(Part 6 of the Founder Briefing Series)
If–
- this is your first startup, and
- you know a lot about some technical or industry domain, and
- an innovation has you in its grip and just won’t let you go, but
- when it comes to starting a business, you know that
- you don’t know what you don’t know,
then JFDI will be a good experience.
Skin in the game
You have to take some risk: you have to put skin in the game. if you are not personally willing to risk at least 50% of your net worth in cash investing in this business, you may not be the right team for this business. Before you can convince anybody else that this business is worth funding, you have to first convince yourself!
If that sounds too abstract, try this: are you willing to spend $500 of your own money buying books, and 500 hours reading them? If that sounds like too much work, keep the day job! Would you choose a co-founder who didn’t care at least that much?
Outside your comfort zone
Entrepreneurship means you have to be willing to step outside your comfort zone (which may be programming, UX design, or sales/marketing) and learn to build and lead a business. (Over the next few years, you will pick up the equivalent of an MBA).
Many founders really just want a patron for their art project.
If there is no conceivable revenue model, or if the point of the project seems to prove that something can be invented, rather than to get lots of people actually paying for your invention, then we are not aligned.
Lifestyle Entrepreneurship.
If there is not a billion-dollar business opportunity here, then we are not aligned.
JFDI sees hundreds of applications. We usually see the same idea multiple times. Mobile dating apps for strangers to have lunch, or for singles to see who’s nearby and bored. Job marketplaces that help (some specialist occupation) connect job seekers with employers. Social shopping apps that use collaborative filtering within social networks to make product recommendations. Airbnb for clothes or food or cars or travel. Events databases. Crowdfunding for charities.
What do we do when we see the same ideas repeat? We cluster them and ask ourselves: which of these teams is the right one to implement this idea? Usually we go with the team that has the necessary-and-sufficient development combo of hipster, hustler, and hacker, and also domain expertise: they should have several years of experience in the industry they’re planning to disrupt, so they don’t waste time climbing the curve.
See earlier comments about domain expertise.
Sometimes we see ideas which we call “five-minute brainstorms” – the kinds of things that any group of four people will usually think of during the first five minutes of any innovation brainstorming exercise. These ideas have a number of attributes in common. They’re obvious. They feel like they don’t need any particular expertise to pull off. You could imagine hacking up a prototype over a weekend. None of the brainstormers has ever heard of any company already doing it. (Not because those companies don’t exist, but because those companies have all failed to solve the promotion problem and haven’t gotten their brand in front of any customers. Or because all the companies doing this have failed to find a revenue model, and consequently gone bust.)
Sometimes we see ideas which we call “fad clones”. Some idea has been showing up on TechCrunch – once in America, and once in Europe. Maybe a startup around that idea just got funded out of the latest Y Combinator batch. Inevitably we see applicants who want to do that idea with JFDI. Why? Because the idea seems easy enough that a team without extraordinary skills can do it. Unfortunately, there are thousands of such teams out there.
If your idea doesn’t emerge from some deep domain expertise, you may be working on a five-minute brainstorm idea or a fad clone, which none of your co-founders would be willing to actually commit their savings to.
Wrong Team.
Even when the concept is worth pursuing many founders are not the right team to execute the opportunity. They also underestimate the responsibility and the work involved in building a business. They give up.
It’s hard to screen for this. That’s why we probe for an authentic connection to the idea.
What is JFDI looking for?
We assume every member of the team has the following basic qualifications:
- literacy
- good with computers
- familiar with Internet email and IM etiquette
- emotionally stable and mature, able to relate well to a range of personalities
- intelligence in the 95th %ile of the population
- able to turn up to meetings on time and use calendaring software
- can dress to suit a range of occasions from hackathon to investor meeting
- familiar with GTD principles and able to lead, follow, manage, and execute a variety of types of projects
- curiosity
- a wide range of hobbies
- the ability to read large volumes of information – a classic hacker trait. see esr’s Portrait of J Random Hacker
- a natural temperament which locates you at the leading edge of the new. (you like gadgets, toys, exploring the boundaries of what is possible with technology. see my essay on Flooders and Extenders.)
- an entrepreneurial temperament.
Then we look for specific skills.
- typically, hacker, hipster, and hustler;
Then we look for domain expertise.
The team must have an authentic connection to the idea.
This means, even if you don’t get into JFDI, you will go ahead and execute anyway. Your admission to JFDI should not determine whether you go ahead with the business. The business must be as compelling to the founders as fire was to Prometheus.
We look for leadership.
You need a natural leader on the team who can pitch, persuade, and sell not just the product but the business.
That leader could ideally take a business all the way to exit, but as an acceptable alternative, to grow the business to product/market fit and marginal profitability, at which point you (as an investor) will fire yourself (as the CEO) and get an operating team to take over for the growth phase.
We look for red flags.
Some of those red flags are described in an earlier section, about birth defects.
We screen for life situation.
There must be no entanglements on the team front. It has to be true for all members of the team that this business will be your top priority.
You should be in a position to take significant risks with your career with tranquility.
Sadly, that means no babies, etc, unless you have a significant safety net already.
If you have to disappear for 3 weeks to be in national service during the course of our bootcamp, that means you miss 25% of the bootcamp. Unfortunately, NS is one of the many ways in which Singapore militates against entrepreneurship. You may be able to get deferment on the “new business” clause. but as long as there is uncertainty about your ability to attend the bootcamp we cannot accept you. And this is unfortunate because the deferment is typically only granted at the start of the ICT period. So if you can get your unit CO to defer you in advance then we can admit you. Unfortunately, in this country, national service trumps innovation. No matter what the top brass say, they are still top brass.
We look for business savvy.
Some experience in business is useful. Knowing how the world works and how businesses work gives a powerful advantage, because you can have sensible conversations with distributors and resellers (if necessary) and with B2B customers (if you’re that type of startup.)
We screen for coachable, emotionally mature individuals.
We expect founders to be prepared to hear rather hard feedback from mentors and the market.
But your authentic connection to the idea, and your hard-won insight, should trump initial rejection.
We make it easier, but it still won’t be easy.
are you willing, for the sake of the business, to sacrifice the personal relationships and friendships you have with all of your cofounders? in other words, is it more important that you bring to the world some new way of doing things, or is it more important that you stay friends with your cofounders? is this new thing that you are doing important enough to you that you will make it your priority for the next 5 years, forsaking a personal life, a love life, a family life?
Closing Thoughts
If you have made it this far, you’ve proven a couple things: that you can read a lot, and that you’re not easily discouraged. If you’ve been through the second-round interviews with JFDI, and have been offered a term sheet, it’s time to evaluate the fit between your startup and JFDI. This essay raises a number of issues. Please meet with your co-founders to talk about them. We are always happy to answer questions and clarify; you’ll find us sitting on Skype and available by IM.
No matter how things go in the next few weeks and months, we wish you the best of luck in your entrepreneurial journey!
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