My dad, Walter Lee Chapman, passed away last week at the age of 67. He was a Vietnam vet (shot twice), a trickster and a friend to many. In a lot of ways we could not have been more different. I am a fairly reserved attorney cum VC and while I feel like I can fit in with the best of them (once I’ve had a drink or two), I am no extrovert. My dad on the other hand was at home in any situation. Whereas I live in Alameda “where hipsters go to breed” he basically lived at the stables where he took care of two stubborn mules. Where I filter everything I say to make sure I don’t offend, he was bold, he was fearless and he didn’t give a f**k what anyone else thought of him. With my dad you never walked away thinking ‘gee what does Buck (his nickname) think about me, because he made sure you knew.
There are countless things my dad taught me over the years, how to shoot a gun, how to live life and most importantly how to be a dad to Amara Chapman (my daughter) but he also taught me things I think are good advice for any startup. I don’t want to be misleading, my dad never made an angel investment and didn’t think about tech companies very often, nor did my dad ever read a book on organizational behavior or pick up a copy of the Harvard business review. He lived his life according to common sense principles and rough spun country wisdom. That said, I think we in the startup community could afford to pay more attention to common sense than we do.
In honor of my dad, I would like to share a few pieces of wisdom from his life.
Don’t Be Forgettable
There are few people who knew my dad and felt indifferently about him. Most people liked him but not everyone and those with whom he didn’t get along were clear on where they stood. Dad may not have “gotten along” with everyone but at the end of the day, the people he loved and who loved him built strong relationships. My dad’s services will be 1000 miles from where he lived but they will be full despite the difficult travel for most of his friends and family. He did not make fair weather friends and neither should you.
Companies should be focused on building a legion of advocates. If a startup can choose between 1,000 passionate customers or 5,000 paying customers they should choose the 1,000 passionate customers every time. Thousands of interesting companies are founded every year and thousands of companies disappear into oblivion just as quickly. To survive long term a startup needs to be a company for which someone will metaphorically travel across the country. Don’t waste money on acquisition campaigns or channels that only bring short term revenue. Those customers will cost you more in the long run and will serve only as a distraction. Most people are familiar with the 80/20 rule, which states 80% of your headaches will come from 20% of your business. Established enterprises often try to reorganize in order to cut this 20% away. Instead, you should be focused from the start on building a business without the 20% deadweight.
Plan Ahead, Armageddon Is Only A Bubble Burst Away
Vietnam changed my dad in many ways. He would never sit in a restaurant with his back to the door and he was never unprepared for disaster. I always knew this to be true but going through some of my dad’s things over the weekend has been eye opening. I can’t tell you how many first aid kits, flashlights, batteries and canned goods I found. Tucked away almost invisible in his wallet were a couple of old $100 bills that had obviously been hidden there years ago, I suspect dad hid the money in case he ever needed to pay a tow truck driver or bribe a border guard either were just as likely in his case. Were my dad’s preparations excessive? Perhaps but I can also tell you that I know at least a dozen families whose emergency plans began and ended with “Get to Buck.” My dad was ready for disaster and he was ready to get all the people he cared about through it.
If you are the founder of a startup, you do not have the luxury of having a Buck Chapman. Nobody is building an emergency stockpile for you and your company. You may think your VC’s job is to be backstopping your shortsightedness, but you are wrong…. dead(pool) wrong. The primary job of the CEO of any startup is to make sure your company has the resources it needs to succeed. Today, tomorrow and for as many tomorrows as it is going to take for you to get to cash flow positive. For the last couple years there has been a lot of talk about the bubble and the series A crunch. Now we are going through instability in the public markets. No startup CEO will be able to say they were taken unaware when the fundraising market dries up. You need to be planning ahead and if you don’t have at least 6 months to 1 year of runway right now than you are depending on the kindness of the startup equivalent of Buck Chapman and they don’t exist.
Practically speaking this means 3 things:
1) Know how much runway you have based on both current and projected burn. If EITHER of those numbers does not give you 6 months + a cushion, you should already be fundraising.
2) Pour over your income statement and look at each and every expense. Identify which expenses you can afford to cut and in what order and set yourself a threshold for when those cuts need to kick in. 3 months of burn left, 2 months of burn left, etc. It gets really hard to make rational calls when the gun is to your head. Make your plan now and stick to it.
3) Tonight, even if you have 12 months of runway left, go draft an update for all your investors, prospective investors, advisors and tire kickers. Then set up lunch meetings or coffee with all of them over the next couple months. The “funraising” landscape of 2015 is going to give rise to a “hair raising” one in Q1 2016. You need to be top of mind for all of your supporters so that when you do go out hat in hand, they are waiting for you with open pocketbooks.
When The Going Gets Tough Be A Mule Not A Horse.
My dad loved mules. He had two Phil and Romey and while he could have just as easily had horses, he chose mules. For those who don’t know, mules are the sterile product of a union between a donkey and horse. Mules are the prototypical example of hybrid vigor where the combination of two things make for a better whole. Mules are smarter than horses but are bigger than donkeys. Pound for pound you can’t beat a mule for actually doing work or surviving in harsh conditions. Moreover, mules can get by on less food than horses. Put simply, mules do more with less. The one benefit of horses is their straight-line speed over flat terrain and short distances.
When conditions are perfect for your startup then by all means be a horse. Dump money into customer acquisition, staff up with talented people and spend money on PR. When conditions are perfect a startup can afford to run like a horse. In ALL other conditions, you need to take a lesson from my dad and favor the mule. Big established companies can afford to pour resources into a business line, startups on the other hand, need to focus on making steady progress and on surviving from one day to the next. As long as you survive and as long as you iterate every day, eventually you will get to your destination.
Startup conditions have been phenomenal for several years. For a while expenses were low across the board for both operating and capital expenses. That time is gone as rents and salaries have shot up. For a while the venture market has been pretty forgiving and full of cash but as general economic uncertainty settles in and as the influx of foreign money slows, times will get harder for startups. With the exception of only a handful of standouts, it is far better for you to be a mule today than a horse.
Living in the bay area it is often very easy to dismiss people in the rest country or even in other parts of California. We live in a bubble and I don’t mean of the economic variety. I think we could all do with listening to the common sense of people like my father more often. After all, what is wisdom if not an uncommon degree of common sense.