Podcast 939: Surviving a Startup with Steven S. Hoffman

My guest for this podcast is Steven S. Hoffman or more likely to known as Captain Hoff and this is not the first time I am interviewing him for the show.  We have him on the show not too long ago for Podcast #918 –  The Five Forces That Change Everything: How Technology is Shaping Our Future and I invited him back for his other book entitled Surviving a Startup: Practical Strategies for Starting a Business, Overcoming Obstacles, and Coming Out on Top which is very intiguing for me.

Steven is the CEO of Founders Space which is a global innovation hub for entrepreneurs, corporations, and investors, with over 50 partners in 22 countries. Moreover, he has served on the Board of Governors of the New Media Council, was the Founder and Chairman of Producers Guild Silicon Valley Chapter, and was a founding member of the Academy of Television Interactive Media Group.

In Surviving a Startup, Hoffman brings readers on a wild ride, sharing with them the tumultuous journey of launching a venture-funded startup and revealing what it takes to make it.  This book prepares entrepreneurs to avoid mistakes, overcome obstacles, and master the skills necessary to make the right choices along their path to success.

If you are interested on learning more about Steven S. Hoffman, his company and books, click here to visit his website.

I hope you enjoy this engaging interview with Captain Hoff. Thank you for listening!

THE BOOK

The fact is that most new startups fail. The path to success is filled with pitfalls, wrong turns, and obstacles. Decisions along the way can make or bankrupt a small company. Every entrepreneur must face this harsh reality and learn to master it if they hope to survive and wind up on top.

The book takes you through the nuts and bolts and sweat and tears of running a real business. It’s about dealing with dysfunctional teams, hitting dead ends, messing up half the time, losing money and self-confidence, and then moving forward. It’s about what it’s actually like to run a startup.

It’s also about the process and planning. Hoffman shows you exactly what he learned running his own startups and coaching others. He has mentored hundreds of founders, collaborated with some of the most brilliant minds in the world, and come to understand what it takes to break through.

THE AUTHOR

Steve Hoffman (Captain Hoff) is the Chairman & CEO of Founders Space, a global innovation hub for entrepreneurs, corporations, and investors, with over 50 partners in 22 countries.

Hoffman is also a venture investor, founder of three venture-backed and two bootstrapped startups, and author of several award-winning books. These include “Make Elephants Fly” (Hachette), “Surviving a Startup” (HarperCollins), and “The Five Forces” (BenBella).

In addition, Hoffman served on the Board of Governors of the New Media Council, was the founder and Chairman of the Producers Guild Silicon Valley Chapter, and was a founding member of the Academy of Television’s Interactive Media Group.

 

You may also refer to the transcripts below for the full transciption (not edited) of the interview.

Steven Hoffman Audio Interview
Steven S. Hoffman
Welcome back to Inside Personal Growth. This is Greg Voisen, the host of Inside Personal Growth. And I have Steven Hoffman joining me and he likes to be known as Captain Hoff. And Captain Hoff is joining us from the Silicon Valley. Actually, he reminded me last night, you really aren't here in Davis. Isn't that right? I am a little bit outside Silicon Valley, more like the Central Valley. Yeah, Central Valley, Central Valley. Definitely. And we had him on the show not that long ago, for a podcast number 918 called the Five Forces that change everything. And I invited him back because if you can see my his screen, there's a book and I'm going to hold up the book that just intrigued me, called surviving a startup. Now, there couldn't be any better person to speak with us about this, then the founder of Founders Space. And Steven, I'm going to let him know a tad bit about you from your website.

Greg Voisen
He's the chairman of founders place a global innovation hub for entrepreneurs, corporations, and investors with over 50 partners in 22 countries. Captain Hoff is also a venture investor, founder of three venture backed and two bootstrapped startups, the author of several award winning books, one of them that we haven't done is a book called make elephants fly, the surviving startup we're going to do today and the five forces we did already. He also served on the Board of Governors of the new media Council and was the founder, the chairman of the Producers Guild Silicon Valley Chapter was the founding member of the Academy of Television, Interactive Media Group. Cough earned his Bachelor's degree in Computer Engineering from the University of California, Master's degree in film and television from the University of Southern California, and currently resides, as we said in Davis, but spend most of his time in air visiting startups and investors and innovators all over the world. Well, Steven, great to have you back on the show. And it's great to talk about in your screen, the middle book, Surviving startup. And, you know, one of the things that you mentioned in the book is, you know, you speak a lot at events, you go around, you speak at events, maybe a lot of it now is more, you know, Zoom kind of events, but you're, you're still doing a lot of speaking. And you frequently get asked questions, should I engage in creating my own startup? You know, and a lot of people have ideas, but to then have the, as I call it, the hutzpah to actually take the effort to go turn that idea into something. You know, I always tell that story. Oh, I had a great idea. And I told somebody, and then, oh, a year later, I saw that on the shelf, somebody else embedded it, you know, so what, in your estimation, are the characteristics of someone who would be successful as an entrepreneur? Because we know that very few of them make it. Right. So I'd love to get your viewpoint from all these people you speak with.

Steven Hoffman
So there are a lot of characteristics of successful entrepreneurs. But let me tell you one right off the bat based on what you said, you know, you think of an idea, you think it's incredible. And then you discover much later a lot of the time that somebody else had already done it. So the first thing that the first characteristic of really good entrepreneurs, is they are diligent, they do their homework, they know that it's not easy. It's not a get rich, quick thing. They when they start their company, they will actually research spending Huge amount of time researching the market, other companies out there so that they're really well informed. So that's one thing. Number two great entrepreneurs tend to be creative individuals, they tend to question you know, everything around them always ask that you're not just accepting that what everybody else is thinking, not just accepting kind of the norms out there. Instead, they ask, why are people doing it? Couldn't they do it differently? Is there something somebody hasn't thought of, because that's where the great ideas come from. Right? Number three. And this is probably the most important one out of all, I'm going to give you four. But number three is the most important one. Number three is leadership. Like, if you can't lead people, if you can't convince people to join you, when you just have an idea, when you don't have a lot of money, get great people on board, it's going to be really hard for you to grow a big business. So if you're not a leader, if you're more of a programmer type of want to work on your programming, or you're great at sales, you're not really great at motivating and leading people, you're like an individual contributor, that could pose a problem. Finally, there is stamina, what I call resilience, because it's going to be tough. This is why we call the book surviving a startup because it's brutal. I've done I myself have done three venture funded startups to bootstrap startups, I've had successes, I've had failures. I know what it's like to go through a startup, it's a roller coaster ride. And when you're down, you feel really down. And the great entrepreneurs can just continually pick themselves up and say, Okay, what's the challenge today? What problem? Do I have to solve? What obstacles in my way? And how can I get around it, and they do it over and over again, even if they're hitting their head against the wall, eventually, they figure out a way through.

Greg Voisen
All of those are great, those four characteristics are definitely important. And I would add to that, that I've gone through three myself, uh, you have to be resilient. And you have to be really curious. You know, most entrepreneurs are very curious, you say they ask a lot of questions are looking a lot of things. And I happened to see the other night, this is very relates very much to this. I watched the Netflix on SpaceX. And they were had a lot of video of Elon Musk. And at one point, which I think everybody listening to the show probably remembers. He had failure after failure after failure as the as the chips went up. And he was down to his last penny said basically, you know, he had like, this was the last chance this one, and it made it and then he got a call and he got his $1.5 billion contract for masa. Right? So interestingly, you know, you have to have, he's got an innate kind of ability to take huge risks. And I know a lot of people don't have that. Speak with our listeners about the 10 reasons not to start not to launch a startup just because there's a lot of reasons not to. But I think what's important is that you've articulated this in surviving a startup. And it's important to know why not to

Steven Hoffman
okay, I might not go into all 10. Because it'd be a long talk, yeah,

Greg Voisen
we're going to go into a few of the most important ones,

Steven Hoffman
I will hit the most important one. So one of them is what you just said. People need a high risk tolerance, right? If you are stressed out about money all the time, you don't like change, you don't like unexpected events, don't be a startup period. You know, know yourself, right? Know who you are. Number two, really important. A lot of people go into a startup for the money. They think, oh, I'm going to be rich. Yeah, I want to be the next billionaire. Well, that's not a reason to start a company, you don't start a company. Just because you think you want to be rich, you start a company, because you see a problem that needs to be solved in the world, you see something that needs to be done. So that getting rich is a result of starting a company, it's it shouldn't be the reason to start a company. Number three, is when you look at the world out there, and you look at yourself, you have to understand how everything fits together. And one thing that people don't understand is that some people believe that, you know, I am in a job, and I'm unhappy with my job. So I'm going to do a startup a startup will make me happy because my boss, my boss is a jerk. I don't like working for this corporation, whatever it is, you think being your own boss? Is the reason to start a company? Well, let me tell you, it's not the reason. Absolutely. It's the worst reason. Because no matter how bop bad your boss is at your current job, well, you could go get another job first of all, and probably find a better boss. But even if your boss is pretty bad, you are going to be trading that boss for the worst boss in the world, I will tell you, there's no worse boss than yourself. Because you can never escape yourself. In when you wake up in the middle of the night, your boss, your brain is going to be pestering you about your startup. Wish you shouldn't do this, you should do that. What about this employee problem? What about that problem, your boss will go on vacations with you, your boss will be with you every second of every waking hour. And you can't get away from that. So if you want the worst boss in the world, start your own company, it's not a reason, it's not a reason to quit your job. The next one is a lot of people, there's a sort of mythology that people buy in that it's easy. Like in Silicon Valley, like it's you know, you, you pick up any paper you go, you know, read any blog, whatever it is watch TV, you're hearing about these unicorns, it's just seems so easy. Well, it's not like, that's a myth. Don't get into it, because it's easy, there's a lot of other easier professions out there. And I could go on and on, there's just so many reasons that you shouldn't do it. Um, but the one reason that you should do it, the reason that you really should do it is because you are passionate about making a change, or doing a difference, you really want to make a difference. And not just your desire to make a difference. You actually see something that needs changing. And then you go, Okay, I'm going to like the fishing industry, let's say the fish, you know, they're overfishing our fish, they're wiping out the fish of the ocean, they're polluting their terrible working environments, you say, I want to go into that industry. And I want to make positive change, you know, and I want to use new technology, new ideas, new business models to do it. Maybe that's a good reason to do a startup. You know,

Greg Voisen
I found out something this morning, I helping put together a documentary with a director. And I interviewed the people at lomi, which is pettah, pet Earth PE T A. And they made the covers for the phones and started in 2011. They now have this thing called a lomi. And the lomi is a compactor I mean a garbage compactor, and basically recycles, as you probably you may have seen it. And I was thinking to myself, This company started in 2011, or 2020. And everybody thinks that it's just this loamy Well, it was the phone cases that were made from combustible material, I should say, recyclable material that then drove the next item in the in the guys evolution. And it's fascinating because this lomi thing I think is going to skyrocket. And it already has they raised 7.3 million and stopped in crowdfunding. And now they're doing a series of other funding. But it's really something and you know, you cited a report in the startup genome report where 3200 high tech startups were surveyed. And the findings were that 90% of those startups fail. And then the less than 10% that do survive, they encounter near death. So speak with us about the challenges that startups face with their funding, and how to overcome some of these funding challenges. Because, you know, let's face it, it's the death of most of these is they run out of money, and then there's no one else to give money to keep going. So they just die.

Steven Hoffman
That's true. And let's be clear, these are startups that are high tech startups, usually in Silicon Valley, the 90%. Not like if you're starting a restaurant now starting a restaurant or a local business, that isn't easy, either. But the survival rate is much higher, right? Although the payoff tends to be much lower, like it's risk versus reward. So when you're doing a startup, you just if you want to have the next unicorn, you've got to take big risks. That's it's just built into the formula. That's why these companies are worth so much. Why do they, you know, why are they worth a billion dollars in a few years? How does that happen? Well, because they, they went out there on a limb and did something nobody else does. And when you try to do something that people haven't done before, oh, II, most people are going to fail. Like it's, it's simply not going to work. And the world is also very competitive. There's just a lot of people out there, everybody's moving, markets are always changing, huge number of risks you take off. So what I do, like at founders space, when we work with startups, we try to lower the risks, we try to get people in a position where they can really evaluate what they have, and see what they have clearly. And I want to tell you something, the biggest mistake entrepreneurs make when they're starting their companies, the biggest mistake is something you wouldn't think about. It's that they fall in love with their idea. Yeah. And they stick with that idea, too long. So you talked about lomi, you know, they, they started with cases for like iPhones and stuff. And now they're doing something totally different. Totally, you could see the connection, right, they're both sustainable, good, good for the environment. But really, they're totally separate products, to the I will tell you, most of the startups that are successful, they're doing something very different than their original idea. And this is what entrepreneurs don't understand. I tell entrepreneurs like, you know, if you want to be successful, don't come up with one idea and fall in love with it, and then spend the next five years trying to make this happen. And in believe the myth that if I just stick with it long enough, it'll work. It's not,

Greg Voisen
it's not going to drain you dry. Most of the time, it usually

Steven Hoffman
drains you dry, like ideas either work, or they don't. And you just need to figure that out as early as possible,

Greg Voisen
like you say, fail and fail fast. And I agree with you, you know, you've got to find out if it's going to work or not work and do it quickly. And get that feedback.

Steven Hoffman
Got to do it quickly. And this is why I say, don't pick an idea. When you start. There's a you know, there's a mythology, the ideas, everything, do the idea. Don't pick an idea, pick a direction, an area you want to innovate on, come up with 20 ideas, get a team together, have them come up with more ideas, then you engage with the people who actually use it. The people who your goal in a company isn't have a great idea. It's to create value, create value for other people. So if you create enough value for them, then you're going to have a business. If you don't, you don't and you need to figure out right away is the value there. And what your

Greg Voisen
value you tell a great story is a majority of startups, just like we've just said they discard their original ideas. I wouldn't say that Patta discarded the phone case. But they moved their focus to the loamy. Right, it's now all about the Lummi. You tell two great stories about companies that morphed the original ideas and became huge successes, successes. Can you tell the stories and why being flexible is so important, because you know, those stories, I didn't even know those stories. And I had no idea about the one you're going to tell because I was like, wow, that was it. So

Steven Hoffman
which one? Are you thinking of that dating app?

Greg Voisen
The one that started as a dating app? Yes,

Steven Hoffman
I will tell you, there was a startup out there that wanted to create a dating app, a video dating app, like we all think, you know, it's in this was in the early days of the internet, they thought Well, everybody would want a video game. We'll of course, people don't like the video date. It's very awkward. But they didn't realize this until they had built the product and put it out there. And then they're fumbling around, trying to figure out what to do their startup is failing. And they actually, in the process, they had their own video of, you know, their a party with friends, and they want to share it with their friends. And they're like, We don't have a way to share this video. How are we going to do it, and they go, Oh, we could upload this to our video dating site that we built that nobody's using. And we could just share a link. So they built this way to easily share files, video files online. And then all of a sudden, they're like, Wow, this works really well. If we could do this, other people probably want to use this. So they put it up there. And they change the name of their video dating site to YouTube. And the rest is history. Right? They didn't start off with the brilliant idea. We're going to build the largest broadcast network in the world. They start off with a totally different idea. And look at startups like it happens over and over again. Groupon right. Groupon said

Greg Voisen
LinkedIn started up with different to that was one of your stories.

Steven Hoffman
Yeah, fine. I think it was Yelp started something different. So Yelp, actually, the review, you know, where you give a restaurant or business five star review. That wasn't that was an afterthought. That wasn't even a main feature that became Yelp, right that that feature of reviewing people writing they didn't know that people would want to write views. They just put it in, oh, maybe somebody will want to do and it turned out to be the application. Another one and I really want to emphasize this is Slack. So we all know, communication software slack Well, Slack started out as a game, a game, and the game was failing. And you know, they had raised a lot of money, the game, just nobody wanted to play the game. And then the CEO looked at the company, and he said, you know, my engineers have hacked together a way to communicate with each other. That seems pretty useful. What if we made this our product and the light bulb went off?

Greg Voisen
It, you know, the feedback loop in all of this is so important from the people that are using it. And I think no matter if it starts from a group of engineers, or one engineer, or whatever it might be in the software field. And we're speaking about everything from apps to, to full on full blown software, it improves as a result of the feedback that you're getting and the recommendations from people. And then it frequently morphs quite a bit, just like you said. And I think the key here is, and I thought this chapter even though very short, in your book, was on defining the problem, you give the entrepreneur five questions that they should ask themselves. And I know when we start, doesn't matter what it is, we think we have a better mousetrap. But we haven't always gotten the feedback needed to figure out if it was the better mousetrap. And we really haven't defined the problem. We think we have defined the problem. Speak with us about the questions and how important they are to ask and answer before developing any product or service to put before they go to market.

Steven Hoffman
Yes, you really, you hit the nail on the head, you're exactly right. You really need to define the problem while and you need to engage deeply with your customers, like whoever is going to be using the product. You know, a lot of entrepreneurs, especially when you love your idea, they when they engage with their customers, they're always trying to sell their customers trying to convince them that their ideas the best that their product is the best that they should love it. Well, don't do that. Just shut your mouth and do two things. One, ask questions. Number two, listen, listen carefully to what they say. And there's a third one, observe what they actually do in their business every day. So I can give you an example. You go into the restaurant business, you say, I'm passionate about changing the restaurant business, I want to bring new ideas, new technology, new business models to this business. Well, you don't go in there just trying to sell them an idea. At the beginning, when you're trying when you when you're trying to figure things out. You go in there you implant yourself, embed yourself in that business, and start watching what people do. What do they do every day? What ask them questions like? What are your biggest problems? You know, what gives you a real headache? Where do you spend most of your time are the things that are sucking up a lot of time. And they might not consider it a problem. Because they do this all the time, you know, the same thing. But you might look at that process that they're going through and say wow, with technology, we could actually make that we could make that so much more efficient. You when you're in the business, you look at how they interact with each other, what they're doing on every day on the job. You look at different opportunities. And another key question to ask, and this is so important, are what are your top five priorities right now? Like, so? What do you as a restaurant owner, really need to get done? And they'll give you their top five priorities? Because most of us know, they're like our top five priorities. And let me tell you, if you're not in one of the top five, you don't have a business, nobody, like your people are focused on their top five, usually their top three. And if you're not in those, then they're what they'll say is Oh, that's great. That's great. You know, come back to us later. And basically what they're saying is, they're not saying it's great. They're saying I'll never get around to it. I don't have time, because I have these five things I have to get done first. So make sure what you do aligns with their top five, whoever you're selling, if you're selling it to chefs, right? It has to be the chef's top five, you're selling it to the owner, the owners top five, if you're selling it to a distributor in the restaurant business, the distributors top five.

Greg Voisen
it logically and deductively. It all makes sense. I think entrepreneurs sometimes throw logic and deduct deduction out the window. But if they went at it a little bit more methodically, I'm not saying that intuition isn't something that you need to tap into. What I'm saying is when you get to the point, I wrote a book called hacking the gap, from intuition to innovation and beyond. And I interviewed all kinds of designers and developers and people and people that I have done that. And I said, you know, how did you get this product from here to here? And what I found out is that, you know, at first there is a spark of intuition, there is this idea. And it goes through a sequence and a cycle. And I interviewed innovation labs and people in innovation labs in it, it really is fascinating. How something sparks and how the ignites the flame and how it ultimately continues to keep fire. Many entrepreneurs who came up with ideas think that they should keep my secret. I've heard this from lots of people, because I've been involved in this space, what shouldn't they keep? Why should they keep their ideas a secret? And why is feedback on new ideas so important to the success and the rollout of a new product? Because, you know, a lot of people are like, I got to keep it a secret, because I got to go get the patent. And then I got to worry about the patent, and you know, all this kind of stuff you're like, That's bullshit.

Steven Hoffman
It's total bullshit. Let me let me tell you, patents are only worth something. Usually, if you have a business, if you don't have a business, what you end up is sitting on very expensive, they cost a lot of money. Yeah, patents that Do you know, good, because you don't even have money to go and force them. You know, most of the patents that entrepreneurs think, honestly, unless you've been researching something for years, and it's really high tech, in those cases, patents can be worth something. But in most cases, the idea is that entrepreneurs patents, software patents and stuff, they're not worth the paper, they're printed up. They're nice investors sometimes like them, they can they're there, you know, they can, they can, they're nice to have, but they don't make the difference. So when you're starting your business, and you are thinking about what you need to do, a lot of entrepreneurs get scared, they're like, I have this brilliant idea. It's so great, that if I put this out there, somebody's going to rip me off. Well, let me tell you a couple things. Number one, somebody's probably already doing that idea. You know, there's somebody in Finland doing it, or China or somewhere else that has that exact same idea, and probably more than one person who are working on it at the same time. So it's not going to be the one who had the idea. First one is going to get first. And so one who goes to market first, but not just goes to market, goes to market with the right product really figures it out? Because remember, Facebook, was it the first social network? No, no, but Facebook, why did Facebook dominate? Why is MySpace and Friendster and all those other early ones gone? Because they had the right idea. But they didn't get it? Right. They didn't figure out how to make it work for the users. So the most important thing, and I like to say this, the most important thing entrepreneurs need to do at an early stage is view themselves as information gatherers, detectives out there. Because what you need to figure out is how do things work? What do people really need, and the more feedback you can get early on, the more you can start to understand and see the potential. Otherwise, if you isolate yourself, if you don't talk about your idea, you're just you're living in a bubble, and you're probably going the wrong direction. So how do you get on the right course, is the most important thing. And that means surrounding yourself with really smart people and sharing your idea with them. I'm not talking about going to a big conference, and broadcasting your idea to all your competitors out there, you know that that would be silly, right? But I am talking about not being afraid to talk about to every smart person you bump into because honestly, those smart people, the chance of them stealing your idea is like tiny, it's miniscule, the chance of your startup not failing, or your startup failing, because you don't execute on the idea because you don't fully flush it out is really high, exponentially higher. So you need to focus on the big risk, which is not gathering enough information, getting enough feedback, not the small risk of somebody stealing it.

Greg Voisen
I concur. And I know that to be the case, because I've seen so many people try and hold something close to their breast. And then you know, and I'm not objectionable, the signing NDAs I've asked for NDAs as well, I get that. And if anything, if they really want to try and protect it, then have someone sign an NDA and, you know, then disclose what you need to disclose. Speak with our listeners about the 20 missteps as to why startups fail, and how to avoid them. You don't have to go through all 20. But, you know, there are lots of missteps. You had like five pages of missteps. Yes.

Steven Hoffman
There's so many mistakes. Yeah. touched on a few of them already. Yeah.

Greg Voisen
Maybe you want to just articulate from that list, maybe three. And, you know, when I'm going to tell the people because we're going to have a link. This is not an expense To book is really good, the chapters are short, and there's lots of them. So what you can do is you can pick it up almost anywhere, open it up, turn the page, and it says skeletons in the closet here, look at I didn't even have that marked, right. And that is only two pages. Most of these are two to three pages. And they're just really smart little ideas that you need to have, this is my plug, go get a copy of the book, if you want to get all of this, and then visit the website, founder space. And we'll put a link to that as well. And then reach out to Steven.

Steven Hoffman
Thank you, Greg. Yeah, I really crammed that book full. Like, it's, it's a book where I just put everything I've learned doing all my companies, and then working with literally hundreds of entrepreneurs seeing all the different crazy problems they have, you know, did a great job. Thank you. It's,

Greg Voisen
it's, you know, it's like, I love it, because it's like almost an encyclopedia of, of startup, you know, hey, if I wanted a Bible and I wanted to go learn something, you should pick up surviving a startup,

Steven Hoffman
I wrote the book I wished I had, when I began my first company that concisely puts everything you know all the basics, everything you need to know to get going. So let me talk about missteps. Now, one of the missteps entrepreneurs make is that they jump in to building their product too soon. Like, don't when you start a company, first of all, don't spend a lot of time building your product. Definitely don't go out and try to raise money. Pick an idea that you can do yourself with a talented group of people, other people, and then spend 80% of your time upfront, finding those people, not cousin Joey, or, you know, your beer drinking buddies, find the most amazing people, you can. Entrepreneurs, a lot of times, they just don't spend the time trying to find people, number one, number two, and I'm going to, I'll go through a few of these. Number two, when you look at the market out there, all the other products out there, spend time using them. If there are competitors out there, a lot of people like they get lazy, like they're like, I just want to build what I want to build, I don't want to look at the competitor, I don't want to copy their ideas will copy their ideas. Don't not copy their ideas, like they've spent maybe years or you know a lot of money, figuring something out, you should know exactly what their products do, and what they do well, and even more importantly, what they do badly where you can innovate on. Number three, don't try to an area's most great products that you build in, you know, they have one or two innovations in these one or two innovations. They're not just like little I, there's a big difference between features, and real innovations. So features make a product a little better. innovations make a product exponentially better, they solve a high value problem, I call it extreme value that somebody really needs. And literally, at the beginning, when you're starting your company, most people will go for your product, just for one reason, they'll say none of the other guys do this, I need this, right. And so adding all the other bells and whistles, adding more features doesn't usually help your product. In fact, it hurts it, you need to isolate down into that one thing that you can do step creates so much value for people that they can't get anywhere else. That's the key.

Greg Voisen
So you know, if it's, if it's a product that needs to be prototyped, it's one thing to engineer software and have engineers work on it and continue to refine it. And yes, that is a prototype because you want people to test it and try and break it. But, you know, I built products in my day that actually had molds and you had to make molds and you had to put physical mold, right? We weren't using 3d printers at the time, we were buying very expensive molds. So you had to get it right. Because if you didn't another mold cost you a lot of money. Right? So what I tell people, you know, is in that design phase of that before that in there still a lot of people that use molds, because plastic injection molded stuff. You need to really work very hard at making sure that whatever designs you're showing the public, whatever you're doing, you're getting feedback, you know, and this jumps me to this funding question because, you know, Steven, finding capital to grow a startup can be really complicated. It actually it is complicated. Okay. There's venture capital, there's angel capital, there's crowd funding, there's bank financing. There's SBA loans and I I think I could go on and on and on. But let's seize it to say that some of the top ones right, what recommendations do you have for startup companies about the options and how to obtain funding?

Steven Hoffman
Okay, number one, try your best not to take money from friends and family. Because, honestly, you saw, you know, you heard the odds of failure are extremely high. You know, what you're basically doing is taking your friends and family money and going to Vegas. And that means you will probably lose their money. And in that you will damage or lose those relationships.

Greg Voisen
I do. I did that my first startup I took, I can't so you know this because you have as much experience or more, I brought 30 people into my living room in my house. And I started a toy company. And it was really exciting because it was in the 80s. And I raised one point something million dollars in my living room that night. Right. Wow. Okay. Great concept. It was a failure. i Yes. And a lot of those people were my friends,

Steven Hoffman
are they still your friends, that's the hard part is to keep them with you.

Greg Voisen
Some still are in. And Steven, I can say it went to the point of pardon me, we sold it to Toys R Us and it didn't work. And it was merchandise on wheels. And it was a long story. I'm not going to go into all of it. But you know, in the end, it was very heart wrenching. Because I was still the CEO, I was driving the company, it was my idea. And one of the investors who put in a lot of money. And in this is a story that I want my listeners to learn from. One day, I get to eat a letter that says, Your major investor wants to remove you as the CEO of the company,

Steven Hoffman
oh, pain. On top of everything else,

Greg Voisen
it as you say can be very painful. And that's

Steven Hoffman
the point where you really need your friends and family, yet, they're not going to be as sympathetic if you just lost their money. So I'm like one of the litmus tests, if should you do the company is can you get a professional angel investor who's not a friend or relative to actually put your money in your company. So they're not putting it in? They're putting it in for the right reasons, because they believe in your company, not because they want to be nice to you, or they believe in you. But they actually believe in what you're doing,

Greg Voisen
and how those people get through the pitch fest to get

Steven Hoffman
an angel. So yeah, that's another thing. So I write about this in detail.

Greg Voisen
Who did I wasn't going to put that in here. Because we didn't have that much time. But you know, the whole thing around pitching and being enthusiastic and doing it right? Even a guy like me, who's pretty good at it. It was tough.

Steven Hoffman
It's tough, but you get better. And let me give you a few. A few tips. Number one, you know, if you're pitching anybody, just tell them what your product does. Just focus on that, like, what value does it create for somebody else? That should be your entire pitch, all the market graphs and everything else don't matter as much? What value are you creating what's so special, so unique that you're doing that other people aren't? Number two, when you go out there and actually try to raise money. What you should do is when you talk to investors, don't just talk, don't just pitch at them, get the invite them out to coffee, sit down with them, show them your idea, and then shut up and listen, listen to what they're these people, these investors are smart. Most of them were successful business people, they've run company, they have ideas start, you couldn't pay them enough, because you don't have usually a lot of money at the beginning to hire them as a consultant, many Shark Tank, right. And here they are giving you feedback on your idea. But you can take that and actually make it much better than what you originally had just by so no meeting is wasted. If you listen and get information out of that meeting, plus, when an investor starts giving you their ideas, magic happens, suddenly they become not. They become already mentally invested in your company engaged and you pitch and I'm an investor, like with startups, I hear so many pitches, I tune out right? But when I'm giving ideas, all of a sudden all those neurons are firing in my brain, you know, and I'm getting excited. The chance of closing goes up so much. And let me give you a third one. The third one is what I call The Prince and the frog rule. So everybody out there wants to find Prince Charming. They want to they all they see are frogs, right. These frogs these investor frogs out there and they think if they kiss the frog You know, it'll turn into Prince Charming and all their dreams will come true. Well, let me tell you, if you kiss the same frog three times, and they haven't given you the money, they're just a frog. So the rule of the story is really, when you go to investors, pitch them once, they'll call you back. If they like it, go meet them again. But the second time you meet them, tell, ask them to invest. Don't wait, just say, Look, can you write the check now? If they don't write the check there? You say, if you say, Are there anything you need to know that you don't know? And I will get it to you. You get it to them. By the third meeting, you basically told them, I'll meet with you. But you have everything you need, right? Everybody in the room, who needs to be a decision maker will be in the room. That's when you agree to meet with them, you go to meet with them. If they don't invest, then move on. Too many entrepreneurs waste too much time on false hopes when pitching.

Greg Voisen
It is a fascinating world to navigate. Startup. And again, for my listeners, you are going to want to buy this book, we'll have a link to Amazon Go to Stephens Captain Hoffs website. This has been highly endorsed by lots of people. And it is I just like to look at it. It's you know, if I was going back into a startup, again, I would have this is on my desk is kind of like a Bible. You know, I'd use it, I'd ear I, you know, bookmark the pages, I'd use my highlighter. I go through there. And I I would take Stephens advice, because it really is Sound Advice. And that's the point of this podcast. Hopefully you all got something out of this. And you literally can go to founder space.com and get in touch with Captain Hoffman, Captain Hoff. And you can ask him questions direct, you don't have to wait, go through me. Just go straight down. In wrapping this up, Steven. I always like to leave some tangibles. Three things that people could take away and use. And remember, when thinking about moving forward with some kind of startup venture? What would you what are the three things that pop into your head that you think they could use?

Steven Hoffman
So number one, know your business model. There are certain types of companies, if you want to do a big company, when it grows really rapidly. Focus on business models with recurring revenue, recurring revenue, look at all the big companies out there, you know, Microsoft, Facebook, Apple, you name it, you know, they have revenue, they don't get money once from a customer and have them disappear. They get money over and over. When you acquire a customer, it's the most expensive thing you do. Once you get that customer, never let them go, number to lock in that customer. Make it so that it's difficult for that customer to move to a competitor. You know, how do you do that? You create an ecosystem where you're, the more they participate, using your product or service, the more value they are gaining, and the more value they are creating for everybody else in the network. And then number three, really important. When you do a startup, remember, you want to do good in the world. So make put your values down on paper at the beginning. So that they can remind you every day, there will be situations where you might compromise those values. Because you're under a lot of pressure. Like we look at Facebook, like why did Facebook make some of the decisions they made that weren't in their users best interest? Because they lost sight of what they really were. There are social network which is supposed to enhance and make people's lives better and richer. Instead, they sold data, they cut corners, they did all this stuff, just because they wanted to show shareholders more profits shareholder value? Yes. So make sure your values are down on the paper and make sure everybody in your organization knows them and lives by them.

Greg Voisen
Well, Netta, which it's now called, has made a few mistakes along the way, which we all know. And the reality is they're still surviving, because they've still linked what billions of people

Steven Hoffman
were. They did the first two things right? Yeah. They didn't do the third one right that.

Greg Voisen
That's right. They did not do the third one. Right. Well, kudos to you cap off. Thanks for being on inside personal growth again and sharing your wisdom and knowledge. And again For my listeners, we'll put a link. You can see on his side surviving a startup. That's the book we've been speaking about. It's been a pleasure having you on and I know everybody who's listening to this can take something away from this. Just if you're in the stages of a startup, if you're just thinking about an idea, even in you're trying to take to the next level, your advice has been invaluable. Thanks so much for being on.

Steven Hoffman
Thank you, Greg.

Greg Voisen
Thank you for listening to this podcast on inside personal growth. We appreciate your support. And for more information about new podcasts, please go to inside personal growth.com or any of your favorite channels to listen to our podcast. Thanks again. And have a wonderful day.

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