210 – Surviving A Start Up With Steve Hoffman

John Over the last two decades, I’ve been on a quest to learn everything I can about leadership obsessed with what makes the best leaders so good after running companies small and large for the last 20 years. Today I speak on stages all across the world to audiences who are interested in that same question. My name’s John Laurito and I’m your host. I invite you to join me on this journey as we explore this topic. What makes the best leader so good? Welcome to tomorrow’s leader! 

John All right, tomorrow’s leaders, so this guy is awesome, I really loved my talk so much, then I’m going to have money for part two at some point. Steve Hoffman. He is the CEO of Founders Space, which is a startup accelerator for companies that are in the startup phase. He’s done it himself multiple times, very successfully. This guy knows his stuff. He just wrote a book that came out called Surviving a Startup. It’s available. You’ll see all the links in our show notes, and he’ll talk about it. It’s his third book. He’s got a couple of others called Make Elephants Fly and the Five Forces, but this guy’s got a really interesting background. We didn’t even get to this, but he was a Hollywood TV executive, a game designer, a voice actor, an animator, and a serial entrepreneur. 

John And the guy knows leadership. So of course, I love him and I loved my conversation with him, and I’m looking forward to continuing itself without any further due here. Steve Hofmeyr. All right, welcome to today’s episode of Tomorrow’s Leader, where we dove deep on all things leader. Related, related. Leading yourself and leading others. I’m John Le Rito, your host with a great guest today. Steve Hoffman is the CEO of Founders Space-based out in the San Francisco Bay Area. Welcome to the show, Steve. Great to have you. 

Steve John, it’s fantastic to be here. 

John Thank you. Well, I’ve been reading about you have been learning about you. You’re the author of the book that’s just come out surviving a startup, which I’m really anxious to read. I love the topic of startups, so congrats on the book. By the way. I think that’s your third book, right? That is excellent. So, so tell us a little bit about this passion of yours and everything around startups enough certainly to write a book on it. You’ve had a lot of success. Where does this passion come from? I guess you’ve had a lot of great experiences with startups. What we kind of got you to that this point of writing this book. 

Steve So I have founded three venture-funded startups in Silicon Valley and two bootstrapped startups. So this book, Surviving a Startup, comes out of my personal experience of trying to survive these crazy adventures. You go on with your startup, you know these roller coaster rides where you have these extreme highs and extreme lows, and sometimes you make it through, sometimes you don’t. And then, you know, after my third venture-funded startup, I started helping all my friends raise capital in Silicon Valley. So they were going out with their companies and they came to me and my nickname is captain half. And they’re like, captain off. How do you raise capital? How did you convince investors to give you that money? 

Steve What do I do with my business model? Every all these questions. And the more entrepreneurs asked me these questions, the more I posted the answers on my blog. And that blog was called founder SpaceX. And it just blew up. And I had so many entrepreneurs coming to me that we decided to form a founders space startup accelerator in San Francisco. And that was over 10 years ago. And in the past 10 years, we’ve grown. We now have partners, over 50 partners in 22 countries around the world. So I have a lot of experience in this. 

John That’s incredible. So, so companies. So somebody who’s got an idea. I mean, what stage are they coming to your literally? Hey, I’ve got a great idea, and I want to turn this into a company, or is it? Is it well, past that point where they’re now at the point they’re trying to raise capital for it? 

Steve All stages? So we get a lot of early-stage entrepreneurs. You just have an idea and we usually work to educate them. So it’s mostly education because they’re just getting started. If they’re more mature and they have a team and a product, they’re ready to go. We can bring them into our accelerator programs. And then if they’re even more mature, like they’re already closed, a lot of venture funding they’re scaling, then we’ll work with them on a consulting basis to help them hit the next level. A lot of times, pre-IPO, something like that. 

John Wow, that’s fascinating. So tell me a little bit about what you see. You’ve obviously had success, but you’ve been through the ups and downs. I mean, it’s got to be an emotional roller coaster. And you know, you got certain days where you’re high on life and others, you just feel like, OK, everything is done and then you keep going. What is the biggest difference between that company that does survive versus the ones that don’t? What are the things the one, two, or three things that you write away say, OK, these are the things that have you have to have otherwise you’re not going to make it? 

Steve Well, the first thing is when I’m a venture investor now, so when I look at and evaluate startups, the first thing I look at is the CEO like that CEO has to be amazing, like a top tier, because if the CEO doesn’t have it, the company almost never succeeds. And how do I judge that CEO? What the beginning. If they don’t have, if they’re if the company isn’t growing, if they don’t have a lot of revenue and customers, then all you have is the CEO and the. Both surround the CEO. So who has this CEO managed to convince to join the team? Because if the CEO is taking, you know, mediocre people and cobbling together a team, well, that startup will almost surely fail. They can even have the greatest idea in the world. But at some point with a mediocre team, they’re going to fumble the ball. 

Steve They’re just going to drop it in some other team. That’s much better. We’ll see the same opportunity. Pick it up, run with it and they’ll win. So I judge the CEO based like a lot of entrepreneurs come to me and they’re like, You know, Captain Hoff, I can’t. I can’t. I have no money. How can I get somebody a great team together like an A-list team? How can I do it? No money. And I’m like, Look, the job of a CEO. The number one job of a CEO is to get great people. It’s leadership like being a great leader. Now how do you be a great leader? Will you be a great leader if somebody could work at Microsoft or they could work for you? Why would they work for you? Well, they would work for you because your company can give them the opportunity to do something that they can’t do at a big company to create something from the ground up to create meaning in their life, to really believe in what they’re doing. If you can instill this in your people, then you are a great leader. And I’ll tell you, start-ups do it all the time. They get people who could have, you know, six-figure jobs at a great company, you know, either a well-funded startup or a giant corporation, but they get them to give up those opportunities to come to join with them and believe in their dream. And to me, that quality proves that they are a leader and that’s how you build great companies. 

John I love that. That’s so, so important. It’s interesting. Reminds me of I had read about one of the best recruiters in business was Steve Jobs. He was just a maniac with it, always going for people that were even out of his reach. And John Sculley, the CEO of Pepsi, who finally did join Apple after years of Steve Jobs going after him because, at that point, Pepsi was was well surpassed where Apple was. So it was kind of in many people’s minds to step down. But the question that Steve Jobs asked John Sculley, which finally got him to come aboard, he said, John, do you want to be selling sugar water for the rest of your life or come with me and change the world? And John said that was the thing that was the difference-maker. So what I hear you saying is you’ve got to give people, it’s not just the product or service you get to surround yourself with the right people and you’ve got to convince them that their world and their future is better with you, with your organization than where they are and that path of thought. 

Steve That’s the litmus test. And, you know, once an entrepreneur gets a great team together, I usually say, don’t build a product, don’t go out and raise money. Don’t do anything until you have your team in place. Honestly, put 90 percent of your time into building the team at the beginning. Don’t even worry about your idea like your ideal will probably change. Most startups there you know they start at point a. By the time they’re successful, they’re somewhere totally different. Your idea should be formed by your team. Now you should pick a direction, an industry like you say, I want to change the fishing industry. I want to make it more sustainable. Do you believe in this? Can we do this together? You don’t have to have a specific idea on how you change the industry because honestly if you’re an outsider to the industry, you don’t know enough to have figured it all you need. 

Steve That’s what the team needs to do is spend that time. But once you have the team and kind of a direction you want to head, the next thing to do is take that team together, owning it together and go out into the world, go out into the world, engage the people who will be using your product or services the people you want to transform the convert into your customers, go to them and don’t try. The best thing is if you don’t have a specific idea, you won’t try to sell them on something. Instead, you’ll be focused on figuring out where their problems are, what’s driving them nuts. Like if you’re going into the restaurant business-like and you want to transform it with technology. You go in there, you start talking to restaurant owners, cooks, waiters, sous chefs, whoever they are like, What’s driving you crazy in this business? What’s what? What would you do differently? And they’ll start to tell you they won’t give you the idea for what product you build, but they will tell you things that they need to be changed, that they would love if they were different. And then it’s up to you, that amazing team you put together to start to come up with different solutions like, Oh, what if we tried this? And what if we tried that and experimented? It’s all about experimenting. 

John I love that, you know, and that’s such a great point. You know, it’s taking the time too often. I think people and leaders assume they have the answers. But what I hear you saying is you’ve got to be great at finding what are the pain points? You know, what are the things that keep people awake at night? What are their needs and then you figure out the solutions, and that’s how the best companies are started is that has that my sense in my hearing what you’re saying correctly? 

Steve Absolutely. So I have a rule for great leadership and that is ask, don’t tell. Now, try this if you’re an entrepreneur out there or if you’re a manager in any company out there right now and you want to be a better leader for an entire week, I challenge you. Don’t tell a single person that reports to you or that you work with. Collaborate with what to do and you’re like, How could I do that? Like, I know what to do. I’m always telling people what to do. That’s my job. But it isn’t your job. Like, great leaders are always asking questions like I was talking to somebody just yesterday, and he was the head of global sales and training at Tesla Nichols. The amazing thing about Elon Musk when he’s running this company isn’t what he said. It’s what he asked. Like in every meeting, he was probing deep asking questions, asking questions, nailing people on, you know, how did you get this? How do you know it’s true? 

Steve Why did you make that decision continually asking people when you go into your company, if you want to transform this team, you have if you want them to really own it and excel and turn on their brains so that they innovate, come up with amazing ideas. If you tell them what to do, then they’re like, Robots do this. Do this. Don’t do that. Don’t go do it. But they’re not there. It’s not theirs. They’re just listening to you. If you go them to them and say, How would you do that better? Why are you making that decision? What could we do to hit this goal? And could we move the data up by a month? How could we move the data every time you ask them a question? Their challenge, they’re like, Oh oh, I have to think of how to move the data by a month. Well, that’s a crazy idea. But would it be possible? And then they start to come up with stuff, and the more they come up with stuff, the more information you get because you’re listening to every employee because you’re not telling them what to do. 

Steve Even if you see an employee about to make a big mistake, like you’ve done this a thousand times, you know they’re doing it wrong. You go up to them and say, No, don’t do it that way. Do it this way. You say, Why are you doing it that way? Have you considered doing it another way? You know what? What do you think this will work? How can you show me that this will work? Because they may surprise you actually, the way they’re doing it might be different than you’ve always done it, but it just could be better. And by asking them, you’ll get information. Also, if somebody says, I can’t do it, you say, Why can’t you do it? Why? And then and then you. Then you might find out there’s somebody else in the organization who is there waiting on who isn’t actually responding. And then you can put them together. Why don’t you go ask that person? Why don’t you talk it out and work it out and come back to me? That ask, don’t tell is golden? 

John I love that is such a great, and I love the one week challenge too because I think there was a lot of leaders and a lot of leaders that I’ve talked to that were we hit the pandemic and they were in a really uncomfortable spot because for once they felt like they didn’t know the answers and because they didn’t know the answers and what was happening or where things were going, they communicated less and had this really negative ripple effect. And I’m a big believer. The days of the leader being the one who knows all the answers are long gone. And to your point, it’s really the best leaders Elon Musk, any great super successful leader. It’s the questions that they ask that change the thinking of people, develop people and develop other leaders and reality instead of managers or, you know, robots or order takers. 

Steve And you said it exactly right the day that the leader supposed to know all the answers. You’re that you don’t have all the information, you can’t know the answers. In fact, you’re just one brain. Your job is to get all these other brains working for you. It’s not to come up with the answers to get them to come up with the answers. That’s the job of a leader. If the leader’s job is to come up with the answers, their company will never grow, but they’ll be inundated trying to figure out all these problems. That’s not their job. I have another rule that’s really critical for being a successful startup. Absolutely critical. When you pick your business model, you need to pick the right model. And this is absolutely critical. I write about this in my book. There are different models in the models that can grow into big companies that are very different than the models that that grow linearly. 

Steve And the big differentiator that I have seen across all industries doesn’t matter what industry it is if you once you get a customer, once you get them to be your customer, you never let them go. So what I mean by this is a lot of companies, they’ll get a customer, they’ll use their product or service, they’ll buy their product or they use this service and then they disappear. And they never see that person again. And they don’t have a relationship. They don’t have they can’t get any more revenue. But the companies have. Incredibly big once they get that customer. That customer’s in a constant relationship with them in that constant relationship is driving value for the customer and driving revenue for the company. So look at Amazon, right? Once they get a customer, they that customer, the more they use Amazon, the more valuable it becomes and the more valuable it becomes, not just for them, but for the entire ecosystem. Yeah. So this is really important. I tell entrepreneurs don’t build products or services, build platforms, build platforms that have an ecosystem where everybody you plug into this ecosystem is creating value for everybody else. So think about Amazon. 

Steve This is just one example of a place to Google. Facebook, Microsoft doesn’t matter. All of them are the same. You plug every time a customer comes in. First of all, the customer is giving that Amazon more data about what products they’re buying. Right. So Amazon has more data so they can pick and select and recommend all the right products, not just to this customer, but to every other customer. Also, the more customers that come in, the more people sellers want to come in and sell products to those customers, which creates more value for the customers because they have more selection, better prices and which creates more value for the sellers because they’re more customers. So it’s a virtuous circle where everything is feeding everything else. This business model that generates recurring revenue means that this customer, might give you a little money every time they purchase if you’re Amazon, but over their lifetime, it adds up to an enormous amount. If you’re a startup that gives you the money to acquire, more and more customers build out a more robust platform, build out more services. This is the magic formula. If your business doesn’t fit this model, it’s going to remain small or medium size. 

John Hmm. Wow. I love that you got my wheels turning in a big way. And it’s interesting because, you know, I’ve sat through a lot of different investor presentations. And, you know, sometimes it’s great and to your point and just soaking everything up that you just shared to your point, sometimes the product is great and the idea is great. And I just I’m not buying into the CEO. I’m not buying into their way of thinking. And it’s unfortunate because then you feel like if you just made that switch, took that idea, and surround it, other people put other people in the equation, then it would take off. But I really like the last point you just said there. So the way that somebody needs to be thinking is how to develop their business and their model in a way where they do have this ecosystem concept, which sounds it makes a ton of sense, but it may for somebody be a real challenge to think about that. How do they how do you get to that point? I mean, it’s a good thing to think about an Amazon model, but if I’m in a totally different space and I’m thinking, how do I create that in this whole other different industry or that doesn’t really exist? 

Steve Well, there are some businesses where it’s really hard to create. So, for example, consulting business or to scale a consulting business because you know, you need people and you need people that have abilities, high talent, people. There are big consulting firms, but they grow very slowly like and so it’s not going to be the same type of model in most consulting firms honestly remain very small. Let’s face it, if you’re not a McKinsey of the world or one of these, you know, big, big consulting firms, and it’s it’s not the type of model, so it can’t apply to everything. If you make a gadget like a lot of people, put a gadget up on Kickstarter and stuff, a lot of times people buy it once and they go away. But that’s why you see these gadget companies. At the end of the day, they don’t have an ecosystem, so people aren’t creating more value their customers. So literally, they end up competing on price and somebody comes out in China with the same gadget at a lower cost and everybody has to lower their cost, their profit margins shrink and they’re literally, you know, one of a million players. They don’t have any competitive edge. Mm hmm. So how do you figure this out? Will you figure it out by engaging with your customer? 

Steve Honestly, you know, if your business is in trouble and you need to figure out like, what’s the next direction? There’s always the true north is always the customer. You go to the customer just like you do with your employees. You don’t tell your customer what you have. You don’t try to sell them on some vision you have. You listen and ask and create a dialog, an ongoing dialog with your customers. In the deeper that dialog, the more information you’ll get, and then you’ll start to see possibilities. Oh wow. Our customers, you know, if we did this for them, none of the competitors are doing that, and this is really valuable if we just sped up the process by 30 percent. 

Steve They would be so happy. Now, how do we do that? How do we get that outcome? What can we do in our processes with new technology, with our team, with business models? We can speed up that process. So you really need, I always say, target the outcomes the customer wants. And then work backwards, you know, at the customer’s, you know, if you ask customers, they will tell you, you know, things that they want. You know, I want to be able to get more revenue. I want to be able to be more efficient. I want to be able to have to put less time into this. I want to, you know, to have it more reliable. We these are the outcomes, you know, in different situations for different products. Once you know the outcome, then you work backwards and you say, Whoa, can I make this an ongoing relationship? Can I make it a relationship where I’m continually giving them value? Because if you put the, you know, the companies that focus on giving value to their customers, they’re the ones that ultimately win because they make the right decisions. It’s not extracting value from your customer that comes naturally. When you’re giving them value, they’re going to give you something in return. If you if you aren’t giving them value, then they’re going to go away. If you’re just focused on how could you know if you’re trying to squeeze them for as much, every customer knows, oh, they’re just trying to squeeze every penny out of me. I don’t like that person, I’m moving on.

John Yeah. Well, I love that true north is your customer. That’s your, you know, your end-user, it’s your true north. And all the answers you need are right there. Steve, I love this. It’s so much great information, and I truly wish we had more time because of so many more questions I want to ask you. So we had mentioned before the show I might want to do a Part two at some point if you’re open to that. And I think the audience photo of that too because there’s so much good stuff surviving a startup is on sale now. Is that correct? Is it? Yeah. OK, great. 

Steve Harper Collins published it. It’s in all the bookstores on Amazon everywhere else. 

John Great. Is it on Audible? Also, can I listen to it? 

Steve Oh yeah, you can get it on Audible, too. Yes, I’m a huge audiobook fan. 

John Same too. So that’ll be my read while I’m working out.

Steve And I have tons of information in here like going really deep on to how to raise capital, how to talk to venture capitalists, how to close deals in your sales pipeline, all the things that startups need to know to survive. 

John Love it. Absolutely love it. And if people want to find out more about founders’ space, where can they go? 

Steve They just go to foundersspace.com. So you can go there. We have my podcast, tons of videos, lots of free stuff because we believe in educating entrepreneurs and I’ll give your audience something special. So we have a special thing I’ll give them, and they have to go to this URL to get it. It’s called the Ten Commandments of raising venture capital, so they go to foundersspace.com/ The number 10, T-E-N, or the number 10 either will get you there. 

John Terrific. Well, we’ll put all that in the show, notes Steve. This has been fantastic. I really, really appreciate you joining us today, so I know the audience will be thanking me for having you on to. So you’ve been a great guest. Excellent. And thanks to everybody for joining us today. I’ve been here with Steve Hoffman, the CEO of Founders Space Startup Accelerator. He is the author of three books, most recently Surviving a startup. Check it out at your local bookstores, online, audible, whatever your favorite way of getting a hold of your newest books. 

John And thanks, of course, for your ongoing suggestions for topics as well as future guests. Keep them coming. I love that and as always, share subscribe. Like this and go down below. Give five-star reviews, your opinion matters. Thanks for joining us today and Steve once again. Thanks for joining us. Thank you. 

John Thanks for joining us on today’s episode of Tomorrow’s Leader for suggestions or inquiries about having me at your next event or personal coaching. Reach me at John@johnlaurito.com. Once again, that’s John@johnlaurito.com Thanks, lead on!