Are You In The Business-Building Business?

I’ve recently had a few conversations with different founders about the companies they are building. Thinking about it, I found I could separate them into two groups (like most other things): those who are building a business and those who are looking to exit quickly.

In today’s market, many startups with zero or very few sales can be sold for tens of millions just for their technology. In many cases their technology really is amazing, while in some cases you find yourself questioning the acquirer’s decision. It’s interesting to see, that even (or some would say, because of) today’s market, people still build companies with the goal of selling them quickly.

Others, focus on building businesses. They want to get to their first $1M ARR, then $10M, then $100M, then $1B, etc. They see a gap in the market that they know they can fill and want to do it for every single possible customer out there. They are building a real business.

From my tone you can see what I prefer to be building. I don’t really understand the concept of building a company for selling it as quickly as possible. You’ve quit your job, you are putting yourself (and possibly a family) through a roller coaster and you’re doing it for what? To make a few millions and do it again? Are you really going to feel self-fulfillment selling your company to some large corporate, who will most probably mishandle the acquisition and kill your vision?

Don’t get me wrong – making millions is important. But you can achieve that on your way to the $1B ARR. Why not focus on building a real business, that will delight customers around the world and have them coming back again and again?

I’ve made my choice when I started indeni: every single enterprise on the planet should be relying on indeni to run their IT and that’s where we’re headed.

What’s your choice?

Why You Shouldn’t Work From Home

You have an amazing idea. You’re excited. You’ve left your job (or are about to). You’re broke and cannot afford an office. So you think to yourself: “I’ll just work from home now until we raise money.”

Big mistake. Big. Huge.

After leaving Check Point to start indeni I thought I can start working from home (this was before Marrisa Mayer outlawed it). A one bedroom apartment in Tel Aviv without a study or a small office in an amazing location and no parking. Fabulous!

A week later I found myself sitting on the couch in my boxers with a laptop, realizing I haven’t showered in three days. Noa, my wife today, girlfriend back then, was amazingly tolerant of this.

The reason this is a mistake, though, is not because of the scent that filled the living room. It was actually the fact that when working out of home you don’t interact with other people throughout the day. Seeing people, having lunch with them, talking to them, even if they’re completely unrelated to what you’re working on, will help you make progress. For example: they will keep asking you what is it that you’re actually doing. Trying to answer that in the early days is as difficult as proving Ferme’s Last Theorem.

But still, you have the problem that you’re broke and cannot afford an office. The solution to that is simple, you find a really good friend and ask for a favor. In my case, it was Lior Akavia, the CEO of Seebo, who came to the rescue. He gave me a place to be when I needed one. Thank you Lior!

Good luck in whatever you’re trying to do!

Home Is Where You Are

In a meeting yesterday I said “I’m a foreigner wherever I am – whether in the US or Israel.”. Which is how I truly feel sometimes. On the way home last night I thought a lot about that sentence.

The bay area, where I live, is full of immigrants. The vast majority of people I know are either immigrants or first-generation born in the US. With those who were born outside of the US and have moved here I find a common language: our minds keep comparing life here with our lives in the country where we were born. We look for what is better at each location, we discuss the process of learning new habits and assimilation into a new culture. Many try to find other immigrants of the same origin to connect with, as it seems easier to do so. US history is full of stories of where certain neighborhoods and even towns were comprised of mostly immigrants coming from a certain country (Irish, German, Mexican, etc.), for this very reason.

So, what can an immigrant do to make their assimilation faster? The tips I found to work so far are:

  • Wake up every morning thinking “This is my home. This is my life. Everything I do today needs to be aligned with setting up roots here.”
  • Identify as many elements of the local culture as you can and force them upon yourself. For example, I look at how others in my industry dress and do the same. In Israel, I would never dress this way, but here it’s the norm.
  • Work. If you haven’t moved here for work (let’s say you’re a spouse of someone who has), find work. Make sure your work is with locals and not in a company that is owned by expats of the same origin. At work, focus on learning how the locals live.
  • Stop comparing to home. Resist the urge. Yes, at home X, Y and Z were better. So what? Here A, B, and C are better. There are pro’s and con’s to everything. Stop comparing.
  • It’s OK for the first two or three friends to be from your home country. But don’t let your fourth, fifth and sixth be. Get out of your comfort zone.
  • Live as if you’re never leaving. Maybe your visa is just for two years, or you told yourself “I’m just coming for this one job and then I’ll go back.”. Whatever it is, living in a sense that one day you’ll go back is dangerous. It puts you in the same situation a cat is in when it’s got a buttered toast attached to its back. You’re in limbo and feel out of place constantly.

Not necessarily tips that are easy to follow constantly. I know I sometimes don’t. However, while I still feel a foreigner here I do feel more and more at home as the days go by. It will take some time, but I’m seeing progress.

Happy St. Patrick’s!

When Customers Give You A Run For Your Money

When you’re a product guy like me, you get excited every time someone uses your product. You think to yourself “That’s my baby out there! Look at how amazing it’s doing!”.

Today, indeni has grown to the size where at any given moment, dozens of enterprises are trying out our software. Those trials usually run for 14 days (we’ve come to the conclusion customers don’t need more than that) and the vast majority convert to paying customers. It gives us a sense of pride – people love what we do.

Sometimes, some of those enterprises trying our software, decide to take our product apart. Piece by piece. Inspect every alert, every feature in every possible scenario. Today I reviewed a report by our support department: there are currently several very large organizations (financial institutions, pharma and government mostly) taking our product apart.

It’s amazing to see what they look at. What they care about. What they verify before making their decision to buy. In my experience, it’s highly uncommon for someone to take this approach. Most of our customers don’t.

Look at your smartphone. Do you know every feature it has and how it works? Have you found all the kinks and where your smartphone is pushed to the extreme? >90% of people I ask this say all they do is call/text/use-apps. They have no idea how to find their APN settings or what that even is. It’s fine, they really don’t need to know actually. I’m actually the odd one out here – knowing what APN is and when you need to change it.

When someone does want to know, though, things become interesting. And if your product can not just tolerate the third degree it’s getting but actually deliver, you become all warm and fuzzy inside. It’s an incredible feeling to suddenly, and repeatedly, realize you’ve built something that actually works.

Silicon Valley Really Is The Center Of The World

To clarify: I was not born here. My first time in California in my adult life was a few years ago and I’ve only been living here for a year. So obviously, I’m not biased towards Silicon Valley.

However, since I moved here, it became widely apparent to me that Silicon Valley (and that includes San Francisco and the peninsula) really is the center of the world in our day and age.

Look at what you do on a daily basis – every single action you take has been impacted by Silicon Valley. Even the design of the milk carton you’ve used for your cereal this morning – was probably created in one of Adobe’s on Apple’s tools.

It annoys the hell out of people when Silicon Valley-ians say this. Some people go blatantly against it –  like Herb Kim. He was interviewed by Gigaom stating that Silicon Valley isn’t the center of the tech world – however the organization he ran no longer exists.

Brad Feld, who is far more known in the tech community, makes a similar argument. In his case he refers to system dynamics as a reason for why it doesn’t make sense to have all of the tech innovation happening in one place. I argue that system dynamics is the exact reason why tech companies should concentrate in a small space.

Something people forget often is that tech companies have two types of customers that are NOT buying their products:

  • Employees – if you think you are not selling your company to prospective employees you are mistaken. Highly talented individuals need to buy into the company’s vision, culture, future. Salary isn’t the only thing that brings them on board. Interestingly, the some tactics one uses to market their product they will find themselves using to market their company to the talent pool.
  • Investors – I don’t think I need to elaborate here.

So – if you have three sets of customers – users, employees and investors – how do you decide where to place yourself? I found it to be very easy:

In the tech world, your users are all over the globe. There is no single location you can place your company that would be close to your users.

However, the talent and investors are concentrated in Silicon Valley. So it makes the most sense to place yourself close to these two types of customers.

Now, this results in an saturation, but that saturation actually makes a ton of sense. It’s the same reason ice cream stands find themselves standing next to one another. We want to get to the most customers we can, and so do others, so we compete for them neck-to-neck. There’s no other alternative.

So, with all due respect to Silicon Alley, Silicon Wady, Silicon Beach, Silicon Flatirons and Silicon Roundabout – it is Silicon Valley where all the tech companies should be located. It is the center of the tech world.

And since tech is the most powerful force changing the way we live then the logical conclusion is that the center of the world is Silicon Valley.

Just accept it, relocate here, and drive up the real estate prices. We haven’t reached the $100/sqft mark yet.

The Art of Firing

If you look for advice on how to hire in startups, you’ll find plenty. For example, for the specific challenge of hiring your first sales persons, you’ll find:

Now – do any of these three blogs have posts dedicated to how to fire someone? As a matter of fact yes – both Mark Suster and Jason Lemkin dedicated blog posts to firing people (why it’s important, how to do it, etc.) which is why I listed them. OnStartups.com did not. I actually scanned more blogs (Google magic) and noticed that only a portion of them dedicate posts to firing, while almost all dedicate posts to hiring.

Firing is painful. It’s the activity I detest the most. No, scratch that, I would hate to lose an important business deal, miss our targets or fail at something important because I did not fire someone I should have.

However, no one prepares you for this. I have directly fired seven people in my role as CEO of indeni, so far. Each and every time I showed up to the event with my hands shaking, my blood pumping and my mind at 200%. “You are about to tell someone you prefer that the company continues its journey without them. However, it’s good for them – if they are not a fit here they better find somewhere they DO fit as they are just wasting their time with us.”.

Rationalizing this is bull. You are breaking up with someone who believed in you, who thought you will lead them to prosperity. And instead, you’re telling them they should find prosperity elsewhere. We’re human beings, we have feelings and we were raised to dislike inflicting pain, even emotional, on others.

Don’t take me the wrong way, I’m sure the event was far more painful for the fired than the firer (yes, that’s a word). However, I can only share my personal experience, not others’.

Some of the firings were a lot more painful than others. One of them blew up in my face in a way I did not anticipate. In hindsight, I should have. That little blow up, though, helped underscore the importance of the action I took. It was the right time to take an uncomfortable action. To this day (and even last night, which spurred this post), I still dream of that specific individual and how bad the process went. Funny how these things don’t leave you.

There’s a silver lining to all this, though. I’m not afraid of firing anyone anymore. I realize that it is my duty to protect the company that I lead, and part of that is by identifying those we are better off without and removing them. I tolerate poor performance a lot less now as I realize the damage it causes, to everyone.

The funny thing is, the more successful you are, the more people you’ll need to fire. All you can do is accept it and focus on doing the hiring right – after all, there are over 1M webpages and blogs posts available to help you hire correctly.

The Mirror Effect

Yesterday I was watching a show about the human brain and some of its odd behaviors. One such behavior was The Mirror Effect. They showed a couple having an argument while the husband was making a salad. All of a sudden, the husband cuts himself with a really long, sharp knife and blood comes gushing out. I felt the pain through my body just by watching it. Weird right?

It’s the same mechanism that causes you to smile when someone else does. They called it Mirror Neurons on the show. It doesn’t look like scientists have much insight into how this works but it’s clear it does.

Then, today, I read Lew Cirne’s Q&A on the New York Times. He’s the CEO and Founder of a very successful startup called New Relic (an anagram on his name). One of the things he said there is the impact of a CEO on the psyche of his employees. Just one sentence can make or break their week.

I first experienced this a decade ago, when I was a young team leader at the Israeli Defense Force’s 8200 unit. I was managing 12 people at the age of 22 without a real clue what I was doing. One morning I came in very aggravated about something that happened earlier. My team members immediately noticed and it was clear it wrecked their day without me even saying a word. That’s when I learned my lesson. The impact of a manager is clearly profound.

With startup CEOs though it goes to the extreme. You have a daily impact on an entire company. Even if people don’t see you that day, they watch your actions as well as the actions of their managers, who in turn take their cues from you. I’m told this effect gets reduced once you cross 150 people (incidentally, that’s the number also mentioned in the Sapiens book as the limit to the size of a group of people where everyone knows each other).

So when Lew said that there are days he doesn’t come into the office if he feels he’ll have a negative impact, it resonated with me. It’s an interesting idea that I may find myself needing to implement one morning. Luckily, my optimistic way of seeing life has so far ensured I start my days positively energized.

Happy Hump Day to you all.

Is Silicon Valley Successful Despite Its Public Infrastructure?

Stefan Dyckerhoff, a partner I respect at SHV, recently said “Silicon Valley is successful despite its public infrastructure.”. (he’s also an immigrant, by the way)  One has to wonder though, how much of a positive impact the public infrastructure can really have on a hi-tech company?

Yesterday I was riding the Caltrain home from the office, when all of a sudden the train stopped. Apparently, a vehicle got hit in Menlo Park and all trains have stopped for a couple of hours as a result (naturally, I jumped on a surge-priced Uber as a result at 2.1x).

I’m originally from Israel. A few years ago, after a series of similar incidents, the department of transportation decided that all risky rail crossings must be separated (so the road must go below or above, and not cross, the tracks). That is clearly a public infrastructure investment decision geared at saving lives. Some, though, argued it also helped the economy.

But, has it really helped the economy? How do we know?

There is generally a wide agreement that investment in public infrastructure improves the economy.  Examples include research conducted on the Mexican and Chilean economies and generally correlation is found. Causation though, is debatable.

The debate gets even more heated when one looks at the hi-tech industry. Is that industry affected at all by the investment in public infrastructure? If you look at California’s five-year public infrastructure investment plan for 2014-2019, you’ll see the main focus is around:

  • Judicial Branch – except for the odd lawsuit, I’m not sure this has a positive impact on the hi-tech industry.
  • Transportation – I spend quite a bit of time and money on the road/tracks. Better public and private transportation would result in less money wasted. I don’t see this necessarily impacting time, though, as usually I’m not driving and am doing something else on the way (phone calls, emails, etc.) anyway.
  • Natural Resources – I love parks, I take my kids to them often, I respond very positively to the color green and the smell of freshly cut grass. However, I don’t see this helping the hi-tech industry much.
  • Education – well, this definitely has a long-term impact on the success of the hi-tech industry. There are some really good K-12 schools here and of course some top colleges and universities. These are fueling the growth and success of startups and we don’t need to collect a lot of data to prove this has a positive impact on Silicon Valley’s hi-tech industry.
  • General Government – frankly, non of the sub-items there I could say has a positive impact on my ability to work or build a company.

When one measures the impact of investment on the economy, the decreases in production costs and increase in productivity are the metrics tracked. If we look at a recent analysis by Tomasz Tunguz on the “production costs” of a startup, we see the increase is dramatic and is fueled primarily by wages. Are wages increasing due to the high costs of living in CA, or due to high demand for talent and the positive impact of such talent?

One can also look at this as a whole – hi-tech relies on talent, and if talent can’t move here (due to high costs, lack of real estate, etc.) then startups will experience talent starvation, will pay more for the same talent and will be less successful. There clearly is a talent shortage in Silicon Valley right now, but I’m thinking it’s caused by an explosion in startups rather than an inability to get people to live here. So investment in public infrastructure would do little to reduce the wages.

To summarize, is it possible that other than education, an improved public infrastructure really wouldn’t do much to help Silicon Valley grow? And if so, what do we even care about the public infrastructure except for the mild frustration of being stuck on a train?

Sapiens and the Brief History of Startups

Sapeins: A Brief History of Humankind (by Yuval Noah Harari) is a book reviewing the history of humans, with specific focus on Homo sapiens and our future as a species. This book has just recently been made available in English and I highly recommend reading it (I read the English version).

While I read it over this past weekend, I found myself thinking a lot about the micro-cosmos I live in: the startup world. As the book points out, the idea of limited liability companies and corporations is a very new one and even compared to that, startups are an extremely new idea. So imagine how insignificant is the concept of startups on the progression of humanity over the course of the million years we’ve been walking the planet. As the author of Sapiens calls it, companies are just a fiction we’ve created to achieve certain goals, there’s no physical value to their existence.

However, startups are the entire life of of nearly two million people, some living in Silicon Valley and others not. Compass have just released a report on the evolution of startups over the past few decades with an intense focus on Silicon Valley. They take us through what they call “the tipping point between the Industrial and Information Eras”. This is interesting as it ties into what Harari discusses regarding the Industrial Revolution and attempts to forecasts where humanity is going.

So, in a thousand years, will someone write an updated version of Sapiens and discuss how the Information Revolution has impacted humanity? Specifically, will they go into great lengths to describe a place called Silicon Valley, where “startups” were created at a previously unheard-of pace, that changed the day-to-day of humans across the entire Earth?

I believe so. Not just because I am the founder of a startup that has set its eyes on changing the world. But because I look around me and see that others are doing the same, and many of us are succeeding. Humans now consume information differently, interact differently, make our livelihood differently and enjoy life differently. Radically different in most cases. It’s akin to the Agricultural Revolution which turned humans from wandering bands to the creators of permanent residences.

Funny to think that startups, which are just a figment of our imagination per Harari’s book, are changing the lives of not just the billions that live today, but the hundreds of billions that will live just a few years from now. Goes to show how powerful imagination can be.

 

Why Optimist? Why Entrepreneur?

My name is Yonadav Norman Leitersdorf. You can call me Yoni for short.

Years ago I decided to leave a comfy job and start my own business – indeni. Since then, I was fully focused on getting a product out the door, finding the first customers and hiring our first employees. I have recently lifted my head up from the day-to-day operations and realized there was something missing.

I no longer had a separate existence. My being merged with that of my company and was indistinguishable. My company is my baby (one of three – the other two are Gili and Michael). On a daily basis, I put everything I have into it and have given no regard to my own, independent brand. My independent brand is important – just as people like Aaron Levie, Mark Zuckerberg, Bill Gates and Larry Ellison have made it clear to us all.

The straw that broke the camel’s back was Mark Suster’s post on personal brands. After thinking about creating my own brand for a while, this post helped me crystallize what I wanted to achieve. So thank you Mark.

I find myself thinking a lot about my life, my work and my family. Most of my thoughts come up in the shower, which is why I take 20-30 minute long showers (although considered by many to be a bad idea – hopefully I won’t be all wrinkly in a few years). Showers are the most productive time of the day for me because they happen in the morning (my brain gets into gear very quickly) and there are no interruptions.

I digress.

My goal with this blog is to be open, sharing, brutally honest, with what goes on in my mind. Since 99% of what goes on in my mind is about work, so will these blog posts be.

Lastly – the name of the blog came from the two characteristics that define me the most: I’m an eternal optimist, knowing that the future is bright, and I’m addicted to building things, hence the entrepreneur.

Looking forward to sharing, listening and discussing with you all.