Superhacker and Phoneboy
Lately I've been thinking about starting a company. Which reminds me of this scene from Paul Graham's Hackers and Painters:
The classic startup is fast and informal, with few people and little money. Those few people work very hard, and technology magnifies the effect of the decisions they make. If they win, they win big.
In a startup writing web-based applications, everything you associate with startups is taken to an extreme. You can write and launch a product with even fewer people and even less money. You have to be even faster, and you can get away with being more informal. You can literally launch your product as three guys operating out of an apartment, with a server collocated at an ISP. We did.
Over time the teams have gotten smaller, faster, and more informal. In 1960, software development meant a roomful of men with horn-rimmed glasses and narrow black neckties, industriously writing ten lines of code a day on IBM coding forms. In 1980, it was a team of eight to ten people wearing jeans to the office and typing into VT100s. Now it's a couple of folks sitting in a living room with laptops. (And jeans turn out not to be the last word in informality.)
So how does a web-based application startup actually get started? Guy Kawasaki's Art of the Start gives us good rules for getting going, such as
- Think big. Don't just do things 10% or 15% or 20% better. Think 10 times better. Think more dramatic improvement. Think different curve, not same curve. Think getting to the next curve. Think creating the next curve.
- When you design your product or service you should not be afraid; you should want to polarize people. You should want people to look at your product or service and say "I love it" or "I hate it". The worst thing is indifference.
But my favorite Guy Kawasaki rule for getting going is,
You need to find soul mates. You know, in America, and particularly Silicon Valley, there is the myth of the sole entrepreneur. This is the Steve Jobs, the Henry Ford, the Anita Roddick, the Richard Branson, the Thomas Edison working alone, genius doing it by all by himself. And in fact, I think if you analyze even these companies history is wrong. All of those people had groups and were members of a team. History is wrong.
It is not about one person, the sole entrepreneur, it about the group of entrepreneurs. Hence my second recommendation is you need to find some soul mates, the people who are drinking the same Kool-Aid that you are. Find some soul mates.
Every person has strengths and weaknesses. The appeal of a partnership -- even if the team is just a pair of people doing what they can to leverage the power of two -- is a matching so well-suited that the pair's strengths are more powerful than those of either individual, thereby reducing the effects of each individual's foibles. Whereas finding a romantic partner is such a regular occurrence in our society that people couple all the time, finding a business partner who is truly complementary and thoroughly communicative and unquestionably trustworthy is a much more elusive achievement. And yet, there is tremendous value to a business person if s/he can find someone with whom s/he can triangulate issues, talk through everything, make decisions, and take actions. (Not to mention the benefits that stem from having someone who will always watch one's back, who will push back gently, and who will amplify the shared message.)
This was the theme of the inaugural 106 Miles meeting that Joyce Park organized as part of her role at CommerceNet. Jeremy Zawodny wrote a nice summary of the event, which included several hours of hallway discussions over beer-and-pizza by entrepreneurial engineers from startups, eBay, Paypal, Yahoo, CNET, Walmart.com, Informatica, Silver Spring Networks, eScend, CommerceNet, TheServerSide.com, Technorati, WordPress, and JotSpot.
The featured guests were JotSpot's founders, Joe Kraus and Graham Spencer, who prior to JotSpot founded Excite (with four other founders) and DigitalConsumer.org (which has over 50,000 members and is working to get passed into law its Consumer Technology Bill of Rights). In an informal roundtable discussion led by Rob Rodin, Joe and Graham discussed the finer points of starting a company as a team of two. The power of two is strong between Graham and Joe, who have been working together as business partners in three organizations in the last dozen years.
Before I get to the minutes of the discussion led by Rob between Joe and Graham and the audience, I want to give you some of my own thoughts about The Power Of Two, specifically as it relates to Founders.
Founders in and of themselves are interesting creatures, for they strive to do the most they can with the least amount of resources; most people just aren't hard-wired to think in such a way.
Founders are people, too. Every Founder has strengths and weaknesses. So it is no surprise that some of the most successful technology startups began with a pair of Founders who could accentuate each other's strengths and compensate for each other's weaknesses; for example:
- Microsoft's Bill Gates and Paul Allen
- Apple's Steve Jobs and Steve Wozniak
- Cisco's Sandy Lerner and Len Bosack
- Yahoo's Jerry Yang and David Filo
- Google's Larry Page and Sergey Brin
Intel had three Founders (Robert Noyce, Gordon Moore, and Andy Grove), and though I believe a lot of the principles of partnerships apply, there's definitely a different dynamic with troikas than there is with partnerships of two. I'm sure there are plenty of other examples of Two Founders -- and I'm going to save for another post my rant about how the most successful technology companies are those which kept the Founders at the top for many years.
The technical Founders of Excite had an affectionate nickname for Joe Kraus, Phoneboy. In a technology startup there are usually just two initial goals: engineering and sales. That is,
Make something excellent, and get others to believe (and buy!).
The "Phoneboy" (or, in some cases, "Phonegirl") part of a founding team is the one who gets others to believe; s/he serves as the intrepid sidekick to the "Superhacker" -- the one who gets things built. Sometimes a Two-Founder team divides the tasks: Apple's Wozniak makes something excellent, and Jobs gets them to believe. Sometimes both individuals do some of each, as is the case (I believe) with Google's Page and Brin. What's important is not how the processes of making and selling are divided; what's important is that the partnership is able to do both well enough -- and communicate together well enough -- that the flywheel can start turning and the combined endeavor is ready to sell, to build more, and to hire.
Hiring is perhaps the single most important thing a company can do, because even if a company figures out how to build something and how to sell it, the company is doomed if it cannot attract the right people to grow the team. Without a doubt, to paraphrase something I heard Rob Rodin tell me and Joyce,
The number one worry in business is human resource -- when you really peel back all of the layers, it's people who change the trajectory of what the business is doing and, more importantly, what the business can do.
Put another way, as Rob Rodin likes to say,
If you see a turtle at the top of a pole, somebody probably put it there.
Now although it's true that what you need to lay the tracks is different from what it takes to drive the train, you cannot get to the train stage without a solid foundation of well-placed tracks. That's what the best Founders do: find a need and fill it. And I think it's why it's rare to find a solitary Founder of a technology startup: because rarely does a single person have the ability, the drive, and the time to do an excellent job of both the Superhacker and Phoneboy roles -- two roles that are essential to the laying of the tracks. Note that a winning partnership need not be 50/50 -- Rob Rodin notes that the most important thing is that they be there for each other, through good times and through bad times, taking care of each other and fighting the fight for each other. Because business is a relentless, uncompromising, amoral, darwinian, machiavellian environment in which philosophy is useless, theology is worse, and survival is never assured. This is why often Superhacker assumes the alter ego of mild mannered geek by day -- conserving his or her superpowers for when they are truly needed. And it's why often Phoneboy needs to have far more tools in his (or her) utility belt than just a phone...
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Ok, enough pontificating about Entrepreneurship 101 for now. Here are my notes from the January 11th 106 Miles...
Joe Kraus and Graham Spencer on: "The Power of Two"
The following is my paraphrasing the major things talked about. Any errors in transcription are my own.
...
Joe Kraus: I'm honored to be here. Excite was started by five nerds and a mouth. Graham is the reliable and trusted source here.
Rob Rodin: Did you have a sense of what you wanted to be when you were 10?
Joe: I know what I didn't want... After freshman year I still wasn't sure what I wanted. My parents told me, good news, we got you a job duplicating microfiche. After that three weeks I vowed to myself, never again will I take a job that is such a soul sucking experience.
Graham Spencer: I had no idea what I wanted to be.
Rob: Your colleague called you a nerd. What was your first toy?
Graham: TRS 80 in the 7th grade. Most of my time then was spent reading. I didn't like the BASIC programming language. When I got to college I wanted to take physics. Computer science only came later.
Joe: We were next door neighbors freshman year at Stanford. Graham was a Tetris monster, and he had 25 Mac extensions, too.
Rob: Did you instantly connect?
Joe: I secretly hated him. (crowd laughs) It was a small dorm, everyone ate together. All the Excite founders met in that freshman dorm.
Graham: All six of us are close. We see each other on a weekly basis, and Ben recently joined JotSpot as well.
Rob: Was there some inspiration or moment where you knew you were going to do a startup? Or did it happen gradually?
Joe: I was a failed computer science major. I got a D in Math 103 (Matrix Theory).
Rob: Was it painful?
Joe: Actually, it was a relief. I felt good about polysci bcause "science" is in my degree. Graham was the smartest person I knew. When we graduated, Microsoft and Apple were recruiting Graham but he decided he could join them anytime, and wouldn't it be more interesting to do something together now?
Rob: Did you feel like you would always be together?
Graham: Yes, because conflict resolution was relatively easy among the six Excite founders. For example, when we had to make a decision between taking venture capital and being acquired by Verity. That was one of the hardest decisions we ever had to make, and we were split 3-3, so it took several hours of empassioned discussion.
Joe: Had we not all been friends we would not have survived as a company. For example, when we had to redistribute equity -- we needed to have very frank discussions with each other. That was hard.
Rob: Who was the leader?
Joe: Me. We all tried to come up with a formula based on contribution. What was I doing besides talking and writing? Mind you, this was after two years of working together in a house. But we were all driven by an underlying sense of fairness.
Rob: That kind of confrontation is really hard.
Joe: We were working in a living room. We were funded by Vinod Khosla who was driven by a sense that Graham be fairly compensated.
Graham: It never occurred to me to ask for more. At the time it didn't feel like something important to negotiate.
Joe: We were 23. Vinod Khosla, plus friends, plus a company worth nothing -- there was so much we didn't know, so we trusted Vinod's perspective.
Graham: If he hadn't suggested it, I wouldn't have been upset.
Joyce: Six is a lot of founders.
Joe: I wish it were one. (crowd laughs) Having done it both ways, two founders is preferable to six. When we started JotSpot, Graham and I had worked together for a decade, and we knew how to efficiently make decisions together. Graham rarely argues strongly for something, and when he does, I listen. For example, early on in Excite, Graham said we must do My Excite. And we did. I don't even question him anymore -- I've learned to take my hands off the wheel because he's watching my back. The hardest part in any startup is going from unanimous consent in decisions to agreeing to disagree when some members of the team dissent.
Graham: In a small startup, you have to learn how to negotiate disagreements. When there are only two founders, negotiation can happen more quickly yet still benefit from multiple viewpoints before a decision is made. Two scales better as the company scales.
Tim: At what point did you realize Excite was no longer yours?
Joe: You have to decide early, do you want success or do you want control? Give up all control and you're unlikely to succeed. Give up no control and you're unlikely to succeed. Decide how much control to give up, and then live by that decision. Build your team wisely -- through hiring you exercise the most control. Hire people with the same philosophy as you. Hire people who are good cultural fits.
Graham: We didn't lose all control until @Home acquired Excite. Before that, we were regularly consulted on all major decisions.
Audience: What did you do differently this time around?
Joe: Hiring is incredibly important. Excite never held the line -- we talked a good game but often we caved when push came to shove. JotSpot doesn't cave. It's much better to have no one than have someone who isn't the best.
Graham: Being strict with hiring up front prevents lots of problems later.
Joe: Keep your company as small as possible as long as possible. Only hire when you're really in pain. Hire deliberately and slowly.
Rob: How do you hire against such a tough standard?
Joe: We don't need total agreement from everyone that a candidate should be hired, but someone needs to feel really strongly that a candidate should be hired. We look for people who are game changers. Cultural fit is actually the biggest determinant of success, but occasionally we relax that constraint in favor of absolute contribution capability. But yeah, hire no false positives.
Audience: Youth versus experience -- which is better to hire for?
Graham: It depends a lot on the job context.
Joe: I like someone who has graduated in the last 4-6 years. I tend to skew younger because young people have a different perspective and bring a good energy to the place. I like balancing experience with new ways of seeing the world... At Excite we got very lucky in hiring Brett Bullington. He could imagine other ways of seeing the world, and he could spot that talent in others.
Tim: On hiring no false positives: If you don't hire someone and it turns out you should have, you will never know what that person is capable of...
Joe: Could Google have relaxed its hiring policies on its 10th hire? How about at 50? At 200? At 1000? There was probably a point at which the strict hiring standards could be relaxed, but it wasn't at 10 or probably even 50. "Hire fast and fire fast" is a fine idea but it does not work in practice. You're better off waiting. Like everyone, I try to avoid fighting the last war, but this hiring policy has been very effective for us.
Rob: In your early stages, where did you go for advice?
Graham: I wish we had had mentors. Brett Bullington became a mentor for us, and I wish we had more. It's hard to find a good mentor, though.
Joe: I'm looking for one, for me, right now.
Rob: What characteristics are you looking for in a mentor?
Joe: Well, I've never been CEO before (you're only a first time CEO once!), and I want to find someone who fills the gaps in my knowledge, and thinks differently than I do so I can take in a wider perspective than just the ones in the company. Mark Leslie, Bill Campbell, and Vinod Khosla have all taught me things. (editor's note: it's hard to be a CEO...)
Graham: In retrospect they were helpful, but it would have been useful to have mentors.
Rob: Where is money in your whole thought process?
Graham: Our motivation in founding a company was being in charge of what we do, and working with people we really liked. It wasn't about the money.
Joe: Money wasn't why we wanted to start a company. We were committed to starting a company before we even knew what the company was going to do. On February 28, 1993, we went to a taqueria and talked about all of the ideas we had, and they all sucked. Our desire at that point was just to find something we could do that was interesting. We moved into a house and worked together for over two years -- and didn't hire anybody until 1995. JotSpot happened in a similar process -- we played with a bunch of ideas until we found something we could be very passionate about, and now we've started to grow the team.
Rob: As angel investors, what do you look for?
Graham: We want to see that people in the company are good at making their ideas work. What matters to us most is who is on the team.
Rob: Thank you for your time.
Joe and Graham: Thank you for having us here.
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Catch the 106 Miles Blog for future 106 Miles events...
Let me close with one more paragraph from Paul Graham's Hackers and Painters:
Steve Jobs once said that the success or failure of a startup depends on the first ten employees. I agree. If anything, it's more like the first five. Being small is not, in itself, what makes startups kick butt, but rather that small groups can be select. You don't want small in the sense of a village, but small in the sense of an all-star team.
That one comes from the chapter on How to Create Wealth, and it's worth getting Hackers and Painters for that chapter alone...
This is a great distinction that prevails in all kinds of startups, from web services to medical practices.
The only exception I can think of is fund management. The few hedge funds that perform well are typically dominated by solo superhackers -- intuitive bookish types. Three features of the business allow this to work: first, there are enormous economies of scale, i.e. you can manage a billion dollars without having to run a large organization; second, funds "sell themselves" based on audited historical returns; and third, there's a disconnect between customer desire and reality. Everyone wants high, consistent, short-term, index-relative returns. Such products basically don't exist, so the phoneboy's appreciation of customer taste pushes the team toward snake oil, usually in the form of closet indexing (http://www.fundscope.com/closet.htm). As a result, the great funds usually take on new assets slowly over long periods, without phoneboys, employing long-term-oriented, unusual strategies, and relying on nothing but past performance to sell new investors.
Posted by: Bill Mitchell | February 24, 2005 at 12:23 PM