Review for: Lost and Founder: A Painfully Honest Field Guide to the Startup World
As a story alone this book is a very thoughtful, somewhat detailed review of how they got to where they are today, including the mistakes.
They started as a consulting company that benefited a great deal from free advice its founder gave on YouTube. They then became the first to develop a tool to show who linked to whom on the internet by building a web index 'to rival Google', despite experts telling them this couldn't be done with their resources.
However, I think the book rises well above this kind of company biography and offers us thoughtful takes on tactics and strategies to think about, anchored by experience. He looks back at decisions he might have made differently in retrospect, which offers a lot of experiential insight.
This is a somewhat unique business book primarily for its exceptionally transparent view of the life and history of a small-to-mid-sized software startup company, as well as noting some nuggets of wisdom along the way. While the company is specifically a B2B SASS company I think much of the content is food for thought for technical startups everywhere. Even if you disagree with some of his take-aways he does a great job of intelligently making each case.
The book is an easy read, with occasional humor ranging from cheesy to funny, it is well-written and well laid-out, something I particularly appreciate having just previously read a fairly dry thesis published in a subatomic font size with barely 2-3 paragraphs per page.
Some Points He Makes:
(1) TRANSPARENCY
He makes a case for 'relentless candor' with employees, customers, and investors, balanced with empathy. He gives a specific example of a time the risk of doing so was perceived to be just too great, so it is a balanced commentary. However, he makes a case for being transparent whenever you can, that the long-term benefits are often well worth it, and the costs of not doing so can be far greater than often recognized. Again, many will disagree with him and work in environments not suited to this, but he makes his case intelligently.
(2) PIVOTS
He notes that extreme pivots are not often successful, despite survivor-bias showing us a great stream of terrific pivot stories like:
- Glitch-to-Slack
- Tote-to-Pinterest
- Odeo-to-Twitter
- Confinity-to-Paypal
- Burbn-to-Instagram
- ThePoint-to-Groupon
He suggests to think really hard before making that big pivot, perhaps trying pivots IN EXECUTION first in some cases before pivoting entirely.
(3) TAKING ON INVESTOR MONEY
Here he takes head on the notion that it is often better to have a smaller portion of a big company than a larger portion of a smaller company, noting this is not always the case and gives an example to illustrate.
He talks about the strengths and weaknesses of different investor categories (VC, speciality VC's, angel, debt, equity crowdfunding, debt crowd funding, etc.) such as cost of money, control of execution, growth requirements, etc.
He notes that the median startup founder ends up with 11% of the company, though without attribution so I'm not sure how canonical the source is.
(4) LIQUIDITY OF OWNERSHIP
He reminds the reader that selling your share of a company might be surprisingly difficult, especially for a good price. You can wind-up shares-rich, cash-poor for an extended period. Which leads to..
(5) CONSIDER AN EARLY EXIT
He demonstrates why he wishes he took an offer to be bought out by Hubspot years ago, despite the company's growth since then. He notes that the stories we hear of rejecting sales to Google, Yahoo, etc., and in time realizing much greater wealth, are the outliers and suggests considering early buy-out offers very seriously. Moments where the right buyer comes along and the company and your stake is worth enough to make for a generous payout may be few and far between.
(6) PRODUCT FOCUS
Here he tells how the company spent so much energy growing new products (and why they did so) that his key product features became an 'also-ran' in three-quarters of the main features. The company comeback through acquiring back talent through an acquisition is also covered.
This serves as an example of an exception to the adage that you want to build and invest in a company, not a product. Here we see a case where this company would be far better off always making the priority keeping primary products competitive before moving on to build out the line.
From a marketing point-of-view he also says it gets MUCH more difficult to SELL a larger number of products (and why). Those who can't compete without a broad product line will disagree, however he makes his case for his business story well.
(7) CUSTOMER RESEARCH
He tells the story of, after a continued failure to do so, really getting his customers needs by visiting a company that is his target market and seeing how the work is actually done over an entire day. The suggestion is that sometimes there is no substitute to getting out there and watching the customer in action, or at least as close to that as possible.
He suggests getting to know customers in-person as people while they are doing their work or tasks related to your product, not just as personas and their resulting biases. This helps to better estimate feature priorities, for example. He gives an example of Facebook making a feature decision that really bit them for reasons they could have uncovered by talking to customers more than relying on data.
He gives several examples of alternative ways to reach out to customers to get this type of feedback, conferences, consulting, pro bono work, and teaching.
(8) MVP
He gives an example from his company's history to demonstrate that for some companies the negative effects on the brand by releasing a minimally viable product (MVP) may not be worth it.
However, he does like iterative DEVELOPMENT working with potential customers pre-release STARTING with an MVP to start getting meaningful feedback as soon as possible. He also notes that the benefits to a small startup company with no brand recognition to lose releasing an MVP may outweigh the negatives. He calls the period after an MVP release that it can continue to hurt the brand's reputation the 'MVP Hangover'.
(9) WHICH INVESTORS
He suggests only raising money from investors with 'models 100% aligned with your business'. Assuming you can be choosy, he feels it is definitely worth the extra effort. He notes that it is common for investors to become misaligned with you over time, for example, perceiving an 8-digit exit as a poor outcome whereby you might be ecstatic over the possibility.
He also suggests that you thank yourself for taking the time to choose founder-friendly, employee-friendly investors, for example in his case having a liquidity preference of 1x and a low option strike price.
(10) FLYWHEEL vs. GROWTH HACKS
He makes the case that short-term growth hacks, unlike the one he did that he writes about, are by far best applied IN THE SERVICE OF UNSTICKING A FLYWHEEL to get it going. On their own the value of growth hacks are often more than short-term otherwise and can often even have negative consequences. Some flywheel-unsticking examples, Yelp paying for references, Yelp giving badges out with links back to Yelp, etc.
(11) CONVERSION RATE SUGGESTIONS
Using a web site improvement project as an example, he talks about the benefits to taking the time to go out and collect objections from real people who would otherwise use the product. Pages 123-124 serve as an excellent real-world example blueprint for this process. They also found that the lifetime value (LTV) of a customer was much higher the longer they engaged with them online before purchasing the product, a reminder of the indirect value of quality content.
(12) HIRING FOR COMPANY FIT
He found that doing so leads to better retention, motivation, and team cohesion.
On the other hand, of 200+ employees the importance of 2-3 key engineers in the success of his company was absolutely critical, twice, and leads one to wonder, what if they didn't meet this qualification? Yet, in support of his position, I've seen poorly fitting employees with terrible communication skills nearly destroy teams.
(13) ADVANCEMENT FOR INDIVIDUAL CONTRIBUTORS
He suggests Individual Contributor promotional and hiring tracks giving similar recognition and influence, salary and stock, accountability/expectations, etc. from a Jr. Role all the way up to VPs, directors, even C-Level executives in some cases, etc. in order to keep talent without requiring promotion on the people manager track. He created roles like 'Product Architect', 'Subject Matter Expert', and so forth to keep top people. He includes the chart they made for this on page 214.
(14) WHAT MAKES GREAT TEAMS
On this subject he brings up the work of an MIT researcher and 3 studies at Google, Carnegie Mellon, and North Dakota State University, as well as his own experience. Way too much to unpack in a sentence or two here, but in a few pages he does a thoughtful job of stressing the human side of a great team and makes an effort to back it up with academic and operational research.
Some example traits of a good team:
- They feel the psychological safety to contradict,question, express criticism, etc.
- They build up tolerances to criticism, learn to accept the faults of others their idiosyncrasies.
- There is empathy between them, a group norm of emotional support, a mutual respect and trust.
.. and more ..
Well, there you go. There's a lot in this book, well beyond what I included here, however I hope it might give you a better idea of the type of content within. It is an easy read, well-written and edited.
Regards,
Neil
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Enlightening, painfully honest, and fun. Excited for the sequel!
Excellent book. I’m not planning to be a founder or even necessarily a CMO. However, Rand highlights and expands on areas of business that are important to me. These include the broader goals, challenges, and motivations in business, a fresh perspective on values, culture, team dynamics, and career paths, and the inspiring reinforcement of transparency's benefits for the betterment of everyone. In addition, it was an incredibly fun read, and lives up to the title as painfully honest, which I appreciate. I'm ready for the sequel 👍
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Excellent book. I’m not planning to be a founder or even necessarily a CMO. However, Rand highlights and expands on areas of business that are important to me. These include the broader goals, challenges, and motivations in business, a fresh perspective on values, culture, team dynamics, and career paths, and the inspiring reinforcement of transparency's benefits for the betterment of everyone. In addition, it was an incredibly fun read, and lives up to the title as painfully honest, which I appreciate. I'm ready for the sequel 👍
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