Course "Blitzscaling" Lecture 4.3. Ann Mura-Ko: Questions and Answers with John Lilly

This lecture was given by Ann Mura-Co - one of the co-founders of Floodgate - which later, during the answers to the questions, joined John Lilly.

Lecture 1: Introduction
Lecture 2.1: Stages of growth of a startup, "family stage"
Lecture 2.2: Stages of growth startup, "family stage"
Lecture 3.1. Michael Dearing. A bit of the history of entrepreneurship and management
Lecture 3.2. Michael Dearing. Questions and Answers with Reid Hoffman
Lecture 3.3. Michael Dearing. Questions and Answers with Reid Hoffman
Lecture 4.1. Ann Mura-Ko: The Thunder Lizard Theory. Author value
Lecture 4.2. Ann Mura-Ko: The Thunder Lizard Theory. Product, corporate and categorical value.
Lecture 4.3. Ann Mura-Ko: Questions and Answers with John Lilly


John Lilly: One of the questions frequently asked by our listeners: What can we ignore, being a small startup? You need to be the best in many issues, but are there any things that can be ignored while you are in the company no more than 15 people?

Ann Mura-Ko: I reflect on this more than on things that need to be thought of, being a large startup. The primacy for a startup in the early stages may be at the very last place in the list of priorities - you need to think about what unique ideas and advantages may be based on which you create your product. Conformity of the product to the market will come after the realization of such unique advantages.
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With a staff of up to 15 employees, you really should not think about the career growth of employees, positions, organizational structure, and so on. All these things will come later.

Also, while you are in the early stage of company formation, technical debt is allowed. During this period, you really cannot always say with certainty what will work and what will not - the key principles of activity should be quick advancement and quick decision-making, and not the desire for perfect execution.

The most important thing that you need to watch first is the speed of decision making and the rapid advance.

John Lilly: Returning to your statement about a unique founding team, do you think that all founders should have an intriguing story? How can you determine if a team is unique or not?

Ann Mura-Ko: Personally, I prefer to understand the connection between a person and an idea, as well as the reason why you are working on a specific project - why is your idea unique?

Every time we ask the same question - why you?

Uniqueness can manifest itself in many different forms. Examples of human communication and ideas:

• The problem can affect you personally, and you can become a consumer of the product yourself.
• You have worked in the industry and have encountered a problem with your own experience, studied it from the inside.

These things are very important, because in the life of every startup there comes a moment when you walk through the valley of the shadow of death. If the idea of ​​a startup belongs to you at least 1/10, you are more likely to abandon this venture during this period.

I personally, with great desire, finance those founders who are very worried about the question that they solve with the help of their startup, and I understand that this is the only thing that they really want to do.

John Lilly: You painted the system very interestingly - while many people do not start with developing a product idea - they go directly to the product. What do you think about technology-based startups and product-based startups?

Ann Mura-Ko: I love it when a certain idea lies at the core, but it doesn't have to be a technical innovation. Here are some examples of ideas:

• Supply Chain Benefits
• Network effect
• The ability to significantly reduce the fixed cost component

John Lilly: If you look at purely technical intellectual property, I have met a lot of smart people working on really interesting research, but the main problem of which is what will it all come out of?

Ann Mura-Ko: This is quite difficult, as part of our thesis is also to conduct several radical scientific investments. The main risk we bear is that these companies have interesting technologies, but they are still looking for a problem.

The example that I already mentioned - Ayasdi - found a response in me, because during my own research, when I was a doctor of science, I faced the same complex data sets that were very difficult to understand and understand that they were in myself conclude. I fully understood the problem that Ayasdi was working on.

Another example is our investment in Inscopix, the company that originally manufactured the microscope, with which it was possible to examine the mouse's brain and understand what it thinks about. The founder was a graduate student who was looking for how to turn technology into a business.

How did he solve this problem? The founder turned out to be very efficient in terms of capital - he collected 1.5 million, sold 18 million devices and continued to repeat this operation until he found a real business scaling model. Venture capitalists with this type of business usually suffer because of the following: he will do more research and less development, or vice versa.

John Lilly: Let's talk about the markets, as they represent a special category, and you have already made several contributions in this area. How do you find signs that the market is working? The first thing we look at is that operations are transparent, and the market is liquid - what do you think about such an assessment at an early stage?

Ann Mura-Ko: In the early stages of market development, we often look more at supply than at market demand. How effective are you in terms of offering to enter the market and stay with us for a long time?

Often, strong supply leads to demand - if there is supply, and it is not going anywhere, demand will come to you.

For example, in the case of Lyft, if you turn on the application and there are no cars around you, you are unlikely to use this application again. With TaskRabbit, if a lot of people leave applications for your work, from the point of view of the proposal this will mean that you have a strong society.

We like to consider first of all the offer, and we realized that this is the main indicator of market liquidity. After some time, it will be much easier for you to balance supply and demand, if you have decided on supply.

John Lilly: Let's go back to the conversation about the founders. What do you want to see in the young founding teams? And what do you think about single founders?

Ann Mura-Ko: We invested in single founders, but more effective dynamics - when there are 2-3 co-founders in a team. Being a lone founder is boring as you become a hostage of your own startup — such dynamics can become really negative.

If a team has 2-3 members, you feel greater social pressure to stay in the game, and you can focus the whole team on the problem. In general, teamwork is a more effective dynamic.

Another problem is that among the founders there are no supermen, each has its own weaknesses. Therefore, it is better to round your personal weaknesses.

Even within the framework of our own company Floodgate, there are two of us, and there is quite a big difference between us: he is a man / I woman, he is white / I am Asian, he is from Texas / I from Palo Alto, he is a romantic / I am more of a fighter.

If I go crazy about something, and he doesn't consider it a big problem - he balances me. This is great when different people have different roles.

John Lilly: There is a dispute over whether it is better to have a "mixed" company at the early stage of creating a startup and have different opinions, or have homogeneity and move faster - what do you think about this?

Ann Mura-Ko: I believe that for a young company it is important to have a consistency point of view. If the young team argues from the very beginning because of everything, this will not lead to anything good. People must move forward in one direction together.

At the same time, I think that versatility in terms of prospects has value from the very beginning. I think that with a homogeneous group structure, it will be more difficult to diversify the company.

John Lilly: Personally, I disagree with this, and I think it is possible to achieve diversification over time. As for hiring the right employees - do you help with hiring employees when you invest in teams in the early stages of development?

Ann Mura-Ko: It depends on the company, some come to us for help in hiring staff.

However, if the company asks us to find candidates, this is a bad sign. Based on our experience, the most successful people find their personnel in the early stages on their own. The most successful of them use their personnel potential to uncover talents who don’t even think to look for another job, transfer to other companies.

If a company advertises and places its vacancies everywhere - this is a sign that not everything is in order in the company. There is no one who would vouch for your company, for example, among people who already work for it.

We are trying to help our companies move in this direction, rather than providing them with the services of a recruitment agency and labor exchanges. This may be an addition to hiring, but the best frames can be found through internal communications.

John Lilly: Let's talk about Lyft. They had a sensational abrupt change of strategy, a shift from car sharing to service on demand. Many do not remember, but they did it before Uber, UberX was just a copy of Lyft. How did Lyft know that the time has come to radically change the direction of our activity?

Ann Mura-Ko: While the founders created Zimride, they constantly experimented, because they understood that their product did not fit the market.

Zimride was originally a car-sharing platform; they sold this platform to individual universities and companies. They had some sales, but it didn't work as a scalable business model. They had consumers, but there was no product matching the market.

Lyft was another experiment that this group conducted. They were looking for bus routes from San Francisco to Tahoe, rental vans from San Francisco to Los Angeles, etc. The main idea of ​​Lyft was the following - big houses on wheels - so why not share the house with another person (P2P).

The main question that confronted the creators of Lyft before launching the service was: Is this something more than just an idea, and how confident they are that it will work out. Usually the founders were quite nice people, but as soon as they clung to the idea of ​​Lyft, they became very persistent, and the council decided to meet them and try.

For the first week of Lyft service (Zimride is still working), Tommy Leap, who worked with us at Floodgate, said: "You have no idea what this will turn into." He experienced the work of this service and became one of the first supporters of Lyft.

At this time, the founders were faced with a dilemma: Lyft was already working with might and main, and at the same time, the existing Zimride service remained. We met with them, and they asked - what should we do with this asset that we own - should we transfer all our strength to Lyft? At the time, it was a really difficult decision, but we decided to transfer all workers to the Lyft project.

Looking back, one can judge that this decision was obvious and did not require in-depth analysis, but it should be understood that at that time the founders spent 3 years of their lives selling the idea of ​​Zimride, creating Zimride, seeking money for Zimride, attracting Zimride users by donating weekends / friends / family in order to achieve all this. And then you come face to face with the fact that everything that you have been building all this time does not work, and the thing you spent a month working for.

It takes a lot of courage to close a project for which you have spent time and effort. I appreciate the courage of the founders, which allowed them to throw all their strength into the project Lyft.

Today, people talk about a change in direction, mean by that changing the home page on your website, and call it a turn. This is not a turn. Turning is when you feel bad and want to quit, because what you are working on completely changes what you have worked on before, and you don’t know whether it will work or not.

A question from the audience - how did the team that created Zimride / Lyft support the loyalty of employees during this abrupt change in activity?

Ann Mura-Ko: The whole team participated in a variety of experiments from the very beginning. At that time, Lyft was just another experiment for them.

Of all the members of the team, the biggest changes have befallen the sellers who sold the Zimride platform. After the project was closed, these workers had to change the market in which they worked and find as many drivers as possible.

It all becomes much easier if your product fits the market. From the very beginning of work on Lyft, it was clear that this product would work. In the early stages, the demand was so great that they needed as many drivers as possible. In particular, we found people who, among other things, even drove a car, even on TaskRabbit, and used them as drivers in the Lyft service.

A question from the audience - what do you think about Uber and the competitive pressure between Lyft and Uber today?

Ann Mura-Ko: I think these companies are too different to say which one is better. There were many other competitors who also dealt with individuals in terms of passenger transport, but Lyft retained an advantage because it was different from all of them.

Among the main differences Lyft at first became the company's culture - they had a pink mustache, a ritual like "Give me five!", And so on. They did not try to become a “favorite driver for everyone,” just to create some kind of new service.

In the Lyft service and in general in the company's activities, there has always been a strong social element, which is why Lyft is so successful today. This experience is well transmitted from father to son.

My father tried traveling with Lyft, and was delighted with his work. Just one click of a button and:

• Great guy arrived
• On a great car
• Took me to the hospital
• Talked about life, weather, everything.

My father never had such impressions in his life. If a person who is 76 years old can feel the difference, it will be a very successful business.

Question from the audience - When you invest money in the founders, do you invest first of all in their knowledge of the market or in their ability to learn quickly?

Ann Mura-Ko: Ideally, of course, we would like to see both of these qualities, and we have the patience to look for a founder who has both of them. However, if we have to choose, we prefer to work with a person who has the ability to quickly learn, who can successfully conduct experiments.

John Lilly: Now the market for startups is very effective. The decision on many investments was not obvious - at first I fall in love with a startup, then I can stop loving it, then fall in love again. At the end of the day, you need to make a call, and from our side this is also a little exciting procedure.

Ann Mura-Ko: Many of our investments are mixed. Many good people work on similar things - the founders must have special qualities.

I noticed that the best investments come out when partners have different opinions. In particular, when Mike and I strongly disagree about a particular investment, I pay special attention to such cases.

John Lilly: I agree: our most successful investments - Airbnb and Facebook - have become a strong test of our partnership. Now they seem obvious.

Question from the audience - What do you think about companies whose product fits perfectly with the market in Silicon Valley, but may not bring success on the world stage?

Ann Mura-Ko: If the product is intended only for marketing inside Silicon Valley, this is a bad sign. We prefer to work with entrepreneurs whose business goes beyond the Valley, especially those whose business goes beyond the main industrial centers.

If we consider international activities and compare them with activities within the United States, then we believe that an entrepreneur who declares his intention to enter the domestic market of the United States should already have a fairly strong deal.

Our next lecture will focus on the next level of scaling.

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