Weekly Briefing Note for Founders 4/7/24

10th July 2024
CATEGORY:

Breakthrough founders build movements not companies

Founders that develop breakthrough startup ideas possess two key attributes. According to veteran VC Mike Maples, they THINK differently, and they ACT differently to other entrepreneurs.

In last week's piece, we discussed how successful founders THINK differently: They develop non-consensus or pattern-breaking ideas. They do this by 'living in the future' and developing unique 'insights' by harnessing 'inflections' that create the potential for radical change.

This week we now look at how successful founders ACT differently. We focus on the formative stages as the startup develops its category-defining strategy and engages with the early market.

Great persuaders

Understanding non-consensus or pattern-breaking ideas lies at the core of the venture model. Founders must learn how to create them, and investors must figure out how to spot them.

Last week we highlighted the research that Mike Maples has undertaken for his forthcoming book, 'Pattern Breakers'. By happy coincidence, Maples was interviewed on Lenny's Podcast this weekend, expanding on the very same subjects we covered.

Listening to Maples talk around these topics adds yet another level of colour to understanding founder behaviour. Below, we've captured some of the nuggets that Maples shared, so you can read this (together with last week's newsletter) almost like a synopsis of his key findings.

Building on how they THINK differently, he explains why founders with breakthrough ideas also ACT differently.

He reminds us that startups win because they "propose a radically different future, disorient the incumbent and chaotically move people to that different future."

The challenge for the founder, at least at first, is that they are all alone in that different future. They have to get other people to come and join in that different future so they can build momentum.

Great startups can only happen when others buy into the founder's insight and then move with them to co-create that future. The problem is not everyone is going to move at first. The founder can't waste time with people that won't move, whether that's prospective employees, customers, or investors.

Founders must therefore create an irresistible desire on the part of the early believers to move to that different future with them.

This means they must be great persuaders.

So, how do founders become great persuaders? Maples says there are 3 key elements: Movements, Storytelling, and Disagreeableness.

Movements

A movement is a set of people with the same belief moving together to a different future. In the context of a startup with a breakthrough idea, the founder is the leader of that movement.

This is a different way of developing a market compared to how most marketing people think about developing a market. Maples captures this so perfectly when he says:

"A movement leverages the grievance of a minority against the tyranny of a majority. And it takes that and animates it in a way that those early believers are emotionally committed to moving."

The crucial insight is this: Early believers (early adopters, early employees, and early investors) don't decide to go into business with you because of the practical reasons that you unlock. They do so because they 'believe what you believe'.

Founders confront this every day as they talk to prospective early adopters. This type of customer is not animated by pragmatism, they're animated by belief. They share the vision, and they are eager to collaborate.

But the reality is that in the beginning very few truly share the vision.

The 'faux' early adopter expresses interest then tries to change what the startup is offering so it fits their own narrow need. They do not believe what the founder believes but they see an opportunity to extend their position in the present. These customers often become a huge distraction and soak up precious resources.

Take the move to the cloud. Many early cloud-based innovations were resisted by firms that had built entire businesses based on on-premise software.

For example, OKTA built a cloud-based solution for identity management in the enterprise. But certain sectors, such as banking, simply could not envisage a world where identity management would be hosted anywhere but on-premise, mainly for security reasons.

Banks were therefore exactly the wrong type of early adopter, but that didn't stop them hounding identity management startups for 'bespoke' on-premise solutions (and so locking them into living in the present).

Visionary companies must align with others that believe what they believe. In doing so they are able to create a movement that even transcends the products they make.

Take Tesla: The mission of their movement is to "Accelerate the world's transition to sustainable energy." They don't even mention cars. In so doing they appeal to a higher purpose that avoids (product) comparison.

Airbnb created a movement around 'living like a local'. It was never about saying hotels don't matter anymore. It was about creating a completely different experience.

As the movement increases in size, what was once heresy becomes the accepted conventional wisdom. And now the business is no longer a startup - it's a company.

Storytelling

Building the movement requires clear and compelling communication. You must tell potential believers that you exist and what you stand for. More than that, you must inspire them.

Maples says that the problem is that in the beginning you know you are non-consensus, but you don't know if you are right - that indeed there is a huge market for your idea (product). A common and effective technique is to describe 'the world that is' and then describe 'the world that could be' in the different future.

Steve Jobs was a natural storyteller. He often used this comparison of different worlds to draw in new believers. His iPhone launch speech epitomised this approach. He masterfully toggled between 'the world before' the iPhone and 'the world after' the iPhone. This wasn't a pitch about a company or a product, it was a pitch about a wholly different (user) paradigm.

It is also vital to remember that the founder is not the hero of the story. The early believers are the heroes. The early iPhone users were the heroes, not Jobs or Apple.

It's the job of the founder to tell a story that emotes early believers to want to move with them and co-create the future with them.

And the story you tell an employee is different from the story you tell and investor, is different from the story you tell a customer, because all of them have a different idea of what their hero's journey is, and what success will look like for them.

So for investors, you must first meet them where they are: what do they care about? It's almost certain that the only way they will become a hero is to make a huge return on their investment. This is the essence of the investor pitch, although the ROI is always implied and never explicit.

Interestingly, storytelling is vital for startups but not so vital for established businesses. This is because the story helps create a vision of the future.

Established businesses are typically not selling the future. They are selling the present. Just think of a public company on an earnings call. They start with who they are, how big they are, what they've achieved etc. But that's all about themselves and how they are the hero. That's not storytelling.

In the startup pitch, you're trying to make the person in the audience the hero. They don't care about you yet. They care about how you're going to make them a hero. They want you to describe the world that could be, the stakes that are involved, and how you will create enormous future value (in which they will share).

Disagreeableness

We are always under pressure to conform. But startups do not conform. They use their insight, their idea, the movement they create and the stories they tell to break free from the conformity trap.

Disagreeable founders fight all the odds to pursue what they are obsessed with. Fulfilling the mission is more important than fitting in. They shun convention and are relentless in the pursuit of their vision.

We see this in our coaching work. It's not that disagreeable founders are argumentative or won't listen - quite the opposite. They want to hear the opinions of others, but they use them as an input and not an instruction. And then they move quickly, guided often by intuition more than by the results of any complex analysis.

In fact, disagreeable founders have an unusually keen ability to listen and synthesise. They may ultimately dismiss someone's input, but they create an environment where this doesn't get personal. They have the courage to be disliked but their authenticity and commitment means they are respected.

Disagreeable founders are not easy to work for. They are highly driven and uncompromising. They work at a pace that few others can keep up with, are demanding and often opinionated. They aren't a slave to any else's ideas or perception of the truth.

They assume power but deftly apply a carrot and stick approach. If all you do is wield the carrot you will not provide enough activation energy for people to move to that different future.

In this environment, great employees - especially their direct reports - feed off this. They have the self-confidence to challenge but when the final call is made, they move forward as one.

Andy Grove, former CEO of Intel, famously espoused the principle of 'disagree and commit'. He would encourage the team to disagree when making an important decision - he wanted opinions openly voiced, not kept quiet. But whatever final decision was made, he expected the team to do everything possible to implement it - even if they disagreed with it. Dissent was not tolerated and everyone knew the rules.

Early-stage boards have a critical role to play in fostering non-conformity. Non-execs, especially the investor directors, are not there to impose their ideas - although will expect their opinions to be heard. They look to the Founder/CEO to make the big calls, not just facilitate a sort of decision making by consensus.

In summary

Founders that successfully bring forward non-consensus, breakthrough ideas think differently. They do this by 'living in the future' and developing unique 'insights' by harnessing 'inflections' that create the potential for radical change.

But great startups can only happen when others buy into the founder's insight and then move with them to co-create that future.

This means they must also be great persuaders. As a result, they act differently. They start movements, are great storytellers, and are naturally disagreeable. They have the courage to be disliked, but through their authentic actions find respect.


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