Nuno Goncalves Pedro

Welcome to Episode 48, the second and last episode on day zero as a founder. What should I do? In this episode, we’ll discuss how culture eats strategy for breakfast, how you should think through the structure of your entity and the legality of your entity. And finally, we’ll land on second-time founders. What do they do differently?

Nuno Goncalves Pedro

Let us start with culture eats strategy for breakfast. This is actually a quote that has to be attributed to one of my professors at Stanford, Robert Pilgarman, one of the great professors of strategy in academia. He always used to say it. I’m probably paraphrasing him wrong but, “Culture eats strategy for breakfast.” And his point was you can define the best strategy ever, but your company culture, if it’s going in a very different direction that doesn’t allow you to align the execution with a strategy you have set forth, that culture will win and the strategy will never work.

Bertrand Schmitt

I totally agree. I don’t see it either way. You have to build your strategy in the constraints of what your team can achieve. Obviously, you can always arrange things a bit. You can hire more people, you can bring different types of people on board. But culture is typically very hard to change, and hopefully you have the right culture. If it’s way beyond what your culture is able to achieve, that will be a problem. Let’s take some examples. If you have a culture of being very careful about your spend, think about Amazon in the early days.

Nuno Goncalves Pedro

Still today?

Bertrand Schmitt

Still today. I remember earlier, I don’t think they still do it today, but they would use, I think, some doors that they buy on the cheap and that they use as a desk, as a surface for your desk. That’s a very distinct type of culture where you try to optimize cost everywhere.

Bertrand Schmitt

There are other ways to optimize cost, by the way. If you look at how they pay employees, stock options the first two years, for instance, they won’t invest much. It will be on year three, year four. That’s not typical, to be clear. But the analysis was most people stay two years or less. We better don’t give too much in term of stock because it’s valuable. We will only give stock to people who are staying for the long run with us.

Bertrand Schmitt

My point here is if you have that culture, you won’t be going, for instance, in the luxury business. Good luck trying to go to sell luxury products with a culture of optimizing cost to the bones. My point is you have to align the two together. You have to understand what type of products we’re willing to deliver, and you have to have a culture that match it. Hopefully, early on, you need to have a good instinct about your type of product, your type of market, and therefore, the type of culture that’s necessary and hire the people who would be a good match with this culture. Step by step, be more clear, be more transparent about what is this culture so that people can self-select in it or not.

Nuno Goncalves Pedro

There’s a couple of exercises that I recommend founders do. The top-down exercise is define your values, define what’s your value system. Values are a very good way of edifying and effectively creating the notion of culture. This is what we stand for. They’re not enough. We’ll come back to that in a second, but they are definitely a good way to start. If you can’t articulate it early on, articulate a few principles. Maybe it’s not a big value system. Chameleon, we actually wrote down a value system. Some people might not want to do that. They might just edify a few principles. There are a couple of principles they start edifying and then start editing it like it’s almost a laundry list of things. Then over time, maybe at some point, you get some consultants or someone particularly talented in the team to restructure it and put it under a couple of buckets, and that’s your value system.

Nuno Goncalves Pedro

One thing I always recommend, think through that. Think through value systems. It’s not a McKinsey engagement. It’s not something you should spend three months doing. But sit down. Sit down with your co-founder. Sit down, what’s your stand for? Write it down as principles, write it down as values.

Nuno Goncalves Pedro

The second part is culture is always manifested in action. It’s not manifested in ideas. It’s manifested in how people behave and do. I’m always reminded of this by my team. As good writer as I can be, it’s like, “Well, are you really living by your values?” You need to. You need to live by your values and everyone will be looking at you. This is manifested in big decisions and big execution, big operations, but also, and more importantly, on small things.

Nuno Goncalves Pedro

Where do you spend your money as a firm? If you’re the CEO, where are you deciding to spend the money? And what are you not spending the money on? How do you acknowledge the rest of the team in terms of seniority? Is your door open or not? How are you actually including people in your decision-making process? How are you making decisions? Everything leads to culture. This is the shocking piece. It’s literally everything. It might be on how you react to bad news on something. It might be how you react to good news on something. Everything defines culture.

Nuno Goncalves Pedro

The part that’s very complex about this is in the early days, it is really the founder, CEO that sets the stage. There’s nowhere to hide. You don’t have 200 people. You have 10 at max, 15 maybe.

Bertrand Schmitt

The founder, the co-founder, the first exec, they definitely set the tone. Some stuff that are very clear in terms of tone-setting, obviously, are hiring, firing, and promoting. If you hire, fire, promote based on the values of your business, then things will be very clear. If you don’t, then your values are just bullshit at the end of the day.

Bertrand Schmitt

Just to be clear, that’s pretty bad because when you have bullshit values, there is a lack of trust. There is a lack of insight of the company. It’s very important to get this right. I totally agree with you on the small things. I think the small things have to be representative if also it would create a bad atmosphere. Oh, these guys, he’s saying this on one side, but he’s doing this on the other side, and everyone knows about it and no one does a thing. It’s really important to really make sure that you enforce that. Yourself, as a founder, you are the embodiment of this approach.

Nuno Goncalves Pedro

Very specifically, if you are a founder, CEO, that says, “I want speed, I want everyone to work fast,” for example, and you start becoming the bottleneck, acknowledge it. Discuss with the team how you can solve it, how you can become better at that. This will have a huge impact on the culture of the company. Huge impact. Because people will be like, “This is the CEO, and he’s apologizing for being the bottleneck. This is how he wants us to behave. He wants us to actually stand for stuff, but at the same time, acknowledge when we have flaws and we need help and we need to go to the next level.”

Nuno Goncalves Pedro

For example, that’s great for teamwork. It might be that you’re actually really fast and you want to manifest that speed, you reply to emails whenever you need to reply to emails. It might be on weekends you’re replying to emails because you said everyone is going to work really fast and everyone is everyone. That also sets the stage. People are like, “Okay, it’s not acceptable then that I don’t reply to emails within 24 hours of me receiving the email. Maybe weekends is an exception, we’ll figure it out. Maybe it’s only for emergencies, but maybe that’s the rule.” Everything defines it.

Nuno Goncalves Pedro

If you have a problem with someone on the team and you take them to the side, and this again could be the CEO, could be another co-founder, and have a one-on-one discussion with that person and try and illustrate what’s the problem, it’s very different than you call them out in front of everyone else. That sets culture as well because guess what? This is going to keep happening. Managers are going to continue doing that to other people on their team if they see that from their leader, from their CEO. You always have to be careful. We always have impetus.

Nuno Goncalves Pedro

I’ll put my mea culpa here. Everyone thinks that… Doesn’t think, actually, that I’m really good at this thing. I’m super flawed like everyone else. I’m an emotional guy. Emotional people sometimes are great because they can get others to believe in things that are still not proven at all. That’s incredible. They can get the most out of people sometimes because they excite them. They want to work with that exciting other person. But emotional people sometimes can be emotional. When they are emotional, they can sometimes overreact to small things and manifest themselves not in an ideal way.

Nuno Goncalves Pedro

It’s my role to work on that. It’s not the role of my team to work on me. It’s my role to work on that. It’s my flaws. Because if I want to create a culture that is totally respectful, emotional, but in a positive manner, a company that is actually trying to go to the next level very fast, breaking some stuff along the way, but at the same time having fun. It is my responsibility to create that culture through the decisions and through the way I act. Every time I don’t do it, I set a bad example for the rest of my team.

Bertrand Schmitt

That’s a key part of the game. There is no question. Sometimes what is not easy is to define values early on. You did that. Me, when I built App Annie, it was more step-by-step process. Actually, it worked great because we asked execs, but also people lower in the ranks to try to come up with the values that embody what they knew and what they lived every day with App Annie. And that was great because it was a real match between what we wrote as values and the reality of the business.Again, if there is a mismatch, that’s a terrible place to be.

Bertrand Schmitt

The positive of defining values early on is transparency with new team members because you can explain clearly in the recruiting process. It’s valuable because it’s a self-selecting system because it means that if people don’t like the type of values you try to push on the bodies. And hopefully, if they have maturity and if they’re honest with themselves, they will know if it’s a match or if it would be a poor match. And if it’s a poor match, hopefully, they will not proceed then.

Nuno Goncalves Pedro

That’s a good segue on culture, not cult, your words, Bertrand, right? It’s a culture, not a cult. Getting that right is complex. Sometimes culture is so pervasive, so strong. I remember working at McKinsey, I always used to give the example. It’s almost like a sect, which doesn’t maybe…

Bertrand Schmitt

It’s my personal opinion. I want to build a great culture everywhere I work with, but at the same time, I want to be careful and not go too deep into people’s life and make sure that it’s not too encompassing and people have their own… I respect everyone’s freedom. For me, that’s quite important. To be frank, I’ve seen quite a few startups where it felt more like a cult than anything else and it has never end well because it was hiding some deeper problems. Typically, with a cult, it also means you don’t question. That’s always wrong. I cannot see a successful startup that is not questioning how things work and that is not ready to change how things work, and that is not ready to question even everyone, including up to the CEO and founder.

Nuno Goncalves Pedro

Agreed on everything that you said. A bit of nuance. I do believe that people don’t need to be friends in working the same company and be great at working together. Absolutely not. They don’t need to be friends. They don’t need to share anything about their personal lives. They should be free to live their lives in whichever way they can, hopefully in a legal manner that doesn’t affect in any way the company, but still. The cultish nature of not questioning, etc., I feel is something that should be avoided at all costs that destroys companies.

Nuno Goncalves Pedro

At the same time, the notion that people like to work together, that they like hunting together, they like to do actual stuff together is something that I quite like. It does happen in many of the organizations that I founded, many of the organizations that I’ve worked in. Again, it’s not an obligation. It’s not we all need to get along, we all need to go out and do things together. But if we want to, we should. We should be able to do. And that does create a little bit of cohesiveness that is powerful as well. This cult of infallibility, I mean, no. Founders, CEOs, CXOs, anyone, we’re all super fallible. And creating that transparency towards teams, I believe, is very powerful. I believe that’s one of the most powerful things that we can do.

Nuno Goncalves Pedro

One thing we hear quite a lot about, and I think Bertrand, you were going to share more with us about Jeff Bezos’s always day one mentality, we have a little bit of this mentality as well. This mentality of we’re always running, we’re always being a startup, we’re always starting somewhere. I would say there’s some nuances around that. You have to be a bit thoughtful on not burning out yourself or burning your team out. But that mentality of being a startup, if you want to be fast, nimble, flexible, if you want to scale, you have to have this mentality. You have to have this mentality of you’re always day one. You’re always a startup. You’re always starting.

Bertrand Schmitt

Yeah, I think it’s a great mentality at Amazon to think that you want to always be day one, not day two. Obviously, today we talk about day zero. Maybe we are fast-forwarding a bit, talking about day one. But in all seriousness, this is a very important concept. You want to stay nimble. You want to keep the mindset that made you great early on in terms of adjusting to the market, understanding the market, being nimble, being ready to change and adapt.

Bertrand Schmitt

Day two means you already made it. You don’t want to question yourself anymore. As a result, you start a stasis. Step by step from stasis, you lack growth. From lacking growth, you go to die, basically. Keeping that day one mentality might not be easy, but because it keeps you on your toes always. Some might argue that, “Were you so right on day one?” I don’t know. But ultimately, that forces you to readjust based on change in the market, change in competition, changes in your industry, and that push you to keep re-evaluating things and keep a fresh eye. I think it’s a great perspective on running a business.

Nuno Goncalves Pedro

I think it’s a great perspective on running a business and that everyone adopts this mentality. As I mentioned before, getting it right in terms of nuancing with when do you step back? When do you celebrate achievements? For example, you have to celebrate achievements. I think that’s an important part of the culture of a company. Otherwise, how do you know that you’ve achieved the milestone? That you’ve passed a certain stage?

Nuno Goncalves Pedro

I agree with everything that defines this mentality, but the tonality of how do we step back a bit is quite important. Always being on, I don’t think works. I’ll tell you why always being on doesn’t work. Because always being on means you’re normally doing something. You’re always in an execution mode. The mode by which you need to rethink things does require that sometimes you establish peace. A peaceful moment is a moment where you have clarity, where you see things normally in the future. Having that balance is difficult to hit. I feel being always there, one, is important, but you need to create these spaces for celebrating achievements, for thinking through things and how the things should evolve going forward in a very thoughtful manner, for being at peace as well.

Nuno Goncalves Pedro

It’s a little bit of this notion. I call it the notion of you live in the present all the time would be what we want, like the power of now, like Eckhart Tolle’s Power of Now. Manifesting that in a work environment is extremely difficult, but that’s the ultimate objective, right? That you’re always present, that you’re always pushing, that you’re always getting to the next level, but at the same time that you create the spaces to be peaceful in that same moment.

Nuno Goncalves Pedro

Maybe this is a good segue for things that are less metaphysical, which is the structure of your company, the legal structure of your company. Well, we’re in the US, we could talk about different structures as well. But the US, if we’re talking about startups, Delaware C-corps seem to be, vis-a-vis the startup world, what has won the day. Because of Delaware, because of the laws that Delaware has, we’ve discussed it in the past as well, being a C corporation and not being an S-corp or other types of structures, LLCs, etc.

Nuno Goncalves Pedro

Again, Delaware C-corps are the norm for most startups in the US. They work well. Nobody will question you creating a Delaware C-corp. If you’re building a company that wants to withstand the test of time, that’s great. If you’re in a different space that has different regulatory requirements, obviously, a Delaware C-corp might not work at all.

Nuno Goncalves Pedro

Obviously, we’re in venture capital. Both Bertrand and I and our structures are not Delaware C-corps for a variety of reasons you guys can Google about. There’s partnerships out there, LPs, limited liability partnerships. There’s LLCs, limited liability corporations. There’s a lot of different formats. You’ll need to choose whichever is right for you.

Nuno Goncalves Pedro

If you’re doing a classic tech startup, it’s very likely that Delaware C-corp is the way to go. And if you don’t go that… Delaware C-corp is the right way to go if you’re in the US. And if that’s not the case, then if you decide to go somewhere else, it might create some issues for you later on. Why did you create an S-Corp and serve as C-corp, etc.

Nuno Goncalves Pedro

The other piece that is quite important is to understand that this is the US. Obviously, you guys are listening to us. You might be in Portugal, France, other parts of the world. You have different structures. Choose the company structure that you think is going to be the best structure for your aims in terms of fundraising.

Nuno Goncalves Pedro

If your aims on fundraising is that you’re going to raise from venture capital firms, choose structures that VC firms easily invest in. Either in your specific market or if you then at some point want to raise money from, for example, the US, maybe you start thinking about actually having a Delaware C-corp structure earlier on rather than later on, even though you’re probably domesticated in another country.

Nuno Goncalves Pedro

Again, thinking through these things early on is important. Have good lawyers, good legal team that gives you good advice. Explain to them clearly what your objectives are for the company. If you’re going to raise money, who are you going to raise it from, how are you going to raise it, etc. How are you going to use the company for the purposes of developing and deploying its own products and services? Have that discussion early on and clarify exactly any doubts you might have. No question is too stupid. I have been learning this for many years. No question is too stupid around structuring your entity, your legal entities.

Bertrand Schmitt

I totally agree. I would just add that, one, always try to work with good lawyers. That can save you a lot of time and a lot of money on the long run because mistakes are very painful. Again, if you are in the startup game, you want to work with people who have true experience there. You have a few firms that have a wealth of experience in the startup industry, just work with them. Don’t waste time with the wrong ones because they will give you poor advice, and poor advice is always very dangerous.

Bertrand Schmitt

Another piece of the puzzle, especially early on, if your needs are relatively simple, I think there has to be more and more solutions that are very well packaged to help you register documents, create documents in a semi-automated way, in a very clean way. I think that some of the stuff that you might want to look into that you don’t spend too much time or money on stuff that is relatively typical.

Bertrand Schmitt

On this topic, I may add that I’m always surprised when some people are raising financing and you are discovering they have all the wrong parameters on setting up the right structure, that sort of stuff. It’s really not a great sign to arrive and showing that some of the basics that obviously everyone knows how to do, you are not able to do.

Bertrand Schmitt

And why is it a bad thing? Because after that, as an investor, you are using this type of weak signal to think, “You know what? If they cannot get the [inaudible 00:18:49] requirement right, then what about the rest? What about their contracts with customers? Their contracts with employees?” I mean, all of this. So yeah, please invest in that. A mistake is painful and can cost money and you might look like a fool.

Nuno Goncalves Pedro

If you give yourself too low equity and someone else too much equity, and if you have all sorts of funky structures going on now, and founders’ shares very early on with nothing yet, all of these things, everyone will start asking questions. Now, it might be I have a really good reason to defend it. It might be defensible, but it might not. If we’re looking at the cap table, let’s say we’re doing a series seed, so the company will have raised anywhere from 2 to 5 million, maybe 7 million max before we come in. If you, at that point in time, only own, I don’t know, 10% of the company, and it’s a two-founder company or something like that, it’s like, why? What valuation did you do these deals on? If, for example, your preferred share investors are significantly larger than you, the co-founding team, early on, why?

Nuno Goncalves Pedro

There’s all these things that some of them are yellow flags, some of them are just straight-up red flags, just to be clear. Because if you have very little incentive to build a company very early on at its development, and I’m looking at your cap table, I’m like, “Maybe I shouldn’t invest in these guys. They’re not motivated enough. Or then maybe the guys are going to ask for a ton of stock options in the future and that’s going to dilute this all, etc.”

Nuno Goncalves Pedro

Again, get these things right early on. Don’t get too fancy or smart unless you’ve done it before and you know you can get too smart or fancy. Get good legal representation, which is not always the most expensive one. Get very good accounting representation as well, which is, again, not always the most expensive one. It’s people that work well with you, that present what you need, that are clear and their explanations to you, that have a little bit of a business mindset, both for accountants and legal support. They have to have a bit of a business mindset.

Nuno Goncalves Pedro

If they can’t help you with scenarios, in particular, if you’re a first-time founder, they’re not the right partners for you. If they’re a law firm and they’ll tell you, “Oh, this is not the market, you shouldn’t accept this,” but they can’t explain to you the corollary of that, if you can still live with it by just changing slightly the clause. If actually, in no scenarios this clause will activate… We see that, by the way, a lot. There’s clauses and agreements that there’s no way in hell this will happen. I would say we have a problem. We have a fundamental problem. Get the right partners for you and iterate them. Partners are service providers. They are great. You pay them for their work. Over time, you expect to develop a relationship that’s long-standing. But at the same time, if it doesn’t work out, it doesn’t work out. These businesses are very based on people.

Bertrand Schmitt

Yeah, going back on your point around equity, I think it’s definitely a perspective that a lot of investors will share is that if early on, the co-founders have already very little shares in the business, that’s a very big red warning sign. It means probably a few things. Either there is a complex history in this business. Maybe there were other founders, there were other CEOs, there were different people before, and it’s not always a great sign. Or you basically gave up way too much equity for too little check. This is sending a bad signal. Why did you need to raise so much? Or why were you ready to dilute yourself so much?

Bertrand Schmitt

Because ultimately, your business life will be made on a lot of business decision. If you are proving that maybe the most important business decision, your own equity as a founder, you are a bad negotiator, that’s not a good sign. Ultimately, and as you said, there would be a question at some point or even pretty quickly about how do you stay motivated if you have little equity in the business? I think it’s a really important point, and not just for you as a founder, but for your co-founders, for your early employees.

Bertrand Schmitt

I would say I urge people to be really thoughtful about having a proper way to assess how to distribute equity very early on, to also have a way to remove equity with cliff, for instance. One-year cliff for yourself and maybe your co-founders and other employees, as well as a vesting program to make sure that if one co-founder leaves early on and is an issue then they are not leaving away with too much equity. You want it to be fair for the rest of the team.

Bertrand Schmitt

I think there are standards for that, how you vest, how you cliff. There are standards for how much you are going to give to different co-founders, early employees. I really urge teams to really be careful about that. You want to give not too much, but also not too little to everyone involved early on. Try to benchmark yourself as early as possible and to keep benchmarking how you do it versus other companies at different stage.

Bertrand Schmitt

It’s really important because every employee, for instance, will benchmark your offer versus other offers. If your offer is too good to be true, you have an issue in the long run, you cannot do that all the time. If it’s too bad, below market, then no one would join you. Again, if there are some weird situation in your cap table, it would make investors not invest. I’ve seen so many situation where red flag, not enough for founders, try to get understanding of why, and can’t be changed. Ultimately, very quickly, you stop the discussion because it’s just going to be one of these very difficult scenario where you have nothing to do but not invest.

Nuno Goncalves Pedro

Keep good, solid, healthy stock option pools from early on. Create them and keep them healthy. Think through them as you’re raising new money. Founders like, “Oh, I don’t want to dilute more. I don’t want to give more away.” Well, you need to reload sometimes these stock option pools because of hiring and how you’re going to the next level. Get pay, well thought through. Be very clear on pay. I think one of the issues we see is people don’t pay anything to anyone at some point. You will always have to pay someone something at some point.

Nuno Goncalves Pedro

If you’re a founder and you say, “Look, I can afford to not get paid and I don’t want to get paid,” or, “I’ll get minimum pay,” or whatever, that’s fine. It’s your choice. It’s your decision. Be thoughtful about your team members and how they are. It should be maybe enough that it hurts a bit so that everyone has a little bit of a pinch of hurt, but it can’t hurt too much.

Nuno Goncalves Pedro

At some point, your salaries need to scale. We know that salaries for entrepreneurs, in particular in the Bay Area where there are silly salaries really moving around, are not great. If a founder comes to you… This has happened to me recently. A founder comes to you, says, “I want to pay X.” Are you sure X is enough? I don’t know what life you have, but are you sure that’s enough? Maybe you pay that person a bit more.

Nuno Goncalves Pedro

As an investor, you say, “Look, as a company, I’m an investor in this company. As a board member, I’m telling you, I think the company should pay you more,” because we want this to be sustainable. We don’t want you to be living in huge difficulty, people that were in Section 8s and stuff like that to make ends meet. I understand that’s needed for a period of time. At some period of time, you need to pay yourself okay. Because we know as a startup entrepreneur, you won’t be paid great for a very long time. At least okay, you should be paid. Enough to live okay.

Bertrand Schmitt

Yeah, totally agree. You cannot live on ramen forever in a dormitory. That’s not an option. You have to be realistic. At some point, you need to do better and the same for your team. But at the same time, as you said, you have to find the team numbers that are adjusted to your stage as a business. You cannot just afford to pay everyone 500K. You simply don’t have the money and you don’t want to bring people who cannot adjust to your business stage.

Nuno Goncalves Pedro

Bertrand, it’s self-defining. If you’re trying to hire someone who says, “I’m willing to go into a startup mode, I’ve made a bunch of money, I think I can bring a lot of value to a startup,” whatever, and that person says, “I need to be paid 500K a year,” that person is not ready to go to a startup. There’s no way. That’s also self-defining as well. It’s self-defining as well.

Bertrand Schmitt

I really don’t understand these people.

Nuno Goncalves Pedro

No, I understand them. They have this image of entrepreneurship and startup life and whatever, which is beautiful because they’ve always been in larger companies, maybe. It’s not our duty to fulfil their image by paying them 500K a year. They can’t earn that.

Bertrand Schmitt

It’s just that it’s a distorted image of startup because you don’t make sense of what is really the business model and what is the capital structure. It’s a lack of understanding that is dangerous. That is very dangerous for startups. Don’t try to bring stars that are totally unable to match your reality. That’s never going to end well.

Nuno Goncalves Pedro

Maybe just to finish on structure and legal, two final elements. Obviously, regulatory environment, you need to take that into account, depending on what area are you in. IPA compliance. If you’re, for example, in the healthcare space, you might need some approvals. You need to understand this well. If you don’t understand your regulatory environment well from the perspective of the legal structure you need to create, but also from the perspective of how you need to operate the firm, you need to certainly hire someone to do that very early on or have the advice of a third party to do that very early on.

Bertrand Schmitt

It’s critical.

Nuno Goncalves Pedro

The final piece is governance. Your board of directors. Even if you don’t have investors, do you have a board of directors? You don’t. Sometimes board of directors don’t exist until there is an actual institutional investor on board. Quite literally, pun intended. I wouldn’t worry dramatically about it. But again, this is something where your lawyers can definitely help you.

Bertrand Schmitt

Governance will still be, even without the board of director, if you have co-founders, for instance, you need to really understand how you are going to run the business. Second-time founders, what do they do differently? If we talk about, in general terms, what people say, and we can share our own experience, one is that they might be faster in some things like fundraising, bringing a team together because been there, done that. But they might be slower in others. I think in only experience, they know that not everything is easy, that some markets can be terrible, takes time to build product. They might spend a lot of time trying to understand markets, trying to find the right idea. Their bar is probably higher than a lot of other entrepreneurs. And of course, there is always a trace that markets always win. Second-time entrepreneurs might spend way more time finding the right product’s idea and market.

Nuno Goncalves Pedro

Yes, it’s slower and faster. If I reflect on my experience, for example, I’m much slower at hiring people, in particular, people that I don’t know. I’m much faster at hiring people that I’ve worked with before. I’m much slower at making big systems decisions for the firm and process. I’m much faster at making the one-off, let’s try that out, see what works, even if it involves a little bit of money, but let’s just try it out. I’m much faster on hacks. Much faster on certain decisions, much slower on others.

Nuno Goncalves Pedro

It’s a bit of a balance thing. It is literally like you’re balancing. It’s like you’re on top of a surfboard and trying to figure out what the balance looks like, and you’re better at it. You’ve been doing it for a while. If you’ve been done two, three, four startups, it’s not your first rodeo. There’s a lot more clarity, I feel, for second-plus-time founders. There’s clarity and intent. There is also a much higher bar on certain aspects. It might be on the markets that they’re going after, on changing the world, doing something that maybe is a little bit more like a real painkiller. It might maybe have solved the pain in the past, but you want to solve a pain that’s going to change the world and that notion of mission.

Bertrand Schmitt

Your ambitions might be different. Let’s say you had a successful outcome your first startup. You made 10, 20 million. Are you doing a new startup to make 10, 20 million again? Or this time are you trying to make 200 million, 2 billion? A very different approach in terms of how you assess the market, how you assess the product, because suddenly you are becoming maybe even more venture capitalist yourself in a way trying to make sure that your investment in time and maybe your own money will be very worth it.

Nuno Goncalves Pedro

Yeah, it’s one of these things that at the end of the day, probably second, third, fourth time founders, they have stronger opinions. They’re probably faster at moving, though, and they’re probably faster at moving in terms of pivoting or moving stuff around as well, which is interesting. It’s all a little bit more nuanced, I feel, at the end of the day. They have stronger opinions, they’re faster, but at the same time, they also take their time to make decisions on the market they’re going into. They talk to more people. They really get their self sure they go into something. I don’t know, maybe they become more like panzers or like ships.

Bertrand Schmitt

They might spend more also. I’ve seen many were spending more in term of building a more top-heavy team. I’m not sure this is always a great idea, to be frank. It goes back to the amount of funding and going step-by-step. It’s great to be able to bring top people from all over the place and sometimes you want to do that and it could make sense. But I think you might want to be careful before you have found a product-market fit. Are you overhiring versus when you are as a business? And if you are overhiring, it’s not just it’s costing you more money, but it raised a lot of questions internally. People will wonder, “Why do you need these guys? What are they really doing?” That’s something you want to be mindful. And sometimes I have seen that with second-time founder and they go maybe a bit too heavy on the exec team side.

Nuno Goncalves Pedro

We’re talking about good founders. People that have done good companies who are going to the next level and want to do even better companies next. And they’ll be thoughtful. They’ll be very thoughtful. And normally, they have very significant growth mindset. They want to learn. They want to get to next level. They’re always in that mindset. There’s also second, third-time founders, and even excluding second, third-time founders where their first exits were awful, that they were failed miserably.

Nuno Goncalves Pedro

But even talking about people that had actually very good exits or exceptional exits, that does not necessarily make them great entrepreneurs. It might have been, honest to God, sheer luck. Right moment at the right time and someone wanted to buy you out. It might have been that they had the right trajectory in the market. The market was there for them, and the market did 80% of the job. In their mind, they were amazing, but actually, the market pushed them. It was that tailwind that we were talking about earlier was fully there.

Nuno Goncalves Pedro

Some of these might actually make the wrong decisions. We’ve seen this. We’ve seen some founders that were in one reason or another, acclaimed for maybe their first, even in their second exit. All of a sudden, they’re going for their third round, and hubris. They’re like, “We’re the best. We can raise 30 million first-round, friends and family. We don’t… It’s an uncapped note. We don’t give any notice to anyone. We just do our thing.” And some of these failed misery. Some of these will end up failing misery because either, again, the founder wasn’t a great founder in the first place, we just got lucky, or the founder was a great founder, but at some point became thought that they were godlike and forgot that maybe they were not God.

Nuno Goncalves Pedro

All of these can happen. Just be thoughtful. When you see people, don’t take it as an extrapolation of that’s what you do when you’re a second or third-time founder. The more nuance you see, the more likely the founder you’re seeing is a good founder. That would be my test. My test is if you see more nuance and thoughtfulness, it’s likely that that person is the real deal. They are a good founder and they’re just going to their next thing.

Bertrand Schmitt

Yes, hubris is never a good sign. Overspending is never a good sign. I think that it’s important to spot this as a future employee, co-founder, or investor.

Nuno Goncalves Pedro

Very good.

Bertrand Schmitt

This concludes episode 48, our second episode on day zero. As a founder, what should I do? We spend in this episode some time talking about how culture eats strategy for breakfast. We spend time on how to structure your organization, your startup, as well as what’s the perspective and how you do things differently if you’re a second-time founder. Hopefully, this was useful for you. Thank you very much for listening. Bye-bye, Nuno.

Nuno Goncalves Pedro

Bye-bye. Thank you.