Startup founders vs investors’ mindsets

If you know any founders, you must have noticed their one shining quality — Optimism. All founders are upbeat people. They are also risk-takers. Otherwise, they wouldn’t do something that has a tiny odd of success. But this optimism and risk-taking attitude also colour their outlook towards life and success.

All founders believe they are building a Unicorn. No one says they want to build a small company. All pitch decks that I see have TAM (Total Addressable Market) of $5–10B and projected revenue of $100M in 5 years. And in a way, it’s fair because there is a minuscule chance that these startups will become billion-dollar companies in the future. It’s a remote possibility.

Thus, founders are always bewildered when investors say no to their companies. After all, why would someone refuse to invest in a future Google or Facebook? But they can understand the rationale if they would put themselves in investors’ shoes.

All investors have limited capital. Even the biggest ones like Tiger Global and Softbank don’t invest in all the companies that approach them. They compare startups before investing. And since they see thousands of startups every month, they have a fair bit of idea on the success odds.

Venture Capital is like shooting in the dark. VCs bet on the future or bet on founders to create a new future. Their capital is limited, and they try to invest in companies that will give you the best return. Their job is to make money for their investors (LPs).

And therein lie the biggest difference between the founder’s and investors’ mindsets. Both are optimistic about the future, but VCs realise failure is much more common than success. Hence, they spread their bets because they have seen most of their investments fail.

Founders are confident that they are building the next big thing while VCs know that the chances of becoming a Google are one in a thousand, even less.

Most people don’t realise what the iPod was originally built for. It’s purpose wasn’t just to play music, but to sell Macintosh computers.

That’s what was in Steve Jobs’ head: “We’re going to make something amazing that will only work with our Macs. People will love it so much that they will start buying Macs again.”

At that time, Apple had almost no market share. Not even in the US. But the iPod would solve that problem and save the company.

So as far as Steve Jobs was concerned, the iPod would never work with a Windows PC. And that’s why the first generation of the iPod fizzled. The critics as well as existing Apple users loved it, but there were barely any to begin with.

The iPod cost $399 and the iMac cost $1300. No one was going to spend $1700 dollars on the package just to listen to crisper sound on Linkin Park songs?

The team went to Steve, asking him to allow for the second version to work with Windows computers, but he wouldn’t budge from his Vision. The team toiled months to convince him that in this battle. Data had to come first, Consumer Insight second and Vision third.

They agreed on letting Walt Mossberg, a famous tech reviewer, cast the deciding vote and the second generation iPod allowed Windows PC owners to transfer music to the device.

This changed the trajectory for Apple immediately and sales skyrocketed to tens of millions annually. This also led people to love Apple so much that they started switching over to Apple’s other products — and sales for the Mac started rising again. The moral of the story is that you’ll have data on consumer insights and vision to take a business decision.

Vision works when there is no data, and once you start capturing data on consumer insights, that has to take precedence over vision for decisions, with Vision being a long term over-arching guiding force.

I read this story in Build by Tony Fadell. The book starts slow but is picking up well, and I’m half way through. He was the guy who headed the development of the iPod and the iPhone. Shall share a more detailed review once I’m done.

10 clever questions you can ask in an interview to check for Culture Fit:

While it’s widely recognized that culture fit is one of the largest factors that determine whether an employee and employer would enjoy and find their partnership fulfilling it’s darn hard to assess it in an interaction of sub-60 minutes.

A lot of times people feel they’ll find culture fit after an employee joins work, or at best, ask questions that have answers well rehearsed and shall give you no idea about the real personality of the interviewee. What you’re essentially trying to gauge are integrity, grit, boldness, trust, ability to learn, and accountability.

Here are 10 that you can use.

1/ What did you like the most and least about your last company and manager?

2/ Have you been reprimanded/scolded at work for a mistake you didn’t make?

3/ Have you ever had to compete with a colleague at work? How did that pan out?

4/ When was the last time you took a risk professionally, and how did that play out?

5/ What advice would you give to someone starting out in your career?

6/ If you were going to start your own business, what would it be?

7/ What tools or apps allow you to work more efficiently?

8/ Who was your best friend at the last organization? What’s the most fun thing you guys did together?

9/ Has most of your work been as a solo contributor or as part of a group? What role did you play in the group?

10/ Describe a situation when you didn’t communicate well at work. When did you realize it?

These questions are not a function of any human psychology study that I’ve done. It’s an attempt to curate a few that can get you some genuine insights from the answers. Would love to know what kind of questions your company uses which are useful, and of course, if you have a differing view. Keep ’em coming.