How to multiply your time and money as a founder

I remember one of my favorite moments during my entrepreneurial journey. It was 2011. My team was less than 10 people. 

Brian, my sales guy, met the VP of Marketing at Zozi (a daily deal site) and closed a trial with them. Kushal, our account manager, onboarded them and had his junior team run the ads. Maria, in our finance team, billed them and collected the money.

Why was it my favorite?

Because I did nothing. And everything still got done. It was a "magical moment" for me as an entrepreneur: the company made money WITHOUT me being involved.

This allowed me to do other things, like hire, work on our next offering or spend time building our Facebook relationship.

If you haven't figured it out yet, today's email is about a favorite business word: LEVERAGE.

From our accelerators and Gateway X, I believe most entrepreneurs actually struggle when it comes to leverage. What is it? When should you use it?

I think of leverage as, simply, anything where I get a multiplier on my time or money.

The most obvious one. More money means I can make a bigger bet. Think of this classic example: if I buy a real estate property with my own money, I can afford a $1M property. If I buy it in cash and then the value goes up 20%... I make 20%. $1M goes to $1.2M.

If, instead, I borrow $4M and buy a $5M property, and THAT goes up 20%, $5M sells for $6M. My $1M becomes $2M! It grows 100%!

In the startup context, once you find an opportunity, capital gives you more leverage (e.g., more salespeople, more product team, more marketing) to attack the opportunity faster and, therefore, get a bigger outcome. 

Perhaps the best example of this is Uber (versus Lyft). As I write this, Uber has over $200BN in market cap and Lyft is at $9BN. Both great outcomes for sure, but look at the difference!

All that capital Uber raised allowed them to get tons of leverage to seize the opportunity in front of them.

The downside of capital, of course, is first you have to go get it (which is a whole function itself), and it increases the risk profile of whatever you're doing. 

In the real estate example, if my $1M property with no leverage went DOWN 20%, I only lose $200K. If the $5M property went down 20%, I lose everything.

The second most obvious one. (And, of course, it’s closely connected with capital.) If you have two sales people, you can close deals without much of your time.

Same goes for recruiting, product-building and, really, anything.

As my story above shows, having a team that can turn around and handle each piece of the business can be incredibly powerful.

Not only can it allow you to do more, but it can allow you to do things beyond your own capability.

The downside of people is that, well, they are people. Unique individuals each have their own insecurities, skill gaps and emotions. 

This leverage can crumble when it isn't met with strong culture, process, empathy and communication.

This is an oft-overlooked form of leverage and, I would argue, more important than the above two. 

We know this because plenty of companies raise money, have tons of people and EVEN a good idea (think MySpace versus Facebook) and still don't succeed. Why?

Because culture (or the way things are done when you're not in the room) is a huge form of leverage.

Let's use this example: following up. Some cultures follow up the same day externally and internally, others don't.

Which ones do you think are more productive? If you were the founder of one versus the other, which would grow more quickly?

Culture is closely related to systems/information. One rule I love from the book The Great CEO Within is: if you find yourself saying the same thing more than three to four times, WRITE IT DOWN.

Over time, these explicit and implicit practices become the highest form of leverage in a company.

What's the downside here? Not too much. The biggest watch-out is if you create a rigid culture and things change externally, it can leave you flat-footed.

This is the classic: write a program once and unlimited people can use it (internally and externally) with almost no incremental cost. It brings leverage to your ideas or processes.

There's tremendous leverage in this tool, and it’s only becoming more important with AI.

The downside, of course, is I see a lot of founders that OVER-invest in technology, especially before they understand the problem deeply. 

And nothing is more frustrating than building technology that nobody uses. Sometimes the ease of it leads us to not think critically to get the answer right.

I'm combining these two to move us along. Media is the idea that you can write/record something once and it can be read/understood multiple times. 

For example, based on our analytics, more than 20,000 people besides you are reading this email! 

Media can be used internally to drive culture and systems. Or for recruiting more talent. Or attracting capital. It's VERY powerful.

Its cousin is “network,” which is all the people you know and who know you. The more folks in that network, the more it compounds to create opportunities for everyone. 

When you're at the center of it, you will benefit increasingly — hence, leverage.

My big call-out here is (in my experience) neither of these two things can be done "for the benefit.” I.e. you can't fake these two. 

This weekly email and my social content are labors of love — something I enjoy doing for my own brain and to help others, not to grow my business. I HATE networking, but I love relationship-building.

The point is: be thoughtful about your forms of leverage. Every successful entrepreneur I know is not only aware of these levers, but they also have a strong point of view on them and build AUTHENTIC competencies around them. 

Meaning, they focus on the aspects that truly feel natural and resonate with them.

Some love designing products, but you could never get them to tweet. Some love raising capital, but hate managing people. Some love culture-building, but don't want to rely on other people’s money (me!).

Like with most things, there isn't a RIGHT answer — there is the answer that works best for you.

Have a great week!

jesse