New to Big: How Companies Can Create Like Entrepreneurs, Invest Like VCs, and Install a Permanent Operating System for Growth - Hardcover

1

New to Big

“What are you going to do when this partnership fails?” It was a simple question, but coming from two of the most respected and successful venture capital investors, Marc Andreessen and Ben Horowitz, it felt like a one-inch punch. They were doing due diligence before they invested in the Series C financing round of my four-year-old startup, Clickable, and I honestly did not have an answer. I had never considered that reality; I was going to will it to work. As if on cue, we all nervously laughed while I tried to keep my adrenaline under control.

As an entrepreneur, over the past twenty-odd years I have worked relentlessly and experienced modest success building several venture-backed startups. I have raised over $50 million in seed and growth capital and have exited twice. But a decade ago, at the moment Marc and Ben were doling out some radical candor, I was frozen with the realization that I had just made an irreversible, fatal decision in building my beloved startup.

Clickable was a pioneer in the search and social marketing space. We had discovered a real pain point: digital marketers had too many platforms to manage and too little understanding of which ones would actually move the needle. So we created and patented the Act Engine. It was a dashboard utilizing some of the earliest forms of machine learning to look across search and social campaigns and give marketers clarity on what to focus on each day.

We were in the right place at the right time and quickly raised over $22 million in our Series A and B financing rounds from some of the most respected venture capitalists in the world. But early on, we spotted a problem with our product-market fit. There were actually two groups of customers who needed us: large enterprises, who wielded the vast majority of online marketing spending, and smaller businesses, who felt the same pain but had much less money to spend on a solution.

The obvious fix would be to target the large enterprises; any entrepreneur will tell you their ideal customer is “rich and in pain.” But our earliest revenue came from the smaller companies, and we were reluctant to abandon them and shift upmarket. As a result of being stuck in the “ugly teenage years,” our growth rate had not yet met the exponential forecast required to raise another round of funding, and we were burning through capital quickly. It was a classic startup dilemma.

So when a Fortune 100 financial services company came knocking in 2009 with interest in pursuing a strategic partnership, we saw it as the silver bullet for our growth challenges. They were building a complete suite of digital marketing solutions for small- and medium-sized businesses, and our Act Engine fit perfectly into their strategy. They had paid a fortune to a prestigious consulting firm to analyze and recommend a leading technology partner, and the firm chose Clickable, resulting in a several-million-dollar partnership to launch a white-label version of our platform for their small-business customers. Unsurprisingly, their customers behaved exactly as our earliest customers did: they tried it, loved it, and then left it when the free trial was over because they couldn’t afford to invest in the paid version. The “smartest plan you can buy” was invalidated. The partnership couldn’t solve our problems; instead, it amplified them, which is exactly what Marc and Ben predicted. As serial founders and investors, they had hard-won experiences and critical answers that we severely required but did not yet possess.

Convinced we could still reboot Clickable’s growth, I embarked on a quest to learn from the world’s best (living) entrepreneurs. I wanted to understand how the most successful founders decided to bet their lives on a business, and then what they did in the first five years to keep those companies alive and thriving. What began as a series of conversations with entrepreneurs like Elon Musk, Reid Hoffman, Sara Blakely, Robin Chase, Steve Case, and more than forty other incredible founders, turned into my last book, The Startup Playbook.

What I learned was that while each founder’s startup journey was unique, they all had a nearly identical collection of mind-sets and lenses they used to discover the root of a customer problem and to scale a solution into a business. These growth mind-sets were distilled into a framework I called the Five Lenses. (We’ll dig into three of these lenses in chapter 7.)

Most entrepreneurs will tell you that the best ideas and the biggest opportunities are often discovered by someone in the right place at the right time, and in this particular story, that place and time was at the TED Conference in 2010, eating breakfast with Beth Comstock, then SVP and chief marketing and commercial officer of General Electric (GE). It was two years before I’d ultimately sell Clickable.

Beth and I had been friends for a decade, and our breakfast at TED was an annual affair, where we caught up on our various professional and family adventures in between presentations from some of the most creative and brilliant minds in art, technology, policy, and more. I was describing the Five Lenses from The Startup Playbook when Beth stopped me midsentence and insisted, “We need this learning at GE.”

She had long owned the disrupter role at the conglomerate, leading their digital transformation efforts (including overseeing the founding of Hulu) and environmental impact work (including creating the Ecomagination initiative), and had recently stepped into the chief commercial officer role. She knew better than anyone that the core of the conglomerate struggled to be entrepreneurial, to operationalize the mind-sets and systems of growth. “Come work with me to install this at GE,” she insisted.

I hesitated. I’m an entrepreneur, not a consultant, and at that point I had a deeply personal and moral commitment to my Clickable team and investors to cross the finish line, no matter the personal cost or the timeline ahead. So we put the idea on the shelf. But two years later, after we sold Clickable and just months before I published The Startup Playbook, Beth asked me to join her keynote panel at GE’s Global Leadership Meeting in Boca Raton, Florida.

What I’ve learned from my experiences as a four-time entrepreneur and an angel investor in more than thirty startups is that while it often looks as if world-altering business opportunities emerge by accident, they can, in fact, be discovered and scaled in a methodical way. In the same way an MBA program teaches a form of management for administering and growing existing businesses, entrepreneurship and venture capital are, together, a form of management for discovering and building new businesses. And this is crucial: enterprises need both. It is the ecosystem created by the two that fuels world-changing innovation. This was the hard-earned, invaluable insight I gained from Clickable and our fatal Fortune 100 partnership. And what a gift it was. I needed to share this insight at the GE Global Leadership meeting.

The challenge would be how to introduce this new ethos and system into a traditional corporate environment. Existing corporations are focused on operational excellence and incremental improvements through process and efficiency. The MBA-driven methodology they use is about taking something big and making it bigger. It is, literally, the toolkit for operating what we call the Big to Bigger machine. Conversely, the integrated mind-set, mechanics, and methodologies of entrepreneurship and venture capital are designed and calibrated to discover new customer needs and devise innovative and new-to-the-world solutions. It is the toolkit of the New to Big machine.

What Beth had been articulating about GE--their struggle to innovate inside their Big to Bigger machine--was an issue plaguing virtually every large organization and enterprise. GE didn’t have a monopoly on this problem; it was everywhere. Corporate innovation is failing at a DNA level because the Big to Bigger machine has been engineered to be incompatible with New to Big. It is literally at war with growth. Truly new, cutting-edge ideas are too risky, too amorphous, too non-consensus to survive the metrics and evaluation process that “well-run” companies apply to capital investments. 

Bionic was born at GE’s conference in Boca. It was not intended, but it happened with a single provocative question. Near the end of the session, Beth surprised the three panelists by asking us onstage if we had any questions as outsiders to the company. Off the cuff, I aimed a question from the stage down to then CEO Jeffrey Immelt, who was seated front row center in an audience of seven hundred executives: “Jeff, how many fifty-million-dollar startups did GE launch last year?” The room shifted uncomfortably. “I bet the answer is zero,” I continued. “And if that’s true, I would be terrified if I were you. With ninety billion dollars in the bank and three hundred thousand employees, how does this not happen all the time?”

The silence was deafening.