I heard the term “free agent nation” recently that I hadn’t heard before. The speaker described free agent nation as the population of folks who detached themselves from large corporations and more or less worked for themselves. Years ago, “lifers” were common place. Then, employees felt their security in corporations dwindle. Companies saw employees as expendable resources. Employees reacted by regarding companies as expendable as well – loyalty was rare for either side.
Googling “free agent nation”, I found an article published on December 31, 1997 titled “Free Agent Nation” by Daniel Pink, author of Drive and To Sell Is Human. Daniel interviewed a number of folks who left the corporate world to be independents/ contractors. This was all fascinating given my foray into independent consulting and entrepreneurship coupled with known colleagues striking out on their own.
Daniel pointed out driving free agents were ideals in value alignment and flexibility. For many independents Daniel interviewed, they cited not feeling tied to the company. Work was satisfactory, but values in personal and professional lives were not aligned. They didn’t feel tied to the purpose of companies. By going independent, professionals selected projects and clients that fit into what their own beliefs.
Many free agents cited, too, they found greater security being an independent vs. being employed at a large corporation. In one particular story, a woman explained how her bank viewed her as risky without a steady W2. She rebuked that she was far more secure in her role as an independent working with six companies. If one company was to discontinue working with her, she still had five clients paying her. Thus, she could still make loan payments.
Values and flexibility are resonating strong as they did 20 years ago and is the whole of free agent nation.
Want vs. choose. Sounds simple, right? Take a second, though, and think about what you want. What about what you choose. How different are they? Why?
This question came about after hearing this concept from the book I am currently reading.
  • I wanted a Tesla earlier this year. Instead, I chose a Toyota 4Runner. Of course, I also wanted a 4Runner, but due to the Tesla X’s $100+K price tag, I chose the vehicle that was a fraction of the cost.
  • I could have also chosen a very simple 4Runner let alone a little Toyota Corolla. Instead, I chose the Limited set-up with 4×4. I wanted this more than the base SR5 package.
  • If I was to step back further, my previous vehicle (2007 Toyota 4Runner Limited 4×4 with 115K miles) was still working great. It was all paid off. Yet, I chose to increase my personal burn rate by several hundreds of dollars because of want.  This, despite wanting to return to startup and entrepreneurship after my time at SalesWise– a life change which would likely provide meager financial security for a while.

Every day, we make decisions based on want. It’s not what we need. It’s what we want. We want what makes us happy. Arguably, we do not need to be happy. Instead, we choose to be. (… or maybe we wake up choosing not to be.)

Think about it. What do you want? What do you choose? Why?
There’s a story that goes –

A group of scientists placed five monkeys in a cage, and in the middle, a ladder with bananas on top.  

Every time a monkey went up the ladder, the scientists soaked the rest of the monkeys with cold water. 

After a while, every time a monkey would start up the ladder, the others would pull it down and beat it up. 

After a time, no monkey would dare try climbing the ladder, no matter how great the temptation. 

The scientists then decided to replace one of the monkeys. The first thing this new monkey did was start to climb the ladder. Immediately, the others pulled him down and beat him up. 

After several beatings, the new monkey learned never to go up the ladder, even though there was no evident reason not to, aside from the beatings. 

The second monkey was substituted and the same occurred. The first monkey participated in the beating of the second monkey. A third monkey was changed and the same was repeated. The fourth monkey was changed, resulting in the same, before the fifth was finally replaced as well. 

What was left was a group of five monkeys that – without ever having received a cold shower – continued to beat up any monkey who attempted to climb the ladder. 

If it was possible to ask the monkeys why they beat up on all those who attempted to climb the ladder, their most likely answer would be “I don’t know. It’s just how things are done around here.”

(originally published on Wisdom Pills)

Culture and set behaviors are incredibly powerful. They affect every new employee, so that they, too, become engrained in the cultural norm. Oftentimes, we are not aware of them just because “that’s how it’s always been”, and we assume we asked the right, challenging questions before. However, it’s not the case. Sprinkle in hubris, and you have a never-ending cycle.
Of course, these establishments also promote loads of opportunities for entrepreneurs and challengers to come in with a fresh take. Once value is realized amongst a few, change can happen. Then, perhaps it’s just a matter of time.
Start with the challenger.
The capitalization table (cap table) is referred to the agreement of shares and ownership of a company. It sits at the intersection of shareholder, number of shares, and company valuation.
I realized that I’ve never touched on this in previous Finance of Startupsposts, so I’ll cover that ground here.
A few examples of cap tables…
Lois and Clark want to cofound a venture to provide virtual tours into the unknown – called The Great Digital Explore. Lois will be the CEO while Clark will be the CTO. Given their differing skill sets and being friends, they’ve decided to split ownership in half – 50-50. They’ve also decided to set aside 20% of the company for future employees. They value the company initially at $20,000. Par value is $0.002 as they “create” an initial pool of 10,00,000 shares (pretty standard).
The cap table for The Great Digital Explore would look like this:
Shareholder
Equity Position
Number of Shares
Price per Share
Value
Lois
40%
4,000,000
$0.002
$8,000
Clark
40%
4,000,000
$0.002
$8,000
Employee Pool
20%
2,000,000
$0.002
$4,000
100%
10,000,000
$0.002
$20,000
Three retired Navy SEALs are looking to start a private security company – Aramis, Athos, Porthos. Being the former team captain while in the SEAL program, Aramis is the CEO, and commands a slightly higher ownership of their new company Musketeer Security Services while Athos and Porthos hold equal positions. As they form, they value their company at $10,000 (with par value of $0.001 at 10,000,000 shares). The three see teamwork to be essential in the success of their company, so they set aside 30% of the company for future employees.
The cap table for Musketeer Security Services would look like this:
Shareholder
Equity Position
Number of Shares
Price per Share
Value
Aramis
28%
2,800,000
$0.001
$2,800
Athos
21%
2,100,000
$0.001
$2,100
Porthos
21%
2,100,000
$0.001
$2,100
Employee Pool
30%
3,000,000
$0.001
$3,000
100%
10,000,000
$0.001
$10,000
As Aramis, Athos, and Porthos are starting up, one of their young SEAL members overhears their discussions. Being the Millennial that he is, D’Artagnan is eager to join the team. He’s fascinated by entrepreneurship. Musketeer Security Services is already up and running, however, and have made a good name for themselves such that they are growing. D’Artagnan wants a piece of the pie and with a sizable bank account from summer jobs when he was younger, he wants to not only join as an employee, but he wants to contribute to the bank. D’Artagnan wishes to inject $100,000 (pizza delivery was very good business for four summers). They all agree on a pre-money valuation of $750,000.
Let’s see how this shakes up the cap table:
(Remember, $750,000 for the pre-money value divided by 10,000,000 shares = $0.075 par value.)
Shareholder
Equity Position
Number of Shares
Price per Share
Value
Aramis
24.7%
2,800,000
$0.075
$210,000
Athos
18.5%
2,100,000
$0.075
$157,500
Porthos
18.5%
2,100,000
$0.075
$157,500
D’Artagnan
11.7%
1,333,333
$0.075
$100,000
Employee Pool
26.5%
3,000,000
$0.075
$225,000
100%
10,000,000
$0.001
$850,000
This isn’t too complicated. It will get complicated as investors start pouring in capital with varying stock classes – common, preferred, etc. You can check out the prior posts to see how the cap table is affected by those capital raises – Finance of Startups.
I met an entrepreneur recently who is approaching a similar market and product that I once did. Before meeting, he realized I had written a book, so read it beforehand. It resonated greatly for him. As we met, he had a few specific questions including: “if you could do it all over again, what would you change?”
There was a lot I would change as I’ve outlined on this blog and in Postmortem of a Failed Startup: Lessons for Success. There are always ways to improve. But one major lesson stuck out at me – start out smaller, more deliberate. Start out with a very specific product addressing a very specific pain.
This would invariably lead to quicker rollout of the product. This would lead to quicker feedback. This would lead to quicker iterations. This would lead to… success? I’m not sure, but I feel this approach would have been much smarter.
Success does not follow a formula. The most brilliant minds have failed. It’s critical to fail at times, too. But the approach to success can be tuned in to mitigate risk. I think my big take-aways after all these years also line up with being loved by customers (the product, at first) to create something wanted… needed. With that, I want to tackle opportunities with a focused effort and building something that enables my customers that also aligns with my vision in mind.
Looking back at your ventures, what would you do different?
Why isn’t an idea already in the market and being successful? Maybe the key question is, “why isn’tthis idea working?”
A good way to tackle a new business idea is to think about the objections. That is, think about why problems exist today – what are their hurdles? Why hasn’t this idea been developed already? How is this problem being addressed today, and how did the market get here? How can these challenges be overcome?
Addressing these challenges (read: objections) is similar to approaches in brainstorming methods such as the Disney way and Six Thinking Hats.
When you ask these types of questions, you might find out macro trends are removing hurdles – maybe, then, it’s great timing for success. For Instagram, for example, anyone with a smartphone almost instantly became talented photographers. For Instagram, the technological evolution of cameras in smartphones lowered the barrier for general consumers to have “good” cameras. Instagram capitalized on this opportunity further by providing filters. These filters enabled everyday photographers to alter and beautify pictures, much like professional photographers could do before.  
Addressing how traditional models operate has made countless companies successful – finding ingenious ways to alleviate the shortcomings of today. They addressed and removed barriers that held back huge markets from capitalizing on huge potential.
In fact, an accelerator program here in town challenges its startup cohorts by pointing out the reasons why the startups will fail. It’s up to the startup, then, to address those challenges – removing the objections of why a buyer would not buy – turning objection discussions into must-haves.
Think about hurdles. Think about the objections – why do these hurdles exist today? How can entrepreneurs move them?
Having 100 million users and a billion in revenue is a pretty good validation of an idea. However, Rome was not built in a day. Validating an idea and the subsequent products/ startups is best done in stages.
The progression:
  • Idea – Validating an idea requires initial feedback and feel amongst a select group of potential buyers. This can be done via surveys either in small verbal groups or large online surveys. This can also be through the first 10-20 customers where many may be friendlies.
  • Product/ Service – This is the long sought-after “product-market” fit stage where validation comes from the first cohorts of buyers – scaling from 20 to 100 inorganic customers. Depending on the product/ service, engagement metrics may also provide validation.
  • Company – Let’s call this stage the growth stage for a company. At this stage, validation comes from lower customer churn. In many cases, competition will be fiercer here, so churn could be a problem.
  • Category/ Market – There are clear market leaders with more niche players taking the smaller 20% of the market. (Follow the 80-20 rule.)
I overheard a discussion between two execs recently about the idea of working closer together. One exec was pitching another way to earn incremental revenue from existing customers. Except, the conversation stopped there – regarding more revenue anyways. Instead, the execs shifted focus to discussing how working closer together could add “delight” to customers.
It’s hugely telling when an entrepreneur pauses a discussion to shift the focus away from “more money” to “more delight”. Here, the entrepreneur understands the importance of thinking about the customer-first. Here, the entrepreneur understands the importance of creating emotional value.
Thinking revenue-first means thinking about the company first. However, the company does not exist without its customers. Thinking customer-first puts the company on a path to bringing customers in and retaining them [especially against competition].
When thinking about the services and products you can’t live without today, think about the ones that you wouldn’t leave the brand. Think about how delight surrounds your decision to use that service or product. Think about the people you surround yourself with, and how your interactions together are delightful. Think about how driving customer deliver shifts how employees engage with the company mission.
Think about delight. Think about customers first.
National Public Radio (NPR) has a great podcast called “How I Built This” anchored by Guy Raz. From the show:

How I Built This is a podcast about innovators, entrepreneurs, and idealists, and the stories behind the movements they built. Each episode is a narrative journey marked by triumphs, failures, serendipity and insight — told by the founders of some of the world’s best known companies and brands.

There are some really fascinating stories including Spanx’s Sarah Blakely, WeWork’s Miguel McKelvey, and Airbnb’s Joe Gebbia.
Here are some trends I heard from these stories:
  • They’re opportunistic. Patagonia’s Yvon Chouinard started life out by becoming a metal worker to make climbing equipment when he couldn’t find what he wanted.
  • They start things with people they haven’t known for a while… or they go it alone.WeWork’s Miguel McKelvey shared how he met his cofounder through his roommate after he wanted to work in NYC. He moved there. He met Adam Neumann who was highly complementary in skill sets and the ability to hook people on vision and sell.
  • They fake the sh!t out of it. Spanx’s Sarah Blakely would pop up her display in department stores on her own without getting official consent. People thought she was legit and bought her product.
  • There’s the hustle we all think we’re doing, and there’s the hustle they do. It’s next level. Toms’ Blake Mycoskie rolled from idea to idea, startup to startup – from a laundry delivery service for his college peers to doing giant advertising displays on the side of buildings only after seeing them work in LA. Then, he spent weeks in S. America to help hand-craft over 2,000 pairs of shoes when orders started piling up when he first started.

Go listen to the podcast. It’ll be motivating and inspirational.

What podcasts do you listen to?
I met up with a friend recently who is noodling over an idea. What was interesting was how she was so deep into her idea, and didn’t use her life’s skills and work to help validate the idea.
Like me, she started her professional career in consulting. Like me, we both ignored our acquired consulting skills when building a startup (my example was Body Boss, as described in Postmortem of a Failed Startup).
It’s a funny and sad mistake I’ve seen a lot – starting with yours truly. There’s excitement in the initial idea that people put on the blinders. They (we) ignore experience in the previous “corporate” world. I attribute much of this to emotions running high. Emotions have ways of clouding our judgements and processes.
This happens especially in endeavors we get excited about but do not have explicit professional experience in. For myself and my Body Boss cofounders, that area was fitness. We loved fitness, but we came from outside the industry.
For example, what makes consulting so effective is the initial phase of any project – discovery. In startups, you throw in “customer” in front of the word, and you have a critical foundation of building a company – “customer discovery”. In this phase, consultants interview stakeholders, assess processes, gather surveys and analytics, etc. to formulate a plan. The same should happen in building a startup.
If you have an idea, be careful of being emotionally attached. Balance excitement with grounded thinking. This doesn’t mean shooting down ideas so early on. Instead, take a moment, and recognize how you can apply previous lessons to the opportunity in front of you. Sometimes, that means playing the role of pre-idea. Be the third-party.