Why startups fail with Dave Hersh, Founder & Author

Dave welcome to the unicorn bakery. Thanks so much for having me the first question
I love to jump into is because you're when I when I read the book and especially the introduction I
realized that you're not a
100% a fan of the venture ecosystem only I mean you're a bootstrapped entrepreneur yourself for a while then you took
funding you IPOed a company or the company you build IPOed and
You bought and
Transformed several companies since then have seen all the sides of the ecosystem as well to what degree do you think?
The venture system and ecosystem is broken. It's a great question and you know, I wouldn't say I'm not a fan
I actually believe in the power of venture capital
But I think it's gotten too big when I came out of college 30 years ago
It was along the lines of eight billion dollars a year in the US invested and now it's in the 300 billion and
I think what it's done is
create a
System that people feel like they need to adhere to
And that drives the way that they think about their businesses in other words
They will say we raise our seed then 18 months later
We'll raise an a then we'll raise our B and then a C and it's a it's kind of like the tail wagging the dog a little bit
Where this is not the ideal way to rate, you know to build a business the business should be built based on what the market potential is
And what its unique strategy is and it should finance based on the opportunity not on a set timeline
And so I think it's become kind of lazy shorthand for
investors and
business builders sometimes and
It gets them into trouble because they'll raise
Earlier than they should they'll raise more than they should and that's what leads to getting stuck
And as the guy that helps startups get unstuck
I see the other end of it, which is companies that have raised too much
And they've set too high a bar for what they can actually achieve
And so I think entrepreneurs need to understand that
Adventure Capital is a hits business meaning they make their money on one out of ten companies roughly
But the entrepreneurs believe they have an 82% chance of success
Right and I'm all about optimism, but sometimes I think it's blind optimism that can lead to
Raising too much money too early scaling too quickly and too aggressively before the company is ready
And that's what leads to getting stuck
I think before we dive deeper into the all the parts that you mentioned the first question that I have in mind is what
Do I have to assess when I'm starting a company?
What are the questions that I have to ask myself and also could be a solo founder or founding team?
What do we have to answer before we decide if we bootstrap if you raise venture to
Figure out what kind of company we want to or even should build
Yeah, I think you answered your own question in a way right is that's the question
What do we really want to build? You know, what's in our heart? What do we want to do?
And it's a bit of an existential question for people. Why am I on this planet? What am I here to do and
You know, what is going to bring me the most joy? What is my superpower?
What does the world need? How do I bring these things together in a way that reflects the journey that I want to be on?
And I think a lot of times entrepreneurs see the business as a means of validating themselves and
wanting to
You know meet certain expectations of their peers or other people in their life
And so raising money looks from the outside like it's success
But what it does is again create a high bar that may be hard to live up to and so for a lot of entrepreneurs
You know, I'm not saying bootstrapping is necessarily best versus raising venture. It might be something in between
but I do think there is
You know a path where if you can go longer and leaner meaning maybe raise some seed capital
but stretch it out and
Enough so that you can start to feel the pull of the market and this is the big big
differentiator for successful companies in my mind is that companies that raise too much too quickly do it on a false story
In a lot of ways or they take a few data points and use that as the basis for a trend in reality
You're just not there yet and what they end up doing is pushing a product to market
So they're trying to scale the business too quickly and they're building a product and they want to you know
Get it out to market
They want to launch it and when you're pushing a product onto the market that really doesn't want it
You're wasting a lot of time and energy potentially versus if you're iterating and experimenting and testing hypotheses
Eventually what happens you start feeling the pull of the market
So if you can be thoughtful and extend that seed capital and extend that first phase of the business
To the point where you can really start feeling the pole and the pole means you have people like I have to live with this thing
You know, you can't take it away from me. This is a huge pain point. We really need this. We'll pay you money tomorrow
It does happen eventually right, but it takes longer than a lot of entrepreneurs may think and so my mind
Yeah, it's not so much weather VC. It's how much and when and how long you can stretch it
Would you say the too much capital and trying to raise too much too early, etc?
This is a problem created by founders created by investors created by media like where does it start?
Yeah, great question. And I think it's a collective, you know, I look back to my time and
It was all of those things, you know, there was a lot of really
smart well-connected VC's who were convincing me to take their money and
You know, that's an interesting proposition when you have people that smart who are telling you we like what you're doing
We want to give you money for it. You know, that's exciting
And the press plays up the stories of the big winners
But they don't really talk about the other 90% of companies so much guilty
And it's fun it's fun to think about the big winners
But also to understand how they got to be there and usually these big winners started by doing one thing really really well
Right, you know Airbnb was doing inflatable mattresses and in conference in conferences
And Amazon was selling books and Google just had a you know better algorithm for search and and all these things
they started doing one thing really really well and I think a lot of times entrepreneurs want to jump to the conclusion which is we
Want to go serve a big market with a whole new product and they try to you know
shortcut the process to being a big company as opposed to recognizing that
Being a big company is the product of doing one thing really well in a small market
Fixing something, you know on a smaller scale usually not always but usually
Fixing that tiny thing being the best in the world at one little thing and then watching that expand or get organically into
Areas would you say that's true for all companies out there?
It's also if I'm trying to build in the deep tech space if I'm trying to build something like SpaceX or other companies
No, that's why I'm saying it's not true in every case, right?
I mean there are you know climate tech companies that are building up big infrastructure for energy and things like that
It's just a different proposition so
But what I see when we're talking about the startup ecosystem is
95% of the companies are getting started are not you know big infrastructure companies that need huge amounts of capital just to get up
And running in the first place
We're talking about software companies and consumer tech companies and ones that can actually
Be lean and disciplined and and austere in those early days just to try to get something out to market
I would even say that some founders sell themselves a bit on the
Side of hey, it's so complex what we're building even when it could be a simpler software solution a simpler
go-to-market strategy for the start for
To validate the product that or the problem that they want to solve and they're selling themselves a bit on
The story of hey, we need to raise money for that. We need to be one of the PR heavy early-stage companies
Yeah, yeah, there's two things in there one is just aiming towards complexity when in reality
You need to aim towards simplicity both in the product as well as its positioning, right?
I mean that's super important, you know, the other is just yeah, how much money you're raising and
When I think entrepreneurs tend to get nervous if they see other people in the space raising this came up yesterday
I had a call they were like, you know in an AI adjacent space and they're like well, everybody else is doing it
We got to go raise money. We got to go big. This is the chance through the window and that rarely works
perspective, right? I think people get
Into a fear state
emotionally
Where they see other people doing something and feel like I'm gonna lose my chance
But the best companies can actually be patient and sit through that and just focus on the customer focus on doing their one thing
really well and letting the market dictate who the big winner is but not falling prey to a
Fear state that causes you to make irrational decisions. I think you mentioned before or I'm sure I know you mentioned before
The 10% outlay a chance for that return venture capital like not in total
But that return the funds that are actually relevant to like the big successes while
More than 80% of founders think they are one of those 10% companies
So the question is because I think a lot of founders listening are like, yeah, that's cool
But I am one of those 10% companies that are like going huge the moonshots the
Stripes Airbnb's ubers of this world
How would you assess if you're on the trajectory to go there versus? Hey, probably I shouldn't
Overreach at the moment because it's a constant question. It's a strategy question that I have to ask myself like where on the scale
Do I position myself to to set the guidance for the next years?
Yeah, I guess going back to your earlier question of what do people do when they start a company and what are the questions
They should ask themselves
One is what is my risk tolerance? Am I swinging for the fence on this one?
Right am I willing to go into this with the expectation that there's only a 10% chance of success and am I okay with that?
In which case have at it, but I don't think going in
Assuming that you have an 80% chance of success when you're running a traditional venture
type of business
Because you're gonna make decisions that are irrational right because you're not making decisions that reflect what the reality and likelihood of the outcome
Really is and so I think when you
Say this is the risk
I am willing to take with this business and that's an alignment with your co-founders and with your investors
Then you can finance the business and run it in a way that reflects that risk tolerance
And I think that's the thing that I like to push people on is to say it doesn't have to be just a round B round C round
You know and don't fall prey to while my competitor is doing this and so I need to do it or
if ultimately
You want to build something and has an 80% chance of success then you have to buy that
chance of success with being lean and and staying lean longer
And maybe serving smaller market needs and getting cash in the business sooner rather than later
It sounds like I'm talking to you too that a lot of German startups actually
have you know more of that
Approach to building cash friendly business, which is great. I think here in the US
Maybe we have this lemming like you know, we have to be on the VC bandwagon
And not really think about the ways in which businesses can be built more creatively where you how you can fund these things
How long you go with certain capital what metrics really matter most at what phase of the business and that's what I've seen is
Looking back on the companies that failed and then talking to entrepreneurs that are second or third time founders and how they've done it differently
They've learned a lot and they've learned it the hard way
so if we can shine a light for people who are first or second time founders on
Exactly what you're asking right which is what is your risk talents? What do you want to do in the world?
What is the reason you're here and let's think about the right way to
Set the good milestones for the business and how to finance those milestones in a smart way
I think one of the things that has to happen for that to become more
normal, I would say is
understanding and promoting that
Companies that are not unicorns are not less important or not less relevant or less great than building a unicorn company building a sustainable
Profitable company that can run probably you can hand it over to CEO and let it be managed at some point or you can stay in
Yourself and find new opportunities to to grow. That's not less
You're not less great of an entrepreneur if you're not the next Mark Zuckerberg
Right and some of those companies by the way if you go longer without raising staying leaner and actually get cash flow positive
some of them actually have breakout potential so in other words you wait and see what the market says and
In some of those cases this happened when I was at Chive we bootstrapped for five years
We had a 12 million dollar very profitable business and then suddenly we felt the pull of the market in a really strong way
This is when Facebook first came online and businesses were like we want more of this kind of a style of collaboration
and we made a decision we're feeling a deep deep pull and so we raised money and
We're able to accommodate that pull but it was five years into the trajectory, right?
And so all that to say is there may be an opportunity for a breakout
But even if not if you own more of the business and you're not deluding yourself through rounds and rounds of funding and pushing yourself too
Hard and burn out too quickly and die as a company if you give yourself that time and space
You may find that there's a breakout at the end of the day or if not you still do well. Yeah fair enough
I think before we dive into
Finding and assessing for example breakout moments. I think we have to take a step back and
Got back to the point where you said hey
Don't raise money too early. Don't raise too much
When would you say it's the right time to raise it all if I decide I want to raise can be family and friends
Can be angel investors when is the right time what what needs to be done or what what questions need do my
Team and I have answered for ourselves before we go out for the first
Smaller fund raise I would say yeah, I have less of an issue with seed funding, right?
Which a lot of times people just need to earn a salary
They need to you know have some people on their team just to go out and validate the product idea
Do we differentiate here between
Private investors and institutional investors in a seed round you can I would say if the institutional investors are investing under the
Belief that you are going to raise again in a certain period of time then that is a distinction
I would call out because
That's putting you on a train that may not be the right train for you to get on not all institutional investors are that way
So you want flexibility right and that's why I think things like safe notes are actually a good thing because what it does is say
We're not taking on any equity out of the gate. Therefore. We still have flexibility
We still call the shots and based on what we believe is the market potential here
We can decide how to fund the business later. So I think you know if you believe in
The vision or you've got direct experience in this industry, and you know that you're solving a paintball
I don't have an issue with seed capital or even a rounds. It's all based on is there
Legitimate data to back up the supposition that you're raising that money under so oftentimes what I see is successful is yeah
You're doing early stage funding seed funding could be from angel investors individuals could be a safe note
but try to extend it as long as possible to really understand the market at a deep level and
Believe in your core that you are solving a pain point that is
Unique to what you're doing and your solution and you can solve that pain point beyond a shadow of a doubt
I don't care how small it is. It could be a small market. That's fine
But once you have that belief and a sense of we're on to something
I wouldn't do subsequent funding rounds until you know, that's really case plus gonna be hard anyway
But I think what I see happen a lot of times is
Companies jump the gun on the A round, you know, and it's very competitive from the venture side as well
So what you get a lot of venture investors who will want to preempt they'll want to come in and I want to work with these guys
I want to get this coming I want to get this deal
And so they'll come in
Earlier so that they can be the one who you know gets that investment and for the entrepreneur that may feel really good to be wanted
Right and they may want to say let's just get this closed up
Then we've got the cash amount to worry about it. The issue is it's based on a few data points that aren't justification of a trend
And it's putting them into a situation where they now have a very high bar to live up to
for that a round and
They're immediately feeling like they're behind the eight ball and then it becomes okay
We need more money and how do we get you know?
How do we prove that we can get to the B round and they try to raise a B round on a you know a similarly
Weak story right so you want to be in the situation where it's irresponsible not to raise money
So you know you're getting such market pull you can't keep up with it, right?
We can't hire customer service people fast enough right like we're their sales people are buried in leads right now
And we can't get the customers live fast enough. Those are those are problems that
That's good to raise money, right? It's irresponsible not to your teams really burnt out
And you can't keep up with the demand if it's we have to weave a complex narrative
You know based on a few random data points in order to get this funding and try to push this product out to more
People in the market and spend way more on sales and marketing. That's not as good
I do see that happen pretty frequently. You'd be surprised
There are a few brackets that you opened up. We need to close again the first is
How much money do I raise especially like let's let's stick with the seed round like how do I assess how much money?
I want to do because recently when I talked to founders
It's like often as much as I get and I'm quite sure from what you said that that's not all not always the right answer
Yeah, again, it is circumstantial
But you know some of the things like safe notes can be done in such a way where you can you know add on to it later
If need be to extend it by the way for all Germans safe notes are the US equivalent to convertible notes in a way
So sorry. Yeah, I know that I just just an explanation that if you if you feel confused
That's for example what white Combinator
Does with and recommends most of the startups to do and set the standard with and in Germany
That's a bit more on the convertible note side and convertible loan that you also have in the US
But does somehow so similar. Yeah
So I work with a lot of first-time founders and I work with a lot of third-time founders
third-time founders will brag about how little money they've raised first-time founders will brag about how much they've raised and
With the third-time founders what they will do is
For that convertible note or initial funding. It'll be a very small team three or four people who are
collectively like this founding
SWAT team or you know Tiger team, whatever you call it
I don't know if there's a form in Germany that you use but that small team of people who are very
creative flexible smart business builders where they bring the tech and market
Thinking together in a way to go out and test these hypotheses and run it and if they
Have an idea for how long it's going to take to get that market validation
They will probably still raise more funding another six to twelve months than they think just to be able to go on with that small team
for longer and what the more experienced ones I've found are will be will do is to
collect a lot more data points and
Really and actually get solutions in place try to get some money coming in try to get you know
into very specific places in the market that nobody else has gotten into and
Feel a deep sense of conviction that I have found in my spot to start this company
And then they will go raise. I think the second part that you
Started with or that I as a founder if I'm in the venture mindset
We'll think about is yeah, of course
I could drag out the seed round a bit more like use it longer and stretch it and
But I have to hit my first million in a hour. I have to triple after that time
I have to triple after that time and like
this feeling of pressure of growth and
I'm not sure if it's already at all cost, but still like trying to hit those those milestones and
targets as
quickly as possible
What are you telling founders that are?
Too worried that they don't hit their sales targets fast enough
This is the inherent problem of raising the money is that if you raise money based on the assumption that you're gonna go hit sales targets
Then your whole raise on detra as a company becomes about hitting sales goals as opposed to learning and so companies
Try to shift into
Scale it mode when they should still be in figure it out mode and that's the inherent challenge
That is everything I see in these startups that get stuck for well
I not everything I would say 80% of the startups
I see that gets stuck it was a situation where they tried to scale prematurely
They tried to get into let's hire sales people
Let's start cranking this out and let's that's gonna allow us to go raise more money
So to me that is the central challenge and I think there are you know
Maxims like triple triple double double double go public
you know things like that that do way more harm than good and
entrepreneurs believe they have to get on that track and investors
You know, it's nothing against them, but they're they don't understand the business well enough
They don't they only have five percent of their time to spend on this particular business, right?
And so they're gonna use pattern recognition as the basis to provide feedback that pattern recognition
May work at some companies, but it certainly doesn't work at all and every company is a unique organism unto itself
And so if you start trying to apply
Traditional maxims that you hear from the market to your company
Traditional playbooks
That's where you start getting into trouble because this business is a sensitive
Organism and the market is a sensitive organism and it takes a long time to figure out your place in that market
And if you can go
Longer on a small amount of money
That's gonna offer you the best chance at really understanding where you fit in and then once you understand where you fit in
you can build out a growth plan and
Finance the business in a way that's reflective of that real opportunity not of some
Belief in what it's gonna look like in the future. That's based on patterns from VCs and playbooks and what the media says
It's interesting that you're the guy like you said it yourself the guy that gets companies unstuck
We're spending a lot of time to even prevent getting stuck at all
We will come to the later part as well to assess what what's happening when I when I got stuck and how to get out of it
But I think it's so important to think about the right setup of a company that doesn't
Yeah, pressure myself into things where I'm like, holy crap. How do I get my company out of this?
so
let's say I
Want to raise venture and I did my seed round
I came to a point where I feel the pull of the market where I where it feels
Unresponsive irresponsible not to raise. What would you look for in the venture investor?
So to give a little detail you said you raised venture you're raised from a very well-known firm
Here in SF in the in the valley. I think you saw it all
At the same time as you've been the board member for a 16z
So you you are you know a few of
Of the investors here and know what they're good at not good at and probably also have thought about it
Once in a while, what would I have done differently back then?
When I would have the chance again to to pick an investor
What would you say what to what to look for how to assess if the investor?
I'm talking to is the right for what I'm looking for. Yeah, it's a great question
And I think a lot of it is personal connection
You know when you sit down with this person because there's the firm itself and understanding the resources that they have and and does the firm
Understand the market and business that you're in and do they have resources that are gonna be helpful to you and what you're trying to do
Have they done similar deals? Do they understand the space? That's important more important
I think is the partner that you're working with and do you
Feel simpatico with them meaning do you have a can you build a deep relationship?
Do you feel like there's a sense of trust? Can they really understand the business? Do you like the?
Advice they're giving you and the feedback. Do you feel like this is somebody that's going to be really helpful to the growth of the business and
Following what we talked about before is their advice
Really unique to this business meaning or are they trying to just implement a playbook?
Are they saying you know what you need to do is triple triple double double double, right?
You know, they're trying to push a playbook approach on you in which case I would say beware
Because playbooks are playbooks for a reason, right? And if everybody's doing the same playbook, it just doesn't work
And so I think the more trust you have the deeper the relationship
The more they seek to really understand the business and where their advice is unique to
The situation of this business that's going to be a better fit
one question I had in mind is
Understanding how well they can understand your business and and understand what you're up to and I thought about
former industry experts and built in the same space versus
Just have a very good understanding of how to assess businesses and then also figure out what to do in a certain way
Do you think it's helpful or harmful if somebody built in the same industry before and has experience that they rely on?
I think generally it's good. It's better if they understand the industry and
The trends in that industry as long as they're not locked into
Historical patterns or approaches, right and that's the one thing I'd look out for so industry experience good
but if they still see the industry the way that it was 10 years ago or
They're not shifting their approach to how to disrupt that industry and how to fit into it
Then that's what I would look out for so you probably don't want to hear it hasn't worked 10 years ago
So don't try it right or it worked this way 10 years ago. Let's do that again
Fair enough. The other side is true as well. Let's talk a bit about the
Maneuvering into a situation where I currently feel like it's not the perfect
story that I wished for as a founder and I think there are so many different indicators
That could be uncovered a bit earlier
To already see hey, we're maneuvering in a way that might not end where we wanted to what would you say?
Founders should look for to understand if they're on the right track
versus if they're getting their company or
Managing their company building their company into a way where it might get stuck at some point
Yeah, and it does depend on the stage of the business
But a lot of this comes to the intuition of the founders, right?
Do they feel like it's working and or are there is the team feel too big?
And there's people who don't seem to be doing
the right stuff for the company or they're not in
Alignment with other people in the business and what they're doing. Are there a lot of
confused people are you not
Getting that pull of the market or you're not getting the response you want you're not getting the deals, you know or
Sales that you're looking for so I would say we sometimes tend to be too data driven
But what you're asking I think tends to be a lot more intuition driven and a lot of times the founders
Have a deeper sense of how it's really going then they may even give themselves credit for and if they can tap into their intuition and
maybe have
advisors who
Can help them think through it and give them feedback and be a sounding board that really is the best situation
So that they don't feel
Alone in these decisions or overwhelmed by them or just
Holding that stress that they can give voice to it and have a set of people who can help them
Think through the situation and offer them advice on where to go from there
So that would be the best in my mind. It's interesting because it's a bit counterintuitive to what I hear from
founders and
investors but often on the venture side
Because many of them try to build very data-driven and comparable businesses like trying to
benchmark their KPIs to other
Ventures that grew
to the certain stage that they want to grow a few years earlier and
Trying to use the data to make data-driven decisions and understand where we're at and it's it just sounds counterintuitive somehow
Yeah, it does. I was in a conference recently and there was a
UGC user-generated content session
that was about data versus intuition and
Everybody in there was telling stories of you know, when they did the wrong thing
You know when they should have used intuition and most of them were that which is we were trying to use data when we should have used intuition
And I think we do get especially with the proliferation of data and how much is available to people and
But there is a compare and despair
element to this right if you're just trying to benchmark yourself you're going to
get overly stressed you're going to try to fix the metric sometimes instead of fixing the underlying problem and
Developing that intuitive sense of how things are really going is incredibly important and that has
Way more repercussions on the positive trajectory of the business
Then just trying to live up to certain data points and trying to present that to investors or board basic question
But when do I now know what to use data or intuition intuition?
Have an intuitive sense
That's where I think advisors can be super helpful. So, you know people who have been through this before and
Can be that sounding board for the founders and I work with a lot of founders who are product founders and
They are brilliant at building product and they're great engineers
But when it comes to other parts of the business, they're trying to engineer it like a product and sometimes that's not the best thing
We're building a sales organization. You don't want to over engineer it or try to
To tightly manage it to data points, you know, there's a level art to it that needs to be accommodated
And so I think yeah you over time
founders can start to develop that intuitive sense of how things are going and they can feel it and
You can feel it in the executive staff meetings and one-on-ones and
Conversations with customers is either working or it's not and you start to know so
I think that's really important
I do think you know having a set of mentors who represent different
backgrounds and areas of expertise is really really helpful to the overall journey for founders
From what you've seen in all the companies you analyzed worked with
Builds bought and rebuilt. What would you say is the flywheel that often leads to being stuck as a company?
The biggest thing is that premature scaling that I spoke about before and so that comes from
Raising too much too quickly and earlier in the trajectory than you should
Hiring too many people trying to scale up sales and marketing before you really understand that pull
Not hiring the right people, you know
Sometimes people hire really well in their department that they come from the founders do but then they miss hire in other areas
trying to adhere to
Playbook advice and just trying to do what the industry says you should do instead of having that deep intuition
But yeah, I would say it's all classified under this heading of we're trying to
Scale it before we've really figured it out and that figure it out period just takes longer than people think
If they can go lean or longer, it's way better for that
Likelihood of being in the 10% successful companies to the hiring part
Do I as a founder try to become better hiring in the parts that are departments and teams that are not my core?
Or do I try to add people that are then better in hiring exactly in those departments?
I think what you're saying. Yeah, do we hire people who know how to hire or do we just hire people who are?
Yeah, who are great in the early stages
You obviously have to just hire used to use your own intuition as the company scales
And it's successful and you you do start selling and really growing the business and it's you know
What they call a scale up I guess then you do want to find people who are way better than you at those individual departments
And that you really trust but that also reflect the skill set that is needed
so I speak to the Stanford MBA students about
Jive case study twice a year and
It's about a thing called the sales learning curve and the sales learning curve is how to sell new products
But in three stages right as a product is new and it's first coming to market
What types of sales DNA do you need who are the types of people who are going to do really well?
And then in this transition stage as you start to get product market fit
And now you're trying to work towards repeatability that that has a different set of characteristics of people that you're hiring and then in the
more mature
Execution phase as things are really taken off. What are the types of sales people and marketing people and what you go to market?
look like and so I find that helpful to think about you know, there's these three phases of
Startups or products within those startups, which is you're first getting it out to market and who are the types of people you need
Now it's in market
but you need to find how to do it really well and make it really repeatable and then you know
It's off to the races and it's very profitable and how do you scale it at that point?
So within each of those phases you just have different, you know sets of characteristics of the team
Your hiring goals are going to be you know unique to that phase or if you kind of understand where you are and see it less as a
Single entity startup, but more as where are we in the trajectory and who do we need?
That'll help figure out who the right types of people to hire are because what I see a lot of times is especially product founders when it comes to
Okay, the board is telling us we need to grow. I need to go hire sales person
First of all sales people all present really well. They all look really
Look really it's what they do right so they all show really well
And so it's easy for a product founder to go this guy looks really good
You know or this woman worked at Google and she did this thing, but in reality a lot of times
They're hiring people who are further along in their skill set than where the company is in its trajectory
And that's where they start to get into trouble and it costs a lot of money to learn those lessons
So I work with a lot of companies that have
You know hired two or three different sales execs that didn't work out
Often because they just didn't know how to hire the right person for where they were
So when my intuition as a founder says my company is stuck, how do I start to?
Assess the situation. What are the things that I need to understand and
Get my head around to even have the opportunity to get it unstuck again
So stuck can mean a lot of things
But it's really in the eye of the beholder meaning if I feel like this company is not going where I want it to go
Where the investors want it to go if I feel like I'm stuck in an eddy, you know
And I'm not flowing down the river that I'm supposed to be going down. Something's wrong. What do I do and
In some of these cases, you know, I work with companies that are stuck
But they may have a five or ten million dollar twenty million dollar business that is their core
But they try to grow too quickly and now what I'll try to do is help them get back to their core to say
What is your best in the world superpower and how do we strip out everything else and just do that really well and
Ideally build out a really profitable healthy business around that core and then once that's
Running smoothly then we can start experimenting with real growth that extends from that core
And that's when you finance the business based in a way that reflects what the real market need is
It may not be venture capital. It may be dead. It may be no investment. You're just doing it organically
Maybe it's private equity or you know, there's other forms of funding
It's got to reflect what the real opportunity is with that business at that point in some cases
You're talking about companies that are truly pivoting and I had to call this morning with a company like that and they have
Really good technology
But their industry got pummeled and they have to like come back and say alright
Well, what do we do? We're the best in the world at this particular
Technology said or this particular industry problem. We know it really well
But it's no longer viable to do it in the way that we've been trying to do it
And so we have to come back and think about how do we redeploy
This technology stack or this IP or even the knowledge that we have in our brains about this particular problem
To a different market need and that's very different. Right? It still comes back to the core
it always comes back to
understand your best in the world superpower, what is your core and
Come back to that and then let's start thinking about how do we take that core
Into a market that is going to allow us to grow and expand the way that we wanted to
So and you know in my book, it's like yeah, do you have conviction? Do you have cash?
You know to get through it. Do you have a core to the business and then you know with that?
You've got the ability to kind of organize your team and start experimenting and trying out
Different things or if it doesn't work, you know, then you you have to close up
It's you know, there's there's not an opportunity out there or maybe it's merging with another company
You got to get creative, but not every company can be
Transformed right some companies don't have a core. All right, they just never figured it out
So I would say the companies I work with great teams a lot of times and either they have an existing business
And that becomes the basis of their
Business model and their their cash generation engine and that you you know
That's what it helps finance the businesses in the next phase or they don't have any business and they're truly pivoting
Their product and technology new new space and that just has a different process that goes with it
How often would you say the answer is?
Handing it over as a CEO or shutting the company down again. It depends on mature the business is you know
the more mature it is the more the larger it is revenue wise then
The more likely you can bring in somebody else to run if you're not the one to run it and you don't want to do it anymore
Then yeah, you could bring somebody else in who could execute in that phase of the business and I think that's that's fine
That's legitimate if it is retrenching to
Core technology and trying to figure out how to apply that technology to other
Market opportunities. I would say that kind of has to be the founder
You know, it's hard to bring in a you know a hired CEO to come in when that's the level of pivot that you're talking about really you need a
small
really creative
Multidisciplinary team to go out and run hypotheses against different market opportunities and you're really you know in the book
I tell a story about this company that was this is back in the dot-com heyday, but they were doing micro transactions back in
2000 and
You know as befitting of that era
Goldman Sachs was taken in public and you know, they only had six million in revenue
You know it's one of those things
They were doing micro transactions and selling it to media companies and then the market crashed and
They had a fire a bunch of people but they kept their R&D team and they started experimenting with it
And instead of selling software to media companies what they did was said there's a huge opportunity with the mobile carriers
So they rebuilt their whole solution. They took their tech. We say we know micro transactions better than anybody else
So let's focus on that as our core our IP around understanding that space
But rebuild the product as middleware that we then take to market and sell the mobile carriers and they built up a
$60 million business that was sold for 330 million a few years later
Because they just took what we know and our superpower about this very specific technology and
Shifted our go-to-market entirely. We talked about raising too much money
Following or setting the wrong goals sometimes pursuing the wrong goals hiring the wrong people
And this all sounds like where I'm finding reasons that are not
Me as a founder making the wrong decisions, but when I when we look at all the topics, it's I think more often than not
I as a founder made the wrong decisions. So
What is my personal assessment of this or what does my personal assessment of the situation look like to understand?
Where I blocking my company's growth where I am limiting
our further journey and trajectory and
Figuring out what I need to sometimes also change my beliefs probably or do better improve
Or also reflect on yeah, so the second chapter in my book is
about our mindset and the psychological blind spots that we bring to
Decision-making that cause companies to get stuck. What I found out is that the companies won't transform
Until the leaders do and that means confronting your blind spots and for a lot of entrepreneurs
They find their identity in the business
right, this is how I earn love and belonging and acceptance and
That could be beautiful and it can create a lot of motivation in the early days
But it can also be really harmful because a lot of times that means the decisions we're making our decisions that are meant to
make us look good and
to want to feel
Successful and validated by our peers family, you know and and friends market
And so that may mean making decisions like raising too much money too early, right?
Because if I want to be seen as successful as an entrepreneur
Well, I may equate raising money to being successful and I may say yeah
I'm gonna go raise that 15 million dollar round because then people will look at me positively
So it's an example of a decision that is driven from the wrong place internally
Which is a desire for validation
But not in the best interest of the company because what it's now putting this really high bar on the company of what success looks like
And it's gonna stress everybody out. It's gonna be really hard to live up to it
So these are patterns that we all do I do them all the time that we all have right in my case
I'm a hero a savior right and so I want to save a company and I want to save employees
You know and I'll do the work for them and things like that that are
Patterns that are deeply held inside of us start in childhood that if we don't confront them
They're gonna repeat themselves over and over and they're gonna lead to
Keeping the company stuck or getting it restock. So what I tell founders CEOs is
What are the things that you did? What are the patterns that you have?
What are the weaknesses blind spots that led to the decisions that ultimately got the company stuck
And it's a hard process as you can imagine
But so powerful if they can confront those blind spots because you want to be in the best athletic position possible
To lead the company into its next phase and so working with coaches
Doing training whatever it is to get past some of those fears and insecurities and doubts and
And blind spots to emerge as the leader that that company needs especially if it's
You know getting a company unstuck because that's the unsexy part, right?
The sexy part is raising a bunch of money and you know being early in the process
The unsexy part is hey, it's not working and now we need to do something entirely different
so to
confront your issues
directly and work with people to help you get past them
So that you can be in the best position to lead that company moving forward and not fall prey to
Those insecurities that may have gotten you stuck in the first place
That is a
That is one of the most powerful things
For any company to do and it's something that we didn't talk about for a long time
And I think we're getting better about it
You know we talk about the mental health of CEOs and how much pressure we put on ourselves and you know how lonely it can be
Now and depression and anxiety and suffering
So i'm glad we have a conversation about it now
But I can tell you again as the get startups unstuck guy
The sooner you can confront those issues
The better off you'll be and the much higher likelihood you'll have a building something sustainable and successful
So it's about building a support system for me as a founder to
constantly reflect on
Me and the work and the company
Yeah to really understand where your motivations are coming from and what are the healthy and unhealthy patterns that you are
living out every day that are
Causing your suffering and maybe causing the suffering of the team and leading the company to get stuck
And so yeah, I think having the infrastructure of support
whether it's
You know coaches advisors getting your team's help
um your significant other whatever it is where you ever get the
You know support to transform yourself to be a better leader and show up
As the leader that the company needs
It's gonna pay off in spades later when the company tries to scale
It's interesting. It sounds or it feels and I personally know it from my
I'm not building a venture and but I'm I'm building a company even with with the podcast and
It always feels like this inner work and personal development takes
The time from the stuff that you that's urgent that you
Think you should do and it always feels like
Ah, is it is it the right thing to do right now thinking about that stuff and the personal and here and there in my opinion
Especially in the first times it in quotation marks never feels right
Yeah, and I think that's the problem with it, you know, but I look back at you know
We talked about jive before that was the company. I did a while ago
So jive got started at the same time as alasian
We were just you know a couple guys and each they were friends of ours and you know my
insecurity at jive led to
Wanting to do more playbook things and not following my intuition and then raising the money at a time that was
Probably premature and instead of following my intuition
I followed what the market was telling me to do it and that was a negative pattern
I had and that ultimately even though jive went public
It kind of died on the public markets and I had sowed the seeds of
You know its ultimate demise early on where I watch it last you and kind of follow their intuition
And they built out a 40 billion dollar business
Now we were just as capable of doing that and if I had followed my intuition and knew
Better what these negative patterns and insecurities I had that were leading to doing things like raising this money or
Going after the enterprise and and not following what I believe maybe was the right thing for the business
You're talking about a you know a difference of 40 billion dollars in valuation
And I see that all the time
So I think in the past it was hard for us to associate some of these softer
approaches with
downstream outcomes, but I can tell you it is very real and
Leaders and founders who
Can work from intuition move much faster attract better people they inspire those people they keep them motivated
they they bring customers into the fold and if you are compromised and
Working from fear working from insecurity
It can sow the seeds of the company's ultimate destruction without you knowing it and I see that a lot
And so that's why I wrote a whole chapter about it and honestly when I give these talks
That's the content that people pull on and I'm grateful
I'm grateful that we're at a place in time when that conversation is being had
But what I'm saying is this isn't just soft skills. This isn't just kind of
Woo, you know work. You're talking about real outcomes. You're talking about putting yourself becoming the best
Conditioned athlete possible to go run this race that you're running and that is not just a case of having access to better data
It's being the
fully embodied
Benevolent leader to guide this company where it needs to go and getting out of your own way to do that
What would you say are the most overlooked areas when we're talking about the inner work and personal development?
I think you mentioned
Figuring out your
let's say habits and and and
characteristics on how you handle situations in your case for example the
Trying to be the hero and then save others
but I can imagine that there
are more dimensions than
In quotation marks just the characteristics that I have and understanding myself a little better here
So what do I what are other areas that I need to dive deeper into to actually
Understand what I'm up to. I mean, how do you figure out what you need to work on or once you know what you need to work on?
How do you do it? I think like I'm coming from the the part of
What is often overlooked in the personal work because it
I I know for example when I first time went to a psychologist and and
Talked to her. Um, I always shared the stuff that was on surface level that felt like I'm sharing
Um things but I'm like I then later uncovered that I had so much more that was bothering me
that I wasn't talking about talking about because I thought okay this
Superficial and and the stuff that I was already reflected on was easy to push push forward and I can't imagine that
There are other areas
that I and other founders and entrepreneurs need to think about more to
Then figure out. Okay. How do I become the best?
performing and and
Prepared athlete to what I want to be. Yeah, great question. I would say
emotions that
Real change in who we are happens at an emotional level not an intellectual level and for a lot of CEOs
They spend their whole life living in the mind
But the mind is like a salesperson. It will tell you anything that you want to hear
It will create really complex narratives that you'll believe but it's not creating change
It's only when you deal at the source code level and that source code level is deep in your body
And that's the emotional work
So it's much harder work, but it's the real work and it's much more long lasting and
Is what allows people to work more from an intuitive space to not be
Suffering over decisions, but to really be able to see the decisions for what they are to inspire people to
Guide the market where it needs to go
It's the hardest work and it takes a long time for a lot of founders and CEOs to get it because they keep trying to
Use the mind as the basis for changing
But the mind is what gets us into these problems in the first place, right?
And so you're trying to solve a problem by using the thing that caused the problem
So I would say
That is the thing that is most useful was to me as a leader was once I understood
That real change just like a software product
You got to get into the deep source code, right?
And you got to re-engineer this product
And if you're just trying to change the user interface over and over again
And that's your form of trying to be a better leader
It's not going to work at some level you have to admit that real change happens at a deeper level and
Whatever path you need to go through whether it's you know therapy or
You know retreats or
You know working in groups with other CEOs who are not connected to your business
There's a lot of mechanisms out there
Where people can have access to tools that are going to help them change at a deeper level
And if you're feeling stuck and if you're suffering
It's one of the best things you can do and it's one of the best things you can do for your people
As well who are working for you or your customers and the business ultimately
Because when you come back to being able to operate from that deeply intuitive space
You move really quickly and you make great decisions and all decisions are emotional at some level
So the sooner you deal with it the better off your company is going to be
So where do I start with this journey when I'm listening to this podcast? I'm like, okay
It makes sense, but how do I take the first step now that I don't
Push it away and not do it. Yeah, great question. It's probably going to come from a place of how
Much pain does the founder feel around this because that's going to drive a lot of it
I do think you know that zero to one phase that can be pretty messy
And it's okay, right until you figure out product market fit and you really have something on your hands
You're probably not going to be dealing with some of this stuff
But as you get to the one to hundred
One to one hundred phase and you really try to grow this business and you're you're hiring more team
And you're facing more decisions on an ongoing basis
It's going to come up
And so I think the sooner you deal with it the better and that may take the form of getting
360 degree review
feedback from people
from hiring a coach from getting
setting a tone of
You know being able to have hard conversations with your team and being able to
Solicit input from them on how things are going to
Signing up for and doing
You know real work on this and making this a part of your pie chart, right?
So again early phase as the company's getting up and running
You may just not have the time to do a lot of this and it's just all scrambling
But once you start hiring people and once you have a team and there's you know
departments forming and it becomes a place where
You really do have to be in that best athletic conditioning for that role
And a big part of that is not just pretending to be somebody else
But is working from your deepest place of this is who I really am
And I can use that as the basis to be the best leader for this company at this point in time
So who is Dave Hirsch really?
I
Learned more every day. You know, I would say that that's been one of the best
Parts of writing this book into this phase of life. You know as a CEO
I think I was often
I mean there was a big part of me that was in there the whole time
But I was also trying to prove things to people and trying to
Show up as the identity of a CEO as opposed to
Being my full self
And at this point in time I've I've done so much work to kind of strip it all down that I can emerge
as
the more
Soulful real version of myself and the coolest part about that is I'm way more motivated now than I've ever been right if you're trying to
Stay motivated as the identity of me as a CEO or you know a founder and
That's what you're holding on to or you're trying to use the company as the basis to earn love
You're going to exhaust yourself
Right, it's going to be really hard. And so I think companies and and that succeed
Often are led by people who are
In their power space and when you're working from that deeper source and you have done that emotional work
It's like an inexhaustible fuel source, right as opposed to if you're working from ego and identity
It burns out quickly if you're working from this deeper. This is who I am. This is why I'm on this planet
This is my purpose. This is my soul. This is what you know, it's like an inexhaustible fuel source
You never want to stop going and creating and doing more
And so I got to see that firsthand and I think as a CEO I could see all the ways that I messed it up
And that's why it's really rewarding for me now to help other CEOs deal with some of these things and to help their companies
Be incredibly successful and to try to operate from that place of that inexhaustible fuel source
Let's say you're in your early 20s building your first company. Do you think it's even possible to
Do all the work and arrive at the point where you are at the moment or does it take some success?
some failure etc to even
Being able to arrive there
No great question
And I think yes, you have to have the sandpaper of experience to really keep shaping yourself
Like that's unavoidable
But I do think the more work you do
The closer to that source you will be working from and so I know a lot of
Very enlightened founders in their 20s who are working in a way that reflects who they really are
There's still a lot of growth that needs to happen and there's still ego and there's still a lot of other things
That's fine. It's natural, but I see them working from a deeper sense of meaning and from
Like in this country, we there's a book that came out called the second mountain
By david brooks and it was all about, you know, as you get into midlife. How do you construct a
Career and a way of being in the world that's more about meaning as opposed to ego and trying to prove yourself
And that's fine, but what I see is even younger founders
They're working towards that second mountain. They're building a base camp on it as I've said, right?
um, and so they they do have a connection to some innate drive inside them and
Now you just get to go out and be in the world and find that sandpaper
Have that experience and just keep doing it and it keeps shaping you into
Somebody who's capable of building great things in the world as the last question of the partners. What will you say?
is your advice to founders knowing that it's
hard to determine because
Every point in life in the on the on the journey on the trajectory is so different
but from all the stuff that
And experience you have and and founders you talk to what will be some last general advice
Yeah, maybe it's a
Synthesis of what we've talked about which is just like a business, you know, when I turn around businesses
It's it's getting back to the core right and that's how I can help transform a stuck business is say
Get back to your core get back to that thing that you are the best in the world at doing
And the same is true of us as individuals, right?
If we feel out of control if we feel like things aren't you know, how do we how do we be that great leader?
It's getting back to that core. Just like our business has to have a core
We have that as individuals and the closer we are to working from that core that central place of that that defines
Who we really are as a person the easier all of this becomes
And the higher the likelihood that we will do the things we want to do in the world
Dave, thank you so much for being a part of the unicorn bakery
I will link to your book in the show notes to your LinkedIn in the show notes. I will have to remodel your
Living room again. So thanks for hosting us here in san francisco. We had to rearrange a bit
Here in in your living room and we'll we'll
Arrange that back so that we don't leave chaos, but it's been such a pleasure. It's been such an honor and
I wish you all the best and I hope that all the founders
Listening think that that's a great start to also
Who who think they might be stuck or want to prevent?
Getting stuck with their business think that it's a good time to also read your book
Thank you for taking the time. Thanks so much for having me really appreciate it