Category: Entrepreneurship

Full Stack Startups in Latin America are a Massive Opportunity

Latin America is the perfect market for full stack startups. I’m convinced of it after living and working in Latin America for the past four and a half years and am even more convinced after having met, worked with and reviewed over 600 startups in the past year and a half as managing partner of Magma Partners in Santiago, Chile.

So what is a full stack startup and why am I convinced that Latin American entrepreneurs should be exploring full stack startup business models?

First, lets start with a definition. Chis Dixon coined the term Full Stack Startup in a blog post in March 2014. He says that a full stack startup is a  “…complete, end-to-end product or service that bypasses existing companies.” It bypasses the old, existing hierarchy to be able to control the entire experience. According to Dixon:

Prominent examples of this “full stack” approach include Tesla, Warby Parker, Uber, Harry’s, Nest, Buzzfeed, and Netflix. Most of these companies had “partial stack” antecedents that either failed or ended up being relatively small businesses.

So why are companies following the full stack method instead of the old school method of partnering with large companies? (more…)

The Best Lectures From How to Start Up – Stanford and Y Combinator

I watched all 19 classes from Sam Altman’s Stanford and Y Combinator’s How to Startup class over the past month and recommend them fully. Sam Altman, Ycombinator’s President, took all of YC’s internal learnings from investing in 716 startups with over $30b in value created, and produced a masterclass on starting a startup.

If you’re thinking about starting a company, have already started a company or just want to see what starting a startup is really like, please watch all of the classes. I’ve been prescribing certain classes for founders we’ve funded in Magma and I’ve seen good results. If you want to save time, you can read the transcripts below each video, but I strongly suggest spending the time to watch the videos.

But if you don’t have time to watch all 15 hours and still don’t have time to read ~150 pages of text, I’m here to help. I’ve selected my favorite classes so that you can get 80% of the learning in 35% of the time. Before you get started, I reiterate, don’t get lazy. Watch or read all of them. But if you’re lazy, here’s my list.

Lecture 1: Intro: Ideas, Products, Team, Execution

Watch the first half with Sam Altman if you’re an experienced entrepreneur. If you’re just getting started or haven’t started yet, watch the entire class with Dustin Moskovitz, one of Facebook’s cofounders. Altman gives his overview of the class and his view on what’s important in a startup and Moskovitz walks you through evaluation your options when you start a startup.

Lecture 2: Ideas, Products, Team, Execution 2

Sam Altman continues talking about the four most important things in any startup. The biggest take away is that its much more important to build something that a small group loves a lot, rather than something a large group of people just simply likes. This is something I see many founders getting wrong. Watch the entire class.

Lecture 3: Before the Startup

Paul Graham, YC’s founder, gives his advice that he would give to his own kids when they are thinking about starting a startup. The most interesting point for me here that most founders get wrong is that Graham wants founders to do things that don’t scale. In my personal experience, doing things that don’t scale has been the only controlable difference between success and failure. Mandatory. Watch the entire class.

Lecture 4: Building product, Talking to Users and Growing

Adora Cheung of Homejoy, tells her story to illustrate how to build product, find users and grow. My biggest take away is the importance of going to where your users are. Most founders stay in their office too much or when they get out of the office, a la lean startup, they don’t go to where their users are. Watch the entire class.

Lecture 6: Growth

Alex Shultz, VP of Growth at Facebook, talks about growth rates, churn and how to know if your business is sustainable. I had to rewind in places and listen again, as its math centric for a humanities graduate like me. Many founders underestimate how important churn rate is and getting the user to their first magical moment as quickly as possible. Its completely worth watching the entire class.

Lecture 7: How to Build Products Users Love

Kevin Hale, the founder of Wufoo and now a partner in YC, tells his story about how he got his customers to love him. This class is probably my favorite or second favorite and is probably the most or second most important class for entrepreneurs who haven’t found product market fit yet. He also talks about bootstrapping a business to success, which is important in a VC focused course. Watch this class.

Lecture 8: Do things that don’t scale and PR

Stanley Tan from Doordash starts out talking about doing the things that don’t scale when you first start your business. Doing things that don’t scale is very intuitive to some entrepreneurs, but many get it wrong. Stanley’s story is a great example of how you can get started doing things that don’t scale are. Next, Walker Williams from Tspring gives his perspective on doing things that don’t scale and how to get users quickly. Watch these first two speakers.

Justin Kan talks about what PR is good for and what it’s not good for. Like money, PR can paper over problem areas in your business, but if you don’t fix the problem areas, you’ll have played your PR card and are still left with a startup with a bad foundation.

Watch the first two presenters and add in Justin’s if you have extra time.

Lecture 16: How to Run a User Interview

Emmet Shear, founder of Twitch, talks about how to run a user interview and then does a mock user interview after his lecture. This is the most important lecture for a first time entrepreneur or an entrepreneur who is still looking for product market fit. Watch this entire class, but if you’re pressed for time and have experience in user interviews, you can skp the mock interview at the end. But I suggest watching the entire class.

Lecture 19: Sales and Marketing

Tyler Bosmeny is the founder of Clever and he has one of the best overviews of startup sales I have seen. He talks about how to run a sales meeting, how to systematize sales calls, the percentage of time a salesperson should speak on an optimal call and many other topics. If you’ve found product market fit or are close, this is the most important class. Watch the first founder.

Bonus: Lecture 5: Competition is for Losers

Peter Thiel, founder of three billion dollar companies and prolific investor shares his view of the world. This is probably the only class where it makes sense to read the transcript or just go directly to his book Zero to One, as his presentation is choppy and can be hard to listen to. The ideas are interesting and I probably only agree with about 60% of what he says, but it’s worth reading.

If you’ve already launched your business and you can only watch two classes:

Lecture 7: How to Build Products Users Love (full class)
Lecture 16: How to Run a User Interview (first 75% of class)
Class 19: Sales and Marketing (first 25% of class)

If you’re thinking about raising money, Lecture 9 with Mark Andreessen, Ron Conway and Parker Conrad and Michael Seibel’s portion of Lecture 19 where he gives the most clear description of how you should talk to investors I’ve seen.

“Never Give Up” is Terrible Advice

Bad advice?

A good friend of mine started a business almost five years ago. He is one of the smartest, most charismatic people I know. His business has generated $100k+ in revenues. But it has never been profitable. And with the way he runs the business, it never will be. Even if he hired the best CEO in the world, it would never be a huge winner.

It’s hugely stressful and has taken a toll on him: mentally, physically, financially and emotionally. Over the past five years, he’s missed out on other life opportunities and wrecked friendships and business relationships. His friends have advised him to close up shop, take stock of his life and start fresh. He is smart enough that he could get a job pretty much anywhere or get a high paying consulting gig to get himself back on his feet. Or even start another business himself.

But he doesn’t. He bangs his head against the wall every day, digging himself deeper and deeper into a hole. He gets angry when friends try to give him advice. To a point where most of us don’t hear from him very often anymore. To a rational outsider, it’s time to cut losses and move on. But he wont. Why?

First rule of holes: when you're in one, stop digging
First rule of holes: when you’re in one, stop digging

Because he can’t bring himself to “give up.” He’s not curing cancer. He’s not stopping a war or saving the planet. He’s not going to the moon. He’s not stuck in a canyon with his arm crushed by rock. He’s working on a business that doesn’t solve a big enough problem that people are willing to pay for it. I’ve seen similar stories many times over the past ten years and it makes me sad every time I see it.

Some entrepreneurs are motivated by the problem they’re trying to solve. Others don’t want to “give up” because they see it as a character flaw or personal failure. Others because they don’t want to tell their friends, family or investors that their company isn’t going to work.

These entrepreneurs are smart people. They have options. They could start a different business. They could do consulting for awhile. They could get a job for six months or a year and get back on their feet. But they don’t.

Why? We’re inundated with well meaning motivational quotes, memes and success stories posted by the successful and those longing to be successful every day. They preach that if you just worked harder and banged your head against the wall longer, you would find success. The simple act of not “giving up” will make you successful, they seem to suggest.

While well meaning, in practice, it’s terrible advice that does more harm that good. Short of life or death scenarios, nearly everything has a point where it doesn’t make sense to continue. But we’ve been indoctrinated by hearing stories of successful people who kept at it and found success. Nearly all successful entrepreneurs have stories about not giving up. But it’s really easy to look back once you’re already successful and pat yourself on the back and tell others to keep banging their head against the wall.

Sure, these entrepreneurs wouldn’t have gotten to where they are today if they had “give up” before they found success. But they also wouldn’t have gotten to where they are today if they didn’t have the right makeup to be a CEO. Or the right timing. Or the right product market fit. Etc. Etc.  Sometimes more effort and not giving up is not the solution. Many entrepreneurs act like “never giving up” is the magic bullet to finding success. It’s not. It’s survivorship bias.

Remember the guy who never gave up and still didn't find success? Neither does anybody else.
Survivorship bias: Remember the guy who never gave up and still didn’t find success? Neither does anybody else.

What about all the people who never gave up but didn’t become successful? Who decided to forego other amazing opportunities because they thought never giving up on their idea was the way forward? Sometimes adding more effort and time to a project will just prolong the inevitable.

I’ve been in the hole before. Deciding to stop digging is always one of the hardest decisions you have to make. But “giving up” has always led me to another, better path. My philosophy is to take many small, calculated risks and see if they pay off. I cut the ones that don’t pay off as quickly as possible. I give up on them. And I try something new. My goal is to find things that motivate me and try to turn them into winners. I “give up” on ideas all the time. Until I find a winner.Then I invest as much time, effort and energy into it as possible. I live my life that way: business, friends and relationships. Failure and “giving up” is an integral part of life.

You can’t have success if you give up before you find success. But you can have success if you “give up” on one path and go down another.  You should weigh the pros and cons of continuing to work on a business, staying friends with someone or continuing in a relationship by evaluating your options. One of those options should be giving up.

By “giving up” on your project, you may keep your big goal alive. If you never give up, you may find success. But just as likely, you’ll be miserable, having left plenty of other great options on the table. So when you’re in a hole, stop digging, take a step back and evaluate your options. Giving up just might be the best one.

What do you think?

The Chilean Mindset Needs to Change from Extraction to Value Creation

People always ask me questions along the lines of “what’s the one thing holding Chile back from being an innovative country?” It’s a question I’m really interested in, not just for Chile, but for the US as well.

My latest column in the Santiago Times titled The Extraction vs. Value Added Mindset talks about Chile’s current preference for business models that extract value, either from the ground, the sea, or even other people, rather than business models that create new value.

Note 22 January 2017: Santiago Times no longer hosts my article, so I reposted it here.

Chile needs to foster value creation over extraction if it wants to establish a real entrepreneurial ecosystem.

I was invited to speak at a roundtable at the Universidad de Desarrollo about the challenges of teaching entrepreneurship in Chile. We had a lively and wide ranging discussion about how best to continue to foment entrepreneurship at all levels of Chilean society. One of the best debates was about trying to answer the question: What is the biggest factor holding Chilean culture back from being more entrepreneurial?

The general consensus was that it’s the Chilean family’s fault. Kids live with their parents until their mid- to late-twenties and generally only move out when they get married. Moms and Dads tell their kids they can do no wrong. Many lead pampered lifestyles with doting parents (and sometimes nanas), who solve even the most trivial of problems. (more…)