Wednesday, August 30, 2017

A Startup | Lefsetz Letter

Is like a band.

You need a leader with a vision, and a group of players who come together in furtherance of the sound.

Assuming you want to have a hit.

Most bands never succeed.

And neither do most startups.

Yesterday I went to a WeWork space in Playa Vista. That’s right, there’s a tech scene in L.A. Nowhere near as big as the one in the Bay Area, and that’s a problem, you can staff up easily up north, but down here, you have to convince people to move and give them ownership. That’s right, at the start, everybody’s an owner, all 23 people in attendance. Sure, they’re getting paid, but their future is involved. Imagine if this was the case at a record company. Could you imagine the vibe, how successful it would be? But labels are archaic constructions in a mature business, there hasn’t been any new thinking since the sixties, when they all hired house hippies, although they have gotten the memo on data.

So you’re at the WeWork space. Where the other entrepreneurs reside. Three floors of this building are WeWork spaces. You’ve got your cubicle or more. There are telephone booth-sized spaces for privacy, for phone calls, but on your own phone, and there is collaboration, an exchange of ideas. You see tech is fluid. With constant expansions and contractions, sales. It’s all about the pivot, if you hit a wall and have no success you take a different direction, whereas in music we’ve been taking the same direction all century. Pop and hip-hop. Used to be there was a new sound that wiped out the old every few years. And now you know why music no longer drives the culture, why it’s a second class citizen, either you innovate or you die.

But unlike a label, the startup office is quiet. There are no stereos blaring. But there are parties, relaxation, because when you’re called to do an all-nighter, to meet a deadline, you have to know you can blow off steam.

That’s right, it’s like college. Do you remember college? They didn’t change the date of the test just for you. Life is about showing up and delivering, meeting deadlines, and if you can’t do this there’s no place for you in life, never mind tech.

So the visionary had an idea. Pondered it for more than a minute. The inspiration is important, but so is the execution. The idea is the kernel, if it’s wrong, you’re wasting your time, so you’d better get it right. How many bands were started with a vision? Just ask Glenn Frey. Oops, that’s right, you can’t. But Don Henley will tell you, how on that very first Ronstadt date, in D.C., the night before, Frey laid out his complete vision for the Eagles. They were backup musicians! But before long, they would own one of the two biggest selling albums of all time.

Then comes the money.

In music, it comes from the labels. In startups, it comes from the VCs. And just like in music, you’re giving up action for cash. But just like music, if you win, there’s enough money for everybody.

But unlike music, you don’t have to prove your idea first. But you do have to prove yourself. They only give money to those with experience, with a track record. It’s millions, double-digit in many cases, the VCs are not just throwing the money around, away, this is an investment, this is a bet, they’ve got to get it right.

So then the visionary finds a CTO, Chief Technology Officer. Who can actually build what the visionary sees in his head.

And then the hiring begins.

Everybody gets a brand new laptop, and a big screen to plug it into when they’re in the office. No corners are cut, that would be wrong, since the goal is so big and the money spent is accordingly large.


The assembled multitude loves to code, they love to build things.

That’s what they told me when I asked. You’re just not performing a rote role. You’re depended upon.

But you’ve got to deliver.

Yes, the nerds rule. These same nerds who used to be musicians, who gave up when society got too coarse, when there was more money in tech, and more freedom. Used to be the label was a conduit, today it tells you what to do, no one likes to be told what to do, there’s more freedom in tech.

So it’s exciting, if you’ve got the chops. If you drop out, say school’s stupid, think you can live by your wits as opposed to your education, there’s no place for you.

So the band rehearses for a year or two and then launches.

Does it succeed?

Unlike a band, the startup has to get it right on the very first try. They launch slowly, adjust along the way, but there’s no artist development. Either the visionary had it right or they didn’t.

But if they did…

They kill all comers in their wake.

This is what the establishment doesn’t understand, with its marketing teams and layers of management, guided by consultants with me-too advice. That if someone takes a run at their business by building a better mousetrap, they’re history. It’s like selling landlines in the era of mobiles, your death warrant has been signed.

Now I don’t know how to code. And I’m too old to start over. But if I was young, I’d hitch my wagon to an enterprise and see where it takes me. And the great thing is you don’t only get one ride, failure equals experience, you can get another gig. Youth is not revered. You’re not playing to tweens. And if you get it right, YOU CHANGE THE WORLD!


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