Techstars Executive Director Cody Simms & ReSci CEO Jerry Jao sit down to chat on a broad range of topics:
- Founder’s depression
- Top Qualities needed as a founder
- How to transition into an investor
- What an investor looks for in a startup
- The truth about the LA tech scene
- Q&A and more
On Founder’s Depression…
Jerry Jao: Tell us a little bit more about some of the traits that help startups succeed, and common traits in founders that help them overcome setbacks?
Cody Simms: First I want to touch on one of the things you’ve mentioned, which is founder’s depression. It’s actually mental health month right now, and I think that’s an area in founding companies that gets talked about a little, but not enough.
Most people who are founders are very driven people who probably have a lot of different paths they could go down, and know they’re putting all those paths on the line or on hold.
There’s often a lot of second guessing opportunity costs and things like that in starting a company, and the added pressure of once you start hiring people, you’re putting their own opportunity costs on the line as well.
Not to mention, it’s also personal credit card debts and all sorts of personal burdens you take upon as a founder. You take investor money and all of a sudden you’re fiscally responsible for trying to return that investors’ capital back to that person as well.
Through c-corp laws, luckily we typically have an environment where you’re not personally liable, but you’re emotionally liable for that capital. There’s so many pressures that sit on a founders’ shoulders.
I do think that recognizing that lots of founders go through depression, lots of founders go through dark times isn’t just a cliche, it’s real reality. I can’t imagine getting a call one day that a founder that I work with did something like take their life, but it happens. I think the more people jump into entrepreneurship not fully ready to embrace how hard it can be, I think that will happen more and more.
Jerry Jao: What is your advice for those who want to start a company? How do they mentally prepare?
Cody Simms: I think the best thing you can do as a founder — or maybe not even as a founder but someone who is thinking about starting a company — if you can mentor other founders’ using your own strengths, you can probably be a mentor to other founders with your narrow vertical expertise even if you can’t be a mentor on the broader side of being a founder yet. That gives you a lot of hands on time with founders where you’re lending some expertise but you’re also hearing their side of what they’re going through. The more I give to someone through what I’m good at or where I think I can offer value I’m going to learn and receive value back. So, getting a lot of exposure to a founder when their gloves are off and you know, they’re not your boss, but they’re engaging with you because they’re actually trying to learn from you, is a great way to experience their side of things.
Jerry Jao: How important is it for a business to be self-sustainable? Because most startups we talk about raise money, but certain companies lose sight and eventually shut down because you don’t have the business model to support it. Have you seen with your time at TechStars, what happens when companies lose sight of that?
Cody Simms: I don’t think there’s a hard and fast, black and white rule around that. I think it’s one of those things, you know, how hard to swing at growth vs how to build the business, so to speak. I think it’s an individual company decision that is unique to the people involved in that company.
It’s important as an employee to know what the company you’re joining is thinking about, for instance what kind of business do they want to build. There’s nothing wrong with building a revenue generating, profitable business that doesn’t raise any venture capital or raises a little bit of venture capital and builds an incredibly high growth, profitable business.
It’s just not aiming for years and years of unprofitable scale. Venture businesses are aiming for what I would call an unprofitable scale where you are throwing money to help grow the problem in a way that is unsustainable. You think throwing money at the problem can help you get there a lot faster than anything else, where you can win market share ultimately.
But if you’re bootstrapping a business or growing a business just through revenue you can still win market share. There’s no rule that says you have to throw at a thing to make it go but you may grow slowly. And that can be totally fine.
I look at businesses like 37signals, the team that built basecamp. They built a huge business just on revenue. They’ve bootstrapped that business and turned it into something really powerful. You also look at what gets called the classical agency business which is 100% cash flow oriented, it’s just generating cash flow each month and maybe even pays dividends back to the owners on an annual basis.
They’re never trying to retain profit inside the c-corp for the purposes of reinvesting on R&D and growth. They’re just trying to distribute money back to the owners of the business, that’s a totally fine business, too. So, it really depends on the people involved.
On Top Qualities in Founders…
Jerry Jao: You meet thousands of founders, what are the top qualities you look for?
Cody Simms: First of all, is this someone I want to work with? Do I like this person? Would I enjoy spending 5 to 7 to 10 years of my life in the trenches helping this person. So, that’s baseline one for me.
Jerry Jao: So, likeability.
Cody Simms: I look for exceptional CEO’s. CEO’s where I’m around them they just light up the room and that’s such an intangible thing to say. But everyone knows who that person is. They just have a spark to them that inspires and motivates people because the CEO is going to be the energy that drives the business. I also look for incredible drive and execution. If I challenge them on something or ask them a question, the next time I talk to them, have they gone and figured that thing out? They show that they can drive and execute.
Jerry Jao: So, likeability, ability to motivate or light up the room, unparalleled desire to execute and hardcore dedicated focus to solve a problem.
Cody Simms: And one more thing which is coach-ability. I personally don’t like to work with very defensive people. Someone who is willing to listen to feedback, they don’t have to agree with the feedback, but willing to dialogue around the feedback in an open way.
Watch the video to hear much more!