How Founders Avoid False Starts & What VCs Actually Add - E581

"Steve Jobs, for most people, was actually fired from Apple because he started doing some things—he was way too perfectionistic about his products, he didn’t listen to engineering, and he didn’t know how to marshal talent—so he kept drinking his own Kool-Aid, and Apple’s performance got so bad that he was fired. He cried and was very sad, and then he was known as an insufferable person. He would go into meetings and be a total—imagine your project work, and he’s just a total asshole amongst those peers. But then, after he was fired, he went on to build a second company called NeXT, and he was even more perfectionistic at that company. He wanted to create perfect cube computers, and he wanted the robots engineering these products to be entirely spotless—which didn’t make sense, because these are engineering assembly robots. Then he wanted these cube computers to be so square that the molds casting his cases would leave a corner behind. You get what I mean? Like, you actually need a little bit of roundedness in the cast to let go." - Jeremy Au, Host of BRAVE Southeast Asia Tech Podcast

"You often see that founders are very often talking to other senior founders, similar to how freshmen talk to sophomores, talk to juniors, talk to seniors. You see a lot of founders will often get advice—they’ll say something like, 'Hey, I'm raising money from this person, what do you think about that?' They will triangulate advice, they’ll be like, 'Hey, do you think now is a good year to fundraise? How much revenue?' I got a WhatsApp message—she was like, 'I have raised my Series A, I want to raise a Series B next year, how much revenue should I get?' So I think the good founders, to avoid failure, will consult wiser people, advisors. And it’s got to the point where, for example, even in America, you may have dedicated executive coaches that focus on coaching founders because it’s a high-risk job, right?" - Jeremy Au, Host of BRAVE Southeast Asia Tech Podcast

"So last year a lot of people joined AI—was that the right time? We don't know. A lot of people did. Some people are still waiting it out too, so it depends on that perspective. The second thing that's important is that success breeds success. In other words, if you are a successful entrepreneur, you have the ability to attract more resources. So you walk around, 'I'm an exited founder,' and more people want to join you, more people want to give you money. Because of that, this amplifies the advantage over less successful peers in the past, and this creates a perception. And because they have more inputs—if that makes sense—therefore the outputs are better, right?" - Jeremy Au, Host of BRAVE Southeast Asia Tech Podcast

Jeremy Au unpacks how startup failure patterns often begin with charisma unchecked by execution. He explores how founders can avoid false starts, the real reason repeat founders succeed, and why the value of VCs and angels depends on founder maturity. The episode draws parallels between entrepreneurship and professional disciplines like medicine, stressing the need for coaching, humility, and peer learning to improve success odds.

00:54 The Yin-Yang of Founding Teams: Jeremy emphasizes that founding success hinges on pairing sales charisma with product execution, using Steve Jobs and Steve Wozniak as archetypes.

04:14 Founder Failure Patterns: Founders fail early when they believe their own hype; trial-and-error has now been replaced by codified frameworks like Lean Startup and Zero to One.

10:13 Repeat Founder Advantage: Successful founders are more likely to succeed again due to better market timing and resource magnetism.

13:57 VC Value Hierarchy: Borrowing from Maslow, Jeremy outlines a VC value pyramid capital, reliability, reinvestment, governance, networks, and coaching.

(00:54) Jeremy Au: One of the things that you gotta have is a reality distortion field, right? So Steve Jobs was considered of a reality distortion (01:00) field and what he meant was that you are a good salesperson, you have charisma, you're able to speak about a problem.

(01:05) So being convincing and compelling is a good part. Of the skillset needed a track, the resources, the teaming, and the customers needed for your company to come into existence. That is only one half of skills like yin and yang, right? So one is salesman. Half that you need to have is need to have the ability to actually build and deliver the product.

(01:24) Steve, his co-founder was Steve Wasniak, who was the actual engineer. Steve Jobs was not an engineer. He did humanities. He enjoyed calligraphy. He had good sales, but he couldn't build and he was a perfectionist. And he had this big vision. And, I think the difference between a false start and a true start is your ability to deliver.

(01:43) So humility, teaming up, and even Steve Jobs never. No matter how arrogant Steve Jobs was by whoever he was, he never what's the word? He never downgraded. Steve Wasniak doesn't make sense for those early days. Doesn't make sense. He recognized the value of Steve Warnick. Now, don't get me wrong, as a (02:00) company, came very big, then he had lots of engineers and Steve Waner became a commodity.

(02:04) That kind of person became a commodity. And he's like your foresight early is like you need a team of the right person. And that's why you often have co-founders. One is a superpower, is sales and others, and is technical. That's a common archetype that VCs will look for. And yeah, you, your, you can go wrong like your superpower of being able to sell you, you can drink your own Kool-Aid.

(02:24) For example, Steve Jobs, for most people, he was actually fired from Apple. Because he started doing some, he was way too perfectionistic about his products. He didn't listen to engineering. He didn't know how to marshal the talent, so he kept drinking his own Kool-Aid and Apple's performance so bad that he got fired from Apple.

(02:40) He cried. It was very sad. And then he was known as an insufferable person. He would go into meetings and then people, he'd be a total, imagine a project work, and then he's just like a total asshole amongst those peers. By then, after this fight, he wanted to build a second company called Next.

(02:55) And he was even more perfectionistic at that company. He wanted to create perfect cube computers. (03:00) And he was, he wanted the robots that were engineering these products to be entirely spotless, which didn't make sense because these are engineering assembly robots. And then he wanted these cube, these computers to be square that the molds that custard his case could not, would leave a corner behind it.

(03:19) You know what I mean? Like you actually need a little bit of roundedness at a cast to let go. It was the company was gonna fail. But thankfully, the replacement that hired him, that took over, called John Scalia, apple was even worse than him. And so Apple begged, and they, apple acquired Next, which was his second company, backed into it. And then he was lucky by then he learned his lesson, and from then on he became much more thoughtful.

(03:41) And he was seen he would always listen to engineers, even though, and he found engineers that knew how to. Get through his bubble. In that sense. So anyone, I'm trying to say here a little bit here is as a result, I think four starts happen because you drink your own Kool-Aid because you're good at selling.

(03:56) And so the best founders have that yin and yang, right? (04:00) Either they are the yin and then they're co-founders, the yang, or maybe internally even within themselves, they have that little dot of the yang, which is they understand what is the, humility, they need to avoid the error. But I can tell you that there are a lot of founders that they can die at a false start 'cause they're too arrogant.

(04:14) But I also seen founders who failed several rounds later because of integrity issues or whatever it is, because, this is during their own Kool-Aid about the fact they can do anything they want. So the question is how can startups acknowledge these failure patterns early? And the answer is 20 years ago you did not, or will not have the knowledge to understand.

(04:32) Startup failure patterns, because startups were very new at the time. The book lean Canvas had barely came to existence. Then Lean Startup also came up around that timeframe, and then other books came to existence like Zero to One, which is by Peter Thiel as well as check GPT and then now this research on startup failure has come up only just like one to two years ago.

(04:51) Anyway, what I'm trying to say here is that. Most people went through this problem on a trial and error basis, and the problem was that people, one person (05:00) succeeded and they're like, I'm amazing. And then someone failed and it was like, oh no, I'm a horrible person. It was not like there was no codification of these lessons.

(05:06) When you see founders, they often, you often see that founders are very often talking to other senior founders. Similar to how freshmen talk to sophomores talk to juniors talk to seniors. You see a lot of founders will often get advice. They'll say something like, Hey I'm raising money from this person.

(05:19) What do you think about that? They will triangulate advice. They'll be like, Hey, do you think now is a good year to fundraise? How much revenue? I got WhatsApp message. She was like, I have raised my series A. I wanna raise the series B next year. How much revenue should I get? So I think the good founders to avoid failure will consult wiser people, advisors.

(05:38) And it's got to the point where, for example, even for, you know, America for example, you may have dedicated executive coaches that focus on coaching founders because it's a high risk job right? Now, if I imagine, if you're like a, if you're a dermatologist, right? I'm using an example.

(05:53) The kind of case you have is, laser and facial. It's like it's not a high risk job, right? So you know that (06:00) your average. Job is gonna be by appointment. That's why a lot of people wanna be dermatologist, for example. So it's a in demand. My roommate and housemate at university she eventually became a doctor and she's now an ER doctor in the San Francisco, right?

(06:16) So imagine if you're an ER doctor, she's seeing gunshot wounds, drug overdoses, like it's a high risk job, right? And so for her day in, day out, she's dealing with these gunshots. Car accidents, motorcycle accidents, like that's her day job. Does it make sense? And so it's a, so for her, if I ask her, I'm gonna ask her, she'll probably know like what the mortality rate is of the patients that happen, right?

(06:40) So similarly for founders, it's quite different from being a banker because a banker, now your transactions should fail, but then if you're a founder, 90% of chance you'll fail. So I think while you're also starting to see the emergence of. Is that founders are becoming more professional lies as an profession.

(06:55) If you go back a hundred years ago, there was no such job as a doctor. It barely existed as a (07:00) profession. Now is a very formalized job with clear instructions, clear courses, clear training, clear associations, right? Insurance as a product didn't really exist, in Singapore as a profession 50 plus years ago, right?

(07:15) I may not, it sounds horrible. I would say a hundred plus years ago, but not in any significant volume in terms of actuarial science, et cetera. So it's become professionalized as a profession. So what in founders today is that entrepreneurship and founder, more professionalized. Okay? When Mark Zuckerberg came up, there was no entrepreneurship class.

(07:32) There was no professor teaching him about startup failure. He just winged it and he succeeded. Today you are gonna see more and more repeat founders, and I'll talk about this later there, but people who are founders will tend to become founders again over the course of their life. So there's a repeat profession in that sense, either on the founder.

(07:48) So that's how they become and avoid failure is get more wisdom from other people get more trained and get more experience.

(07:56) So we're gonna be talking about VC value edition, and I think we'll see (08:00) where we get from there. So VCs and angels do add value. Obviously one way to think about it is that there are two sources of capital. There are angels, like myself, I'm an angel.

(08:10) Maybe not as angelic as this profile picture here. But I do invest in companies at earliest stages. And of course there's venture capital, right? Which is more structured. Companies are more professionalized firms that are investing in probably companies that have grown a little bit further along.

(08:25) So what the research has shown is that angels are bishop, perhaps growth, performance and survival across both developed markets. And less developed markets. So startups, the way they did the research was they looked at these angel investment syndicates and they had these grading and then some companies took the money and some companies do not take the money.

(08:46) And some of these companies didn't receive the money even though they receive a high grade. So this is what's their way to stratify what happens if you take on a high quality angel investment group. Onto your cap (09:00) table as the founder. And what I found out is that if you are a startup that receive angel backing even though you are of equivalent quality based on rubrics, you as a company are 14% more likely to survive 18 months post funding, and you're likely to hire 40% more employees on average.

(09:17) And at the end of your 10 year horizon, the angel will increase the probability of a successful sex by about 10% to a total of about 70%. Again, this is referring to high quality angel investment groups. So long story short, what we're trying to say here is that at the earliest stages, you, if you are a founder, you want an.

(09:39) You receive money from angels and you wanna receive money from high quality angels who can understand your business. Maybe because they already have experience in industry, maybe because they're a good executive coach, maybe because they understand financials. Maybe they are, have a good and strong network.

(09:54) But this is the kind of thinking that you should be thinking about at every stage. The next that we wanna talk about is (10:00) for top tier VCs. Now what's interesting is that the key takeaway here is that high quality VCs add value primarily to less skilled founders. So that's the takeaway. But let me walk you through the point of view here.

(10:13) So a successful somebody, Sarah, as well as someone here, over there on left, you asked, both of you asked the same question which was what is the chance of success of repeat success? So a successful entrepreneur. So yeah, a successful exit. In your second company will have a 30% chance of succeeding in your next venture.

(10:33) First time founders will have a 18% success, and those who have previously failed, the first venture will have about a 20% success in their second venture. So I would say a first. In other words, if you're a first time founder or you are a second time founder and your first company failed, you learned a bit, but you're effectively the same level of quality in terms of outcomes.

(10:52) So it's only when you are have been successful as a founder does it. Really show up as better (11:00) probabilistic outcome in a second venture. So then what this research team did was that they then tried to figure out why is this happening? Why are the founders who have succeeded the first time are likely to succeed again the second time?

(11:11) But basically they disaggregated into two pieces. The first skill that they had was that successful entrepreneurs were better at market timing. So they were able to figure out when was the right time to join a market.

(11:21) They didn't join too early. They didn't join too late, but they were able to join at the right time because they were able to join a sector that was going through a boom cycle, right? So that was the first analysis they did. So successful entrepreneurs are better at judging when's the right time to enter it.

(11:37) Okay, so last year a lot of people joined AI was the right time. We don't know a lot of people did. Some people are still waiting it out, right? To, so it depends on that perspective. The second thing that's important is that succeed breed success. In other words, if you are a successful entrepreneur, you have the ability to attract more resources, right?

(11:56) So you walk around, I'm an exited founder. More people wanna (12:00) join you. More people wanna give you money. Because of that this amplifies the advantage over less successful peers in the past. And this creates a perception and because they have more inputs, if they make sense, therefore the outputs are better, right?

(12:13) So for example, if you are a first time founder and I hire five employees. Average fine, right? And then if I'm a successful founder and hiring people because people believe I'm successful, will be successful again. Again, hire five employees. But these are five rockstar employees. I'm not necessarily, and maybe both.

(12:30) Both founders are, have the same level of managerial skill, but because one has a better. Inputs, they're able to have better outputs and have more success. So the ability to attract better quality inputs is a really important skillset for founders. And of course the third skill set is making sure that you're able to manage well the team and attract resources.

(12:50) So these are individual skills. What's interesting is that they were also able to separate these founders and their success. Based on whether they received money from top tier or lower (13:00) tier venture capital firms. And what they found out was that if you are have already been successful in your first company for your second company, if you took money from a high tier or lower tier vc, it didn't matter.

(13:11) You were equally likely to be more successful. But if you are a first time founder, or you had previously failed, getting money from a higher tier VC increases your chance of success.

(13:22) But, and I know we're quantifying some parts of it, it seems no brainer thing because they'll be saying like basketball, right? It's like saying I'm a rookie, a basketball and I have a really great coach. Of course I'm gonna benefit more from a great coach versus I am a rockstar, basketball player and I have a great coach.

(13:40) The advantage of performance improvement is not huge, right? From that perspective. I think these are things that make a lot of common sense, but these things do show up in the industry. And so VCs can and do add value as a result. So this is a great pyramid. It's like similar to Maslow's hierarchy.

(13:57) So you know, people talk about, you people want shelter, (14:00) food, then self-actualization at top. So this is quite similar, saying that from part tech at Boris Golden said, Hey, from bottom to top, these are the basics. Then these are the value add. So first of all, can you provide me financial capital to do and expand the business tool Is.

(14:16) Don't be toxic, don't be unreliable. Don't have a conflict interest. Then can you have the ability to reinvest again, to provide more capital, to provide a positive signal? Then can they do shareholder duties? Can they. Do checks and balances, help with corporate governance, do some of the basic work in the minutes.

(14:32) So these are the basics. And of course they can do additional stuff like doing the ecosystem, which is giving them networks and introductions to make the right connections. And lastly, of course, is providing a lot of in-depth coaching and, executive support in helping them become the best leaders and managers they can.

(14:50) So obviously, if you think to yourself, famous VCs like Adrian Horowitz, some of them, a lot of people will look at the top two, y Combin, most of them will be thinking, wow, it's a great, ecosystem for a (15:00) y company, a great platform for, to meet a lot of people.

(15:02) There'll be some advising coaching for Paul Graham or these famous people, Sam Alman, et cetera. So the kind of context that people have. But these are the ways that VCs can add value. And I would say that most founders like. Most first time founders overvalue the top of this from the perspective, and they undervalue checking for the ability of these funds to do this because they're not sophisticated.

(15:26) Whereas from my experience founders tend to be much more focused on working with VCs they know will do a good job on these things. And then. The experienced founders because they don't need coaching, they don't need ecosystem. 'cause they were those introductions. They're just like, look, just don't bother me.

(15:40) Don't be an asshole. Don't make my life hell. And we're good to go. I'll settle my own coaching, I'll pay for my own coach, I'll find my own connections. I'll get and settle things myself. That being said, VCs do have a mismatch between what value they provide is versus what VCs think they do.

(15:57) So VCs, 92% of VCs (16:00) say that they add value from a founder perspective. Only 39 9 to only 39% think that their VC provides average or above average value add, right? So in other words, most VCs are underperforming, right? So there's a structural mismatch. And I love this meme here. Value add from VCs, expectations versus reality.

(16:19) You have a nice, cute Pikachu and then you get this hot mess. But who knows? Maybe after you let in more air into this vacuum seal pick true, you get a better version of it, right? And there are different ways. Again, we're not trying to get into the details here again, VCs, so the question was, what impact did your VC have in the foreign categories? 60% of VCs thought they were very quickly and very helpful for recruitment. Only 20% thought that they were over recruitment. 70% thought they were helpful for introductions. Only 44%. They were, some, I think, but I think one part that's interesting is if you look at here, I think that.

(16:53) Follow. I think what VCs can be really good at, and I think it's underappreciated, is that VCs who are helpful in helping (17:00) them find the next round of funding is really important because guess what? VCs hang out with other VCs all the time. We play poker, we play golf together, we hang out for meals, we swap notes, we scratch others back.

(17:09) Like of course we're able to introduce you to other VCs as well. So I think what I'm trying to say here is like you, what I'm just trying to provide you here is what is a realistic set of expectations you think a VC should do? And I think this is a fun fact is that if you look at founder age at billion dollar VC backed private companies, and this is estimated using the year college graduation, they basically said age when they founded it. So you can see that most VCs standard at the found these companies around 20.

(17:35) So about almost 25% of companies were founded between 20 to $24 billion companies, which is crazy, right? You know what I mean? So 20, 25%. So almost a quarter of all unicorn companies were founded by people effectively around before or right after graduation. And then after that the next, another 20% and not 25%.

(17:56) Was between 25 to 34. (18:00) So that's in the US Obviously data obviously kind of tapers off over time.

(18:03) The chance of you becoming successful as a founder actually goes up with age, right? So if you look at it from 20 to 60, that the maximal amount of success is around 40, 50, right? Now, of course the odds are not very good, if you look at it right.

(18:18) So the odds are like 0.3%, right? That's the maximum you can get, so there's one in two in 1000, so one in 500 basically. Chance. It's not bad if you think about it. But the reason why I'm trying to say here is that as you get older, you tend to get more experience in industry.

(18:34) So for example, yes. You refuse Jeremy's advice to not do finance. You decided to become finance. You became a banker and all that stuff, but you are 10 or 20 years. You're like, you know what? I really understand this thing about, s small, medium enterprise, working capital loans, and now finally have the energy to build up, because I got my condo, I got my car, I got my kids out of the way, for example, and you're like, no, it's time for me to build.

(18:57) So when you do that, first of all, you have more (19:00) money. You have more savings, you have more expertise in the space, and you wanna build a startup that's going after small, medium enterprise voting capital, then you have more relevant connections and customers. So you're more likely to succeed over time.

(19:11) Which makes sense because if you ask me like, it goes back to basketball, right? If you are a 12-year-old basketballer, you can't be the world's best basketballer because you're still young, right? But as you get older, you hit 21, 25 years old, even 30 years old, you start to get better because you have more experience, you have more time to understand at it.

(19:28) But that being said VCs tend to fund earlier because one thing about older founders is they tend to take in less VC capital because if you're older, you have more money, you have more rich friends you're more connections, you're more efficient about how you spend money, and because of that you are, you don't need as much extra capital.

(19:47) So what you normally find is that these older founders tend not as accept as much VC capital. As they would. Which is bad for VCs, 'cause VCs make money when they are able to buy 20%, 40%, 60% of your company over (20:00) time. So it's an interesting piece, which is, the older you get, the more likely you ought to be successful.

(20:05) But then our ability to buy a larger chunk of your company for the same price goes down. Therefore. If you're young and need a lot of help, then this is a good time for us to buy a larger percentage of your company. There's a little bit of arbitrage in that side as well. That's it for Value Edition.