#AskGaryVee Episode 197: All Things Startup

“when to add staff? “What positions are most
critical to line up first?” – Taylor, and by the way before
I get into your answer Taylor, obviously this is a startup
themed episode in honor of the 43North competition. Taylor, I think that there’s a
lot of ways to go about this. I think you reverse engineer
the founders of the company. So there’s a lot of
things that are needed. Financial understanding
is needed. Marketing understanding
is needed. Product understanding
is needed. There’s a lot of needs
when you’re a small company. I think what you need to
do is first you hire as soon as you can afford to. There are startups that I know
that are literally paying their founders and CEOs way too much
money because they want to take the money home. You’ve got to start spending it
to invest in your business but not more than you have. So if you make 30
or $40,000 a year as an entrepreneur that’s plenty. You’re building an asset
for yourself for the rest of your life. It’s better than making 100 so
you can take that 70,000 and go and hire your head of marketing,
hire a project manager, hire whatever needs you have. Who to hire is actually
quite easy my opinion. You hire around the thing that
you most need that you yourself can’t most provide. I don’t hire salespeople
very quickly in my companies. I don’t hire HR
people very quickly. We didn’t have a HR department
or a sales staff for the first five of the seven years of
VaynerMedia and everyboy thought that was so crazy because
those of the things that I did. Those are things that I
could do with my hustle. But we did have a CFO and a
legal person very quickly over our means because
those were shortcomings. I think AJ could have probably
learned it on the job but those are things we
didn’t have as much of. I think when you hire first is
the thing you need to round out your team with even if it’s not. Let’s say sales is more
important than legal but you’re great at sales I think you still
fix legal even though it’s less in priority because by doubling
down on a person you’re still zero here and you might just
gain 20 to 50 percent here, where maybe your hustle
and your efforts could just be the part that gains. I think that sometimes people
say sales of the number one thing for this company but even
though I’m great in sales I’m gonna hire second person and
won’t get to that I find that to be a vulnerability. I would say up your game by 20
to 40 percent and allow you to fill some of the other needs
that can become vulnerabilities on your team.

Really quick question, you and
other VCs see a ton of deals come across your plate. My question is what are two
or three things that makes one pitch stand out from
all the other ones? Thanks Gary. – You got it. It’s gonna be a good episode. We haven’t done a
lot of startup stuff. It’s been very entrepreneurial.
This will be good. Ace what stands out ironically
is the way I just set up you and this question, for me the jockey
the she and he that are pitching me are normally
80% of the equation. So many of you have heard that
the classic story of basically I knew I was going to marry
my wife five minutes in. If I’m willing to make my
biggest life decision predicated on my intuition, I’m definitely
going to let it do something so secondary like investing. The same way I hire.
I’m a funny hirer. Everybody used want to
actually watch this Alex, Alex. This is ironic timing.
This is Alex Klein. Alex get in here. You’re making an appearance
on the #AskGaryVee show. – Alright. – This is literally
crazy timing. – Okay. – Because I was about to say
something that is a story that involves you. Alex Klein, my brother-in-law,
Lizzie’s brother who happens to do a ton of recruiting from his
own firm for Vayner is this true or false because we got to go
fast here I don’t want you to like I feel like you
would take up too much time. – True or false– – True or false, did you Alex
remember had a recruiting firm that would make a commission
if we were to place somebody. Got it that’s of
his business works. True or false you liked it
better when I interviewed people because I almost hired
everybody versus everybody else at VaynerMedia? – True. And false. – Okay go ahead. Because? – Well, I think it
works out better. Long term for everybody, I think
it works out better with this kind of process
that’s in place now– – Instead of me just
shooting from the hip? – Yeah. – Let’s get to
actually my point. Is it true that I’d be more
likely to hire somebody after a seven minute meeting
and just make a decision. – 100%
– Okay, cool. That’s it. Thanks, brother.
– Later. – See you later.
– Bye. Big Mets loss
opening day, sorry. – Tough David Wright.
We’ll see. – The funny thing is he
happened to be walking by. Love the serendipity
of all that. That’s the punchline,
I hire in four seconds. I make decisions based on my
intuition but a startup has to have an idea in a
genre that I like. If you’re doing E-sports,
if you’re doing VR B-to-B, if you’re doing fully integrated
brand direct consumer consumer package goods, if you doing
things I believe in and I like your style, very quickly then
that something I’m going to be open up to. If you have those same things
and I don’t like your style, I’m definitely out. And if you have something that’s
not in my wheelhouse that I believe is going to make money
but I’m in love with your style I can be intrigued
and sold into you. The ones I get my deals are
usually genres I like and I liked the jockey the CEO,
I believe that she and he can navigate even changing it along
the way because that’s what happens in startups
that’s my intuition. Some people that get my money is
I don’t know this much about the space or passionate about it
but I think you’re a superstar. You have to be better
than the first group. The things that don’t get are
the things I don’t like or don’t like that genre and definitely
I don’t like the individual. I don’t think they’re
going to see it through. Thanks Ace. Let’s keep it, Alex Klein
making an appearance.

– [Voiceover] Niall asks, “Ideas
alone can only get you far, but “once you gotten off the ground,
what does an investor need to “see to investment in a startup? – Well I think investors
all act very differently. There some black-and-white
binary investors who are looking for math to add up, right? Here are your sales, here’s your
cost of acquisition your monthly burn just pure financial
decisions and then other investors are betting
on the hypergrowth. You’ve gone from 0 to 50,000
users in two minutes, I predict that you’re going
to go to 5 million users. You’re not making any money but
you’re going to grow faster and you’re going to hit a home run
and I’m okay with the burn and the financial issues ’cause
you’re going to raise more money as you get bigger and bigger
so you’re betting on hard-core financial principles or
you’re betting on the anticipation of hypergrowth. I think one thing to keep in
mind is once you’re off the ground people have
something to judge. So I think a lot of people get
away with getting investors just on ideas which I think
is a vulnerability to the whole ecosystem. But it’s funny I’ve always been
fascinated by companies that are making money and have a year’s
worth of data often times aren’t as sexy as the idea because
investors get romanced in the upside without any practical
data versus well I already know you’ve done for a year and so I
think a lot of youngsters have been crafty in getting
investment before they have a product which I think has led to
a much higher return of failures which I think people need to
become more practical and so I think, just for everybody and
for you, once you have some data be prepared to be grilled a
little bit more because people have something to judge. I think that’s great and
healthy and needs to be more the standard. – [Sam] Cool.
Next video submission.

For an early stage startup that
just received 500,000, 600,000 or $1 million in capital, what
are the critical things they should be looking to address? – These guys have
a great company. Let’s make sure we link up
both Ace’s and their company and Plum’s company in
my description. Staphon make sure you
team up with Sam on that. Well look I mean first and
foremost, you don’t blow it. The amount of people that
have blown through their five or 600, million in cash because
they didn’t have a strategy of what they were going to do
with money is unbelievable. It’s unbelievable how much cash
and wallet is just burning for so many startup
founders it’s quite said. So I think you have to have a
real plan for it and again no different than the first
question on this episode, you have to have a strategy on
where you’re going to deploy it. What are your biggest needs? To me I like to invest in
things that bring back dollars in the midterm. I don’t need the short term but
I don’t need the longest term. I think sometimes
people are too… It’s funny, ideas are shit until
execution I like to say a lot because I think most
founders get caught on one side or the other. Some founders take $500,000
and they want that 500,000 to make them 800,000. It’s all transactional.
Sales, conversion. Other founders start thinking
about what their company needs in three years. In three years, we’re going to
need video editing software so let’s buy that now and you
didn’t get to three years. By the time that you spent all
the money that was what created this scenario you never getting
to those three years from now. I think much like marketing in
the year that you live in, day trading attention, some
of my marketing principles, I deploy in my
operating principles. What is the most important
thing with that money right this second that isn’t short-term
sales turn 500 into 600,000 but what is not the were going to
need this in three years so let’s spend it? By the way furniture and rent
and all these things that’s where people waste money. AJ and I started
this company in a conference room
of another company. This is not a
super fancy office. Right? Yeah.
It’s good. I’m happy about that. This is actually pretty fancy
compared to where we were a year ago so like people just waste
money on a lot of things that don’t matter. Now, it can’t be so screwed
up here that people don’t want to come here. But we don’t need $8000
recliner chairs for everybody and that’s what a lot
of startups do. It’s crazy. They spend more time and energy
on like how fancy this coffee machine is gonna be than
actually building a god damn business. So what you do with it? You better know what to
do with it or your startup is in deep shit. Don’t ask GaryVee, I hate
third person, don’t ask me. Figure out what to do with it. Make it practical as hell
because that money will disappear fast and the only
thing that will disappear faster is your hopes and dreams about
your business if you don’t know what to do with it.

“scalability for a company, “what are the things
you look for?” – You know Zach, I’m not looking
for much I’m usually doing that homework and living that
business life beforehand. It’s not hard for me, I
don’t ever struggle with understanding…I don’t of you
noticed in my face there Staphon I was like thinking about it
I see what’s happening. I have such a good understanding
of end consumer dynamics, the marketplace, the market,
the stuff I talk about for the last 10 years of my life. A lot of venture
capitalists don’t. A lot of business people don’t
but what I’m really good at is understanding demand.
I understand the customer. I rarely ever struggle with
being like who’s going to buy your thing. I can make those connections
in my head pretty easily. And so I’m not spending a
lot, anything is scalable. Anything is scalable in theory
because you can either humanly scale it or you can
scale it with technology. You just have to
understand if people want it. Do people want
mattresses sent to their home? That’s what people
messed up with Casper and those kinds of companies. Uber. We thought it was going
to be a 1% problem when we first heard it. Those early conversation were
like well okay there’s enough rich people. Maybe we
underestimated the fact that everybody wants to buy time
and we didn’t understand that. Eight dollar green juice. That maybe didn’t seem right to
a lot of people because who’s going to pay that? People are paying luxury fees
now for their body and their health and so this generation
the kids and not just the kids I like to make that joke,
millennial’s and Gen X and everybody, everybody now is more
willing to spend money on their health and wellness versus
an 80 inch screen television. The 1980s and 90s mentality of
an 80 inch screen television and the most extensive car you could
get has been replaced with 60 inch television, solidly
awesome car but an extra $20,000 to buy eight dollar
green juices and a one-year subscription
to Soul Cycle. If you didn’t understand that
was happening, you missed it. Do I think people will pay
$50 to go to the movies? The answer is yes. Has there been an execution that
I’ve seen that makes me feel like that’s the right bet?
I haven’t yet. I know Cuban’s got some stuff in
his world but will people pay $50 to go to the
movies absolutely. Has anybody really executed the
added values that force people at all income levels to do it?
Not yet. But if I saw
somebody pitch me, I’d be like yes that
could happen. I have a good understanding
for consumer to understand where things are going. How do I navigate? Do I think there is a demand
currently or could be bubbled up quickly to justify the value and
the lifecycle of that business or is it too early?
VR consumer. Do I think enough people have
VR units at home to watch seven hours worth of content? I don’t and so I’m not investing
the companies that are selling based on that reality because
I don’t think that’s going to happen next 24 months. So the punchline is do I believe
consumers are going to do it in a short enough time so that the
business can actually make money in that lifecycle? – [Sam] Cool.
– Cool.

There are a lot of reasons why
startups are flocking to Silicon Valley and New York but
it seems like emerging startup markets are becoming
increasingly viable. What are cities like
Buffalo doing right? – I think it’s becoming
viable because people are all buying into the dream. What they’re doing right is
there’s more money available to invest in startups. Startups are simple animals. They want expertise,
mentorship and money. Silicon Valley is going to win
because a lot of developers in San Francisco and things of that
nature and if you going for big, big tech ideas you
need that talent. Things are Buffalo and New
Jersey and even New York don’t fully have the kind of
engineering talent that a San Francisco has so if you got
an eBay or Facebook or a Microsoft ambition well then
you’ve got to really debate being out there to
have the engineering talent. In the beginning these
things can start anywhere. Facebook started in Boston. Pinterest started
in Pennsylvania. You can start them anywhere and
more importantly if you’re doing things that are not grossly
reliant on engineering talent you can do them anywhere. And the things that Buffalo
and Cleveland and Detroit and Columbus, Ohio and Chattanooga,
Tennessee are doing is that the rich people in those areas
are starting to write checks to startups and so then
it becomes agnostic. And more importantly there’s
such a rejuvenation of city life across the whole country so all
these really it’s amazing to see the cities of America go
from places that were seedy, ironically, to having high
ceiling lofts that are a great price and great coffee
shops and cool wine bars. We’re living through a very
interesting time in the city rejuvenation of the United
States and with that comes the natural artist and tech talent
and so I think what they’re doing right is the riding the
wave to be very frank with you and I also think that there
are wealthy 50, 60, 70 and 80-year-olds in those
towns that love their town. Right? That want
to see it succeed. I’ve even had feelings towards
Jersey on this issue and I’m still fairly young. When I 70,
80 I’ll definitely want to make Edison, New Jersey an
ecosystem of something. I think those
practical behaviors is why. It’s just the evolution
of the marketplace.