Friday, June 25, 2010

The Land of Dreamers

My partner Yael and I have a notebook with ideas for new products, services and other things that could become startups.

To understand this statement and why it makes me shudder, I need to tell you a story first.

The Fall

We've just launched Our original startup idea for auntieChef, the food-from-people-that-care-to-you-marketplace is not panning out. It doesn't really matter why (ask me if you really want the whole story) but we've decided it's not the right way to solve the healthy / better food at home problem.

After spending a few weeks agonizing about how to solve it in other ways, how to kickstart the business in more innovative ways (at some point we were talking about becoming a virtual restaurant to an office building - don't ask), we've finally hit on a direction that might work.

Excited, we went home for the weekend (meaning two of us stayed in NY, the third went home to Boston) and reconvened on Monday. A few hours of a very downer conversation ended up with our Bostonian partner deciding that he doesn't want to continue.

We spent a couple of weeks recovering from this, and working through our idea to see how we would build it. We ended up deciding that no, we don't really think we can make it happen.

So now we had a startup, two founders and no idea.

The thing is, there are two types of people: execution people and idea people.

And both of us are execution people.

Yin and Yang

The execution people take an idea, latch on to it and move forward, going around obstacles, changing parameters to solve problems that come up.

I'll call them executioners. (yes - I know what it means, but the point is - move forward, slay problems, get it done).

Idea people are better at the random, out-of-the-blue idea.

I'll call them dreamers.

Executioners will say: The user has a problem with the login page? no problem - we'll move things around, simplify, they'll only have to provide a password and we'll figure out the username, etc.

Dreamers will say: The user has a problem with the login page? Let's have them call in instead of logging in. Let's do an anonymous service. Let's sell raw ingredients and have the people cook their own food, so we don't need to know who they are. Let's leave the food outside so people can come pick it up without telling us who they are.

Both are critical to the team, but their jobs are very different.

What's also interesting is that if you put a dreamer and an executioner together on a team, their roles will get even more polarized. Dreamers will provide the wilder ideas, executioners will censor, narrow down, focus the ideas.

One of the ways to recognize dreamers is that they have a notebook full of ideas.

Notebooks Notebooks Everywhere

In one of those startup meetings that lots of startup people go to in order to network, hear what others are doing and provide criticism worded in the form of polite feedback, we met Liam. Liam, a very nice guy, heard that we're in flux and offered to share an idea with us.

What evolved over a series of meetings was one of the most bizarre, entertaining, flabbergasting, and all-around blog-material-generating set of conversations I've had in a long time.

Liam had an idea that sounded very interesting and seemed to have potential. Since all startups are about building a company that will last and change the world, and not remotely about the most relevant exit in the form of an IPO or a sale, let's call this idea The Magic Money Factory(TM) (no illegal money counterfeiting implied).

After a couple of days of thinking about The Magic Money Factory(TM) we decided that we're interested in pursuing this a bit more. We set up a meeting with Liam and asked him what he had in mind for us to move forward.

He outlined that because he's bringing in the idea, and has a lot of relevant connections, he wants 40% of the company (we get the rest) and he wants to be vested immediately, like an investor. For the non-startupers of you, this means that while we'll have to work through a few years to earn our full share, he owns his immediately, even if he doesn't do anything else from now on.

Let's analyze this a bit:

- An idea is important. In fact, an idea is a critical piece of starting a company. It's like the grain of sand that gets embedded in an oyster, and starts the pearl creation process. On the other hand, most startups end up with a different product than what they started doing, because once you start talking to customers, working through issues, etc. you'll find that you might have identified a problem, but your solution is wrong, or even that the way you described the problem is wrong. A bit of internet search will show that ideas are valued as 1-5% of the company, the rest is execution. After all, a pearl is not a grain of sand, and the iPod is not an "easy-to-use MP3 player".

- The connections Liam was bringing to help The Magic Money Factory(TM) were, to stretch the allegory a bit, not money people, but cotton people. (US money is printed on a cotton / linen combination). So yes - they had some relevance, but were not really the people we needed.

We tried to explain that between the two of us, we have a lot of experience in management, releasing products, marketing and executive exposure, but to no avail. Liam said that this idea is much better than a lot of other ones, and that he should know.

He's got a notebook full of ideas at home.

Leggo my Ego

He made it clear that this conversation was about business, not about ego.

A few minutes later he said "The reason I'm asking for 40% of the company is so that you show me that you believe enough in the idea that 10% here or there won't matter to you."

"Doesn't that work both ways?", we asked.

"Yes", said Liam, "but it's important for me to own 40%".

I'd like to point out that some ego is being harmed in the making of this blog entry.

The Piss has Gone to His Head

And so we went home and sent a polite refusal email saying that we can't accept those terms.

A few days later we got a message asking to meet again, to see if we can reach some agreement.

After some chitchat (as I said - Liam is a very nice person), we got down to business. The new offer was a 33% split each way. There was also a commitment to work with us on this project throughout, and a provision that if Liam leaves or stops working full time on this, his control stake would drop (though not his part of the money).

Once more we were treated to how this idea is better than most:

First of all, it's not an idea, it's a "concept". Liam's definition is that apparently while everyone has ideas, this is a thought-out idea. And concepts are worth more. oh yes.

Second, this idea, sorry, this concept, is like an autobot: it's a car AND a robot. It can transform. It can start as a business making money, THEN become a startup getting funding. It's the swiss-army-knife of concepts. The elusive unicorn of concepts. It's a UniConcept(TM).

(remember - he has a notebook full of ideas at home. He can tell!)

The thing is, to catch a UniConcept(TM), you need a virgin startupper, commonly known as The Fool(TM).

Then we tried to understand why a person who pretty much professes to work less on the project deserves to own 33% of it. Once you start working on a startup idea, you've got no time for anything else. You focus on it, make tweaks, do everything needed to make it work.

Liam promised he will work with us full time on this idea.

I should probably explain a bit about Liam. This is how he presented his life story to us:

- He finished his BA from a good school, then thought about what to do with his life.
- He then started his masters in two fields, but didn't finish.
- Then he was accepted to a very prestigious economics PhD program, which he didn't finish.
- Then he started a company with a partner but they had a falling out and they, well, didn't finish.
- And he's been working on a different idea for the past two years which, to be fair, he never quite started.

So Liam doesn't seem to have the staying power. We could pretty much predict that after a few months he'll drift along to the next idea. He acknowledged this, but said he'll commit to showing up at the office. I can already foresee the annual performance review conversation: "But I'm in the office 9-5 every day!"

He then said the thing that killed the deal for us: even if he only commits 30% of his time to the project, his contribution is going to be as powerful and meaningful as our full time.

So there - a guy with no credentials is absolutely certain that he's better than us. Isn't that nice?

Did you wonder what the "Piss has gone to his head" title meant? It's a literal translation of a Hebrew expression that means that someone is swollen-headed, has grown too big for his breeches, is self-important. I like the piss metaphor better - it explains the actual physical process that happens when you're too important to take a piss.

As for me, I'll have a problem working with people who have notebooks full of ideas. It seems like those ideas rarely get translated to reality.

The Liam Strikes Back

There were a few other Liamism jewels sprinkled throughout the conversations. For example, he said he could probably get Ben Bernanke to be on the advisory board. You don't get it? He's sort of the head of the competition for Magic Money(TM). Oh never mind. You just don't get it.

"I can prove that this concept works very easily", he said. "All I have to do is grow a potato in a glass of water in my kitchen". We weren't quite sure how that would prove the point, so he explained: "it's almost like growing cotton, which is the first step to making Magic Money, sort of."

We had one final call with him, since he wanted to hear our counter-offer before we close the negotiations. To be fair, he was trying to be creative and come up with other ways of structuring the deal to get us on board, except we had our best offer defined and would not budge.

"I'm disappointed you weren't more creative. For me.", said Liam.

The Notebook

And so we went back to the drawing board, thinking up ideas for startups. No - not concepts. We're not smart enough for that.

What surprised us was that in a few short days of, admittedly intense, brainstorming, we came up with quite a number of ideas. It seems that if the dreamers are not on the team anymore, the executioners can actually come up with ideas. Maybe it's all the quiet that's causing us to speak up and fill the void.

We started writing them down in a notebook.

But it scares me. I'm not sure I can work with us anymore now that we have a notebook.


P.S. The name Liam is obviously not his real name. Liam = Living In A Movie

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