Ep. #2, Featuring Sean Byrnes and Edith Harbaugh

Sean Byrnes: Startup companies can only really ever be good at one thing. Your decision as a founder is what should that one thing be? Starting companies is very difficult.

Edith Harbaugh: Triumph of hope over experience.

Sean: The market will not tell you where the future is.

Edith: Mind your burn.

Sean: Mind your burn.

Ted Carstensen: Hi, I'm Ted Carstensen, and I'd like to welcome you to Caveat Founder, a regular series featuring founders sharing their experiences building developer-facing companies. Gain insight into what it takes to build a successful developer-facing company by hearing about big wins and epic fails directly from founders themselves.

In this episode, we host Edith Harbaugh, co-founder and CEO of LaunchDarkly, and Sean Byrnes, co-founder and CEO of Outlier and previously CEO and co-founder of Flurry. Edith and Sean talk about how things have changed since Sean founded Flurry in 2005. They conclude that building a startup is sometimes just like running a marathon, and finally, they share stories about how easy it can be to make the same mistakes twice.

To learn more about Heavybit, visit Heavybit.com, and while you're there, check out our library. It's home to over 75 talks from other developer company founders and industry leaders.

Starting a Second Company

Edith: Hi, I'm Edith Harbaugh, and I'm thrilled today to be here with Sean Byrnes, who has been an advisor to my own company, LaunchDarkly. He started out as our advisor at Alchemist and is now officially an advisor.

And I've learned so much from him because he started Flurry in 2005, was the only founder who was with it all the way till when it was sold to Yahoo. And now, in a triumph of hope over experience, has started Outlier, a second company a decade later. So I'm really excited to talk to him about what he's learned, what he's seen, how things have changed, and how you can make the same mistake twice or even thrice.

Sean: Thank you. I'm very excited to be here. I am a very big admirer of Edith. I've been working with her since she got started with LaunchDarkly and she's had a long track ride of success, even though she's modest, helping found and build companies like TripIt across the board that have been very successful. So she has a lot of success as well.

Edith: Thanks, Sean. I guess let's get the first thing out of the way. Flurry was a very successful company. What made you decide to start a second company? I mean, you took a year off just to advise people, and then what was the trigger?

Sean: That's a good question. So Flurry was acquired by Yahoo last year in 2014. I took a year off. It had been nine years since I started the company. I started the company in 2005. That's a long time. I mean, starting companies is very difficult.

It is probably one of the most emotionally draining, exhausting experiences you can go through. And I think it's a lot like running a marathon, where you put everything you can into it for so long that afterwards you really need a break. You need to take a rest to get your perspective back.

So I took that year off for a few reasons. One is I was burnt out. I was very burnt out. It just happens to founders, especially along that path, long term.

The second was I had a daughter at that time and she is just turning one and I really wanted to spend time with her. I mean, kids are young for such a short period of time in their lives. I wanted to be there. But third, you spend that long in a business.

So Flurry was the largest analytics and advertising provider in mobile apps. It still is, it's just part of Yahoo now. I knew so much about the world of mobile and analytics and what it took to be successful in that, that your world starts shrinking around you, right?

You get so good at this little part of the world that everything else that was going on, and there were so many exciting things going on, I didn't see them and I wasn't part of them. And I was lucky that the part of the world I was in became the centerpiece of the new technology revolution. That was a coincidence. That was fantastic. But I wanted to see the rest of the world.

And part of the reason I took that year off was I felt like I had to reset my brain. I had to start thinking about the world differently. And I started advising and investing in coaching companies, partly because I wanted to give back.

A lot of people helped me in the early days of Flurry and they didn't have to. And they helped me avoid a lot of mistakes and be more successful. But frankly, also I wanted to see other ideas. I wanted to see other kinds of companies.

As Edith mentioned, I coached at Alchemist, which is enterprise accelerator. I also coached at Highway1, which is a hardware accelerator. Going back to my days as an undergrad doing robotics, I coached at the University of Waterloo's Velocity program, which is a bunch of student companies.

I tried to get as far outside my comfort zone as I could while still being able to add value and help people. So obviously I didn't jump in and start restaurants or bars or things that I couldn't probably help them with.

And it worked. I think coming out of that, when I thought about what I wanted to do next, if you love technology like startup companies, there's not a lot of paths, right? You can be a founder, you can be an investor, or you can join an existing growth stage company. And I looked at being an investor, I looked at being a growth stage company, and I realized I really loved starting companies.

And to be honest with you, I had this thought process where I realized that it's so exhausting and draining to start companies that there's probably a limited time in my life where it will sound like a good idea. Right? It's not about age. There'd be a point where I'll have done it so much, I'll have drained so much of my emotional energy that I just won't want to do it anymore.

And I feel like it's like professional athletes, right? When they come out of retirement. When you can play, you want to play, because you know there'll be a time when it's not your choice anymore. And so that's why I decided to do it again.

Edith: I really like your analogy of a startup is like a marathon, because I actually run longer than marathon. I run hundred-mile races.

Sean: Well, you actually run five marathons back to back.

Edith: Well, four out of four.

Sean: Well, I'm not rounding, I'm gonna round up for you.

Edith: But I'd say in some ways a hundred-mile race, you have a fixed destination at the end. I think one of the hardest things about a startup is that you don't really have a fixed end.

When I was doing my most recent hundred-mile race, around mile eighty-five, I was in complete and utter misery, because I'd been awake for twenty-plus hours.

Sean: But up to that point it was fantastically fun.

Edith: Yeah, there was a lot of good times in there. And around mile eighty-five I was just like, okay, there's no more fun. I'm hallucinating. I'm on my feet. I'm at 9,000 feet. But I knew if I kept moving forward, even at three miles an hour walking, I would get to the end. And I was like, okay, I'm not gonna throw in the towel.

I think what's really hard about startups is that there's no similar finish line.

Sean: Well, and it's also very difficult to measure your progress. So you start your company and that's a milestone because you form a corporation. And then maybe you raise money and maybe that's a milestone, maybe that's progress, but sometimes it's not.

Edith: It feels like a milestone at a time, and then you're like, oh, now that I have the money.

Sean: Exactly. And then you have some customers, and so it's very difficult to know if you're actually, so it's almost like you're doing a marathon in the fog, right, with no visual indicators of how you're doing.

You're right, when I started Flurry, I really did not think I'd be doing it for nine years, I'll be honest with you. I was like, maybe two years, maybe three years. Because nobody told me that if you do the startup thing and it works out and you're really successful the way you dream of being successful, you'll be doing it for a really long time. And you wake up one day and realize that it takes a lot of investment and a lot of time to get to where you're going.

And I think if you're not prepared for it. A lot of what I do with my workers' companies is try to set their expectations, because I find that mismatch expectations, being a founder having bad expectations about what it's like to be a founder, or founding teams having different expectations of what they want to get out of the company, or employees having different expectations of what they want, expectations that don't match are typically the source of almost all founder conflict, early stage company failures, that kind of stuff.

So if you can really set those expectations up front, you eliminate a lot of that pain later on. It's just really hard to do if you've never done it before. If you're a first-time founder, how do you set expectations? You have absolutely no idea.

Narcissism and Hubris

Edith: Well, so you talked a little bit right now about what led you to start a company the second time. What led you to start it the first time?

Sean: Oh, narcissism and hubris, definitely. No, when I graduated from grad school, I did grad school in artificial intelligence and I graduated in 2001, which was the worst time in history to get a job in technology. It was right after the dot-com bubble bursted. And I went to go work at Verizon of all places and they had this incubator for new technology businesses.

And it was actually a lot of fun. You had the resources of a large company and they let us take new technologies and figure out how to build businesses out of them from scratch. And so it was a great training ground for being an entrepreneur.

I spent four years there building businesses that kept growing and I felt coming out of that really good. I knew how to build products and how to get them to market. And I eventually didn't want to do it for Verizon anymore because there was no upside for me. No matter if I was successful or if I failed, I got my salary.

And so I wanted to start a company. I was at this point where I want to do it for myself. I want to see if I'm as good as I thought I was. And then I found out that I had no idea what I was doing.

I thought I knew what to do and I really had no idea and I learned a lot of lessons the hard way, which was unfortunate, and that's why I spent so much time with founders now trying to help them avoid making at least some of the bad mistakes that I made along the way.

Edith: Yeah, it's funny, because my co-founder and I actually wanted to start a company for a long time together, but around that same era, around 2005-2006, when he was finishing up his PhD, we felt like we didn't know enough.

Sean: You were smarter than I am then.

Edith: Well, and now I see all these kids who are like twenty-one, twenty-two, twenty-three, and they just do it. And I don't know if things have gotten easier or we weren't brave enough.

Sean: Well, I will say that today, if you go back to 2005, so I just started a new company this year, 2015. So it's been 10 years between starting companies. Starting company today is very different than it was back then in a few ways. One is the cost is much lower.

So back in 2005, you had to buy your own servers and host them yourself. The advent of cloud computing means that you can actually test ideas much more quickly. The second is back then there were very few forums to get attention. So things like TechCrunch didn't exist. There was one conference for startup companies called Demo, but it cost you $20,000 to present that. Now we have all these startup conferences, there's things like AngelList.

The angel investing environment back then was very undeveloped. You either knew rich people or you didn't. There was no way to go find them. So you did your best with what you could. And venture capitalists coming out of the remnants of the dot-com bubble were very, very different than today.

So it was very difficult to raise money. You had to prove out a lot of things you don't have to show today. For better or for worse, I mean, it meant that you had to really have a good idea of what your business was.

And even back then there was still a lot of hesitation around people to join startup companies, because they remembered the dot-com bubble bursting so vividly. It was hard to convince people to take a risk on a new company in an unproven market.

And I'll also point out that there's a lot of things today in terms of, you think about how do you distribute a new idea today. You build a mobile app and goes in the App Store, you can use Facebook, you can use Twitter, these things didn't exist. So how did you reach customers? How did you get out there? And it was a very difficult and profound challenge.

And so it's a lot easier today to start companies. I think, though, in some ways it's more difficult. One example is, because it's gotten so easy, the number of people doing exactly the same thing you're doing has gone up.

So I'm a firm believer that no ideas are new. Somebody's always doing what you're doing. And as a founder, you have to assume that right now there's somebody who has more money than you, a larger team than you, and a three-month head start. It's the only safe assumption you can make.

But that was the safe assumption in 2005. In 2015, you have to assume there's a half dozen people like that, because it's just so easy to get started and try these things out and move forward. I don't know if that makes you better or worse. I think it just means the rules of the games are changing.

What it takes to be successful is still sound execution, efficient use of your money, and a focus on what's actually important, in the realization, and this is one of the expectations that's true, is startup companies can only really ever be good at one thing. And I think the question is, your decision as a founder is, what should that one thing be? And if you don't choose it well, then you kind of put yourself behind the eight ball before you even get started.

Edith: Yeah. So I graduated college and I was actually a dot-com consultant back when that was a thing.

Sean: Oh, that was a very profitable business to be in.

Edith: That was a very profitable business to be in until it wasn't. Well, the analogy was, you're selling shovels to gold miners.

So I remember literally, I was a dot-com consultant. I was getting billed out at four hundred dollars an hour, that's a lot of money, of which I saw a small fraction of that. And what was fueling it was everybody dumping money into all these, like, the eToys or Pets.com, and what you just said about we need to bring this to market faster. And then all that money just evaporated. So I vividly remember those days and I think they definitely scarred me.

Sean: Can I sound like an old person for a second? No, I've already sounded like an old person. No, I wanna say this. I try to fight my bias as much as I can, because the world is different now, right?

But at the same time, I feel like a lot of people founding companies today, it's like in Game of Thrones, they're the children of summer, right? And winter's coming, right? So people talk about how, oh, the kids today don't remember 2007. I'm like, well, I remember 1999, I remember. The reality is once you've been through one business cycle, and I've been through two, Let's put aside any sort of beliefs.

Businesses run in cycles. There will be a cycle here. It's not like zero percent interest rates are gonna stay forever.

I think you end up with these battle scars that you have to overcome. It makes you a better founder in some ways. You're more capital conservative. You're trying to plan for the future. But frankly, in some ways it's actually a detriment, right?

I think if you believe that good times are gonna last, you're probably gonna take risks that we might not take. You're gonna do things that maybe are more aggressive. And if you look at the really big wins, if you want to win big, you have to be very aggressive. You just do.

Edith: Yeah, I mean, so hindsight is 20/20. Now I'm like, maybe we should have started a company in 2006, 2007, but at the time I'd seen everything go bust. I remember walking down Second Street when I would count the number of for rent signs up.

Sean: And it's scary.

Edith: One more every day.

Sean: The first time you worry about how I'm gonna pay my rent, it's scary. It's scary and I think it changes the way you think about money and the way you think about the world. But I think it's a net positive in the end. The more you see, the more mistakes you've made.

And people always joke with me, the second time around, now that I have a new company called Outlier, by the way, they're like, listen, you're gonna make so much fewer mistakes. And I'm like, I'm gonna make the same number of mistakes, it'll just be different mistakes, right? I'm just gonna avoid making the same mistakes over again.

Edith: So it actually took me four tries to finish my first hundred, and my joke was that every time I made new mistakes.

Sean: And it's amazing the number of new mistakes that you can make. You think, oh, I've done so much, there's no more. Oh, nope, there's a whole new barrel of mistakes over here. Let's pop that one open and see how we're doing.

Dark Launching Outlier

Edith: Yeah. So one of the things you always warn me about is to be cash prudent, to the point where you just raised, have you announced how much you've raised?

Sean: No, we haven't.

Edith: So I won't talk about it.

Sean: It wasn't very much.

Edith: Well, and actually it seemed like you dark launched yourself, because it was only today that you actually updated your LinkedIn profile. Was that deliberate or just

Sean: No, I'm not a firm believer in stealth mode. I think that if you can't talk about what you're working on, there's something wrong. If somebody can just take your idea and that's a competitive disadvantage for you, then you're not working on something that's hard or easy enough.

I think the challenge, so my new company Outlier, we're working in what I call business analysis automation. We're trying to automate the process of analyzing your business and trying to help people get beyond using spreadsheets and charts and dashboards, which are really just, they're struggling to keep up with the complexity of today's businesses.

Now I can explain that to you and it sounds like it makes sense, but your first question is, well, tell me more. I need to know more. How does it work? How do you do that? And so it takes a while to get far enough that you can explain what you're doing in smaller and smaller snippets, right?

So at the beginning, when I was first starting the company in January, I could sit down with somebody in about half an hour, explain it. And then slowly it becomes fifteen minutes and then it becomes five. And it's not because it takes a while of explaining. I mean, the idea evolves, right? The product that you're doing evolves. These things change.

And so, as Edith mentioned, just recently we've gotten far enough along that I can kind of convey what we're doing over social media, but I still would struggle to explain what we're doing in one sentence. We're not at that stage yet. So as the company is evolving and we're narrowing our focus, it gets easier to talk about what we're doing.

So we haven't really been in stealth mode. We've just been refining what we're doing and moving forward, and that part of it's fun for me, because I think having been through it once, one of the things you definitely have the second time is much more appreciation for how fun the process is.

The first time around, I spent so much time being scared to death that we're gonna go out of business tomorrow. Now I'm very zen about it. I'm like, yes, we might go to business tomorrow, but it's really fun right now.

Edith: Well, do you think that's just also that you're much more financially successful? I mean, it's been ten more years.

Sean: When I started my first company, my wife was a lawyer. She was getting paid very well. I had health insurance. I was lucky to be in a position, although it was largely on purpose, putting myself in a position where I wouldn't feel that kind of pinch, because I knew and I saw too many people, when you get into that situation where you're worried about my bank account is like less than ten thousand dollars and that kind of stuff, you start making really bad decisions.

And so I still don't own a house. My car is 10 years old. I make decisions in life to put myself in a position to do the things that I want to do, like start companies. So it's a very conscious decision to put myself in a position where those things don't exist.

I have friends that have very nice houses. Some of them actually have boats. I'd love a boat, right?

Edith: Maybe a canoe.

Sean: But there's things that I don't do to enable myself to do the things that I want.

Edith: Yeah, I mean, I think there's a lot of debate right now, and I think it's very one-sided, where VCs say, oh, CEOs should not make any money so they're hungry, and then you go to their Silicon Valley offices and you're like, well, you all don't seem like you've missed a meal in a long time.

Sean: Yeah, that's a big load. It's funny, because in startup companies, I don't want to get too off topic here, but one of my opinions is we wanna believe that venture capitalists, investors, and startup companies are on the same team. We're all trying to innovate. And to a certain extent that's true. And to a large extent it's not true, right?

Edith: Like, you're an investor in us.

Sean: I am.

Edith: Sean was actually one of our first investors. Thank you, Sean.

Sean: Well, thank you for doing well with my money. I expect a very large return.

Edith: And maybe you can finally get your boat.

Sean: But it's more that investors are trying to produce returns for external investors. And so because of that, they have large portfolios. They also, as Edith mentioned, have things like management fees and various structures, and they're playing a very long game across a very wide diversified portfolio.

We as founders have all of our risk consolidated into a single company, right? And our job is to make that company as successful as possible. The investor's job is to make their portfolio as successful as possible, which sounds like a small semantic difference, but it's actually an enormously large, gaping hole that we have to cross over.

And so I'm a big fan of many investors who I think really do want companies to succeed. And one of the biggest changes again between 2015 and 2005: if you went back to 2005, most venture capitalists were finance professionals. They had never actually worked at a startup company before. They'd come up through management consulting or investment banking.

Today, I would actually say the tide has turned. Many investors are now former operators. And you're seeing it become much more understanding to the challenges of being a founder, but the incentives are still backwards, right?

The incentives are still backwards, because if you ever wonder if your investors are on your same team, check and make sure on your term sheet the name is your company, the name of their fund. It's not like Jim and Joe and Susan's name. Their job is to make a relationship with your company profitable for their fund and their LPs.

Working Without an Office

Edith: Yeah. Sean, you have a really interesting policy. You told me that you weren't gonna get an office.

Sean: That's true.

Edith: Until a certain point. So do you want to talk a little bit about that?

Sean: So there's a lot of things I did the first time, when I was starting Flurry, inadvertently that ended up being good decisions. And one of them was, we actually didn't get an office until we closed our Series A.

Edith: Wow, Series A. Well, Series A back then.

Sean: Series A back then was more like, it was a lot. It was four million dollars. So it was somewhere between seed and Series A today. The Series A we talk about today is more what I used to think about as Series B. But so that meant for the first two years of the company, the office was like my couch for coffee shops.

And so this time around with Outlier, we very purposely don't have an office. And I have said we won't get an office until we reach what I call product customer fit, which is the point where you can make a few dozen customers very, very happy with what you're doing.

And the reason is that I learned the first time around that there's a few aspects of having an office which are great. Everybody can be in the same place. You have shared meetings, it's easy to do stuff. The problem though is in these early stages, where you're trying to create something from nothing, that process of innovation is very creative.

And the problem with having an office is that, A, it's very easy to show up at the office and feel like you're doing work, right? You just go into the office, feels like you're working, just showing up and sitting down at your desk. Whereas in reality, that's not true. Often you want to be out meeting with customers and talking about what they want.

And if you don't have an office, the activation energy to go to a customer or go to a coffee shop is roughly equivalent, right? And so you find yourself doing a lot more of the things you should be doing, instead of just going to the office because that's what you do out of habit.

The second is, I think that there's an element of creativity. If you go back to the psychology of how do ideas happen, it's very well proven that changing your environment is a big part of being creative, right? And so being able to work from different places, different coffee shops, actually accelerates the creative process. And so when your business is ideas, you want to put yourself in a position to have as many ideas as possible.

I don't want to say we don't have an office. We actually very often, one of my co-founders has a room in his house that he set up some tables in, and we'll go work from there. We even have a whiteboard there. But I would say most of the time we're in the world trying to find and generate new ideas.

Edith: So here's the other side of it. How do you start to build a team culture and a cohesion and a rhythm if every day you're kind of scrambling for space? I mean, I think a lot of what I like is that now we have a daily stand-up, we eat lunch together every day, and that's when we really all get on the same page.

Sean: It's interesting. I've come a long way in my evolution of what I think drives a corporate culture. And I think that ten years ago, I would have agreed with you that it is true, being in the same way. But in 2015. No, in 2025 I'll be sitting here telling you.

Edith: 2025, we'll be doing this over virtual reality, so it'll all be academic. I'll be on Mars or something. We'll just be floating heads in like some vat.

Sean: There you go. Well, we've just made a commitment to come back in ten years and tell you how different it is then.

But these days, you've seen such great companies built like Product Hunt and GitHub and WordPress that are purely virtual companies. And you look at it, and how is it that they can do that? And the reality is the tools for communicating over Google Hangouts and Skype and Slack are a big part of enabling you to do those things.

But I also very much believe that your corporate culture, 90% of it is based on who you hire. It's not based on whether or not you eat lunch together. It's not based on what you talk about. It's the kinds of people you bring into your organization.

So I'll give you one example. One of the things at Flurry that I did very deliberately was we did not recruit people who had mobile or big data expertise. And Flurry was the big data mobile company, right? And so I'm not saying we didn't hire anybody that had those, but that was not a criteria we were looking for.

And so why is that? Well, I wanted to create a culture of collaborative team-based working, an environment of learners, people who wanted to learn. And the best way to do that is if you hire people who have no expertise in what you're doing, they have to be learners, right?

Edith: They have to be fine with admitting, they don't know anything.

Sean: That's right. And you filter out the prima donnas who believe that they are the expert on X, Y, and Z. You bring in people who want to learn new things, who want to collaborate and work together.

And because of that, most people on the Flurry engineering team learned everything they knew about mobile and big data at Flurry. And so that meant they were ready to teach the next people who came in. And it becomes a magnet of learning and collaboration. And that's just one small example.

But I find that hiring and the kinds of people you bring in set your culture. I don't think that cultures are designed. I know that there's a lot of talk about Zappos and their culture and how you build cultures, and I really think what you do is you collect groups of people, and a culture is an emergent property of those people. And it's somewhat an emergent property of the environment they're in.

And I think that that's true. If Outlier was like 50 people and we're always trying to take over a coffee shop to have meetings. I mean, there's ways you can adversely affect your culture, but I'll give you one great example. There's been great research proven that these open office plans we all have, that we think are so conducive, are actually enormously detrimental to productivity. People actually hate them. And the most productive and the best functioning team I've ever had was a team that worked in offices that had doors, and everybody had their own office with their own door.

Edith: Yeah, it's a little bit unfashionable to admit, but I find Slack and HipChat very unproductive sometimes.

Sean: You have to filter them out. It's like anything, that can be just overwhelming and too much. But I have this great blog post, pitch for my blog, seanonstartups

Edith: .co.

Sean: Which is awesome. Which is great. Yeah, it's the best blog ever.

Edith: Tweet it today.

Sean: No, but I actually blogged about this, because going back to advising founders, one of the mistakes I made in the early days of Flurry was I confused motion with progress. I confused the fact that I was doing something with actually moving things forward.

And a large part of doing that is, the first thing you do, you wake up in the morning, is I check email and respond to a bunch of emails, and then, oh, two hours went by. I should start getting to work, do something else.

Edith: You're talking about my life.

Sean: Yeah. And what you realize is that all the studies on productivity is you have at most two hours of peak productivity a day, right? Which is your peak ability to create and do. And usually it's in the morning. And so what I was doing is I was essentially just wasting those on email instead of actually doing useful work.

And so I published a thing called the Founder's Schedule, 'cause I thought it was important to share it. And it was basically talking about how I blocked off my mornings, where I wake up, I don't check email. In fact, I don't check email until around lunchtime. Instead in the morning I make, I do, I create, I come up with new ideas, I try to innovate. I have lunch, I check email, I can take meetings in the afternoon because I'm, you know, got my food comatose going on after lunch.

Edith: Or do a podcast like this.

Sean: Yeah, exactly. And then kick it back in the afternoon.

And if you organize your time along those lines and you think about what you actually want to get done, it helps a lot. And I'm actually much more productive than I was as a founder of Flurry, working Outlier, even though I don't work as many hours.

Edith: Yeah, I think that's the wisdom that comes with older. I gave up trying to keep up with all of our chat rooms. I'm just like, I can't, there's too much going on. If it's really important, at me or send me an email, but I'm not gonna read every message that goes by. I just physically can't. That's all I'll do.

Sean: And that's an important inflection point, I think, as a founder, the point at which you're not part of every conversation, right? I always think about milestones as companies grow. There's a point where you're not part of every conversation or every decision anymore. And then there's a point where you're not actually interviewing everybody anymore. And then there's a point where you may not actually know everybody at your company anymore, right?

So the first one is around three or four people, when you're not part of every decision, every conversation. And then there's a point where you're not interviewing, it's usually around seven, ten people. And then once you get past 50 people, all of a sudden somebody's at your office and you're like, I don't know if they work here or if they just showed up or they're just walking off the street. I have no idea.

Edith: But they're taking a monitor out of here, so maybe I should go ask.

Raising Money Later

So some advice you gave me when I was starting out was around fundraising, which was interesting. You gave us a lot of advice around fundraising, and then you decided to raise your own money. So it was the inflection point for you that you decided to raise money?

Sean: Oh, sure. So this goes back, it's funny.

The reason I advise companies not to focus on fundraising too early is that it's very difficult as a first-time founder to raise money for something that's just an idea until you have something to show for it. It's just really hard. Especially, as I mentioned, today there's so many companies, it's so cheap to start a company.

To get the attention of investors, you often need traction, right? You need something to show them to prove that you're onto something. And so a lot of founders that I meet, the very first thing they want to talk about after founding their company is let's go raise money.

And I see them spend four, five, six months trying to raise money, they end up not raising as much as they want or not raising anything at all. And they've lost that time to investing in their product, investing in their business, trying to get that traction, which would have allowed them to raise more money. And so I try to advise people against it.

We raised some friends and family money early on, but we didn't actually raise any money at Flurry for the first year, until our mobile, we were a mobile app company before we became a platform, until our app was in use around the world, and our fundraising process was basically like, look at all these people around the world using our product, this is great. And it saves you a lot of time and pain in that process. And then frankly you get better investors and that kind of stuff.

So with Outlier I was focused on not raising money until I had proven this product customer fit, that we could make people very happy with what we're doing. And so I started the company in January and my plan was not to raise money until like end of this year, like early next year, whenever we reached that point. And I did raise some money in July.

I will say that a lot of that was a byproduct of the environment we're in today. And some investors were very nice to give me the same terms I would have gotten had I waited. And then if that happens, then you're very lucky to not have to be distracted later on when things are going well.

Because the biggest problem is, the best time to raise money is when things start to take off. But that means that you're distracted then from investing in something taking off. And so it's a big trade-off that you exist in, like, at what point do you take the distraction of fundraising at the cost of the business or not? And so being able to do that early was good.

But our burn rate right now is still $200 a month. We haven't spent any of it.

Edith: $200 a month?

Sean: I know.

Edith: That sounds like you're either not paying yourself anything or

Sean: I didn't pay myself for the first year of Flurry. I can't remember the whole deal. I didn't get paid for a very long time and then I got paid minimum wage a little bit. I'd have to go back and check the numbers.

But that's part of your incentive as a founder. I feel like I want to have an incentive to succeed. And so I can't get rewarded until I prove that the company is doing something that deserves that. For example, I told the team that we can start buying lunch for everybody once we have 10 paying customers, right? And stuff like that. Things that provide you very tangible measures of making forward progress.

Because sometimes it's easy to say, oh, hey, we raised money, or hey, we hired five people, and feel like that's success. And for me, it's so hard to start a company and to build a new business from scratch. It's probably one of the hardest things you can do. Making sure you're aligned with what success actually means is really important, because it's really easy to get distracted.

Choosing Co-Founders

Edith: Well, so Sean, this is my chance to ask you a couple of questions. Usually, to be honest, when Sean and I talk, it's selfishly all about my own company.

Sean: Which is an awesome company called LaunchDarkly that everybody should be using.

Edith: Well, because Sean's an official advisor. So you said that your original company, Flurry, you were the only founder when you got acquired. Why do you think that happened, and how did that affect how you got your founder for your next company?

Sean: Yeah, that's a good question. So there were three founders of Flurry: myself, Dan Scholnick, who was a friend from college, and Gabe Vanrenen, who was one of Dan's friends. He was also from Dartmouth, but he was a few years behind us.

I think that we came together as three people who wanted to start a company. I didn't know Gabe at all. I knew Dan very well, but we'd never worked together before.

Dan had this idea for creating a mobile email client. And honestly, I didn't own a cell phone at that point. So I was like, hey, that sounds like a good idea. So I credit Dan very much with seeing the potential of the mobile industry and moving forward with that.

You'd have to talk to them about why they didn't want to make it for the full ride. I think that Dan left the company in 2006, I believe. And then Gabe left the company in 2008.

I can tell you why I stayed with it, which was that I had two feelings that drove me to keep wanting to go through. Flurry was a very rocky road. So the company ended up being very successful, but it was insolvent twice in its history.

As I mentioned, for a good portion of that I wasn't getting paid. It was a very difficult road. When we were starting in mobile in 2005, people thought it was a horrible idea. And in fact, people thought mobile was a horrible idea straight up probably like 2009 or 2010. It was a long road of very difficult times.

I stayed with it because I had two feelings that drove me. One was I felt a large responsibility to the people who had invested in us, probably unhealthily so. I think I have a much healthier relationship with investors, but I felt like these original investors were my family and my friends, and I wanted to do my best to respect that investment.

But the second was I also had this overwhelming feeling that there was so much potential. Sometimes I couldn't even express what it was. I just felt like there was something there. I felt like that potential existed and I kept scratching at it and I felt like I couldn't give up until we saw if that potential could be realized.

And eventually it was, and honestly more so than I even imagined it was possible. But I wasn't willing to give up until I saw that through. It could have easily been a mistake. It ended up working out very well.

Edith: Yeah, I mean, I remember something you said to me once, which was, if you're not too early, you're not there when the wave breaks.

Sean: Yeah, it's like surfing, right? If you want to catch a wave, you have to start early, and once a wave passes you by, no matter how hard you paddle, you can't catch up. And it's true, I mean, startups are as much about timing as anything else.

One of my professors in grad school said entrepreneurship is taking advantage of economic disequilibrium. And the problem is economics disequilibrium is they want to resolve themselves. And so it will happen. And so if you're going to take advantage of that, you need to move quickly.

Edith: Well, and it's more just the gaps that exist in the market even six months ago or two years ago are not there anymore.

Sean: Yeah, that's right.

Edith: So what changed about how you chose a co-founder this time?

Sean: I just had a lot more understanding about myself and I think the kinds of people I work well with. And so it was very important to me, and frankly it more came down to making sure, as I mentioned at the beginning, expectations were set correctly.

And so when I decided I wanted to start Outlier, I started a long process of trying to find a co-founder. I called it the anti-recruiting process, where I basically was trying, people who were interested, I was trying to talk them out of it as best I could. And I tried my best to simulate the experience of what it would be like working together.

It was basically a three-stage process. The first stage, I spoke to everybody they'd ever worked with, and the second was we did a test project that was very stressful and very difficult, and the third step was I literally sat them down and tried to talk them out of it, about why it was such a bad idea.

I did everything I could to try and express what it was, mostly 'cause I wanted their expectation to be set that this is not gonna be a fun ride, jumping on board with Sean who started a previously successful company. I wanted them to know how hard it was. And they had to want to do it despite me trying to talk them out of it, for me to feel like their expectation was set appropriately.

Because as I said before, almost all the conflict, all the failures I see are mismatched expectations, and I could not count on the fact that they would just say, oh yeah, I know it's hard, but I still want to do it. I had to be sure, as sure as you can be without actually doing it.

And I'm very excited. I mean, co-founder of my new company is Mike Kim. He's a great guy. I've known him for years. And to his credit, he's done a great job at rising into the founder role. This is his first founding company, but he's doing a great job.

Why Not to Start a Company

Edith: Well, so Sean, now is our downer interlude. Can you talk about how hard it is? I mean, what advice would you give somebody about why not to do it?

Sean: I think that not everybody's made up for what it takes. I mean, when I say that, I don't mean that it's one of these things where not everybody can run a marathon. I mean, it's an emotional roller coaster. In the morning things are going well, in the afternoon the world's falling apart and you can't possibly succeed.

I think that it's very difficult to deal with those emotional extremes in a lot of circumstances if you've never been in that position before or you have a lot of other things going on personally. It's really tough. I mean, I'll be honest with you.

So for example, when I got divorced in two thousand and nine, I had to take a few months off. I could not deal with the emotional roller coaster of a startup company at the same time that my personal life was in a difficult place. You have to be really ready to deal with those kinds of extremes. It's really hard to do otherwise.

And the second is that I always tell people jokingly, if you want to be a founder, bad reasons to be a founder are you want to be rich, you want to be powerful, you want to be famous, right? Because nobody gets rich, nobody gets powerful, nobody gets famous.

Edith: Or you get famous for the wrong reasons.

Sean: Yeah, there's a lot of easier ways. You want to get rich, you go work for a hedge fund. You want to be famous, you get a reality TV show, you want to be powerful, you go into politics.

If you want to start a company, it's because you love the process of creation and not just building. It's not enough to be an engineer that likes building products, because that's actually a small part of it. You have to like building organizations, you have to like building relationships, you have to like building brands, you have to like building very complicated multidimensional things.

And I started my career, and I get this from my dad, is just building. He's an engineer and I always love building things, but there was a point where building physical objects wasn't good enough for me anymore. I had to build something else, and organizations and companies have this complexity of building that I loved, and that's why I love doing it. And there's these problems that I think I love solving.

But first and foremost for me, if you ask me in the early days why I started Flurry, I started Flurry because I wanted to start a company that I would want to work for. And I had yet to find a company that was like that.

And I was like, well, somebody has to do it. I'm gonna go do it. It wasn't like I want to be rich. It wasn't like I want to solve mobile. It's like I want to start a company that Sean would want to work for.

Edith: Sean, you're not talking me out of starting a company. Where's the downer part?

Sean: Well, so the reality is that not everybody is up for that. It sounds easy, it sounds like you can just do it, but I think it's very, very difficult to come to the realization that this is something I like to do. I would say that most of the founders that I work with realize too late that it's not something that they're cut out to do.

I think it's the kind of thing where the world will tell you no infinitely more than tell you yes. It's the same reason that many people can't be, I mean, being in sales is difficult. Because you hear no a lot and dealing with rejection is difficult. Being a founder is like that, an order magnitude worse.

Investors will tell you no, employees will tell you no, customers will tell you no, and everybody will tell you no. And worse than that, they'll tell you that you're crazy. So when I started Flurry, people told me that there was no way it could work. They told me it was legitimately impossible.

But the reality, and we always joke about this because, like, oh, people said it was impossible and I proved them wrong. Almost always those people are right. We have this weird survivorship bias in Silicon Valley where, like, oh, Sean was successful and he said no to the skeptics, so I'm gonna say no to the skeptics too.

And skeptics, it just turns out, are often right, because it's difficult. There's times when you literally can't do it. It's just not possible. And they were right.

And you have to realize that you'll spend a few years of your life working on something, struggling and going through these emotional roller coasters, trying to make things work, burning through your money and end up with literally nothing at the end. Nothing at the end. It's a difficult journey to go down.

Edith: Yeah, I give advice. I try to give back, and I was an accelerator a year ago, and now I mentor the people who are in the newest classes on fundraising, and they always want to practice their pitch on me, and I say no. I'm like, I cannot in any way, shape or form judge your business.

I can be very helpful with the mechanics of fundraising, the process of fundraising, like how to do it. But whether or not your idea is good, please don't, like, I can't judge that. Because they're doing all this stuff that I have no background in. The one I love the most was some antimatter play. Or something else was biochemicals.

I'm like, I have no idea if this is a good idea or not. Don't pitch me. Like, the process of finding investors, of how you pitch, of how you do a round, sure. Whether or not this is an investable idea, whether you're crazy.

Sean: And the reality is most people give you conflicting advice. Because everybody has their own experience, their own beliefs, and people will give you different advice. And if you're a first-time founder, it's really hard to figure out whose advice to follow, because you have no idea to figure out who's right. And the reality is nobody's right. Everybody's kind of partially right in different ways.

Edith: Well, I just give them advice like, okay, how many people have you pitched to? Okay, you need to pitch 20. Like, how many people have you pitched? Two hundred. Okay, your pitch is probably not good.

Sean: If you pitch two hundred and made no progress, you have problems beyond your pitch.

Edith: And then you kinda tease apart. Okay, you pitched two hundred, were the people actually who had money? And then finally it was this one firm I was talking to, and I figured out that their CEO had not quit his day job.

Sean: Oh, I met a company the other day who none of the founders have quit their day jobs.

Edith: And I was like, okay, but me judging your pitch, that's not the issue.

Sean: Yeah, I hear you.

Edith: So after you gave all this completely depressing advice about never do a startup, why do you think a founder needs to quit their day job?

Sean: I think that it's very difficult for investors and employees to bet on you if you're not willing to go all in. I think that it's an expression of belief and passion that you need to show if you want other people to take that same leap.

And like I said, I've met companies recently that have founders that aren't working day jobs who actually did raise seed money and hire people to build their product for them. And I just find it hard to believe that if you're not willing to go all in, why investors and other people should spend their time. No matter how good you think your idea is, a lot of what's gonna build a return is you and your work and your focus and your efforts.

Honestly, I have yet to meet a successful startup company that ended up doing what they started out doing. Which basically tells me your initial idea is like whatever. Hopefully it's like somewhere in the vicinity of where you want to go, but it's like horseshoes. Let's just get close and then figure it out.

Pivots at Flurry

Edith: Well, so Flurry did a couple big inflections. What were the points where you decided, I know it's trendy to say the word pivot, was it just like

Sean: No, we pivoted for sure.

Edith: Well, because you started off before lean startup was an actual word.

Sean: That's true. So Flurry started out as a mobile app company, and so we had a few interesting pivots. The first is, we initially were building productivity apps for feature phones, so like Motorola Razrs and flip phones, and targeting the US, which in 2005 was a really bad idea, turned out, in retrospect.

And so the company was basically failing right up to the point we realized that there was a huge market outside the US, and Flurry became one of the largest, what they call direct-to-consumer mobile companies in the developing world. So India, Malaysia, Indonesia, all across the developing world. And we raised our first round of funding just based on how popular our apps were in those places. I had at that point not been to most of those places. I did not know

Edith: Was it a deliberate thing? I mean, 'cause usually the advice you hear is, like, don't go international too soon.

Sean: And that was why we didn't, and it just turned out that the problem we were solving, which was accessing things like your email and your calendar on your feature phone, people in the US didn't care because they had computers, but people in India and Indonesia and Malaysia, they didn't have computers, but they did have feature phones. And so what we had done is inadvertently solved a problem they had, which was bridging the internet cafe back to their homes.

But at some point we realized that there was probably a bigger business, not in doing that, but in taking the tools we had built to do that, like analytics and advertising, and rolling it out to other app developers. And so in 2008 we decided to become a platform company for other developers.

Edith: Well, but you make it sound so simple. It's like, oh, we're tired of this mail.

Sean: Well, frankly, there's other motivations. It's really hard to make money in the developing market on mobile. I mean, there was lots of other motivating factors, but it really wasn't much more complicated than that, we thought there was more potential in being a platform than being a mobile app developer.

At the same time, when we had made that decision, you have to realize that it was 2007, 2008. The iPhone had come out, but it didn't support apps. The belief was the mobile web was the future, native apps were gonna end. And so it was great when the App Store launched and all of a sudden apps became the next big thing, but when we decided to become a platform, it didn't look like a very good idea from the outside.

Edith: So what made you decide to do it?

Sean: I honestly, personally, I just had this belief that it was going to be the next big market. We'd seen people using Flurry so aggressive, our apps, like we had an app called Flurry Mail. We had seen them using them so voraciously, just becoming part of how they lived, that I really thought that this was a future, and there were such primitive tools.

If you go back to that point when Flurry was launching our platform, the state of the art in the industry for analytics was how many downloads your app had. That's the only number you had. And that's a horrible metric, right?

Imagine today. And so the idea that you could actually measure behavioral funnels and loops and retention and these kinds of things, nobody could do that, but we could do that because we'd built this platform. And I thought if you could bring that to this market it would change the way it worked, and I did think it was a future. I did not know it was gonna become the next big technology wave. That was a happy coincidence.

Edith: Why do you think Google Analytics was so late to that?

Sean: See, one of the things, and this is going beyond early stage companies, if you wanna grow your company to being big, you need all the big players to not realize that it's a big market until it's too late.

So if you think about it, why did Google get into blowing up? They had many acquisitions offers early. Nobody was willing to buy them when they were willing to sell, because they thought search was done, right? Same thing with Facebook. People thought social networking was done. People didn't think these things were big markets until it was too late.

So as Flurry as a platform was growing, people still thought the mobile web was coming and native apps were an arbitrage. They thought, as late as 2011, people were still talking about how native apps are gonna go away. So Google thought their JavaScript tags were just, and eventually by the time they realized that native apps were here to stay, it was too late. Flurry had grown to be too big.

And so I think that you look at these companies that grow up to be big, it's always a case of nobody else realized the opportunity until it was too late. Because if they did, it becomes one of these crowded markets with 3,000 people doing exactly the same thing. So you look at Airbnb, right? I mean, today there's so many different sharing things. But nobody thought Airbnb was a good idea. Literally, nobody did until it was too late and it was too big.

Vision Over Iteration

Edith: Wow, so you have to be crazy enough to keep doing it.

Sean: You do. I think that's the biggest thing is, the lean startup methodology is great, but what it leaves out is the fact that the market will not tell you where the future is, right? You have to have a vision. You have to decide what the future looks like. And what Lean does, it helps you kind of refine that.

But you cannot find a bigger opportunity using Lean. You have to believe in your heart that you know where things are going and what the opportunity looks like, because that's your lighthouse in the fog of war that is startup companies. That's what will guide you through. Otherwise, it's just really hard to see where you should be going.

I've seen companies just iterating and pivoting themselves into oblivion. Because all they were looking for was something that was working. And in reality you have to start out with that vision and then iterate around it. You don't just iterate into a vision, it doesn't work that way.

Edith: Well, it seems like I get to talk back to Sean for once. It seems like you start off with saying you're just, I mean, starting off as mobile apps and then saying, okay, if true vision was developer tools for mobile, I mean, those aren't the same vision.

Sean: No, that's right. But the vision was that mobile was going to be the future. And that ended up being true. And we thought originally the way to realize that was to be an app company.

And for a while it was. We could not have started Flurry as a platform in 2005. It wouldn't have made any sense. There weren't enough companies. It would be silly. There's no apps. And so it was being an app company then that allowed us to know enough about the market to have a vision of the analytics and advertising potential later on.

So yeah, I mean, like I said before, most successful companies I know, they end up doing something different than what they started out doing. And that's okay. There's no problem with that. And maybe your vision changes, but I guess my bigger point is you're not going to iterate yourself into that.

There was nothing at the time that was showing us, listen, being a mobile analytics and advertising company is a power move, right? Like I said, people still thought it was crazy because they thought mobile web was taking over, so they're like, this is a stupid idea.

Edith: I was at TripIt and I could see the use of our app. We were a really early user of Flurry, because we had everybody using our app, and we were like, we need to get analytics around this.

Sean: And so it ended up working out well, but had we not put ourselves in that position, I mean, tons of other companies, you point out Google Analytics was already very well established at that point. People could have done what we're doing. We had to be that early just to even have that vision of the future.

Edith: And I think, so on the other side, so TripIt, we had millions of users. They all wanted to use our app. It was frustrating for us because we couldn't have the same funnels that we were used to. And that's why we use Flurry, even though, honestly, sorry, Sean, it was a little flaky at the time.

Sean: Oh, it was very flaky in the early stages.

Edith: But it was like, well, there was no alternative. We just didn't understand why Google didn't do it.

Sean: And it was funny, I always thought over the years, you see these companies and they're always overnight successes, like Flurry blows up, and I was like, this is an overnight success? Are you kidding? Like, you haven't been working on this for so long?

And that's what happens, is eventually either your vision is realized and people are like, wow, you're right all along, or it doesn't, and you fade into oblivion. And so we only really pay attention to the visions that were eventually fulfilled.

Even today, there's some company working on something crazy. I have no idea what it is. None of us do. But a few years from now we'll be like, it's obvious that's the future. Clearly.

Edith: So to me it seems so obvious. I'm like, okay, every product manager in the world wants analytics on their product. Mobile apps are where it's at and I can't get analytics from Google.

Sean: Like I said, everything in retrospect that's successful, always, like, Snapchat, for example, the idea of expiring content. It seems obvious for the new millennial generation. But when first Snapchat came out, people were like, what? My photos just disappear?

Edith: It still doesn't make sense to me, but I'm not a millennial.

Sean: But my point is that you can always retroactively think, I think successful things always seem to make sense, and failed things, we always, obviously, why they should fail. And in reality, in the fog of war, it's a lot more difficult to tell a difference when you're doing it.

So let's say, for example, you have a startup company and you're getting going, you have a product and you have five customers, but you're a little bit struggling. We were struggling in the early days of Flurry to get people in the US to use our mobile app. The problem wasn't our product and our business, it was that we were looking at the wrong customers.

Edith: Well, product market is the trendy term now.

Sean: Exactly. But so how do you know what the problem is, right? Is the problem your product? Is it your vision? Is it the customers you're going after?

Is it the timing? When we first launched the Flurry platform for mobile apps, it was before the App Store came off. So in theory, it was a little bit early. And ostensibly you'd be like, oh, this is a failure. And all of a sudden the App Store comes out and all of a sudden it's the next big thing.

And so it's so hard to know why things are failing. And frankly, it's also not hard to know why things are working, often, that it's really difficult to judge how you're doing. And going back to your point at the beginning, Edith, it's not like there's a finish line. Judging progress is really hard.

I look at these companies, I think a lot of the reason you've seen these unicorn companies go after billion dollar valuations is it feels like a milestone. It feels like a way to say I've made it, that I'm doing well. I don't think it actually is, but you're so desperate to know that you're getting there, that things are working, that I've made it through, that people have decided that a billion dollar valuation means that you've made it, and so they're really going after it. Whereas reality, it's just tougher than that.

It's one of these ongoing, like, if you look at this great Wikipedia page, it talks about the oldest businesses in the world, right? And they're all like hotels.

Edith: People always need a place to sleep.

Sean: Exactly. And so the question in my mind is, you see all these companies talk about starting a hundred-year technology company. Has there been a hundred-year technology company? Is it even possible? The number of companies, period, not even technology, that lasts for 100 years, that's not very many.

And so organizations and companies are always changing, they're evolving, and they're moving, and so you're never done. And so that's why, another reason why starting company is so difficult is that even when you're done, you're not done. Going public isn't being done. Look at Twitter. They're still trying to figure out what's going on.

Edith: Well, yeah. I mean, back as a dot-com consultant, it was a public company, publicly traded. And we had a box, it was Pac Bell Park. We had a box.

Sean: Sounds like a success.

Edith: Literally six months later, delisted off the stock exchange, bankrupt, because what happened is all the people who used to hire dot-com consultants didn't have that money anymore. And if you're just a consulting company and nobody's paying for your consultants, your burn gets very ugly really fast.

Sean: That's true.

Edith: The company was done.

No Easy Button

Well, on a more uplifting note, one of my favorite Sean sayings is there's no easy button.

Sean: There is no easy button. So where that comes from is that I meet with all these companies. I think it's especially true of accelerators, because the thing about being an accelerator, it helps a lot if you're in a good one, but you're surrounded by these other companies that are supposed to be at the same stage you are. And that's also never true, but it's supposed to be all the same stage.

And there's always one company in the accelerator that's doing really well. And you're like, I'm struggling to get customers, I'm struggling to hire people, I'm struggling to raise money. How is it that it's easy for them and it's hard for me? Where is the easy button that they found, so I can start pressing that?

And it's weird because the reason I go on and on about this is there is no easy button, right? It's just often from the outside, things look easier than they do from the inside. And so for every company that's seen rapid growth, for every company that's been very successful, there's struggles they've been through, struggles they're going through right now.

I mean, you look at Theranos, I have no idea if the accusations are true, but this is a company valued a lot of money, it raised a lot of money, that's frankly now struggling a lot to reverse a lot of negative publicity. And so you're never done, no matter how successful you are. Things are struggling. And if you start measuring yourself by your perceived peers and their perceived success, it's tough.

I mean, there was articles written about how Exec versus Homejoy was a case study and how to start a great company, and why Homejoy was beating Exec, and all the things you should do that they were doing. And obviously we all know Homejoy just shut down because their business wasn't viable, right? And so I think it's very dangerous to measure yourself by other startup peers, which goes back to this point. It's very hard to measure yourself, period.

But if you do try to measure yourself by your peers, you start to believe that somehow they've found an easy button that you don't have, and it's not as hard for them as it is for you. And the reality is it is just as hard for them as it is for you, just probably in different ways.

Edith: Yeah, it's funny. Good advice I got from my friend Dan Shapiro was to actually be buddies with other CEOs who are around the same time, so at least you have somebody to compare notes with.

Sean: And that's something I did with Outlier, is you create a little cohort of CEOs that are starting at the same time, but it needs to be an evolving group, right? Because companies don't grow up at the same rate. And so you need to make sure you realize that of your cohort of CEOs you're starting with, or CEO or founders or CTOs, some of them will grow faster than you, some of them will grow slower, and you need to change that group constantly to have people around you at the same point.

Edith: Well, it's funny, 'cause I have a friend, he's a really close friend, and I think he does very well at some things, and finally he told me, but Edith, I'm so jealous of you 'cause you're really good at this. I'm like, oh, I never thought of myself as good at that. And he's like, but you are.

Sean: No, it's often much easier to see your own faults than your own positives. One of the things that I like to do for the companies I work with is what I call reverse pitching, where I come in and pitch the company back to the founders.

Edith: Well, that's why at the very beginning I wanted us to introduce each other. It was a very deliberate Seanism.

Sean: But the reason it's so good is that sometimes you're not as proud of your successes as you should be. And so having somebody from the outside come pitch why they think the company is so great and all the potential is there, it can be really eye-opening for companies to be like, wow, yeah, we really are into something.

You spend so long screwing with this technology problem or fighting with this customer who tells you you're an idiot, and you start losing that higher level perspective. So I try to get people out of that to be like, listen, we are working on something cool. We have come pretty far. Yeah, we have filled a great team. Understanding that things are always better than you think they are.

Because I think that there's this funny psychological thing where, I don't know if you all remember high school. High school wasn't a lot of years ago for me, but when you meet somebody, but even when I meet my high school friends now, my image and my mind of them is locked into what they were like in high school. And it might never change, right? And this happens to people in your life. You always remember them in a certain way, a certain time that you knew them. And it's very difficult to get that unhinged.

And that happens for your company. So as a founder, in the early days, your company's a disaster. Let's just straight up be honest. It's always a disaster in the early days. The process of birthing anything is very messy, and companies are no different.

But many founders, you get locked into that idea of your company as this messy, difficult, struggling thing. And so even when it grows up, you get very paranoid, right? You're like, I remember how things used to be. I see this company around me and I remember how it used to be. And so it could go back, right? And so you never quite rest easy.

Edith: Well, you went insolvent twice, right?

Sean: Yeah. And so I had good reason to be paranoid. It turns out you're not paranoid if they really are out to get you.

Edith: Yeah, I'm like, Sean's advice to me is always mind your burn.

Sean: Mind your burn. No, but so a lot of those things are good lessons, but I think my bigger point is that when you see your company as a struggling difficult thing, you're not always ready to acknowledge all the great things that have happened in the meantime. It's grown up, it's gone to high school, it's gone to great college.

Everybody feels like their parents treat them as kids, and it's really just your parents remember you as a kid much more than they remember you as an adult. It just happens and it's very difficult to break that. And thinking about your company and how far you've come is an exercise that you have to do as a founder to adjust your expectations.

Minding the Burn

The reason I'm so focused on the burn rate, by the way, I wanna bring this up again because you brought it up now three times, and I wanted to explain why. I'm really big on conserving burn for the following reason. I believe that burn rates only go up, they never go down. Because once you start spending money, it's like a habit.

And so, like, when I was in grad school, my dorm room was literally a converted closet. It was literally a closet in that building that was converted into a dorm room. It was that small.

Edith: Did it have heating?

Sean: It did have heating. And yeah, I went to grad school in Ithaca, New York, so I would have died if it didn't.

Edith: Indoor plumbing?

Sean: But the thing is, at the time I had only lived in a dorm room in college, which was small, so it didn't feel small, like all my stuff fit. Right? And then after I graduated, I got an apartment, but it was a small apartment, and all my stuff, it felt huge.

Edith: Yeah, you have your own place. You don't have a roommate.

Sean: And then it expands, and now I live in a house. My house is full of stuff and I'm like, there's no way I could go back.

Edith: What's the hedonic treadmill?

Sean: Exactly. And so the same thing happens with startup companies. Once you start spending money, paying your salary, buying lunch, having the fancy office, what you have to do to pull your burn back is very psychologically difficult. And people almost never do it. And so I would rather just not raise my burn rate in the first place, and give myself as much time to find the next milestone that I want.

Because I'm also a big fan of, you should raise your round of funding based on the fundamentals of the next round. So you raise your seed round on Series A fundamentals, you raise your Series A and Series B fundamentals, because as long as you're doing that, you're always ahead of the game. But to do that, you have to give yourself a lot of time. And the only way to do that is to reduce the burn.

We survived the implosion of the economy in 2008 at Flurry, a time when it was literally nuclear winter for investors. Two out of every three sort of companies I knew just disappeared in a period of six months. It was insane.

Edith: I was there.

Sean: Yeah, you were, you remember it very well. And the only reason we survived was we were the most capital-efficient company in our investors' portfolio. And they were willing to keep us going because of that, because they knew we were making the best use of their money that could possibly be made.

And so I come away with that, again, this is not necessarily a good or a bad thing, but I want to make sure I give myself the most chances to be successful. And I know that means taking the money that I have and making it last the longest.

Edith: So Sean actually came by Heavybit today because I had a LaunchDarkly hoodie for him.

Sean: And it looks great, by the way. Everybody should become a LaunchDarkly customer just to get the hoodie.

Edith: But I mean, so the reason why we have hoodies is because I saw them as a marketing and branding expense. I didn't get all of our investors a hoodie. I put at the bottom of our investor update. So that was like the first test. And then it was like, I'm only gonna buy a hoodie, or we're only gonna buy a hoodie, if people promise to tweet them and wear them out with pride and basically act as an evangelist for us. So I mean, and you were talking about before, at Flurry you didn't have any swag whatsoever.

Sean: I actually do like swag, because I think it goes to, you want people to be proud of what you do. You want people to wear your company brand. And it's more for the employees than anybody else.

I think that the problem in Silicon Valley, for example, is that every company has t-shirts. And so if you give out t-shirts, it doesn't stand out. It doesn't really build your brand. It doesn't advertise your company, because everybody's wearing a t-shirt. It just blends into the noise.

But for your team, it can really, it's like, listen, this is my team. This is who we are. It's like why you wear jerseys, right? For sporting teams. This is who I represent.

This is what I go. So we actually just got our first business cards for Outlier this week. Pretty excited about that. So I'm not opposed to swag, and again, I'm not opposed to spending money. It's spending money intelligently on things that you think are really furthering your cause.

And so I think, for example, it can actually help a lot. It can be a good way to spend your money, to spend on swag. There's a great number of companies that, for a while New Relic had this great program where if you integrated you had a t-shirt, and it worked very well for them. These things can be assets. I just don't want to spend money for the sake of spending money.

Edith: No, I mean, they tease me because I always ask before I give a t-shirt, like, hey, will you actually wear this? And will you tweet it and brag? Because I don't want to give somebody a t-shirt which they go home and put in a pile and give to Goodwill. It just does nobody any good.

Sean: I agree.

Have Fun

Edith: So Sean, I really appreciate you coming by today. Now is where I ask you for your final tip, which will blow all the other tips away.

Sean: I think the most important thing about starting companies is that you have to have fun. It's just so hard if you're not having fun. It shouldn't feel like work. It is work and it's hard.

And people tell you no all the time and you feel really bad about yourself, especially if you've been an overachiever your whole life.

Edith: Sean, people tell you no?

Sean: Yeah, people tell you no a lot.

Edith: But you've had this huge excessive Flurry.

Sean: Yeah, no, I hear no a whole lot more than I hear yes. And I think that if you've been an overachiever and you've gotten good grades in school and you got good jobs and good performance reviews, you're not used to the world telling you that you're not good. And you hear you're not good a lot.

And so you want to have fun. You want to be in a team of people that you enjoy. You want to be working on something that you like. So if you don't like house cleaning, don't start a house cleaning company even if you think it's a good business. If you really don't like welding things, don't start a robotics company even if you think it's a good business. You have to enjoy it.

It has to be fun. And honestly, the minute it's not fun anymore, you really have to look in the mirror and say, should I be doing this? Because this is more of a life thing, but life is short. I mean, we have such little time to do what we want. If you're doing something that makes you miserable, even if it's starting a company, it's just not worth it in the end. The payoff is just not there.

The random variable of the probability of success of a startup company is basically zero. Basically all startup companies fail. So you should go in acknowledging that your startup company will very likely fail and want to do it anyway.

Edith: Yeah. I mean, it's kinda like, so people ask me why I like running fifty-mile races and then wanted to move up to a hundred, and it's because I really like running.

Sean: Also you love a hundred. The number a hundred is just very round number.

Edith: Oh no, a hundred is a hundred and sixty K. It's not that round. But it's the same with startups.

Every day I wake up excited. There's a new customer that's coming on board. We're producing something new. There's somebody new joining.

The team is cohesing. You said before about the joy of creating. I think you're right. It's not just creating a product, it's creating an organization, it's creating a team, it's creating value for customers.

Sean: And like I said, just make sure you're happy. And if you wake up every day and you ask yourself that question, it's always yes, you're frankly a very lucky person whether or not your company succeeds.

Ted: Thanks for listening to this episode of Caveat Founder, brought to you by Heavybit. Head over to Heavybit.com to sign up to be notified when the next episode is available. And while you're there, check out our library. It's home to over 75 talks from other developer company founders and industry leaders.