SPEAKER_00: Did you learn calculus and then get the A, or did you cheat and get the A? It's like you know the answer to that question. The A isn't the goal, it's the representation of your knowledge and your mastery.
SPEAKER_00: This is Michael Sybo with Dalton and Caldwell. Today we're going to talk about setting goals. More specifically, all of the pitfalls involved in setting or trying to accomplish goals that startup founders we work with tend to fall for. Dalton, why don't you set this one up? Yeah, you know, when we were talking about it this morning, the phrase or the meme that
SPEAKER_01: came to mind was the one, play stupid games, win stupid prizes. You know, and again, what I think it means in this context is if you set goals or if you start playing one specific game that is silly to begin with or that it's like clearly a bad call, yeah, the prizes, the implications of that, the things that you win are going to be equally silly or nonsensical or nonproductive. We see a lot of people who set goals to in effect play kind of stupid games.
SPEAKER_00: Let's talk about the stupid games and then we'll talk about the stupid prizes at the end. Those are maybe even more fun. I think it makes sense to split this up into mistakes that people make setting goals and then mistakes people make trying to accomplish these goals. So I would say the first one, and maybe I'll start with the simplest, is when people set goals that are so aggressive, they aren't motivational. And they're basically missing the understanding of what the purpose of setting a goal is, right? Like you want to motivate yourself to act smarter, faster, more intelligently than you would otherwise. And oftentimes people are setting goals that are too aggressive because they're motivated by fear. In YC we see this all the time.
SPEAKER_01: And what's an example of a too aggressive goal? What do you think? I can give you an example. What do you think?
SPEAKER_00: Yeah, I'll see a YC founder who comes into YC just starting to build their product and they tell me, by demo day we want to have 30K in MRR. And we want to do that because some alum told us that that's how much MRR you need in order to raise money on demo day. And it's just like, how many errors can be set in three sentences? You know, is my thought. What's an example that comes to your mind?
SPEAKER_01: My most common example is someone that believes once they launch a product, it will immediately succeed and take off. And so it's like, we're going to spend three months building this app. We're going to put it in the app store, we're going to launch, and then we're going to get a hundred thousand DAU. Yeah, like two weeks later. Yeah, it's always the plan is they're going to put it out and then it's going to immediately take off. Those are always the goals that are rough.
SPEAKER_01: And what's funny is we're always like, why don't you launch sooner so you have more time to make it grow after it launches? And like, no, no, no, no, no. We're going to spend all the time making it good. And so then when it goes, it's going to immediately take off top of the app store 100%.
SPEAKER_00: Why would we launch something bad? Then it won't take off, Dalton. Jesus.
SPEAKER_01: We're going to talk to some influencers, we're going to do a social media launch. We've got it all lined up. We have a wait list. So yeah, top of the charts, definitely.
SPEAKER_00: Game on. So both examples of being too aggressive. The next one that comes up a lot is fake metrics. And we've talked about this a little bit, but for companies who charge their customers money, somehow creating a goal incremented in something that's not money. Hey, my product costs $10 a month, but I'm measuring registered users. I want to hit a thousand registered users. And it's like, that's weird. Like hell, if users is going to be the metric, why wouldn't it be active users? Just like if we're going to be in that world. Well, that's too hard, Michael. That's why. Well, fair. But if we're charging them, why wouldn't it be the amount of money we make? That seems even simpler. But I think you've seen a wide variety of fake metrics that goes way further than users, right?
SPEAKER_01: Yeah. Okay. Counting hits on your website. That's an oldie, but a goodie. Counting downloads, but not registrations is a good one. Counting users as people that started the registration process and didn't finish it. Counting users as people that downloaded your product, opened it, closed it after five seconds and never opened it again as users. Yes. Yes. We've heard that one. Just basically like a thousand and one different ways to avoid the actual meaning of the metric,
SPEAKER_01: which is to capture if it's working or not. It's like every which way. People are so creative at finding ways to not actually measure the thing that they know they're supposed to be measuring. And I can never tell if they're doing it to fool themselves or to fool investors or authority. You know what I'm saying? It's hard for me to tell when someone is practicing self-deception that number of downloads is the right metric, or if they think that no one else realizes that that's obviously... No one else can tell what they're trying to do.
SPEAKER_00: We can tell. It's probably both. It's probably a combination of both. Here's another one that I see a lot, especially with fundraising. Stupid comparatives. In 2021, Tiger gave this company $100 million funding when they accomplished blank. 500,000 of ARR. Therefore, we will be able to raise $100 million of funding when we accomplish 500,000 of ARR. Right, Michael? There's no difference between summer 2022 and summer 2021 at all.
SPEAKER_01: That's how it works, right? What they do is they just are always consistent and they always make the same decisions. And it's easy for you to tell, reading the TechCrunch announcement, why the investor made the investment. Right? It's clear. I read the article, this VC invested in this company. We're kind of like that company in some superficial ways.
SPEAKER_01: It's in the bag. We got it.
SPEAKER_00: And then the other one that I love about it is like, no, Michael, that round was announced last week. That just happened. And it's like, sorry, but lots of things are announced way after they happen. Way, way after.
SPEAKER_01: So again, I think what we're saying about what's the stupid goal in this case, playing the stupid game here is trying to create superficial resemblance to other things as opposed to deep the thing is working, or maybe there's a deeper analog to the other thing. But if you're just focusing on the very surface level stuff, yeah, that is not a smart game to be playing.
SPEAKER_00: One other example, maybe an old one we talked about in the past with Facebook, where you might be able to argue, well, they raised money when they only had a small number of users. And then you completely punt on the fact that that small number of users were 95% two hour a day Facebook users. So the engagement was incredible. Yeah, if you can replicate Facebook's engagement, then you've got something versus replicating,
SPEAKER_01: I don't know, it's for college kids or I don't know, people have very superficial stuff there. Oh, God, you bought up one on our list about sandbagging.
SPEAKER_00: Let's talk about sandbagging a little bit.
SPEAKER_01: Yeah, so sandbagging, I don't know how much people are used to that term. I think it's, I think it's a golf term. Sandbagging is basically where you set goals that are intentionally way easy to hit with the goal of blowing them out of the water. So say you know you can accomplish something in one week, the sandbag version of the goal is to give yourself a month. And then when you go around and you hit the goal, you like look like a genius. And what's funny is when you are working for the man, when you are working at a company like Office Space, you know, you're in a cube farm somewhere. It makes sense to sandbag goals. And that's actually great career advice, I suppose, is that you, you know, you set really, you convince people that something's really hard to do, and then you exceed their expectations. What a great way to get promoted or whatever. Of course. However, there's a problem. If you're used to doing that, and that's how you think all things should work. When you start working for yourself, when you are your own boss, you are screwing yourself. And what may be a good strategy to like rest invest working at Google or Facebook, and to just do as little work as possible by sandbagging goals and working three hours a week or whatever people do. When you're the boss, do you see how that's like, not great? Well, and you better believe that big company you work for didn't have that culture when
SPEAKER_00: it was starting.
SPEAKER_01: Yeah, the founders of that company were not doing that. No.
SPEAKER_00: All right, let's talk about accomplishing goals. So okay, let's say I set a good goal, right? I'm a post launch B2B SaaS company with a couple users, and I am setting a goal of getting my first 10 paying users, right? Great. Like, we're in the right ballpark. Let's hear about how people screw up accomplishing goals and somehow kind of still play the stupid game.
SPEAKER_01: Right out of the gate, it's the way that you accomplished it is something that you know in your heart is not like, what's the word I want to use kosher? I don't know what would you what word would you use? I'm Michael, like,
SPEAKER_00: I like using the word cheating. Like, you know, it's like, you're taking a calculus test. Did you learn calculus and then get the A? Or did you cheat and get the A? Like, it's like, you know, the answer to that question. Like the A isn't the goal. It's the representation of your knowledge and your mastery. If you didn't learn something when accomplishing the goal, maybe you didn't accomplish the
SPEAKER_00: goal.
SPEAKER_01: You know, you can fool investors, you can fool co-founders, you can fool a lot of people. People are very trusting. And so I think the way the mistake people make is they think that because they fooled people in the short term, they know they didn't hit the goal.
SPEAKER_01: They're like, yeah, you know, what I actually did was I got my friends and family to do blah, blah, blah. Or what I actually, you know, there's like something where you're like, yeah, this didn't, we cheated. But no one else seems to be aware of us. You're like, well, I guess I guess this worked. I guess this is how this goes.
SPEAKER_00: So another way that people screw up the accomplishing goals is not understanding how to take the L. Okay, maybe you set the wrong goal. And instead of realizing that and setting a new goal, you cheat or do one of these other tactics to try to accomplish it because you feel as though not accomplishing your goal is a failure in and of itself. Man, I find founders screw this up constantly. It's like, you don't have to assume you're going to be good at setting goals. You can give yourself some slack, assume you're going to be bad at it. And you can adjust over time. You can set better goals over time. You cannot accomplish your goals and learn from it. There isn't this, you know, sometimes in YC, I think people feel this like, oh, we're grading them on whether they accomplish their goals. And it's like, first of all, we're not grading. We're not your teacher. We're not your boss. And second of all, your job is to work on the hardest problem in your company. If you've made progress on the hardest problems in your company, you're doing well. That's the whole gist of this. It's not like, oh, did you release that feature when you said you were going to that no one's going to use? Oh, man. And then you talk about excuses a lot. How do people screw that up when they don't accomplish their goal?
SPEAKER_01: I just notice a lot that when folks set goals and are able to hit them, that's OK. But when folks are in a position where they really think it's important to make a lot of excuses on why it's not their fault and never to everyone else's fault, and they just have this inner desire to tell me all the excuses. I think that's not helpful in that, again, I'm not the boss. I don't care. OK, you didn't hear a goal. Great. Let's move on. Like, it's like they want redemption.
SPEAKER_01: And so I just think that it's good if something doesn't work to accept it, to acknowledge it, to look at it, but realize you're the boss of yourself and you should just not feel a need to make a million excuses or have like create this long narrative where you're the victim and everyone else. It's not your fault and your heart was in the right place and you did everything right, but everyone else was wrong. This is usually stuff about sales cycle. Well, the sales cycle is just long. Like this is just too hard. And it's just when people do this, my message to them is like, hey, that's fine. I'm not saying your excuse is wrong, but like, why are you spending all this energy trying to plead a case like you're in court that the thing didn't work as opposed to like, well, move on and make something that does work. How about that? Spend energy in a positive, proactive direction than weaving the narrative of yourself as the person who did great, but you're misunderstood by the universe.
SPEAKER_00: This is an internal tool. Like this is a tool for you to use your help yourself. This is not a tool for you to please someone else. Like that's kind of irrelevant. So let's do the takeaway here. You know, you set this up with play stupid games, win stupid prizes. Let's talk about some of the stupid prizes that we see companies win. Where do you want to start here? Yeah, well, the thing is, if you set that goal, if you start playing a silly game, you
SPEAKER_01: can win at the game. We see lots of people win at the game. And so one of the one of the stupid games sometimes people play is just how much money can I raise? The more money I raise, the better. My goal is most dollars raised. And the bigger that number is, the better I am. So you're playing the game. You won the game. Congratulations. What's the prize you win, Michael? What's the stupid prize if you play the raise as much as you can game?
SPEAKER_00: Often you lose control of your company. So like when you confront the challenges, suddenly, you know, your board can fire you. Often you find yourself burning tons of money because all the people who gave you money expect you to spend it. Oftentimes you have the wrong people on your team. You have a bunch of people who think you've made it, who think that this is, you know, the next Google when in reality it's not. And then last, you might have to change what you're working on or change the problem or pivot in some significant way. But now there are all of these people and all this money and all this momentum going down a direction that's driving a company off the cliff. And that pivot becomes 10 times harder or damn near impossible oftentimes. But you did win the fundraising game. Yeah, it's a congratulations.
SPEAKER_01: So congratulations. You won the fundraising game.
SPEAKER_01: Here's your prize. You have a messed up company that shouldn't have raised all the money and you've got to dig yourself out of a disaster and everyone's mad at you. Here you go. You won the prize.
SPEAKER_00: Have fun. The next fun one is I want to feel like someone running a big company. I want to have 50 employees. I want to have 100 employees. I want to have 500 employees. I want to be a boss of a lot of people.
SPEAKER_01: Number of employees. I want a real big team. I want to move real fast. That's my game. Yeah.
SPEAKER_00: It's always about moving faster. That's the lie. It's like if we had this, we could finally move as fast as like, you know, we could finally build all the things that I want us to build. So what's the stupid prize on that one, Dalton?
SPEAKER_01: Now you wake up one day and you look at the spreadsheet of your burn and you look at all the people that work at your company and you're like, oh, no. And guess what? It's now your problem because now you might have to do a layoff. You might have to let people go. You might mess up people's lives that believed in you. You might mess up that or have moral issues there. It's like the worst thing ever to over hire and have to deal with it. And if you talk to someone that's had to deal with this, this is usually one of the more the biggest failures. If you look at your life. I know that's how I feel like personally is the biggest failures I've ever had. You were definitely having to let people go that I shouldn't have hired. So congratulations, you win the prize. You hired a bunch of people. You're a big important person. Now you're responsible for all of this.
SPEAKER_01: Yes. Yes.
SPEAKER_00: Here's the other one. I love this one. Dalton, I need an executive team. It's time for my company to become a real serious company. And to do that, I need an executive team. And so I'm going to spend the next year recruiting the executive team. Like it's time. I'm ready to grow up, Dalton. I'm ready to grow up. What do you think about this one? How many great executives have we encountered over the year?
SPEAKER_01: I think if all you do is consume like VC content, this is an idea that gets introduced into your brain. And I think maybe there is a time where this is a good answer. It's like so much of the VC content is aimed at late stage founders, which is pretty weird. It's like putting out content that's like how to care for your Ferrari or something. Again, I don't really know who a lot of this stuff is aimed at. The majority of the people that consume it are like two or three person startups. And if all of your advice is like hire an executive team, when you have like a three person pre PMF startup, like, oh man, you can get someone with a title to leave Google or Facebook or somewhere really impressive. And you think you're like a big winner that you got someone from this cool company to join your company. But then you wake up and you're like, wow, what did I do? What usually happens is they either join your startup because they weren't doing well. I'm trying to think of a nice way to say it. Either the reason they joined your startup and left Google or they had expectations that you were farther along or more successful than you actually are. And they get very upset with you when they realize that your startup sucks. Tricky.
SPEAKER_00: All right. The next one, the next gift that you receive when you play a stupid game, we've touched on this a little bit is I'm now burning tons of money because I just scaled negative margins. I had something that wasn't working in this city and I expanded that thing to 30 other cities. And now it's not working at a massive scale. And I did it because my investors told me to. And now those investors aren't taking my phone call. And this is like so hard because I think people don't realize that either some stage of investors or at some point in your company, someone's going to pull out your finances and do basic arithmetic and ask themselves, is this real? And eventually you will be judged based on like, is this real and sustainable? And if it's not like, hey, sometimes you even get post IPO. But at some point.
SPEAKER_01: Those people are having a bad time. We're not going to name any names. No, we're not having fun. So that being post IPO and then having your stock with 95% of its value. I don't think those people are having a good, they played a game and here's the prize they have is having a rough time.
SPEAKER_00: So I definitely feel as though founders make this mistake of like, if I raise the last round by my massively scaling my negative margins, I'll be able to raise the next round. And that luck runs out at some point. The next topic is on acquiring companies. And I think that this comes in a number of flavors. One is once again, we're finally grown up, we can make our first acquisition or like we want to get good at this acquisition thing. So we got to start doing it.
SPEAKER_01: There's a lot of talent out there, Michael. And some really talented, failing startups would love to be acquired by us. And this will help us grow faster. So we're going to acquire them.
SPEAKER_00: And by the way, that doesn't mean that like acquiring companies is bad. It just often means the folks who are thinking about it in startup land tend to be thinking about it too early. This is like another example of like taking later stage advice too early when like the advice you should be taking is make your core business work. Like just make your core business work. Yeah, if you're creating PMF, if you don't have product market fit yourself, probably
SPEAKER_01: you're not an acquirer. Probably not a great idea. You're laughing, but people are probably like, wait, really?
SPEAKER_00: Yeah, really. You know, Dalton, you're right. I am laughing because that's like, that's an inconceivable concept in my mind. Like, oh, we're pre-product market fit. We should definitely be spinning up core dev. Here's another one that's in the news more and more lately. Defrauding your customers, selling your customers something and telling them it's one thing. And you know it's not that thing and your customers lose money or your customers are in some way extremely harmed. What's the prize for doing that, Dalton?
SPEAKER_01: No joke. It seems like there's people going to jail and getting arrested and people whose actual lives are now irreparably harmed by the games that they were playing to get growth or to get money. And yeah, they're going to spend, you know, best case scenario is spending years and years and years in court and in the court system and just having your life changed. Like this isn't making a mistake.
SPEAKER_00: We're going to be clear here. Like your state of mind is extremely important here. This is like knowingly pursuing a strategy that you know is harming your users. And I think what's tricky is that oftentimes people don't think this is happening.
SPEAKER_01: I think sometimes people forget that they're not playing a game. And I think especially in COVID land, I don't know, like one of my explanations is if you spend all day on Twitter and Discord and everything's a game and everything to joke, everything's silly, you can kind of, I just have noticed some folks lose themselves and not realize that the numbers in the spreadsheet are real dollars. And I don't know, it's like we're not playing Monopoly, we're not playing Sellers of Catan. And I think that the prize that you win is the knock on the door from the police. And that's when you're like, oh, wow, this was real life.
SPEAKER_00: And the last one on our list, playing the game of using your position as a startup founder to become an amazing investor. And I think this one's like really tricky because for one thing, you definitely see a lot of famous startup founders have written kind of angel and checks into companies that tend to do well. And so I think sometimes people confuse that for, oh, I should be spending a significant amount of my time looking around and trying to be an angel investor instead of making my company work. And I think that if I can try to explain to you what's actually happening, when you're a good founder, oftentimes you know other good people and the opportunity you have to give them money requires almost no time or effort. And so you just, and like if you're a good founder, oftentimes people are offering you deals. And so like, you know, you're spending five minutes saying, yes, this is an obviously good thing, I use it, or this is my friend, I want to support them. And the amount of time and effort you're spending writing these angel checks is basically nil. Like I remember when I was starting Socialcam, I emailed Brian Chesky saying, do you want to angel invest? He was like, sure. That's it. Like that was the entire time that he spent, probably less than 15 seconds. I think people don't see this, so they think, oh, I need to copy what I see investors on Twitter doing. I need to go network. I need to go meet founders and advise them and do office hours and like all these things. And it's like, ah, like classic example of cargo culting, right? Like not really understanding what's going on.
SPEAKER_01: The stupid game you're playing is a status game. Like if you play status games where what you want to do is level up, you want to put angel investor in your Twitter bio or something. Okay, you're playing a status game. Fair enough. The prizes that you win playing the game is congratulations. Now a bunch of your money is tied up in illiquid investments that may or may not show up. So now maybe you're like financially strapped. Maybe you're worried about other stuff. You're worried about your startup. So maybe you're performing worse because your money's tied up somewhere. You have spent a bunch of time and stuff. You've totally pissed off your employees, whether or not they would say it to your face. That is not a great way to win awards with your team. Yep.
SPEAKER_00: You're a scene stir. Congratulations. Yeah. So I think to wrap this up right. Sometimes founders don't think enough about the bad consequences of the games they're playing. And once they really do the whole logic tree down to the end, they'll realize that maybe it's not worth playing those games and you might as well just build a good business. And even if that's a tricky message for you to internalize, think about what you're teaching your team if you're making these mistakes. They will copy what you're doing because you define success in your company. And so even if you're like, oh, for me, this is cool. Like a perfect example, if becoming a status seeking angel investor is like what seems cool in your company, people in your company can start trying to do it instead of doing their work. And so if they see you fudge numbers, make sure.
SPEAKER_00: Yeah. People in their company start doing it. It's kind of like a little bit, we're both parents. It's kind of like, hey, if you don't want your kid to be a screw up, you don't do screw up shit in front of them. It's like a pretty simple one to one here. And on the flip side, to kind of end with a positive note, some of our best companies get so good at goal setting and accomplishing goals that they move faster than we would ever imagine possible. Like they are just machines at doing this well. And I would argue that most people don't start doing this well. Most people who focus on setting goals and accomplishing them get better at it over time. But man, the rate of improvement is sometimes shocking. Sometimes they're founders who are kind of fooling themselves who are thinking like, hey, I'm smart so I can coast on this stuff. It's like, man, outliers are smart and great executors and great trainers. Like they have multiple things they're great at. They don't sandbag themselves. Any other thoughts here, Dalton?
SPEAKER_01: I think we're good. I think it's well said. Thanks, man. Awesome. Talk to you later.
