Self-doubt vs. conviction, and losing millions (or billions) of dollars
The night I lost $1,000,000; Quibi bites the poisoned apple; "angels" in the cap table; and introducing Michael Seibel
|Oct 26, 2020||1|
🧠Top of mind: Self-doubt is real
The night I lost $1,000,000 was one of my best as a founder.
In January 2019, I entered a pitch competition to try to win a million-dollar prize with a new startup idea. I prepared like a champion: I practiced my pitch so incessantly that even my girlfriend could easily recite it from memory. When the time came, I took the stage confidently and pitched my heart out. I nailed all of my talking points, and, frankly, I felt like I had a very real chance to end the night in the money. As all founders do, I started dreaming about what it would be like to have that kind of investment in my startup — and to realize the dreams that had brought me to Silicon Valley in the first place.
After the last pitch, the judges deliberated for what felt like an eternity, then got on stage to announce the results. And the first name they called was mine! I had won… second place. The first place team took home $1,000,000. I got a kitschy trophy, a firm handshake, and an email from my co-founder the next day that said he was leaving me to intern at Facebook.
Such is the rollercoaster of founding a company: high highs, low lows, and little in between. But even though I had lost one million dollars, I was surprised to find myself relieved. Truth be told, I wasn’t yet sure if my idea would work. I had convinced the judges, but I hadn’t yet convinced myself.
Self-doubt while starting something new is entirely normal. Y Combinator founder Paul Graham wrote a great essay this week titled “Early Work,” where he said:
One of the biggest things holding people back from doing great work is the fear of making something lame. And this fear is not an irrational one. Many great projects go through a stage early on where they don't seem very impressive, even to their creators. You have to push through this stage to reach the great work that lies beyond…
Unfortunately, if you want to do new things, you'll face a force more powerful than other people's skepticism: your own skepticism. You too will judge your early work too harshly.
This was the story of my entire, year-long journey with my startup idea. I went to battle every day not only with the skepticism of the entire world — huge incumbents, enterprise (read: massive, old-fashioned) customers, and expensive engineers — but also my own self-doubt.
Sometimes, it’s best to blast through self-doubt and to just keep trucking. In fact, putting on the blinders and constructing your own “reality distortion field” is often seen as a skill worth cultivating in Silicon Valley, as we talked about last week. But my founding experience taught me that when those thoughts linger, you should listen to them.
Aaron Dinin, an entrepreneurship professor at Duke, wrote an essay this week about why founders should be comfortable bugging potential sales leads, in which he said:
Remember — if you believe in the value of what you’re selling and the value it will provide to your customers, you’re never bugging them. You’re trying to help them. In fact, the only bad sign is that you’re worried about bugging people. If you’re genuinely worried you’re bugging people, maybe you need to reconsider whether you truly believe in what you’re building.
I’m not sure I entirely agree with Dinin. Doing something truly new will never feel as socially comfortable as taking the well-trodden path to become a lawyer, doctor, or consultant. But his broader point is really insightful: self-doubt is okay, as long as it’s eventually outweighed by your conviction in your own product.
With my startup, I ultimately found that I had the self-doubt but not the conviction: a losing combo. In retrospect, winning the $1,000,000 award only would have made the decision to shut down my company harder. And that’s a lesson I’ve kept with me: folding a losing hand is a win in Silicon Valley — because as soon you fold, you’re ready to play the next hand.
✨What’s (not-so) new in the Valley
Hello, Robots: Back in June, OpenAI (an artificial intelligence R&D lab founded by Sam Altman and Elon Musk, among others) released the world’s best-ever AI chatbot, GPT-3. It’s scary good. Now, offshoot companies are emerging that use OpenAI’s technology to replace humans — for instance, copywriters. The future is coming faster than you think.
Burning Bright: Quibi was a “startup” that raised $2 billion for a pre-product, short-form, mobile-first media app with TV-quality content. And then they failed. Six months later. The internet is now on fire with hot takes of Quibi’s demise, some of which throw Silicon Valley into the flames as well — but if anything, Quibi was a distinctly anti-Silicon Valley company. They didn’t experiment at all, they started huge, and raised a ton of money all at once on the names of their famous founders. Almost no Silicon Valley VCs bet on them as a result; they primarily fundraised from media companies. Brex (credit-cards-for-startups startup) founder Henrique Dubugras had a great thread on the difference between the Quibi model and the Silicon Valley model:
Paying it Forward: In Silicon Valley, successful startup operators often offer up their time and advice to folks who are just beginning their startup journeys. Case in point: Austen Allred is the founder of Lambda (a very zeitgeist-y online coding school that charges students only after they’re hired into software development roles), and went to Twitter to ask for some advice. Shopify CTO Jean-Michel Lemieux replied with an incredibly thoughtful video. Resources, relationships, and nuggets of wisdom like this are everywhere in Silicon Valley — it’s one of the best reasons to immerse yourself in SV culture if you want to work on startups.
😇 Define “Angel”
Angels are individuals who invest in startups — often newly-rich folks from Silicon Valley who have sold startups of their own.
Angel investors generally make smaller, earlier, and faster investments than venture capitalists. They answer only to themselves, and don’t have structural requirements to return X% on their investments. (In contrast, VC firms need each chunk of deployed money [each “fund”] to perform well, or they won’t be able to raise the next fund.)
It turns out that freely investing your millions of dollars in startups can work really, really well. This week, early Facebook employee Yun-Fang Juan released hard data that details her real angel investing returns from 2012-2016. tl;dr: she turned ~$1M of investment into $3-7M by investing in fifty early-stage startups.
👨🏾🦲 Someone to know: Michael Seibel
Michael Seibel entered the startup world by pursuing a strange idea: helping his co-founder Justin Kan livestream every moment of his waking life.
While you now know what I mean by “livestream,” you wouldn’t have known it in 2007 when Seibel and Kan launched Justin.tv, the company that would become Twitch.tv, the world’s most popular streaming platform for gamers.
Seibel continued on to found Socialcam, a company funded by Y Combinator that sold for $60 million in 2012, the same year it was founded (!), and then became a Partner at YC, where he works to this day.
I had the pleasure of seeing Seibel speak at a UC Berkeley event, and his humility and spirit of helpfulness are emblematic of everything right with Silicon Valley. He responds to literally every email he receives, a theory I tested and confirmed, and recently offered some great words of wisdom to his younger brother in a series of free videos on YouTube.
When asked what it was like being a non-technical co-founder, Seibel replied:
Before we launched, my job was just to make sure that the little apartment we lived in was as functional as possible. So I would cook dinner, I would help do food shopping, I would help clean… basically, I felt as though my job was just to not get in the way…
Even though I was a business guy, I made a decision that I wanted the company to be a technology company, not a business company… I want to make sure we’re leading with tech. I want to make sure we’re leading with building interesting features and having an interesting product, not having the best biz dev deals or having a bunch of business people around the office.
Humility and helpfulness is a great combination — so Seibel is certainly someone to know and follow in Silicon Valley.
Catch you on the outside,