Sam is a CEO coach, interim CEO/CTO/CFO, a Silicon Valley advisor and the author of 21 Secrets of Successful Startups, a book about world-class execution for startups. As a serial entrepreneur, he has been CEO, CTO, or VP Engineering / TechOps for five companies, driving multiple acquisitions. As a hands-on “roll up the sleeves” startup advisor, Sam draws from his 30+ years of successes and failures to train and help entrepreneurs with execution, fundability, fundraising, strategy, product/market fit, product management, finance, operations, legal, talent development and founder wellness.
Elnaz Sarraf, who is a serial entrepreneur with over 15 years of experience in technology, business, sales, and marketing. She is currently the CEO and Founder of ROYBI; an investor backed EdTech company focusing on early childhood education, that recently raised $4.2 million in its seed round. Before starting ROYBI, Elnaz co-founded and led a consumer electronics/IoT company, iBaby, serving as the company’s President.
As an immigrant and female founder, Elnaz has made worthy accomplishments in a short duration living in the US. Honors include being selected as Nasdaq Entrepreneurial Center Milestone Maker 2018, named the Woman of Influence through Silicon Valley Business Journal in 2016 and Entrepreneur of The Year in 2016 in Silicon Valley. She has been a speaker at several conferences such as the Mobile World Congress, ASU GSV Summit, Consumer Technology Association, and more.
Sandra Shpilberg is the Founder and CEO of Adnexi, a disease intelligence platform for the next generation of biopharma treatments.
Prior to this, Sandra was the Founder and CEO of Seeker Health, a breakthrough digital patient finding platform, which accelerates drug development and commercialization for biopharmaceutical companies. Seeker Health was acquired by EVERSANA in September 2018.
She’s the author of New Startup Mindset, a book on her non-traditional founder’s journey and lessons learned starting, building and exiting this company.
She’s a featured contributor at Thrive Global, InsightTimer and Hackernoon.
Daniel Edwards is currently the CEO and Chairman of Transactive, an international financial technology company that provides payment infrastructure software and payment services globally. Under Daniel’s leadership Transactive has successfully launched its software, services over thousand customers, done over $1bn in payments and achieved profitability. Previously Daniel was the Vice President of Finance and Operations at Mobile Gaming Technologies. Mobile Gaming Technologies was the world’s first crypto iGaming platform. Under his leadership Mobile Gaming Technologies became venture backed, scaled international and achieved profitability. He also led Mobile Gaming Technologies through several successful capital raises, raising over $40m for the company. MGT became the first blockchain company in the world to sponsor a major league sports team, Arsenal Football Club from London. Eventually the MGT sold the company to Novomatic, the largest privately held gaming company in the world with over 5bn in revenue per year. Prior to joining Mobile Gaming Technologies, Daniel worked as an Investment Banker at Financial Technology Partners, D.A. Davidson and Wells Fargo / Wachovia. He advised technology companies on mergers and acquisitions, capital raising and strategic corporate development. He has successfully closed over 15 M&A and capital raise transactions. Daniel is also a board member of several technology companies spanning from London to Silicon Valley. He is a financial technology enthusiast and speaks at conferences all around the world about financial technology, blockchain and cryptocurrency. Daniel graduated with a B.S. in Finance & minor in Chemistry from Oregon State University.
Shawn Flynn 0:00
On this week’s episode of the Silicon Valley podcast, we are going back to some of the past episodes where we interviewed some of the biggest names in venture capitalism. We’re taking some of the highlights some of the snippets from these episodes, and we’re compiling it into this episode that we know you’re going to love. Now, some other announcements, redoing a little bit of the website and some other things. And we’re gonna have some announcements for everyone in the coming month. Be prepared, be surprised. But right now, let’s start this week’s episode of the Silicon Valley podcast. Enjoy.
Announcer 0:32
Welcome to the Silicon Valley podcast with your host, Shawn Flynn, who interviews famous entrepreneurs, venture capitalists and leaders in tech, learn their secrets and see tomorrow’s world today.
Shawn Flynn 0:49
So when you’re transitioning out of investment banking to the startup world, I mean, you just mentioned the importance of saving money and having some dry gunpowder when you switched over. I mean, you went from this very nice salary to close to nothing. How are compensations decided amongst you and your co-founders or general the salaries at that first startup you did and talk about that?
Daniel Edwards 1:13
eye opening experience for me, just not having that income, I had actually saved that money and then was able to invest that money in the first startup, a lot of my life savings, or almost all of it, I kind of pushed all the chips into the middle of the table and said, I’m willing to bet on myself. That’s what ended up happening. There are riches to rags story, right, the reverse of rags to riches because I, I went from making a lot of money to making pretty much nothing. For me, it was almost more like rags to rags. So you know, I wasn’t living investment banker’s lifestyle. While I was an investment banker, I wasn’t accustomed to that life and wasn’t needing that life didn’t have those obligations. I didn’t have a car. My apartment was very decent. You know, I wasn’t buying Gucci or Prada. I just wasn’t accustomed to those things. It was easy for me not to live a lifestyle that was lesser than I was accustomed to. I just continued to save my money. I mean, I think a lot of people look my life and kind of laughed at it. When I moved back to San Francisco. I lived in something called an SRO, which is a single residency occupant pretty much looked like a decommissioned hotel six, it was very humble. And I stayed there for a long time, I actually only recently moved out of that apartment. My mindset was still that of the stories I had heard about Mark Cuban and Elon Musk, and others to where it’s like, don’t focus on right now, don’t live your best life right now. dedicate your time and dedicate your money, and all your focus and effort and be obsessed about becoming something that you want to become. And so that’s what I had done. I you know, Mark Cuban talks about basically not having things in his life that would distract him, I was very much along the same kind of line, I didn’t have a TV in my apartment, which is kind of crazy. I didn’t have a video game system I; I hadn’t had these things that I was kind of accustomed to growing up or wanted or needed her thought I did. By putting myself in those situations, there was nothing to do what work is a hell maybe inside its own scape. For me, it was actually kind of liberating. You know, it was like I only had one focus. And that focus was to build, I did nothing but build. Fast forward. Now I’ve actually got a nice place. And I am living to you know, learning to live a little bit more like a normal human. It was I definitely was very, very focused. I wasn’t making anything, the startup world, I was more focused on others. And I was myself. And I think that a good leader needs to take care of the pack before they take care of themselves.
Shawn Flynn 3:38
So tell me about that hack. How did you decide who got to join? How to kick them out? If they weren’t working? What was the fire and hire experience? Like for your startup?
Daniel Edwards 3:50
Networking was the number one key, right? You know, you and I run into each other all over the valley. It’s funny how many people Shawn knows he knows everybody. Yeah, I talk to people and they’re like, Oh, yeah, Sean, you know, Sean, I know, Sean, that’s because you’re such a great networker. And I’d like to think that I’m okay at it. And I’m always striving to get better. It’s incredible to me how small the world is. And I think that you never know, who’s going to swing back around in your life at any given point, and what you could do with them. And so I think for me, it was just networking like crazy, right? Always going out and meeting people. Even when I was in investment banking. I was joining the boards of companies, I was advising companies, I was trying to do anything I could to just get in front of people I know you always kind of used to, you know, be like, what are you doing here when I’d show up to a Bay Angels or any of the other investor networking events. And it was just me trying to learn and to also provide value if I could, you know, some of the first companies that I started being a board member or being an advisory board member to they needed finance help or they needed, model building help or they needed help raising money. And those were things that I could provide offering that you know, that service to be able to learn from them. The product side or building an organizing a company operation, all of these things. And so, Gary Vaynerchuk is he has a book, it’s good, I’d recommend it, give, give or take, right? It’s kind of the philosophy of it. It’s all about giving, and then eventually asking for something that was kind of my philosophy going into this is like, you never meet somebody. And their first meeting is like, Hey, can you do this for me? Because the answer is gonna be no, you know, it’s you want them to see. And this is good for venture capital, too. You want them to see a story, right? You don’t want them to see a snapshot in time, if they see a snapshot in time of one thing you’ve done, they have nothing to really put that against in any other knowings of you. But if you show them a whole story, that’s more like a movie instead of a pitcher. It can be like, oh, wow, Daniel was doing this. And now he’s here. And they’re like, wow, okay, he does what he says he does, you know, he can do what he says he does. That was I think, you know, something that was important, to me is just getting out of networking. The biggest thing, though, is in, you have all these opportunities flying at you, and all these people, and then you need to qualify. So now you got your leads, how do you qualify them. And for me, one of the biggest things I stand by ancient agricultural, or you can find it in the Bible is in Second Corinthians, it talks about being equally yoked. And what that means is back in the day, when an oxen would plow a field, there was a yoke that would attach one oxen to the other. And that you would then allow those oxen to drive in unison, and plow the field. But if the yoke wasn’t as tight as it was on one of the oxen, or it was misaligned, or something, the job wasn’t done correctly. And for me, in any relationship that I get into, I always think about the equally yoked aspect for starting a company, that can mean a lot of things, right? Or your work ethics equally, you know, is this person going to work as hard as you? What about age, you know, like, are they the same age as you are in a point in their life to where they have to go home and take care of a family, and you just got out of college? Right? Because those are two very different things. I can tell you, there’s no worse feeling in the world than being that person sitting alone in the office, trying to plow the company forward trying to move the mission forward. And no one else is with you. And that’s unequally yoked, I think, also fortitude, you know, like, what happens when the going gets tough, you know, is this person built like you, you know, if you have a hardship and you’re running out of money for your startup, are they going to be able to have the iron stomach that you have to be able to get through it to not pay take a paycheck, maybe this person is in debt. And if they’re in debt, and you’re not, and they need that paycheck, and you don’t, you can actually, that’s an inquiry to go into any relationship, whether it’s, you know, romantic, or, you know, whether it’s a business relationship, or even a friendship, it just makes sure that you’re equally yoked, because if you’re not somebody who’s always going to be giving, someone’s always going to be taking, and you want that unison partnership to where it’s like, give and take together in unison. So that’s kind of the things I think about when I think about team members and who do I want on my team, you know, I want somebody that’s equally yoked.
Shawn Flynn 8:03
And then other than hiring, or finding those team members that are equally yoked, everyone’s working together in unison to solve these problems. What were some of the early struggles that you came across?
Daniel Edwards 8:15
You probably have stories. And I know I have a ton of stories about getting into relationships where you were unequal yoke, that is the number one burden. And people say that all the time, right? Like why did your startup fail, our product didn’t hit or you know, financials weren’t there or something? Probably not the case is probably stems back to being unequally yoked with the founding team, you can almost do anything, if you’re on the same page as someone else. And that’s at least what I’ve learned and experienced, or you’re on the same page to call it quits. financials are a huge thing, right? It’s very interesting to always listen to somebody talk about their company, and how what do they say, first, we’ve raised, you know, 100 million in venture capital money, we have 2 billion in revenue, or you know, whatever the number is, right? If they don’t talk about their product, and they don’t talk about their customer experience and what they’re doing for the customer, it’s probably a red flag. When I go in, I’m either investing in something, or joining a team, you know, whether it’s board member, or full time, I want to hear whoever is the visionary of the product, talk about it. And if it’s all about financials, if it’s all like, basically Wall Street mumbo jumbo, right, doing this, and we’ve grown this, and we’ve done that, and they’re not talking about their product, they’re not talking about who they’re servicing, they’re not talking about their customers are just so excited about the product that they can’t stop talking about it. It’s kind of a red flag. Once you get past that point. And you know, the team is equally yoked, you’re driven on a mission to make a good product and you have a good product, then I also think that it’s been about aesthetics. So I’ve been in companies to where the product was phenomenal. You know, we had a great software stack or we had a great product but it was all the back end was really good and really strong and the front end wasn’t so communist. Ford’s car engine in a junkyard car body. And if you look at a junkyard car body, and you’re like, wow, that car looks really rusted, you know, the seats are all ripped up looks horrible, you know, looks homeless person lives in there something I don’t want anything to do with that. You go and open up the hood and it’s got a Ferrari engine. Okay, well, I’ve never would have guessed that. And there’s so many startups that have a junkyard body and a Ferrari engine. And it’s because they’re really good at building the API, they’re really good at building the core software, they don’t know how to wrap it, you know, they don’t know how to put it in a box in an in container, to where it’s like, Wow, that’s a Ferrari. Right. And it’s got a Ferrari engine. And so I think for me, you know, one of the biggest struggles that I had is working with technology innovators, that didn’t understand that we can get into stories of competitors and things that I’ve had happen to me later on. But you know, that that’s a huge thing is the aesthetics of the product, we’re very visual culture, you know, people are all about aesthetics and visual appeal. And if you’re not just looking at that, and in giving that person, the visual appeal that makes them question to say, I want more, I want to know more, then you’re not going to get past the first step. So that was really difficult. I think also, sales team here in Silicon Valley, think people are really good at building things, right. But they’re really bad at selling things. It almost takes a different kind of person come in and sell things. And a lot of the times the salesperson isn’t equally yoked with the technology person, you figure out very different goals, very different personalities, just very different mission, that has been something that’s been really difficult for me, you know, is like, how do you balance between being an innovator, and entrepreneur, but also selling. And so for me, personally, that’s been rolling up my sleeves, you know, I’m not a professional salesperson. But I can tell you in the startup that we have now, I’ve made almost every sale for us. And at least in the early days, now there ventures I’ve done, you know, I was the person who won the biggest clients who went out and met those people. And I did it the same way that I got that internship, you know, I would just cold call, this is what I have to offer you, I’d love to you know, have some of your time, I’ll give you this for free. I’ll spend some time with you and see if I can help you not getting not being like, Oh, I’m the finance guy, or I’m the operations person or I’m you know, whatever, right, step outside of that box and wear all those hats. You know, it’s kind of a joke in Silicon Valley, that we always say I’m wearing many hats. But not a lot of people actually are, you know, it’s very rare to find somebody who’s actually making the sales on the product meetings, you know, innovating on the product side, who’s spending time with the technology team, who’s spending time with finance in the operations team. And who knows it all right. Kevin O’Leary on Shark Tank will always say what’s your numbers? Right, you know, your business, the thing that I find is people don’t they know one aspect of their business, but they don’t know how to get out and learn the other aspects. And I don’t know if it’s whether they think they can, or they just they don’t the effort in and what I’ve, I’ve been in experiences to where they don’t put the effort in, you know, you need to get out of that mind frame, frame of mind and just kind of say, I can do anything, you know, that I put time and effort in?
Shawn Flynn 13:09
And how many meetings do you say you went to before you got that first investor that said, you know, I’m interested in write a check. He may have not written a check, but that first validation of Yeah, I think you got something.
Elnaz Sarraf 13:22
Oh, my God. That’s a that’s an interesting question. Because I really don’t know how many but definitely over 100 meetings, I’m not kidding. Over at least 500 emails, and so many rejections. And even with our first investor, when she was evaluating the company, one thing that I was so excited is because she’s a female, very successful female in Silicon Valley, I was really excited to make sure that she has a believing in Roy beam. But even at the last minute, I wasn’t even sure it’s gonna happen. So it was quite challenging
Shawn Flynn 14:05
for that first investor, what type of valuation Do you give your company? Are you saying, you know, you’re the investor, just tell me what you want? Or do you have an idea going into that meeting?
Elnaz Sarraf 14:16
You know, it varies depending on the companies. Of course, we had a number in mind generally, that’s not what is going to happen. The reality is always really different. But I think it’s just the conversation between investors founders, find the right number. One thing I want to say is don’t get stuck with the valuation, because in the beginning is really hard to put a value on a company. Of course, if you can get a deal at no cap is amazing. What do you mean by no cap? means no valuation. So if you can raise on a safe agreement without evaluation that will Be Your best bet. But it’s really hard to do it. But I’d say don’t get stuck on it move forward. Because at the end of the day, the valuation you can get in the future, it’s, it’s more important get your product out. And it’s quality over quantity.
Shawn Flynn 15:19
Do you say that first pre seed round may not be the best terms, but you got to do it anyway to get to that a round where you’d have more leverage? Is that kind of it?
Elnaz Sarraf 15:29
Yes, of course, if you have that ability to finance the company on to series A and get some revenue, that’s the best case scenario. But it’s not the case with most startups, because it’s very costly these days, you need to really think about your options between the offers that you have, make the right decision with the best option, it’s not going to be the best, and I’m sure next rounds, a lot of people are gonna tell you, why did you make this decision, but be confident that the decision you make at that moment probably is the best for the company?
Shawn Flynn 16:05
So 500 emails, 100 meetings face to face? How many must you go without any money?
Elnaz Sarraf 16:12
The best thing I can say is whatever you think, add another six months, and personally, I I’d say two times my own bank account almost went to zero. I’ve been really lucky to have amazing friends and supporters that they said, Oh, okay, here is a little bit of money more for Ward’s you’re on it on something really amazing. Build it, and everything is gonna be okay. And it’s exactly that’s what happened. One or two weeks after we got investment, things move forward, it was very hard, but I say for one year, have savings. And consider whatever you think the expenses are going to be more is going to take more time than you think.
Shawn Flynn 16:59
And then when you finally got that investment, one, how did it feel to what was the team’s feedback when they heard about it. And I kind of want you to say the number that
Elnaz Sarraf 17:10
it was July, we announced and close 4.2 million in our seed round, then at that point, it was super, super exciting, because we didn’t even have the product. So purely the investors invested in the company and the vision skills off the team. I remember, you know, I still can’t feel the same. And I every time I talk about it, I get so excited. Because it’s a significant amount of capital at this stage that we were everybody was so excited. I was stressed out overwhelmed. Super excited. I was also scared, because without much capital and the trust that investors are putting in you also comes a lot of responsibilities. And but I’d say was the best thing that happened. And every time I think about it, I really feel excited. The time that I sent a message to our team called my co-founder. He was like almost jumping up and down. It was really, really amazing.
Shawn Flynn 18:15
That sounds more like an A round than a pre seed round. Or a company’s already have traction already have customers who came up with that number? Did you propose it to the investors? Or did they propose it going? This is how much we think you need? What was the conversations like?
Elnaz Sarraf 18:31
It’s interesting, because originally, we were just thinking about raising 1 million for our seed round. And then we were thinking to go to like, let’s say 5 million in our series A, which made sense at that point, because we are a hardware company. So we need a lot more capital than just a software company. It’s just that we were getting a lot of traction. At that point. We were featured on CNN, he partnered with Alibaba, you know, we were getting so many things, a lot of awards traction. So the investors got so excited and said, Hey, you need this capital anyways. And we have all the means to provide this capital to this stage. Instead of wasting your time, you know, going for another round, why not have the steel together? And terms worked out both sides were happy. And that’s how it’s happened.
Shawn Flynn 19:25
Tell me about some of these awards you want. And also, how long is this money expected to last?
Elnaz Sarraf 19:31
First divorce. We want so many of them I can barely remember by last week. For example, CNBC named Roy be one of the most promising startups in the world to watch in 2019. Which is amazing because there are only 100 startups on that list around the world. And Roy B is one of them. And again, the product is not even on the market. So you can imagine how exciting it is. We were named fast Companies world changing idea in 2019. We won both sides awarding take for good. We were one of the winners nationwide, and many more. But also, it was very exciting. And what is the second question?
Shawn Flynn 20:16
How long is this money going to last you? And actually, I’ll just follow up with another question there. What are you going to do in that timeframe? What are the milestones that are expected to be made?
Elnaz Sarraf 20:26
So the money we would expect to last easily one year, and the next milestones would be to make sure we have a good product in people’s hands because everybody’s so excited. It would be to focus on sales marketing, making the product better launched in the US and Canada. And then we are launching also in UAE. So we want to expand in Middle East for sure. Expand the countries. That would be the plan so far.
Shawn Flynn 20:54
Talk about that expansion plan, because most companies I talked to they want to go north America than Europe, not UAE.
Elnaz Sarraf 21:02
For us, considering we are a language learning company, as you can imagine, there is a lot of demand in English language in certain regions and countries and Middle East is definitely one of it. And in Middle East, they also really like products that come out of Silicon Valley. So they got so excited. We are launching into stores, they’re called Sharaf DG, they’re like Best Buy in in us. They’re very big and they want to launch Ruby into stores and for their children to learn English language.
Shawn Flynn 21:39
How important is it as a startup to position yourself? What insights what advice or thoughts can you share on this?
Sandra Shpilberg 21:47
This is super important, I think to position the company because many times when we see the success stories, right like Facebook, the Googles the zooms now, we think that they work for everybody, right that they provide their service, or everybody that is out there, right all 8 million people in the globe. That is not true, especially when you think about how each one of these companies begins. Even Facebook began on college campuses targeting a specific age demographic, targeting a specific behavioral profile, it’s very important early on to find that group of consumers that segment that acts the same way and is most likely to adopt the product or service as fast as possible. All companies should do that, especially in the beginning. Once you start to grow, you can say well, okay, like for secret health, we were really well positioned for emerging biopharmaceutical companies working in rare diseases, I’m working in cancer. Well, now that we’re growing, we can grow, we can go after Pfizer, we can go after those others. But it’s very important in the beginning to get traction, quick traction in a group of customers that really needs what you are offering today.
Shawn Flynn 22:57
Now many startups, I mean, they want that funding, so they can go out and hire as many people as possible they want to grow a team. In fact, a lot of people brag about AI. Now, you know, I’m going to increase my company by 20 employees next quarter. And we’ll have 100 employees by the end of the year, it seems like you did the exact opposite approach. You tried to keep it as small as possible. In fact, I remember hearing, you’re hiring blank slates. Now. Can you talk to us and give us a little insight of your hiring. And once again, do the opposite of everyone and to sort of grow as fast as possible, keep it as small. And as I guess, family as you did?
Sandra Shpilberg 23:37
Let’s start with blank slate, blank slate are these individuals that perhaps do not have all the experience that is required to take on the job, but they’re smart, they can learn fast, and they believe in the mission. And they think that working at this company is a good thing to do with their limited time on this planet, right? That’s what I consider a blank slate. Probably the opposite of a blank slate is an adult in the room, which is why a lot of the startups at some point tend to hire very expensive managers, that leaders that are going to know what they’re doing, because they probably have done it before. Because I was bootstrapping the company. I certainly didn’t have money to hire adults in the front. But I didn’t want them necessarily either. At that stage in the company, I found that the blank slates these people that were really hungry to learn were really excellent growing with the business. And to some extent, what we were doing at secret health wasn’t really being done anywhere else. So it wasn’t like I could find I could write a job description that said, I need this prior experience and the prior experience would exist. They really didn’t exist. In the day blank slates was what it was all about. Now, let’s go to the numbers. Every time I would go to these sort of like startup or founder type of meetups. People would always ask me three questions. How much money did you raise? Zero was my answer. Who did you raise them from? No one. And then how many employees do you have as few as possible? There’s sort of Like this sense that more employees mean more traction, there is a perspective that if you are building a company, and now you have all these seats filled that now the company can move much faster traction in the market. But it’s not always right, I was trying to build here a revenue generating profitable company. So for me, it was very important to keep the team small, to give them really broad jobs, jobs, that would make them really excited that we’re learning so many different things in this job that they could take on, of course, to their next step in their career. That’s really what I was looking for. So that’s why the team was small.
Shawn Flynn 25:37
And you also talked about the due diligence being very demanding for being acquired. Can you talk a little bit about what happened in that due diligence process?
Sandra Shpilberg 25:46
Yes, after the letter of intent get signed, generally, the companies will begin their due diligence workflows. And generally due diligence is in both directions, the acquirer will do a very extensive search and audit, basically, of the acquiree. But then the acquirer also gets to do some due diligence on the acquirer to make sure let’s say that they have the cash that they’re talking about to acquire your company, and so forth, I’ll speak mostly about what I had to present to the acquire, think of these workflows is a complete audit of your company, anything that’s pretty much ever happened to the company that has a signature somewhere needs to be presented back for review, there is a way to prepare for this from the beginning, five years into the company is sort of too late to start organizing all of the information that is needed for the due diligence. But if we were doing it, as we’re going along and building the company, then it’s much easier choir is going to be looking for all the formation information, right, the articles of incorporation, anything that had to do with stock issuances, with directors, with minutes, all of those things, they’re going to be looking at the technology itself, if you are selling technology, and auditing that and seeing if they can make can continue to grow and maintain it, they’re going to be looking at every contract that the company has ever engaged in, they’re going to be looking at every employee, they’re going to be looking at every invoice that has ever been sent out of the company and into the company. Basically, bottom line for founders is that it’s really important to be organized, right? This information needs to be organized from the beginning. It’s really difficult to go back five years, even three years, and then put all this together. So from the beginning, organize your folders. You know, in my book, you have the list of what you need to keep and have these folders set up already so that when a data room, right, get set up for your due diligence, you I just simply moving folders over right? Wouldn’t that be a dream?
Shawn Flynn 27:51
So wait, Sam, you’re a startup CEO coach, and this is coming to my mind right now. While we’re talking about executing and planning a lot of startups with mentors, when it’s a simple problem, no big issue, they faced it before they have an answer for it. But when it gets a little bit more complicated, a little bit more superficial problem, things just break down. Why is it when the problem gets tough, the mentor and may not be there? Why is it that complex problems are a challenge.
Sam Wong 28:24
I faced this myself, I was a first time CEO with startup number four. And quite honestly, I didn’t really know what I was doing. So I was learning for the first time and I made lots of mistakes. I ran into tons of problems. And my friends, I had a very strong support network tried to help me a ton. I got introduced to various advisors, etc. Many of those conversations went something like me about your problems. Tell me what you need. they’d ask one or two questions, it would go five minutes, and then I proceed to get 30 to 60 minutes with a feedback. The challenge was these guys didn’t have the chance to prepare, nor did they ask for any preparation in advance. They didn’t really dig deep. So some of my problems weren’t simple. The soundbite advice was not something that was going to solve it. What made the difference for me was when I ran into another person who was very different in his approach, we spent two hours together talking and he asked obviously 1520 questions, and we went back and forth. After the two hours we’re done, Then, and only then did he start giving advice. And it made a huge difference because he understand the detail, then I could actually work with him together. And what I found was that the soundbite advice I’d gotten was pretty much worthless because either I had already tried it. It wasn’t applicable in our situation, or there was something else wrong with it. When I sat with this other mentor who spent the time to really learn what was going on. That’s what made the difference. And that’s what I really tried to do because many startup mentors today spend just five hours a month with their startup If it’s only five hours a month, you might be able to do a meeting every other week. And then some follow up outside of the meeting. I think relationship by itself limits how much those mentors can do. They can be very good at what they do. But the structure of the relationship I think, is flawed in many situations. If you have an a phenomenally great founder, who’d you just tell him climb Mount Everest, and they figure it out? They can do it. rate. That’s sufficient. But I find that most founders need a little bit more help. And just by Mount Everest, stay safe, bring one close.
Shawn Flynn 30:34
Speaking of problems that founders might run into that first question, we talked about your five companies that three were successful in two wars that had problems. We never really dived into those two that weren’t successful. Can we circle back? And can you go into a little bit more detail about the problems that as a founder or the team might have come across in those startups and what you learned from it?
Sam Wong 30:58
I think one key lesson was from startup number two, we had a technology platform that allowed two enterprise applications to integrate very easily. It was an early version of what Zapier does today. We were based on web services technology, and UD di, it was the rage of the day back in the 2000 timeframe. But for whatever reason, we had chosen not to highlight that, in fact, we downplayed that, because I think some of the logic was we didn’t want Microsoft to crush us, because that’s what they were doing. So we went and took this under the radar marketing approach. And it ended up not working out. There was some problems where when we saw one of our competitors make some of the same decisions. We went and said, Hey, they’re doing that it we must be on the right path. Problem was both of us were lost. Okay, so they shut down. And we ended up shutting down. And the sad thing was, is this great technology, one of the largest companies in the space B EA acquired our competitor company named Ross game for $30 million. Unfortunately, cross game had no shipping product, no customers, and a lawsuit pending with Microsoft because they had tons of Microsoft employees. Ba was local here in the Bay Area and cross game was in Seattle. So they also had a distance issue in integrating the companies. We were local, we had a shipping product, we had revenue, we had no lawsuit, and we were right down the street. But since we didn’t really highlight that we were in this space, this company didn’t think of us as potential acquisition candidates. So we made a mistake in the marketing approach. I think in addition, I would say experience matters. There was one startup that had four Harvard grads, including three that were Harvard MBAs, one MIT grad to Stanford folks. But almost everybody, including myself was early in career. These were folks who with a little time and a little seasoning would be phenomenal contributors, and many of them have become that. Many have gone on to be VPS at name brand startups. That was only my second time as a VP, I thought I knew what I was doing. But now looking back as I didn’t, I still had a lot to learn. So the experience matters, because the talent that you have encapsulate that experience, the talent again, matters. And we had a number of startups, not just this one that had some talent problems, was one startup where we had a techie who go back, there’s a couple situations. One was a techie one was a sales guy, and one was a sales executive. For the situation with the techie, he was charged with running the database, and he was still learning his trade. And he just wasn’t a good fit. HR was very hesitant to part ways because there’s the attorney said, hey, there’s tons of risk. Well, we built a case that says, hey, this is not a good fit. It wasn’t very objective. It wasn’t personal. We weren’t mean to the guy, we let the guy down, gently gave him a package took care of them, made sure he had health care coverage for his family. And we parted ways. That was the right thing to do, because the just wasn’t a good fit. There was another situation where we had a sales guy who wasn’t passing muster. When we let him go, our sales went up, even though we were down one player. So because everybody was taking time to help this guy out, they weren’t doing their own jobs. And there was another situation where we had a sales executive. That wasn’t a good fit. He had some good talent, but not in a startup space because he didn’t have startup skills. He had big company skills. The senior team was afraid of letting them go. Because we were in the middle of fundraising. They thought it would look bad if we lost a VP level person while we’re fundraising. I challenged that notion because, yes, we lost a guy. But if any, anybody out there investors ask, we say, well, we had a person who wasn’t a good fit. And we made the super difficult decision to amicably part ways. Being a CEO is All about being willing to make the hard decisions in life, not run from them. Yes, there would have been some eyebrows raised, some of the investors say, Hey, what happened? The clear and truthful explanation was, he wasn’t a good fit, we decided to amicably part ways, he was the highest paid person in the company. Alright, so that was a drain on resources as well. But when you realize, okay, this isn’t good, I’m going to clean up my own mess. Okay, those are the hard decisions that comes into play. Because ultimately, these people who are playing the roles, their judgment matters. I can’t tell you how many times key decisions were made in various startups or consulting projects that ended up crippling the company. If you make enough crippling decisions, a company will die. If you make enough good decisions, the company has a strong chance of success. And those decisions are made by the people and the judgment that these people have.
Shawn Flynn 35:58
So you had made the comment. And it really resonated with me, the team of Harvard MBAs, Stanford, MBA, all these people, they’re early in your career. And on your website, when you go to the homepage, it does say in that video, it takes more than a single success to really learn the ropes in the startup space. Now, can you dive more into that sentence? that comment?
Sam Wong 36:23
I absolutely believe it because there are many situations where somebody has some good fortune and has a phenomenal exit. There are stories of many founders, who because they got a billion dollar exits, suddenly our celebrity, but they’ve done it one time, and only one time, there was an instance where a founder had two successful exits a company number three and number four ended up dying horribly, because he had only known success. He didn’t know he didn’t taste the mistakes and hadn’t had an opportunity to learn from them. So there was another situation where a company got a big fat exit, and he got a lot of visibility, because Congratulations, you got a billion dollar exit. But that founders second venture, I heard about what they were doing, I immediately thought that’s not going to work. Because they had this problem, this problem, this problem, this problem. But six months later, they had this major pivot laid off half their staff, and they went in a completely different direction. It’s not just about what I would say, being lucky one time, because a lot of times, it’s really, maybe you just happen to buy the right stock and your portfolio goes through the roof. But can you do that, especially in a bear market, and not just in a bull market? Those are the things that I think it matters a lot when you’ve lost money, and you realize, Oh, God, don’t do that again. I certainly made a ton of those mistakes. And you know, my checkbooks chosen as well.
Shawn Flynn 37:48
Now, you just mentioned something about someone having a billion dollar exit, but then their third or fourth company maybe not doing so good. Well, I mean, what I travel outside of Silicon Valley, and I tell people I’m from here, I work in tech, people just automatically assume it’s all glory. Do you have any experience that you can share that maybe to elaborate on that, that maybe what people hear in the news and reality, maybe aren’t really as aligned as some people might think?
Sam Wong 38:17
Yeah, it’s the sad truth of the matter is, even though I love being in the startup space, it’s actually very, very hard and pretty risky is 95% of startups either fail or dramatically Miss expectations. There is actually an analysis done. In fact, we could do the simple math ourselves. The average salary for a senior staff engineer here in the Bay Area, according to LinkedIn survey is $194,000. So it’s just under 200. k, in five year’s time, if you were a at that level, you’ll get a million dollars in salary just from doing a decent job and not getting fired. Well, a lot of people chase that carrot on the end of the stick, and they think that Ooh, if I left my job, I can become a startup success. bazillionaire when the math really doesn’t demonstrate that you actually have to be very lucky. And the moons almost have to align. And you have to have just the right team to execute Well, the reality is that startups are hard. And I know that when I was doing startup number four, again, I was a first time CEO, I was pouring all sorts of my own time, energy and money, because it felt like every month I had to get a pint of blood and a pound of flesh. I remember one time where we had a situation. We had a customer project where customer just didn’t pay us, they owed us a quarter million dollars. They just didn’t pay us. There were no complaints. There were no issues. They were just growing so fast that they changed accounting systems lost our bill and it took months for us for them to finally pay us. Five months later, we finally got our check. So that really hits you when you need that quarter million dollars to make payroll there. Another situation where I think I talked about this situation earlier where we were deploying firewalls all across the globe, there was a situation where that project Nash ran into some problems, some of its client issues, some of it are issues, I remember, we were trying to deploy some gear into Mexico. And we stripped it down there, but the recipient refused to sign for it. FedEx shows up at the destination, here’s your packages, but the recipient one sided because it had some export paperwork he wasn’t familiar with. So we refuse to sign it and the shipment didn’t get delivered. The client blamed me, because I was the guy who shipped it, when I could easily point the fingers and whatever, it didn’t matter who was right or wrong. The problem was, the gear wasn’t there, the deployment was delayed. In the top of running the company, I actually had to bend over backwards. That’s like I had a second 40 hour a week job. And the client was threatening to sue us. I had personally guaranteed the finances of the company. So a lot of the bank agreements I’d signed, if the company went down, I would lose my house, quite likely. Okay, so my stress level is through the roof. And it was really challenging. I remember what it was like, because in order to solve that problem, I had to call the US consulate in Mexico. And the consulate happened to have a staffer there, I don’t even remember his name, a guy dropped everything to help me. He found a friend who ran a company that did copiers. And he said, Okay, this guy will sign for it. So just pay him. So I wired the guy $2,000, he sends a van over to FedEx signs for the paperwork, drives the gear across to the data center across the town, drops it off, and then Problem solved. He makes $2,000 for about an hour’s worth of driving. But in order to get to that point, I mean, I had no idea that us constantly even had this type of services in the Department of State. Thank you so much, you saved my bacon on that project. Now there are other problems I still had to go solve. Those are things where I was fretting like crazy, because I thought we were gonna lose my house, and my kids would not have a place to live. Those are challenges. I mean, I tell you, my wife and I, she was concerned. And there’s a lot of times we didn’t see things eye to eye. Those are the realities of what happens. And thankfully, we had a strong support network who helped us we got marriage counseling together. But if we didn’t have that, I’m not sure. Honestly, I’m not sure I’d be married. And sadly, those are decisions that have a much broader impact. I happen to know a number of founders whose wives did leave them. And I can tell you this much. You can have lots of jobs in life, you should only have one family.
Announcer 42:41
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