Episode 94: Surviving a Startup with Captain Hoff – Transcript
Rennie Gabriel 00:09
Hi folks, welcome to Episode 94 of the Wealth On Any Income Podcast. This is where we talk about money tips, techniques, attitudes, information and provide inspiration around your business and your money. I'm your host, Rennie Gabriel. In past episodes, we spoke about how to understand the numbers from your business, how to measure the level of pleasure based on where you spend your money, how to track your money in 5 - 10 seconds, what determines how close you are to Complete Financial Choice®, and how to run your business without being in your business. And last week, we had Doug Sandler, who taught me how to do a podcast and get over 4600 downloads. Doug has 3,500,000 downloads of his podcast. Today we have as our guest, Steve Hoffman. Steve, also known as Captain Hoff, is the Chairman and CEO of Founders Space, a global innovation hub for entrepreneurs, corporations and investors, with over 50 partners in 22 countries. Steve is also a venture investor, founder of three venture-backed and two bootstrapped startups, and the author of several award winning books, including, Surviving a Startup, published by HarperCollins - that I probably should have read before becoming an angel investor. In addition, Steve Hoffman served on the Board of Governors of the New Media Council, and was a founding member of the Academy of Television's Interactive Media Group. Steve, welcome to the Wealth On Any Income Podcast.
Steve Hoffman 01:51
Rennie, it's fantastic to be here.
Rennie Gabriel 01:54
Thank you. Now, based on your bio, it sounds like you've been busy. Oh, and now you can add my podcast to your bio.
Steve Hoffman 02:02
Rennie Gabriel 02:04
But first, tell me why you're known as Captain Hoff?
Steve Hoffman 02:09
Captain Hoff is my gamer handle. So I'm a big gamer. It's been my gamer handle. And now it's what they call me. I'm captain of the team, captain of Founders Space. I work with, you know, hundreds of startups around the world- and I lead them and their businesses and help them break through.
Rennie Gabriel 02:29
Great, well, excuse me while I was typing "gamer handle" next to that. So rather than having to listen to it I can read the show notes. Now, it sounds like, you know, obviously you fund, mentor and educate entrepreneurs. But why?
Steve Hoffman 02:47
Because I love it. Like every entrepreneur has a new challenge. Every business is different. So when I go deep on a business, I am teaching the entrepreneur what I know, from my personal experience - running venture funded startups, from my experience as an investor. But I'm also learning from that entrepreneur - what their business is like, the unique problems they face, and together we're solving that puzzle.
Rennie Gabriel 03:15
Terrific. It sounds like, obviously, the people you're working with end up being empowered.
Steve Hoffman 03:21
I hope to empower them. You know, being an entrepreneur is tough. It's really hard. Most startups fail. The majority of startups don't make it. So the odds are against you from the beginning. But if you know the right things, and you can plot the right course, you can up your odds dramatically.
Rennie Gabriel 03:39
Oh, absolutely. There was a book that I read called, The Disciplined Entrepreneur, by a professor from MIT, his students, well, generally, I think startups get, or 5 - 10% of the startups get funding. His students, they were getting... 50% of his students were getting funded.
Steve Hoffman 04:00
Yeah, they also went to MIT, you have to remember. They have an advantage there.
Rennie Gabriel 04:06
Yeah. Well, I think it really had to do with the 26-step process he took them through as well.
Steve Hoffman 04:13
I'm sure that helped.
Rennie Gabriel 04:14
Yeah, I try and lead by example. And I donate 100% of the profits from my online work and books and stuff to charity. What's a cause or charity that's important to you that you support?
Steve Hoffman 04:27
So I want to help, and I know you're already helping this because we discussed it. I want to help stop human trafficking. There are 40 million people enslaved around the world today, more people than during our dark period of our history when we had slaves in America. And we aren't doing enough to recognize this problem or stop it. It shouldn't be happening. We can stop it but we need people mobilized.
Rennie Gabriel 04:56
Yes. And yeah, it's hard to fathom how many people are in that situation.
Steve Hoffman 05:03
It's a horrible situation.
Rennie Gabriel 05:05
Steve Hoffman 05:06
It's like just God-awful. I mean, imagine being a slave today. It's so brutal.
Rennie Gabriel 05:14
Yeah. And yeah, because I donate to a similar charity called CAST, which stands for Coalition to Abolish Slavery and Trafficking. And a lot of, we're talking about sex slaves as well.
Steve Hoffman 05:25
Yes. Yeah. It's, you can imagine, it's just absolutely horrific. So, you know, donating to CAST is, would be wonderful.
Rennie Gabriel 05:36
Yeah, or, you know, Polaris or whatever.
Steve Hoffman 05:39
Yeah, the Polaris group that I recommended.
Rennie Gabriel 05:41
Exactly. So well, let's talk a little bit about business. My guess is that your target market would be entrepreneurs, business owners, and executives, right?
Steve Hoffman 05:51
Rennie Gabriel 05:53
Okay, well, let's talk about what your biggest failure was, whether it was personal or business.
Steve Hoffman 06:00
So my biggest failure, I have had lots of different challenges in my life, but my biggest failure - at one point, and I'm not going to talk about all the different ones, because all of us face failures.
Rennie Gabriel 06:14
Steve Hoffman 06:14
But at one point, my company, one of my companies, we were developing a product, and it literally wasn't gaining traction, meaning the users would come into the product, and they would leave, and they would come in, and they would leave. And when they came in, they thought it was amazing. And we were getting all this great feedback, but then they would just disappear. And they wouldn't come back. And we couldn't figure it out. And I kept thinking, if I add one more feature, if I change one more thing, if I just improve this, if I just improve that, I will transform this product into a success. Well, I'll tell you what, we wasted close to 9 months, going - iterating -on this product over and over and over, and it made no difference. You know what I say? If the core of a product doesn't work, it doesn't work. It doesn't matter how many extra features, how many tweaks you make, whatever it is, if that core value you're giving somebody is something that doesn't keep them coming back, then it doesn't work. You're just adding features on a bad product. And I would have been better off to recognize that in month three, and just cut it right there, take my losses and move on.
Rennie Gabriel 07:29
Exactly. So what would you say was your biggest insight from that failure? Was it just that the core business - the core function - has to work or?
Steve Hoffman 07:41
Whatever... you have to first isolate the core value. What is, what is the thing that you're giving your customers that they can't get anywhere else. And if that thing, in itself, without anything extra, you know, the raw crude, just the core of that isn't compelling, then it doesn't matter how much lipstick you add to that pig, it is still an ugly pig. It isn't going to change it. You can add a lot of frosting to the cake, it's only going to make the cake taste worse, if the cake isn't good - it doesn't matter. So that that was my insight. And then the long-term strategic insight was that most startups fail, not because they try too many things, but because they stick with one thing too long that isn't working, because they don't want to admit it.
Rennie Gabriel 08:26
Yeah. Yeah, that makes sense. It's like, you know, they're like a child who gets into trouble, but it's still their child.
Steve Hoffman 08:34
Yes, it's still their child, or a stock that, you know, that company is no longer performing. And you keep holding it, all the way to the bottom.
Rennie Gabriel 08:44
Well, what would you say the typical feelings are that your prospects experience?
Steve Hoffman 08:50
Oh, so peep - you know, when I engage with entrepreneurs, you know, a lot of them are stressed out. Because, you know, I wrote my book, Surviving a Startup, because it's tough, like, you're under lots of family pressure, you're under financial pressure, you're under pressure from your investors, your employee - you have employee problems, you never have enough money to pay them. And, you know, and they're not performing like you'd like, but you can't replace them. So all of these things, a lot of people I work with feel anxiety, and they need to understand how to deal with this, how to, on a personal level, how to manage their anxiety, and then on a business level, how to perform and actually take actions that can mitigate these problems and not make the problems worse.
Rennie Gabriel 09:37
So it sounds like you're also providing them the guidance to identify and overcome these issues, right?
Steve Hoffman 09:45
Yes. And I talk personally about my experiences with them. And, you know, you know, I've been fairly successful, but there were times - and I just described one of them - when things just don't go right. And if you're, you know, pushing the limits, if you're doing, if you're being an entrepreneur, you're going to face a lot of ups and downs, like a massive roller coaster ride. You got to be prepared for the downs. And one thing I tell them is there is no substitute for communication.
Rennie Gabriel 10:13
Steve Hoffman 10:13
That means you can never communicate too much with your employees. And really understanding what they're facing, what they're going through, what they need from you - not what you think they need - but what they actually need. Your family, you know, if your family isn't on board, it's going to be a hellish ride. You got to get them on board from day one. And that means they have to want to go on this experience with you. If they don't, if you can't get their buy in, pick another job, there's a billion other things you can do in your life, that you know, might be better for your family relationship. Do you want to sacrifice that over a company? But if they're on board from the beginning, then you at least have a basis point - we're going into this together - but you have to keep communicating with them. You can't stop. And then also with your investors and advisors from the outside, like, do not ignore problems. And when you communicate to them what's going on in your company that's causing, you know, stress, don't hide it from them, thinking that they're just going to get stressed out too. In fact, they usually just want to help you, but they can't help you, if they don't know what's going on. And then they get upset that you're keeping information from them, and that you're not telling them exactly what's happening and it just compounds the problem.
Rennie Gabriel 11:28
Exactly. In other words, if you're communicating, well, one of my mentors had a fabulous expression, and it was, she used it all the time, fish can't see the water they're swimming in.
Steve Hoffman 11:39
Oh, yes. You cannot. You are blind, you have blinders. The only way to see what's happening is, honestly, in a startup, to get people from the outside, who have a perspective on your business. And to tell them the truth of what's going on in your business, not sugarcoat it, so that you don't look bad. Tell them the really hard things. And then listen, listen to what they're saying, what their perspective is, ask them what they would do. Ask a lot of questions like, how would you deal with this? What you know, if you were in my situation, well, what options do you see because you might not see the right option, and it's right in front of you. But to them, it's very obvious, like, you got to do this, you got to like fire that employee, like that engineer that you think is indispensable that you can't live without, you got to get rid of them. And you'd be like, I can't, but they're like, You got it. And then you do it. And I was in this position and all of a sudden things work.
Rennie Gabriel 12:34
Yeah, yeah. It's so funny. I'm going to guess, among the mistakes your prospects make, one of them it's probably that the idea that they have for the business is what matters? Is that accurate?
Steve Hoffman 12:49
The idea, ironically, that they have for the business, usually at the beginning at least, doesn't matter at all. Because usually, those ideas are wrong. People like, you don't know a lot about your business before you get deep in it. So a lot of us think, an entrepreneurs supposed to have this epiphany, this unicorn idea, go out there and change the world, right? But what happens in reality is you have this great idea, but it doesn't map to what people really need in the world. You don't know your customers well enough. You don't know what their problems really are. You think you have a solution for them. But it's not until you go and totally engage with them that you start to find out, 'oh, wow' and you start to see where, where you can create value. That is the key. Now I'll just give you an example. We all know this company. They started out as a video dating site. And they were spectacularly unsuccessful as a video dating site. But then they decided they wanted to share a video file with friends. And they're like, 'Oh, what's the easiest way to do this?' Upload it to our video dating site and share the link. That simple idea then became YouTube. YouTube, right? You know, these ideas of that you have, you know, Yelp, the ratings on Yelp, the five star ratings. Those were an afterthought, an extra feature. Yeah, it became the product. Groupon was a site for doing social good, where people started to band together to buy products and the founder didn't like that idea. He was like, 'Don't do this on my site'. Well, that became their core product. Google, you know, that was, they thought they were doing a nonprofit. It was a search engine for academics to find research paper, niche market. Then it became Google we know and we all use. All of these companies . . . You know, Twitter was a podcasting platform early on. So all of these companies that made this breakthrough, they didn't start with that idea, but they were open enough to find it, to discover it along the way.
Rennie Gabriel 14:55
These are, I love these examples. It's similar to what I do when I'm talking about how wealth creation is a team sport, not a solo sport. And I ask people if they knew who Warren Buffett is, and they all say yes. And when I ask if they know who Charlie Munger is, hardly anyone knows, some people do.
Steve Hoffman 15:17
Yeah, and they should know. He's running the company now.
Rennie Gabriel 15:19
Yeah, you know, and so it, but it's funny because it's the whole concept of having a visionary and an execution master. And it's giving the examples like you did, of YouTube, of Twitter, and things of that nature.
Steve Hoffman 15:34
What you ask is the idea important, or is it even important that you come up with the idea? And the answer is always no. Like Elon Musk? People don't know this, but he didn't start Tesla. It was somebody else's company. He just invested in it.
Rennie Gabriel 15:47
Exactly. And Elon admits he knows nothing about building cars.
Steve Hoffman 15:54
No, he didn't know anything.
Rennie Gabriel 15:55
Exactly. He probably still doesn't. And he doesn't need to, because he's got Guillien . . . I can't pronounce it.
Rennie Gabriel 16:02
Steve Hoffman 16:02
He's really good at that. And he's an amazing marketer. He's an amazing promoter. You got to hand it to him.
Steve Hoffman 16:02
Yeah, he has a great team. And incredible team.
Rennie Gabriel 16:06
Yeah. So now, there was a case study of some entrepreneur who talked to over 100 customers, and all of them told her, she had a nice product. And she should come back after it was built, and they'd try it out. Tell me what happened.
Steve Hoffman 16:29
This is somebody I work with. You know, try it out. All, you know, the customers came back. And they were like, 'Yeah, this is really nice'. You know, come back when you've built it out, and we'll give it a try. And she's like, 'What do you think? Is this going to be a big success?' She was super excited, you know? And I told her, you will absolutely, positively fail. She's like, 'What?'
Rennie Gabriel 16:29
Steve Hoffman 16:34
And I go you had a 100, she goes, I had 100 customers that said it was nice, and they wanted to see it again. I go, 'What they're telling you is go away.' They don't want, they're not going to say your product sucks. What they're going to say is, Oh, that's nice. Come back later. And then they're not going to take your call. The only, if you have a product, if you have an early idea, and you go to your your exact target customer, and you show it to them, and they go, that's nice. Forget it. This is what you need to hear. You need to hear. 'Oh, my God, that's, I need that today. How can I get that today? Can I sign up? Can I pay you? What are, this is something I've been waiting for. How can I get my hands on it?' If you don't hear that reaction, they're never going to buy it. You know, none of us buy products that are nice to have. Like, we know, we buy products that we need, or really, really want. Like, think of your phone, you hear about an app, you download it onto your phone. And you're like, Oh, that's pretty nice. A week later, you've forgotten about it. Delete. That's what will, that's what happens.
Rennie Gabriel 17:57
Yeah, that is such a valuable insight for absolutely everyone. Thank you for that one, Steve. Is there a valuable free resource that you can direct some of the listeners to that could further support them?
Steve Hoffman 18:12
Yes. We have a special thing, a special place for your members to go. And it is called the 10 Commandments to Raise Venture Capital. So if you're thinking of raising money, you need to follow these 10 steps, and it's free. Go there, foundersspace.com/ten. And that can be the number 10 or t e n.
Rennie Gabriel 18:38
Perfect. I'll make sure that's in the show notes. So people can just click on it and go right there. And is there a question that I should have asked you, that would also give great value to those who are listening?
Steve Hoffman 18:51
You should ask me what are the qualities that make a great entrepreneur?
Rennie Gabriel 19:00
Okay, what are the qualities that make a great entrepreneur?
Steve Hoffman 19:03
Well, let me tell you. There are a couple amazing qualities that you have to have. So number one, is you don't have to be great at anything, except one thing. And the only thing you need to be really, really good at is leadership. Honestly, you don't have to be good at... a brilliant salesperson. You don't have to be brilliant at marketing. You don't have to be a super technical wiz, any of that. But you do have to be able to attract amazing people and lead them in a direction. Number two, you have to have tenacity. Like, like I said, in my book, Surviving a Startup, it's tough like you, the only the people who are tenacious, like who get knocked down and get up and get knocked down and get up and see all these obstacles, not as impediments to their success, but as challenges to overcome - really important. And then number three, If you want to break through in a big way, I'm talking like, you know, unicorn big, multi-billion dollar companies, you have to be super curious, always questioning orthodoxies always asking, Why are you doing this? How how, you know, how is this being done? Is this the best way it could be done? And going deep on those subjects, because that's how you end up breaking through. That's how you end up doing something that somebody else hasn't done.
Rennie Gabriel 20:31
Fabulous. I want to thank you, Steve, for being on the show and what you've contributed.
Steve Hoffman 20:37
Well, thank you very much for having me.
Rennie Gabriel 20:40
And to my listeners, thank you for tuning in. Next week, we'll have Beejel Parmar, speaking about how to effectively outsource. You can listen to the Wealth On Any Income Podcast on your favorite platform. And please rate, review and subscribe. And if you'd like to know how books, movies and Society programs you to be poor, and what the cure is, then log on to wealthonanyincome.com/TEDx. You'll hear my TEDx talk and can request a free 27-page Roadmap to Complete Financial Choice® and Philanthropy, and receive a weekly email with tips, techniques, or inspiration around your business or your money. And if you'd like to see how you can increase your wealth, and donate to the causes that touch your heart, please check out our affordable program, Wealth with Purpose, on the wealthonanyincome.com website. Until next week, be prosperous.