NEVER make an MBA your co-founder

Key Takeaways

these are the 10 largest public tech companies in the world and these are the 10 largest tech startups unicorns currently here are their Founders and finally the only ones that had an MBA when they started the company mbas make terrible Tech startup Founders let me explain why this is me coming out of high school I had some ideas about whether in my life I wanted to start my own business and I assumed like many that the best RW to accomplish this was a business major oh thinking about business school which I in the end didn't choose the problem is that the Dynamics of a tech starter today are massively different from what textbooks teach my first reality check on this came from reading the lean starter the basic framework that Eric Rees proposes revolves around this build measure learn cycle build a basic MVP put it out there measure its performance and then learn from those metrics and start over again the old school method would be to hire a market study keep your idea super secret in case somebody might steal it protect your brand by never launching unfinished crap and this Lean Startup cycle operates on weekly Maybe bi-weekly processes there's no time for Market studies the clock is sticking you plan you execute [ __ ] it chip it done is better than perfect I often see this Clash of thinking with more traditional business school Founders and it's hard for them to take this approach when it opposes you know this degree that they're probably still paying for but that isn't even the biggest problem the biggest problem is in this building part building tech means coding think of some stereotypical startup stories like uh airbnbs Founders an industrial designer a graphic designer and a computer scientist stripee a fintech two College dropouts Google more computer scientists Amazon an electrical engineer and a computer scientist the winkl Voss very arguably who came up with the idea for Facebook economics Majors got screwed by Mark an engineer not because Mark is evil or a lizard but because they couldn't build the product they came up with many of the business majors I meet who are trying to build a company have this exact mindset I have this idea I just need someone who builds it for me but that has a plethora of problems first people without technical background without a product background have a hard time understanding the nuances of building software how long should this take what's possible and what isn't how a product should look they might have an idea in their minds about the product that their company should build and sometimes those ideas are good but often times they suck and they Clash once they land on an engineer's desk especially if the engineer doesn't even have a say in how the product should look famously Engineers hate being managed by non-technical people precisely for these reasons and that gentlemen is Scrum welcome to the next 8 weeks of Our Lives this just became a job second Engineers are expensive and good Engineers probably have a job if you were to draw a vend diagram of coders good coders and people who want to take the risk of starting a business you'll find a very small overlap those are the founders of these Tech startups but they want to be Founders probably not employees some might not be willing to take the big risk of starting their own company but they might be willing to join an early company under the leadership of a great CTO one that they can learn from welcome to Facebook and it isn't just about Equity it's about the fact that they know that their work the role that they're playing is essential for this business to even exist what good is the next Giller app if there's no route to take it from your brain to an actual product business ideas are completely worthless without the execution one of my favorite ever threads on Reddit is this coders are Reddit how do you politely refuse your friend's million dooll app idea many of the founders that I come across either you they come to us cuz they they need to write a pitch tick or or do Financial projections they they come with this sentence oh oh I just need to raise money to hire a developer but everything about this sentence is wrong I'm going to break it down first they don't understand the type of engineer they need or how complex their product might be how long it might take to build second they're looking to hire an employee they want someone who who's going to follow their instructions who's to do what they say rather than bring new ideas into the mix rather than than bring their own value into the company I.E a co-founder and third they think they can raise money for this Tech startup investors know almost better than anyone how critical and how hard that person it is to find that Tech co-founder isn't quitting their day job because this guy raised half a million dollars to give them a salary bump until the company runs out of money they'd be willing to quit for the right idea for the right fit to co-found a company that they believe in so you don't really need the money to find that person my conclusion on this front is that the founding team needs to have the skills to get the company to its first million dollars in Revenue put that quote somewhere that's not to say that they won't hire anyone else but the skills are there building a social network well you need someone who can raise money cuz this is a product that makes no revenue for a while incredible marketing skills fantastic product design and of course code building up B2B SAS well you need incredible sales a network of people to become your first customers and again code and yes some operations that's essentially what a co-founding team is a group of people that has all of these skills and here's the thing if you can group all those skills into two people great that's a 50/50 Equity split need three people okay a third of the company that's fair but you don't want five co-founders cuz that doesn't make sense for a lot of reasons I've become a big believer in equal Equity splits especially if everyone is bringing the same amount of experience and covering the same amount of skills needed but how many of those skills does an NBA bring great salesman aren't necessarily business majors an NBA might be a good marketer but that's not a guarantee and it's not something that they necessarily teach you in business school they should definitely be able to do ops but at the early stage Ops is a bit of a secondary task and honestly one that is easy to learn or to delegate the early stages of a company means being in the trenches doing a bit of everything and the more of these things that you can do code marketing design well the bigger chances of success for a company some of the most common mistakes I see here U are Hiring Agency genes for early versions of the software or for marketing a software agency Will Bill you hourly even if they quote you for the entire project they're really converting that brief into hours and using that to estimate and their business is finishing your brief your specifications as quickly and efficiently as possible deliver it finish the project but that's not how early stage products work early stage products need to be changed every day at the beginning you're looking at every single sign up every user journey and acting upon it as quickly as possible you have to be able to act not to have to requote a whole new project for an adjustment to your user experience I've seen Founders burn through thousands hundreds of thousands of dollars for a version of the product that launches but then they no longer have any money to rehire that agency to modify it on the marketing side most marketing agencies are too focused on driving Impressions brand awareness via paid advertising they'll charge a margin on top of the ads that they run but that margin might just make the difference between positive or negative unit economics moreover the agency cares about a goal which is usually driving leads but a lead isn't a sale marketing at this stage requires understanding which companes are driving good leads or bad leads which leads become good customers and which ones are cancelling right away and as an early stage starter founder you have to look into these Journeys into these users with a magnifying glass and if there's nobody inside the team that understands the data or the campaign where they actually came from and that can immediately act on it you become very Capital inefficient a lot of that does relate to tracking performance and then using the data to forecast for the future and you don't really need an NBA for that it's all about understanding what these numbers are and how one drives the other I made a whole video on driver-based financial modeling which goes over how the tracking works I'm going to drop that below and in a couple weeks we're hosting a live Workshop course thing so that you can level up on these skills and on spreadsheets and have viewer reasons to need an MBA as a co-founder I learned more than business school would ever teach me or Ryan would ever teach me okay that's an enough shaming of mbas the mandatory disclaimer here is that the problem is not in the career or in the curriculum or in the diploma and that the somewhat clickbait title is a gross generalization but the point remains building a startup from the ground up requires a set of skills that more closely resembles building than operating which is what most NBA curricula focuses on the stories I told you are real it makes sense that someone who understands how business Works someone who chooses that as a career path wants to start one it even connects to personality traits I know it's controversial but the Myers Briggs personality more closely associated with entrepreneurship is estp extroverts ready to act wanting to take risks I'm an the ntp myself which is close enough it's natural that these personalities are the ones that take the risk of starting a company and most product Builders have introverted personalities and they value job stability mbas are absolutely crucial to companies later but at the earliest stage I think it's builders that you need the idea might seem like the Golden Goose but without the execution part recruiting a team building a product it's worthless if you want to start your company make sure that you are bringing some of this yourself that you're bringing that stuff to the mix now if you enjoyed this video make sure to check out our previous episode on the mistakes I made when we first started slide BNN what I would do differently if I had to start over thanks L for [Music] watching