Do what you say

A twitter fortune cookie statement I’ve seen a few times lately says something like “actually doing what you say you’ll do puts you ahead of 90% of the competition”.

This is something I’ve come to appreciate more and more. The ability to consider different alternatives, prioritizing what is most important (and in that process, deselecting a bunch of less important stuff), clearly articulating what “done” is and then actually doing it, is surprisingly rare.

Obviously, this is not a binary ability. Very few are able to do everything they plan to, but from my experience there are different “tiers”, and I’d always strive to place myself in the top one. Even more important, it is completely fine to change plans and prioritize to do something else than what was first communicated. Facts change, and when they do it’s often a very good idea to change the what you’ll do. But: there is a big difference between communicating this and not. If you want to be amongst those who “do what they say”, you have to communicate when priorities change.

I see this with a lot of companies that end up failing (exceptions apply!): they start out committing to sending regular investor updates, but after a few months of emails they stop without ever communicating why. I tend to think it’s symptomatic of a bigger issue: the company is no longer “doing what they say”. And then it’s suddenly much more difficult to win.

Voice vs exit

Through this post on YC I found this talk from Balaji Srinivasan called “voice vs exit”. It’s only 16 minutes long and really recommended, especially if you plan on reading the next few paragraphs.

I really liked the first part of the talk where he talk about how to have the most impact. You will most likely accomplish more if you exit. It’s much easier to change things when you’re in control, similar to how one should sell directly to customers rather than “that one big distribution deal”. In theory large groups mean you can more easily multiply your effect, but in practice this is never the case and it’s a better bet to go direct on your own.

I struggle more with he second part on how to exit just about every part of society. I get how the principle applies more broadly, but I wonder what happens to the rest of society if such exits are successful. Will successful products and services replace existing infrastructure for everyone, or will society increasingly separate into multiple groups?

The talk was held in 2013, and I would argue that the latter has started to happen since. Polarization has been increasing on many levels, and one reason is the gap between exiters and the rest. This leaves me wondering what the right balance is.

We need people to exit for new products and services to be built, but at the same time successful exits should be distributed broadly for maximum impact and minimum conflict. We have solved the first (but maybe built the wrong products?), but the second remains.

Same round, same terms

Sometimes in fundraising processes, there is this one investor who wants special treatment. I’m not talking about the lead investor wanting a board seat (which is completely fine). I’m talking about that 7-percent-of-the-round-angel who has “so much to offer” they believe they deserve a better deal than the rest. Some warrants, a lower price, or maybe some sweat equity for the “exceptionally” good advice that will be given.

The answer to such requests is just about always no (if Ron Conway wants to invest, fine, break the rule). Investors investing in the same round should get equal treatment.

Let me start by saying that equal treatment of all investors is unfair. Everyone gets the same number of shares per dollar invested, but the degree of contribution is the opposite of even. Theoretically, there is a more fair way when it comes to investment terms. But in practice, this is too complicated. The transaction costs related to such a way fair outweigh the benefits.

Try thinking about it. If two investors should get different terms because of different contributions - how do you measure such contributions? In number of hours? Or in effect of the work they do. Either way, this means overhead for you as a founder because you have to measure and account for this contribution. And what if the contribution is not as promised? Do you buy back some of the shares? Do you give all other investors some extra shares? It’s a mess without an end.

That’s why you should always choose to go for equal terms for investors investing in the same round (except lead investor terms). It’s like the saying about democracy, that it’s the worst form of government except all the others. Same round, same terms.

Then again, nobody outside the founders and employees really matter. The rest of us are all this dog :)

Working from home

If you asked me what I thought about working from home three weeks ago, I would have told you that I expected to be super productive, work through my massive backlog and catch up on a lot of reading and other important non-urgent matters.

Today, I can tell you this is definitely not the case. It’s 6pm, I’m only halfway through my inbox and I have another 4 tasks on my todo list before I can call it a day. It’s super busy, and this is how all days are.

In most ways this is positive, as it is mostly caused by the fact that it’s business as usual just from a different location. Things have not slowed down, companies need funding, introductions and sparring, and projects go along (maybe even better than before because of forced adoption to better tools).

At the same time, I find that working from home can be more exhausting in many ways. Just about every work related matter happens in front of a screen. I’m trying to go for a walk during some calls, but this is more of an exception. Writing, thinking and most meetings are in front of a screen. Additionally, there are no natural breaks because you have to travel to in between meetings, find time for lunch before the canteen closes (the fridge is always open) or be at any event. It’s more non-stop than ever - a continuous stream of things to do. I’m currently thinking about ways to manage this better.

I realize I’m not the only one realizing this (see twitter), and there are plenty of strategies out there. To begin with, I’ll start by introducing firmer routines for lunch and exercise, block time in between meetings to decompress, and have a scheduled end-of-day time. Let’s see how it goes.

Reasons for optimism

This situation sucks. Lockdown, people dying, losing their jobs. All that stuff. Still, when given the choice between optimism and pessimism, I always choose the former. So today I wanted to put forward 7 reasons for optimism in these special times.

  1. Climate wins. Plenty of stories on how the lockdown means fewer people will die from air pollution.
  2. We can change. Related to the former - if somebody ever tries to claim that “we can’t shut down x to save the planet”, these days we’re getting evidence disproving such statements. We can - the questions is merely if there is willingness.
  3. If you can work from home, this situation is a perfect opportunity to streamline your organization. You suddenly have a lot of time to migrate the entire organization from email-mostly workflows to the many excellent productivity tools you never really had the time to test properly before.
  4. Working from home, it’s suddenly much more evident who is and isn’t productive. Hopefully this does not go unnoticed, and organization can get rid of dead meat and run more efficently once this is over. As the saying goes; when the tide goes out, you can see who has been swimming naked.
  5. Black swans won’t be dismissed anytime soon. People who are fond of margins of safety, cash savings, some extra food stored and so on, won’t be ridiculed the way they were a few months ago. Just-in-time everything is right most of the time but really really wrong when it’s wrong.
  6. The Nordic model wins. Pure capitalism is struggling these days and screaming for a bailout. Having a strong government has never been a bad idea and this situation amplifies that point.
  7. More time for friends. Everyone is in the same situation - suddenly with a lot of extra time on their hands. While we can’t hang out like before, I find myself talking to friends and family much more than before. That is definitely a good thing.

Open for business

Uncertain times all around these days, for good reasons. I’m well settled in my new office which is in my bedroom at home, and all of my colleagues are working from similar setups.

Even though our office looks like a ghost town these days, we have not stopped working. Rather the opposite. Our mission, to support entrepreneurs with ambitions to build important tech companies out of Norway, is if anything more relevant than ever. The best thing those of us without a directly contributing job can do in this situation is to keep the wheels moving to the best extent possible - fight uncertainty with certainty.

While we for natural reasons can’t provide an awesome workspace these days, we continue to actively look for entrepreneurs to partner with and invest in. I have no doubt that some of the most important companies of this coming decade will be founded in this period, something this tweet from a few days ago put perfectly.

If you or someone you know see an opportunity to build an important company in this situation and need funding to get going, please reach out to me on kjetil at startuplab dot no. I’d love to talk.

Corona

No topic feels of similar importance as the Covid-19 virus this week. I could have written about it, but I choose the Jurgen Klopp-approach and instead let the professionals tell us what to do.

Thus, this week’s post will be really brief. Rather, I’d spend my time planning for some weeks of uncertainty and working from home - which for me means establishing a few new routines - which might very well be next week’s blog post. For now, stay calm and healthy, wash your hands and follow the guidelines given by those in charge.

Meta (or, why I write)

I’ve gotten a few questions lately around why and how I write stuff here, so I wanted to spend a few lines explaining it.

There are two main reasons why: First and foremost, writing is a skill I want to improve. I’m believe in learning in public, so putting my words out there makes it easier to get feedback and get better. Having good writing skills is an important part of my job - it helps me think, ask better questions and in general communicate effectively with the people I work with.

Further, if I repeat myself in a meeting more than 4 times, I benefit from writing down whatever it is I repeat. I can’t remember where I read this first, but it’s a really good rule - for two reasons. First, I force myself to articulate what I’m saying in a very crip and concise way, meaning I have a better chance of getting my point across next time I’m talking about it. And second, many times I can just share a link instead of spending time repeating something. Win-win.

Previously, the answer to “how I write” was “whenever I feel the urge”. I since realized that the urge appears too infrequently in a busy schedule, so I have since changed what the answer is. These days I write at least once every week (excluding holidays) - usually on Wednesday. No big deal if I’m a day late though, like this one. I don’t really care about the lenght of the post or what the topic is - 1.01^x is a big number if x is a big number so the main KPI is just production for now. Some posts are better, and when I have something I belive is worthwhile reading for more people I try to distribute them more broadly (most are just tweeted out once immediately after posting).

Lastly; all posts are written in English. This is a principled thing for me; a lot of the founders I want to connect with now and in the future will live in Norway but will not understand Norwegian. It is important to not exclude immigrants from the conversation, and the best way to ensure that is to use a language that is more broadly understood.

/fin

I don't know

I love when people say “I don’t know” confidently.

Unfortunately, this happens all too infrequent. Usually when someone asks a question, they don’t know what the right answer is (which is why they’re asking, duh). What this means is that regardless of whether you answer correct or not, your answer will usually be accepted by the other person.

We tend to reward people who give us answers, regardless of whether or not the answers are any good. Say you don’t know, feel stupid and you get a follow-up question. Or give your best guess with enough confidence and move on (most of the time, because the other person can’t tell you’re “bluffing”).

What I’m trying to say, I understand why people try give answers even when they really “don’t know”. What I wish is that more people understood that saying “I don’t know” is better for all parties.

If you have an answer to every question, people will gradually start to discount everything you say because they don’t know what’s inside and what’s outside your circle of competence. If on average you’re right half of the time, your answers will be valued at 0.5 - both your good and bad answers. Choosing to say I don’t know when that is actually the case, means your other answers has a higher value.

There are few ways to add more trust than to admit that you don’t have all the answers. Say you don’t know, and say it confidently. And people will trust everything else you say more.

(IPO) pops and drops

The most recent edition of my newsletter went out this Sunday, and I got a comment on this section:

Consumer finance company Hudya Group listed on Nasdaq First North. The share price has fallen since then, and while the story talks about this as a clear negative it could be argued otherwise too (the opposite would be leaving money on the table). Too early to say what’s correct in this specific case though. Link

The comment was that I was surprisingly mild towards the company, Hudya, as they appeared to have had a very unsuccessful listing. There are a few aspects here that I wanted to comment on.

First, I want to clarify that my comment was not directed at the company. I have never met Hudya, and have no opinion whatsoever on the quality nor the real value of the company. Generally, I try not to pass judgment on any of the startups mentioned in my newsletter - that’s the job of journalists. My job as an investor is to support companies, and I’m not contributing positively by publicly pointing out flaws from afar.

Instead, I was addressing a general issue: the prevalent view that an “IPO-pop”, that the share price appreciates immediately after listing, is the only desired outcome for a company going public.

An IPO-pop basically means that a company left money on the table. It issued shares at a price lower than what the market was willing to pay, at the expense of current shareholders who take on extra dilution. Slack and Spotify both avoided this dynamic when they recently went public, as they did what is called a direct listing - and I’m not the only one believing this will evolve into the new standard going forward.

It was this perception, that an IPO-pop is not necessarily the best outcome, I was trying to address with my newsletter comment.

Another interesting question is what an unsuccessful listing is? Because the answer depends on how long you hold the stock acquired. If you invested in Facebook when they listed, you would have earned almost 6x your investment today. But if you sold after 115 days, you would’ve lost about half of your investment. Amazon would’ve given you a return of 1250x if you held on to the share until today, but only 3.5 if you held onto the shares for 4.5 years. You get my point: unless you have sold your shares it’s hard to conclude on the quality of any investment.

That said, every company considering to go public should feel a degree of responsibility towards investors, employees as well as other founders. It is said that good companies open (IPO) windows, while bad companies close them. If the share price of your company drops and continues to struggle after you list, it can have broad implications.

All else equal, poor share performance makes investors less likely to invest in the next company wanting to go public. It can also affect the psychology of your own company. Employees who’ve been told they’re part of an exciting journey can suddenly monitor the market’s take on this journey, and when things are going south and their stock options go out of the money, the mood tend to shift negatively.

Better make sure your company is quite robust before exposing your company to the scrutiny of public markets.