mountain always helps me self-reflect and think more. Without a shadow of doubt that one week skiing may be the most productive of my entire year. And whilst I always push myself to self-reflect that time of year – and this year in particular- is the deepest and most meaningful retrospection of all.

As I reflected on the past year I realized how much had actually happened. We started the year on steroids, the typical ‘go go’ top line investor fuelled growth mode. We operated on vanity metrics instead of sanity metrics.  We were fat and over-bloated. We were management heavy and inefficient. We were shooting for the stars and developed tunnel vision.

And then something painful but retrospectively lucky happened. The investor appetite changed, some of the assumptions, promises and myths came out sour. Some hidden realities came out of the wash. The froth came off the cappuccino.

I’ve said time and time again that the true test in life is what one does when that happens. In our case I’m proud to say that we just picked ourselves up, implemented some drastic changes, got real and elevated sanity above vanity.

It wasn’t easy.  We had to let go of team members, change plans and direction, scrap a lot of things that had emotional equity built in, and especially for the guy at the top who gets the shit from both ends – investors on one and team on other – I can tell you I had more than a few sleepless nights.

But we pulled through. We turned the business into cash-flow positive, we became leaner and meaner, the people staying over being part of the earlier hires who had more dedication and passion about who we are and what we stand for. Who share our sense of purpose.

We made drastic changes like moving from two split locations to one, which meant making our support team in London redundant. We dropped a few balls in the process with some metrics temporarily dipping but overall we came out a winner. Our costs overall halved and our revenue trebled in the year.

For this I am most grateful to the team that’s left over. They are warriors, with heart, passion and dedication. To reward them I doubled the stock pool and allocated a much bigger chunk of equity to the team that stayed for the fight. Some of the more senior management voluntarily took salary cuts in exchange for more stock.

The difference I’ve seen in mindset and perceptions is that from night and day. Its almost a different company now. Before I had employees. Now I have partners. Co-owners. And I push them to look at me more as a peer than a boss.

But good is the enemy of great !

Yet with all of that, I was still troubled at the end of the year. I had a niggling piece of the puzzle missing somewhere. I felt we did good but not great. continue reading »

2013 was without a shadow of doubt the most intense, eventful and transformational year for my company PeoplePerHour since it’s founding in 2008. And so as the year comes to an end I reflected as I usually do on what the key learning from the year have been for me. continue reading »