What does it Take to be a Successful Entrepreneur in 2019
Michael Dermer, Author @ The Lonely Entrepreneur
Ascent Conference 2019
[00:00:06] We’re going to talk a little bit today about what it really takes to be an entrepreneur in the year twenty eighteen, and I’ll share a little bit of my background and get a little bit into hopefully insights that you can walk away with that can help you in kind of your endeavors, either being an observer or supporting them at the Lonely Entrepreneur. Our mission is really to try to turn the passion of entrepreneurs into success. And that’s, as we all know, easier said than done. Our mission to do that stems from kind of a long, sordid story that we like to call the perfect storm. I started my career as a corporate lawyer for a big New York law firm, literally a block from here, Willke, Fong Gallagher doing M&A. But I was looking to start a business and I didn’t know what it was. I was looking for something big and interesting and strategic. And this was in the year 2000 when there weren’t events like this. And Google for startups and dot, dot, dot. So I stumbled upon and started what got to be known as the first company in the US to reward people for being healthy. Somebody said a statistic to me one time that for every 10 pregnant women that don’t follow their prenatal care, it cost the health care system a million dollars. Hold on. Wait a minute.
[00:01:14] So if you just bribe these women gave them ten thousand dollars each, the system would save nine hundred grand. And people said yes. And we said, what about heart disease? And when we went down the list, we found that that the medical community knew exactly what they wanted to get people to do. They just couldn’t do it. And in every other consumer industry out there, they were using reward programs. So I left a big cushy New York corporate law job after three years and a lot of education and started the first company to reward people to being healthy in the early days. Not only was that company existent or that concept non-existent, it was offensive. The health care industry said we are never going to pay the people money to do the things that they should be doing.
[00:01:55] And we said, no, no, it’s just it’s just math. So for the first five years of our company, it was incredibly lean from twenty two thousand five from 2006 to 2008. We grew like crazy. You know, we had evangelized it for five years. Companies had gone through this long, long period of time of not getting diabetics to do what they needed to do and pregnant women to do what they needed to do. So we took venture capital in 2006, grew like crazy to twenty eight, and in twenty eight we had made it all of our it was a software license business. All of our clients were the biggest health plans, Medicare, Medicaid and the largest companies in the country. And we watched the company that we had built basically over 10 years to that point, literally get cut in half overnight by the financial crisis are 60 million dollar business with just north of five hundred employees literally got cut in half. My three largest clients at the time were Washington Mutual, Countrywide Financial and General Motors. Here’s a trivia question. How many of those exist today? One, and they would they have existed without a government bailout? Maybe not. So software license business, incredibly profitable that we had built on our backs, basically gone. We spent the next two or three years battling and scrapping clothing like a lot of people did. My family had invested a lot of money. We had private equity. So there was a lot going on at that time. And we just battled and scratched and clawed for the next two or three years. Learned a lot about bourbon. So if anybody’s in the bourbon tasting business, I’m your guy. Angell’s envy if you’ve never tried. And we were just fortunate enough after about two and a half or three years to kind of stabilize and start to grow again. And then on the other end of the financial crisis, everybody was like, oh, my God, we’ve got to fix health care. And we got approached by some folks that we knew when we got bought. And it worked out terrifically, but it was an incredibly wild ride. And after that, I was just chilling, you know, ten years of building, three years of craziness, two years of M&A and just relaxing. I live about 20 blocks from here in New York City and was just helping entrepreneurs for fun. And one of them said to me, being an entrepreneur, really lonely. And I was like, mm hmm. And so we started this little company called The Lonely Entrepreneur. And in our effort to really help people turn their passion into success, you know, the one thing we all share is the struggle. But what does it really take to be passionate? And this not a new thing, but what does it actually take to get there? So hopefully I can try to learn some insights, because as you can imagine, over the ten years of building a company, we learned a lot in the two years after the financial crisis was like twenty years of learning. So hopefully we can share some of those insights. First is really understanding the the entrepreneurs or the emerging companies leaders perspective. And here’s one lens that we think about it. We call it the four PS. We are always under the influence of these four PS passion. You’re like, you know, I have these amazing meatballs and someone’s like, well, wait a minute, we live in New York City. There’s plenty of meatballs. They’re like, know not my meatballs. Right. Pressure. We’re maxing out our credit cards. We’re putting our family at risk. Right. We’re doing all these things pleasure. We like. To kid around and call this, you know, you have all these first kisses, right, your first business card, your first customer. Right. I hope people at IBM are high five when they get a deal. But it’s not like when you have your first whatever and you feel that pleasure. And then the pain right now, when an investor tells you that your business is not that interesting, it’s literally like they’re calling your baby ugly and you’re always under the influence of these of these four PS, but you also experience all of these other things that we don’t really talk about. No one no one cares as much as you do. There are actually people out there talking about their children and vacations and sports. And we’re like, what are you talking about? Like, isn’t it? It’s all about my business. Right? But no one will ever care as much as you do. We feel overwhelmed all the time. There’s things that we’re going to talk about that will hopefully help us. But that’s just the common feeling we all feel. We get advice from people that will say, just go to the movies, just take a weekend off. Right. And people are like, what are you talking about? Like, you just don’t understand. And it drives us. It drives us crazy. Your balloon is full. This is one of my favorite. And you see it all the time in the startup pitches. Somebody will an investor will ask a question in the audience and the person on stage literally can’t even wait for the question to come out before they start just like spewing.
[00:06:23] And it’s almost like if somebody had said to me in twenty seven. So do you prefer Mike or Michael, I would have given him a half hour on my pricing model. Right. We just have so much energy that’s built up over time that the balloon, the air has to go somewhere we always have and feel like we have one hundred hours of work and ten hours of time. Right. Constantly. We don’t know who to trust. We actually think we should trust the brokers that business investors. That’s silly, so and so many people are helping, hurting, supporting, and we just don’t know who to trust. We also feel that everyone else around us sucks, right? I brought in a marketing person. I have somebody working for a university and this person is working for equity. And they’re like, I’m the CEO. And they just handed me something that five mistakes in it. And like, we just think everybody around it just doesn’t have the same focus or attention that we have. And finally, you know, we’re at a tech conference here.
[00:07:20] So many people have a unique skill technology that they’re building. We’ve heard about amazing technology here. There are a doctor there, a fashionista. Right. But like it or not, you actually have to be a CEO and that might have not when you were bargained for.
[00:07:35] So this is the whole context that we all feel, plus many, many more when we’re in the struggle and the journey of being an entrepreneur. But there’s a little bit of a of a fallacy that I think we have to help each other get over. And this is what it’s really like in the year 2000 nineteen and into the future first.
[00:07:52] Passion, grit, and a good idea is not enough. When I started, it was plenty. Right, rewards for health care. Nobody is doing it if I just run into that wall harder than the next person, right? I’m good. Today, you need passion, grit and a good idea just to get on the ride, but it’s not enough. OK, number two, we actually have to develop skills as entrepreneurs. And a lot of times we don’t talk about it this way. Right. Think about any many moms in the audience. Right, when you had your first child, did you wake up the next day and go, Wow, I’m amazing at this mom thing, or you’re like, I might actually kill this little human being. Right. But what do you do? You learn you get better. Any golfer’s. Right, do you just go out there and hit the crap out of it all the time and stick it to the right, you work at it. But for some reason, as entrepreneurs, we don’t think of this as developing developing skills. And finally, while we as entrepreneurs almost always lack capital and resources, we don’t lack the ability to think differently. OK? And this is the context that we, in my opinion, that we have to learn it.
[00:08:58] So let’s think about some of the things and some of the ideas that I hope can be helpful in being a successful entrepreneur in the year 2013. First we call this at the Lonely Entrepreneur Finding Playground’s where no one else is playing.
[00:09:13] And we believe that this is by far the most significant skill you can have as an entrepreneur. If you think about it, we all have access to capital. We have access to the same technologies. We can all do social media. So why does somebody win and somebody not win? It’s not good enough to have a unique selling proposition. Right. You could all open up your email right now and there would be a legitimate hundred million dollars in there for you and you wouldn’t even see it. It’s not just about creating a unique selling proposition. Take my old company rewards for health care right at the time. Anybody want to guess at the time this is your two thousand how many loyalty programs the average American was was enrolled in. Any guesses? Two. Twenty seven.
[00:10:03] People are doing reward programs all over the place. All we did was apply it to health care and we were the only game in town. OK, we have to fight really, really, really hard to find these playgrounds where nobody else is playing. If you think about Starbucks. Right. When Starbucks started, it’s a really dumb idea. There’s coffee everywhere. It’s inexpensive. And here in New York City and places like Seattle, it’s pretty good. So here’s the plan. We’re going to go and we’re going to get a billion dollars of real estate. We’re going to put on every corner. And if nobody buys coffee, we’re stuck with a billion dollars of real estate. That’s a really dumb idea, but what they did do, if you remember back in the day, they created a community, they said, come here and meet your friends, come here and meet your business partners, actually plug in and stay. Don’t even buy coffee. All they did was find a playground where nobody else was playing it, and the reason why this is so important is because everybody has competition, everybody has access to more capital. If it’s big enough, if anybody in this room has an idea, it’s big enough. Apple and Google care about it. Right. So how do you actually win, you actually have to find we call it a plague on a niche where you define it first. If you’re going to go start a PR firm, your friends will say to you, great, there’s a there’s a conference for PR professionals at Jacob Javits next weekend. You should go. Why would you ever go where everybody else is going? You have to find playgrounds where nobody else is playing. And when you do do that, you get to define the rules. Now, what I’m saying is really hard to find and it gets harder and harder each and every day. But for you to go and follow others that have more capital than you do is really, really difficult. You have to fight and scrap and claw and try to find that playground. And if you do find that playground right, you get to define the rules. You get to define how it prices and everybody else follows you. What I think is the most important skill positioning is more important than product. I remember back in the beginning of my company, all the developers used to say we hate Microsoft products. And everybody use them. They were just better at positioning it. OK, if I if somebody from the fashion business came and said, I’ve got this amazing red dress and they took that red dress and they walked up 5th Avenue and they went to Saks and Bergdorf and Bloomingdale’s and DataDot and said, hey, guess where the amazing red dress one of those retailers is going to say? We’ve plenty redresses.
[00:12:40] But what if you took that red dress and made it part of a personal shopping experience for every new banker and lawyer that started in New York City?
[00:12:49] You’d be the only red dress in town. OK, my company rewards for health care product already existed.
[00:12:56] There were loyalty programs everywhere, rewarding people for taking behavior. We just applied it to health care. So as much as we as entrepreneurs have great pride and should have great pride in the products and services that we’re building, sometimes we have too much of an emphasis on that, right? If we build a great mousetrap, that’s what matters when positioning is, in many cases, more important than product. Next, you can’t chase every customer. We all, as entrepreneurs, myself included, would chase revenue anywhere in the early stages of our company. And it seems like the right thing to do. Well, if there’s revenue on Saturn, then I just got to get some money to get an Uber to Saturn and I’ll figure out how to get the money right. But that has some really systematic problems for us, number one. Right. We don’t learn, right. If we don’t focus on a market, we’re always bouncing around. Think about this. Every single market that you go into in an early stage company, there’s going to be challenges. What you’re doing is unique, right? If every time you go to a customer, you say, well, that’s not really working and you shift to another customer set, you’re basically starting over, right? You don’t learn. You don’t create efficiency of your sales process. You don’t hire the sales team or have the marketing pitches that apply to a certain market. Right. This is a really, really hard thing to do because in first, we don’t know exactly who our customer is, but there’s huge fallacies in trying to chase every customer as opposed to trying to stick to one and getting really, really good at, OK, why build a rocket when when there are plenty. My company today rewarding people for being healthy. I would actually not build today. If I started that today, I would take the concept and I’d go to American Express and I’d say, you already have a broad platform, right? I’m just going to do a deal with you. There are many, many, many cases where large organizations have capital and resources but lack the innovative ideas that can really be groundbreaking. So sometimes it doesn’t make sense to build your own rocket and do seed and do series A and build your team and get to a million in revenue.
[00:14:59] Sometimes it’s better just to go find a strategic partner that already has rockets sitting, setting aside in the shed. OK, next. No what inning you’re in. Any baseball fans, Yankee fans. I hope I missed the meaning the inning we were in.
[00:15:15] So we as founders and entrepreneurs often have a belief in what we’re doing. I believe that everybody I mean, today, everybody does. But I believe that everybody within five years would reward people for being healthy. OK, I thought we were in the fifth inning. We were actually in the first inning, and if you get that wrong, you don’t line up your capital the right way, you don’t line up your people the right way. And so I brought in capital early and it took us five years what I thought it would take us three years to do. And that’s where those four P’s I talked about before come into play, you know, because we have passion and belief in what we’re doing right now. We go of course, people are going to reward people for being healthy. OK, but but sometimes we just get these these innings wrong. You really have to try to be to be candid with yourself. OK, couple more investors. For those of us like myself that came from the M&A world or those of us in the audience who are from the investing community, we’re all used to all this. We’re used to series A, we’re used to dilution, released to safes, you know, all this stuff to an entrepreneur, this is literally like landing on another planet.
[00:16:22] I mean, it’s literally like a brand new language that certainly we learn. I mean, you will have somebody that will go sit with an investor, have two investor meetings in a row, 15 minutes apart, and one investor will say your ideas to different and the next will say your ideas not different enough. This is really hard. OK, so there’s things that you have to learn about approaching investors, right? First is they ask you a question, how many people, when they go talk to investors, say their product or service is awesome. Everybody does anybody go in there and say, my stuff sucks? So what do you think investors do, they just tune out to all this, OK, so what’s a better way to say your product or service is awesome? You say, listen, I think what we’re doing is pretty cool, but talk to these three customers. You know, we just got our name in the paper. Talk to this employee that just joined us from Google. Like, don’t don’t talk to me. I’m biased, right? Go talk to others. And the more you let them talk to others, right. The more credibility you get as a leader. OK, second is. Bring up your weaknesses and tell them how you’re going to address them. How many times have any of us sat in front of something? We’re great at this. We’re great at this. We’re going to Google Google. We’re going to blankety blank and blank. And investor just goes, I don’t want to invest in this person. Go up and say, I think we do this really well, I think these are the things that we’re going to need help with and we’re going to take your capital and do an X and Y and Z to address those weaknesses. These are really counterintuitive things like don’t tell them you’re awesome. Tell them what all your problems are. OK, but remember, investors see a thousand of these, everybody says they’re awesome. And another one on this, don’t you? Superlatives like don’t tell your investors that your customers love your software.
[00:18:12] People don’t love software. They love their wife. They love their dog. They don’t love software.
[00:18:17] Right. So so some of the ways you express yourself. Right. You have to be really mindful of how this comes across next. I coming out of college was a college baseball player. I was an M&A lawyer. I was a boy. None of that screams humble. And I got dumped on my butt by the whole financial crisis and probably the greatest gift. All that is to realize that when you’re actually running a company, while you have to have an incredible dose of ego to tell people, like in my case, tell a health care industry that they’re going to do things completely differently than they had done before. That ego has to be balanced with the humility to understand that you have to learn and get better every single day. If you walk into Barnes and Noble right now, you go on Amazon. How many books are there about being a CEO? Not one. It’s hard, right, and so you actually have to really embrace the journey of getting better, no different than a mom would write, no different than a mom would go. Of course, I’m going to get better at this every day. And if I have a second child, they’ll be better at it. Right. You really have to bring the humility to understand just how important just to learn on a Day-To-Day basis. What goes with that is knowing where you need help. Right. Some of the best leaders understand what it’s supposed to look like, like they understand the universe.
[00:19:40] Right. And then they go, what am I good at? What am I not good at? What do I like? What I don’t like. There are technologies that literally will stay up 24 hours a day and write code and be thrilled about it. All right, but if you ask me to do a financial statement, they’ll want to jump off the building. OK, you have to know what you’re good at.
[00:20:00] You have to know what you’re not good at and you have to know what you like and what you don’t like, because how many times have we seen founders and entrepreneurs go, you know, I’m just going to lock myself in a room and learn finance when you could literally go to NYU and get an intern for free. Delp, you do your financial status, OK, a good amount of being happy and fulfilled through this struggle is understanding what you’re good at and understanding what you what you like. Next is managing the chaos of the day. OK? For some reason when we’re entrepreneurs, we think that as soon as we put the little E on our chest that we’re allowed to be morons, like we’re allowed to just throw out the window. All the basic business concepts we learned, as if we as if we didn’t work in a larger company. Right. If you walked into IBM and you said and you did your strategic planning session, somebody said, I have an idea, we’re going to do everything. I’m going to do everything today, they would just take you to your desk and walk you out of the building and they’d never hear from you again. But as entrepreneurs, we’re like, I can’t prioritize. Right. There’s certain things that you have to be able to do as an entrepreneur that are really counterintuitive. Part of the managing the chaos of your day is certainly setting priorities not just for the day, but overall, everybody says, well, you got to set priorities.
[00:21:11] And a lot of entrepreneurs say, no, I can’t, which is just wrong. OK, you have to do that. But even within the context of your day, how can you take your day and make it more efficient? So a couple of different things. One is do the hardest thing first thing in the morning. I mean, the stuff that really requires your brainpower, like when my company was crumbling and we were working 24 hours a day. Right. And we were barely sleeping for years, like first thing in the morning, you had to do the stuff that really took the most the most brainpower. Secondly is picked the five things you’re going to do that day.
[00:21:47] And don’t worry about the 95 five that you’re not going to do. OK, if you think about the ninety five, you don’t do to ninety five, of course, then you don’t do the five well and you feel it, you feel like you’re swimming in quicksand. You ever seen the movie Apollo 13. Right. And spaceship is blown up and everything’s going wrong. And Tom Hanks, his character is trying to keep them aligned. And I think it’s Kevin Bacon character says, well, what does this happen in the heat shield and the thing and the thing and thing? And Tom Hanks says, listen, we need one hundred and eleven things to go. Right. We’re on number six. Work the problem. As entrepreneurs, we always have one hundred hours of work and 10 hours of time, go to work, pick the five things little, leave a little time for number six. Right. But don’t worry about the nine to five that you’re there not doing. And then finally and kind of the last thing is, is not evaluating your life in the middle of the fight so many times as as entrepreneurs, you know, this is hard and so many times as entrepreneurs, we never evaluate whether we want to be an entrepreneur. When we just win a deal, like let’s say you say you come back for an investor meeting and you said, yep, we agreed on valuation, we’re signing tomorrow, we’re gonna have ten million dollars. I’m going to sit down now and decide whether I’m going to be an entrepreneur or not. That’s never when we do it. We always do it when shit goes bad, right? When we lose the deal, the employee leaves. We lose the big customer. That’s not the time to evaluate your life. OK, you absolutely. We you know, anybody who’s entrepreneur knows this is hard. So especially in technology, right. You absolutely have to evaluate whether you feel fulfilled. But that should be on a weekend with a with a friend having a glass of wine. It’s not on Tuesday afternoon when your investor told told you that nobody else will ever invest in your company. OK, so evaluating your fight in a middle matter in your life, rather, in the middle of the fight is not productive in any way. And if you think about these ten or so insights, these are a lot of these things are really counterintuitive, finding a new playground. Right. Not chasing every customer, saying these types of things to investors. These are once some of the many skills that that we really believe that you have to develop as an entrepreneur. Because remember, the context of what we do is not only it’s difficult, but why is it difficult? There’s obviously a lot of reasons, but one of the main reasons is that that the competition is intense. More and more people are doing it. Capital can come from anywhere. We in this room could lock the door was an amazing idea. Have a website by the time we left right. And we walk out and say great and find out that somebody just did it in China an hour ago. I mean, it’s unforgiving. So how do you actually apply some of these techniques? Because if you find a playground where nobody else is playing right, it doesn’t matter that people that people do the things. Remember, there were people in twenty seven loyalty programs when I started my business. OK, hopefully these are some of the techniques that can help us have a better chance of success that range from going to market to to how you manage your day. And finally, you know, obviously the experience that that we went through was somewhat unique, not that others didn’t go through the same thing in the financial crisis, but what it really made me realize is that is that being an option is not a job, it’s an identity. And when we wrote the Lonely Entrepreneur book and we were telling this whole story when this when this really came to life for me was when I was trying to write the ending. And it turns out, unfortunately, my my father was very sick and he was in the hospital and I was with him and he was dying. And I remember, despite all these emotions and all this terrible stuff that was going on around us, there was they would put an oxygen mask on his face every day and it fell off every day. And it was like somebody. Can work, just get in here and can somebody just get in here and come up with an oxygen mask that actually stays on the like, what you realize is that, you know, being an entrepreneur is not a job. It’s an identity. And if you really embrace that as an identity. Then you embrace the learning that goes with it and hopefully each and every day you you don’t just rely on passion, grit and a good idea. You actually develop the skills it takes to be a to be a better engineer. So thank you very much for listening. I’m happy to take questions. You can find lonely entrepreneur, lonely, outspoken and all over social media. So I’m happy to take questions.
[00:26:11] Thank you very much, everybody. I appreciate it.
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