Investopedia CEO Says These Are the 3 Things Entrepreneurs Need to Know
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I have always had a strong sense of urgency. I think it’s a pretty common characteristic of entrepreneurs. After all, if we liked the way things were, we wouldn’t be so convinced we could do everything differently and better. And we wouldn’t be so good at persuading people to give us their money -- or leave perfectly good jobs -- to join us in our craziness and make it happen.
That sense of urgency has been the source of most of my successes -- and failures. Investopedia is my seventh company, so I’ve had time to learn when that entrepreneurial fire works for you and when you need to bank it just a little to keep it from burning down the building. Here are three tips that I’ve found most useful in harnessing my intensity to become a more effective entrepreneur.
1. Don’t conflate “figure-it-out mode” and “scale mode.”
One of the biggest mistakes I’ve made due to my urgency is trying to scale businesses before they were ready.
As a newly-minted MBA from the University of Pennsylvania's Wharton School, for example, I was given the opportunity to develop a new technology for Duane Reade that facilitated video conferencing with pharmacists (that was pretty new in 2003!). We developed a kiosk for ordering and delivering prescriptions, placed it in a few hospitals and physicians’ offices, and saw incredible initial usage.
I decided to scale from about five to more than 100 kiosks within a year. But, the kiosks broke down so frequently (and cost so much to repair) that the company paused the business. We scaled way too fast, which is especially dangerous when dealing with hardware and new technology. Learning: Take a breath after you launch. I scaled up when we should have tried to understand the customer metrics and gather qualitative and quantitative data.
That doesn’t mean your product needs to be perfect to launch. On the contrary, you want to launch something as soon as possible in order to get to the all-important “figure-it-out mode.” At Investopedia, MVP doesn’t mean Most Valuable Player. It means Minimum Viable Product, a concept I’ve happily stolen from The Lean Startup by entrepreneur Eric Ries. (I like the book so much that I urged Investopedia staffers to read it at our in-house book club.) What it means is, don’t invest too much time or money making a product perfect before you try it on customers and use their feedback to improve your initial idea before scaling up.
2. Learning from failure is more important than learning from success.
In my five years as an executive at 1-800-flowers.com, the experience that was the most meaningful and formative was ultimately a failure. It was a business area I ran at one point that rapidly grew from zero to close to 20 percent of the company’s profit, but with a questionable user experience. The company and I loved the dramatic revenue growth and blew past other execs who worried about our customers.
They turned out to be right: While we made strong short-term gains, it hurt us in the long term. We started to hear from more and more customers that, due to the new service I had started, we had lost their trust and future business. A reputation can be lost very quickly; it simply isn't worth short-term, non-repeatable revenue. I have become a far greater champion of user value above all other decision criteria from this experience.
Entrepreneurs need to understand that the goal of a startup is to learn and that making mistakes is the most productive way to drive real learning. With a success you may not know why you succeed -- and in fact, it may have been just good luck or fantastic timing. But when you fail, you almost always can figure out why.
3. The right number two is as important as number one.
As a CEO, choosing the right Number Two is another place where urgency can be the enemy of success. So can feeling too comfortable with your potential choice. You need someone who can compensate for your weak points and give you more reach than you’d have on your own.
On a personal level, our current COO and I could not be more different. I’ve worked at seven companies. He has worked at two. I am completely non-technical, he is a former developer. Many of the ways in which I need to improve on as a leader are his strengths and vice versa. The danger points for the company are the areas where we overlap: Left to our own devices, we can over-emphasize analytics or new business development. If you’re choosing a co-founder for a brand-new start-up, these rules hold even truer.
It’s harder than you think. Just last month I almost hired an incredible VP of sales. Our chief revenue officer and I were going to pull the trigger on the hire. Then something began to bother me. After a couple of days I figured it out. Everything that I liked about the VP, I loved about our CRO. The VP was basically a less experienced version of our CRO. What we needed was someone who truly complemented our exec, who would bring healthy tension to the job. We ultimately hired another candidate who is the “yin” to our CRO’s “yang.”
I feel honored to teach entrepreneurship at both Columbia University and Pace University. I try to drive home and reiterate each of these three concepts frequently, as those who don't learn from the past are destined to -- well, you know.