It Isn’t Bullshit if you Believe it Yourself.

I’ve been outed.

Last week, a friend of mine publically called me out as a Huckster.  I think the exact term he used was “world class bullshitter”.

Well, he was right.   In fact, I’m happy to go on record as saying that the ability to create a “Reality Distortion Field” is right up there alongside optimism as an entrepreneur’s most valuable weapon.

It has certainly worked for me!  It has helped me to convince superstar hires to leave comfortable positions, get huge multi-nationals into co-promotions with my tiny startup, and get A-list investors to bet their real-cash-money that my company might be the next big thing.

But even though my friend is right . . . He’s only half right.  It is certainly important to be able to talk a good game, but you’ve got to have the goods too.

Fourteen years ago, when Netflix was only a few months old, I needed to choose a codename; something to use for our test site, our email, and our legal documents.  As I was struggling to come up with something catchy, one of my mentors gave me two great pieces of advice.

“First”, he said, “pick a name that’s so bad, that you won’t even be tempted to use it when you run into difficulties finding your real domain name.

“Second, pick something meaningful.  It’s a great way to start aligning everyone around what you think is really important.

So I called it Kibble.  Kibble.com.  Like the dog food.

Unlaunchable name?  You betcha!

But ultimately I choose Kibble for a more important reason:  it was to remind me (and everyone else at Netflix) never to forget that old Madison Avenue chestnut:

“No matter how good the advertising, it’s not a success if the dogs don’t eat the dog food”.

In other words, you have to have Product and Promotion.  Steak and Sizzle.  Substance and Spin.

It hasn’t always been like that in Silicon Valley.  When I first arrived here in the late 1980s there was no question about the hierarchy.  Engineers were king.   Product uber alles.

At that time Silicon Valley was the closest thing this country has ever had to a true  meritrocracy.  If you were an engineer, it didn’t matter what you looked like, dressed like, or smelled like for that matter – the only thing that mattered was the quality of your code.  And that was transparently visible to everyone.  There was nothing to hide behind.  You could be the most awkward dork in the room, but if your code was good, you were revered.  Bullshit got you nowhere.

It got to the point that at Borland International, the software company where I worked in the early ‘90s, that the engineers were the ones who got the big offices with windows and balconies on the third floor.  Us marketing and sales guys were in the airless cubicles below.

I was living “The revenge of the Nerds”.

But slowly and surely the pendulum began to swing back the other way.  One year for instance, we got the great news that one of our products had won PC Magazine’s Technical Excellence Award.  Flushed with excitement, we rushed to see who some of the previous years’ winners had been.  As we read the list, you could feel the excitement draining out of the room.  Who?  What?  Didn’t they go out of business two years ago?  Oh my god!  This award is the kiss of death!

As software began to be sold to people who would never consider themselves technical, it suddenly became clear that you needed people who spoke their language.  It became fashionable to hire product managers from places like Proctor and Gamble.  Or Clorox.   And even the data-driven engineers had to admit that this marketing stuff might have something to it.

It drove them crazy.   It was best when you had iron-clad test data demonstrating something purely ridiculous; like that software in the blue box sold twice as well as the exact same product in the red box.  It made their head explode.  On the one hand, they knew with absolute conviction that there was absolutely no reason why the color of the box should make the least bit of difference.  But on the other hand, they also knew with absolute conviction that data didn’t lie.  After puzzling over this paradox for a few hours they had no choice but to conclude that maybe us marketing people had some value.  Or practiced a kind of black magic.  Or both.

These days, the soft bigotry of anti-hucksterism can be seen every day on Hacker News.  And there are still plenty of Hustler’s not quite getting how important their technical co-founder actually is to their success.   The truth of the matter is that both sides need each other.  We always have and we always will.

When it comes right down to it, being a world-class bullshitter doesn’t mean anything if all you ever spout is bullshit.  Eventually you have to deliver.  Pitching a concept well is certainly important, but ultimately you have to build it.

So be confident.  Spin some dreams.  But be prepared to back them up.

Back in the early days at Netflix, it wasn’t unheard of for me to tell prospective hires that I could see our stock going to a hundred dollars some day.  I was telling this story to an interviewer a few years later when he asked me, “don’t you feel a little funny?  bullshitting people like that?”

I had to think for a minute.  Then I said, “It isn’t bullshit if you really believe it yourself”.

Even less so if it eventually comes true.

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Be Careful What You Wish For

So you want to do a startup!

Sure sounds like fun doesn’t it?  Starting and ending your day devouring the latest articles on Hacker News. Posting questions and answers on Quora.  Working the party circuit at SXSW. Snarfing pizza with your fellow Y-combinator founders.  Dashing off clever twitter exchanges with Dave McClure, Chris Dixon,  Mark Suster and the rest of the Entreprenati.

Well I hate to be the one to break it to you, but ultimately, you have to actually build the  company you’ve spent all that time pitching.  That’s not quite as easy.  Nor as sexy.

There’s a lot of talk these days about whether the start-up world is in the midst of a financial bubble, but not enough discussion about whether we’ve over-glorified what it really means to be an entrepreneur.

With TechCrunch breathlessly reporting every seed round raised, not to mention glowingly reporting on every Pitch contest, Hack-a-thon and Startup Bus, it’s easy to think that the entire process of being an entrepreneur is coming up with a clever idea and raising a little money.

The pitch deck starts to become the product being sold, with little thought to the reality of what might be involved in actually making the concept become the reality.

And now that “social proof” has becomes its own investment premise, it easy to be a “famous” entrepreneur based entirely on how confidently and quickly you were able to raise money.

But in fact, as any real founder knows, it’s only once that first round is in the bank, after your popped your TechCrunch cherry, and once you’ve moved out of your basement into a real office that the immensity of the task you’ve bitten off becomes real.

Your next round will have very little to do with how charismatic you are and how many twitter followers you have.  Your seed investors may have been enamored by your vision, but your series A funders are going to be much more interested in more basic concepts.  Like Traction.  Customers.  Revenues.  Profitability.

As true entrepreneurs find out, building an enduring reputation comes from building an actual company.  Which in many cases requires an entirely separate skill set from the skills required to launch one.

If you don’t have a true passion for your product, and the ability to bounce back from countless setbacks, it’s going to be a long hard slog.  Ben Horowitz has a phenomenal blog post where he so accurately describes the loneliness of the entrepreneur, memorably saying that if you’re not comfortable having to frequently choose between “horrible and cataclysmic” you may not be cut out to be a CEO.

Perhaps not so eloquently, I once described our first years at Netflix to someone as “four years of pissing blood”.

The moment I first felt like a real entrepreneur was not the day I deposited my seed round checks.  It was a day about nine months later, with subscriber numbers basically flat, when I looked down from our conference room window onto the parking lot and thought “Oh my god, I’m responsible for all those car payments”.

But don’t let me scare you.  It’s still worth every minute of it.  Just know what you’re getting in to.  And be careful what you wish for.

This might be a little too abstract a reference, but there’s a wonderful moment at the end of The Candidate, where senator-elect McKay (played by Robert Redford), after having betrayed every one of his beliefs to finally win the election, pulls his campaign manager aside and ask “what do we do now?”

Like many politicians, McKay ultimately confused what it took to win office with the real responsibilities of governing.

For your part, don’t confuse the act of starting a company, with the real responsibilities of actually growing it.

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Why Entrepreneurs make Bad Angel investors

I came to the sad realization today that I was never going to be a great angel investor.  And for a simple reason: I like every idea I hear.

Obviously it’s not that my deal flow is so spectacular – the law of averages suggests that I should be getting an equal mix of hits and misses. In fact, since I’m not particularly well connected in the angel investing world (and am still trying to limit the time I spend doing it to a single day a week)  I should be getting a considerably worse share of the best deals.

And no, I’m not incapable of saying “No”.  I do that all the time.  Ask my kids.

The simple reason I like every idea is that I’m an optimist.  Not just a run of the mill optimist who sees the glass as half full; I’m an over-the-top optimist.  The guy who insists on ordering a whole case of extra glasses to handle the overflow.

In my past life as an entrepreneur, this optimism was a critical tool.  I just always believed we would succeed.  Even when everyone else said my ideas were ridiculous. Even when we were almost out of money.  Even when the metrics were all upside down.  I always have confidence that I’ll figure something out.  I just have that confidence that things are going to work out fine.

But that’s the problem.  I also see that in every other entrepreneur’s idea.  It’s even more pathetic because I have enough experience to clearly see the flaws in their reasoning and the gaps in their execution.  But then I have that moment where I lean back on the chair, stair into space for second, and say “wait a minute — you know, there just might be a way here”.  And pretty soon I’m up at the whiteboard sketching out a possible path to daylight and I’m just as excited as they are.

So far I’ve been incredibly lucky, and every investment that I’ve made has turned out to actually be pretty solid.  No crater’s yet.  And even a couple that look really promising.

Perhaps one could make the case that because of my operating experience I actually have a better idea than most what constitutes a “doable” idea.  Or that my experience as an entrepreneur somehow helps me recognize a fellow optimist when I see one.

Either way, I’m not going to stop doing it.  Too much fun.  And what can I say?  I just have that confidence that things are going to work out fine.

Now where did I leave my checkbook?

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Happy Birthday Netflix

EXACTLY THIRTEEN YEARS AGO today, sometime in the early morning hours of April 14th, 1998, the Netflix site went live for the first time.   We lasted about 6 hours before the site crashed for the first of many (many!) times that morning.  Only after a long ugly day – and temporarily re-purposing everyone’s desktop PCs as web servers – was the site stable enough to finish out the day.

By that night we had just over 100 customers.  Just over three years later we celebrated our 500,000th subscriber.  Today Netflix has over 20 million.

Although I certainly dreamed that this crazy idea might have a shot at success, I certainly never imagined it would be of this magnitude.  But as we got bigger, it was not the numbers that got me excited – it was the little unexpected signs that we were actually making progress.

Like the first time I got stopped in an airport wearing a Netflix T-Shirt.  Or the day I saw “Netflix” used as an answer in the New York Times Crossword Puzzle. (October 26, 2007 – “Modern Rental Option?”).

If you’re currently in the trenchs of trying to start a company,  go ahead and dream big – no matter what you’re pursuing.  But don’t be obsessed about those dreams.  The real excitement of doing a startup is working with a team of super-smart people, solving interesting problems, and making steady progress.  If you’re head’s in the right place – you’ll love what you’re doing no matter what stage you get to.  Starting a company is the biggest rush of them all.

And for God’s sake, take plenty of pictures.  In the off-chance you do become a multinational behemoth, you’re going to need some good pictures of the early days to hang in your lobby.

Over the next few months I’ll try and post some more recollections from those initial few months and years.  But in the meantime, Happy Birthday Netflix.

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Founding Relics

I love “founding relics” – those old documents, sketchs and pitch decks from a company’s earliest days that make it clear that even some of Silicon Valley’s biggest success stories all started out just like you – a couple of guys with a good idea and not much else, camped out amongst their servers and pizza boxes in a 2-bedroom Mountain View apartment complex.

(Side story: Barely a year after Netflix got off the ground, Reed Hastings and I flew up to Seattle to meet with Jeff Bezos who was kicking our tires for a possible acquisition.  We got to talking about our respective first monthes of business and I could see Jeff’s face lighting up as he described the bell they had rigged to ring every time an order came in).

Anyway, I’ve got a box full of old Netflix memorabilia that I’ll share with you someday.  But this post is about a particular document from the Dropbox site that I found particularly interesting; It’s the Dropbox’ Y-combinator funding application.

Some of it’s value certainly comes from seeing founder Drew Houston’s background, experience and expectations at this very early stage.

Some of it’s value comes from trying to reverse engineer what particular aspects of the business appealed to Y-combinator; since not only has Dropbox been one of their particular successs, but it is often held up as one of the few exceptions to their “no solo founders” guideline.

But a major part of it’s value comes from seeing the questions they asked.  It’s a great checklist for any early stage company.

Check it: Dropbox Y Combinator Application

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The World is (not really) Flat

I finally took the plunge and bought one of those “great courses” to listen to on my weekly drives up to the Valley.

The “Great Courses” (of course) are those ubiquitously promoted university level courses taught by “some of the country’s best professors” on a tremendously wide variety of topics.  It’s like porn for those of us who love eclectic and ultimately useless information.

They sent me a sample CD with two sample lessons, one on Linguistics and the other from their course on American History.  Way better than expected.  Sufficiently so that I plunked down the $119 dollars for American History and soon had nearly 40 CDs worth of lessons to start absorbing.

In one of the earlier lectures, my professor spent a lot of time exploring motivations for the initial voyages to the new world that ultimately led to the settling of the American colonies, and once again felt compelled to spend class time to debunk the idea that Columbus was trying to prove the earth was not flat.

I couldn’t help rolling my eyes at that, and then not a day or two later found this fascinating site: edge.org in which there is an exhaustive list of scientiic beliefs that have ultimately been shown to be false.

It definitely made me think about what beliefs I hold that may ultimately be disproven.  But then again, isn’t it the nature of an entrepreneur to take on things that everyone else believes to be impossible?

What do you think?  What beliefs did you hold that were ultimately proven false – in business or otherwise.

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The essential presentation primer

Looking back on my years as a student, I have no problem determining which three classes were the best I ever took.

The first two were public speaking and basic composition – both of which I took my Freshman year in college. But the third most valuable class wasn’t taken until years later when I had the opportunity to study with Jerry Weisman, arguably the worlds best presentation coach.

Perhaps even more fortunately, I had the opportunity to do so twice.  The first time was at Borland, when Philippe Kahn decided that he wanted all of his top execs to get this training.  The second time was at PureAtria when Reed was preparing to go on the road for some financial presentation or other (who the hell remember this stuff).

Jerry’s classes were no one or two hour, sit in the back of an auditorium kind of thing – it was a multi-day seminar starting with constructing the content of the pitch, putting together the slide deck, and then learning how to deliver it.  Amazing!

Anyway, I found this fantastic presentation on – what else – how to prepare a fantastic presentation put together by slideshow impressario JesseDee (@jessedee).  For those of you not in a position to spend many thousands of dollars for your own private sessions with Mr. Weissman, this will have to sufice:

The Essential Presentation Primer

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