Episode Transcript
[00:00:00] Speaker A: Justin Kahn has a beautiful line that says first time founders are obsessed with product, second time founders are obsessed with distribution. And that cannot be truer. As a first time founder, we were about building product, didn't think as much as we should have about distribution. Well, we have distribution. Problem solved. Maybe it's not a matter of distribution, it's a matter of is there a demand.
[00:00:25] Speaker B: Today on the seed series, we're excited to have Stephan co founder and CEO of Corpora. Prior to starting Corpa, he practiced corporate law for 10 plus years, helping hundreds of founders across all stages of the startup life cycle, navigating their legal journey. If you're actively working on a startup, you want to listen to today's show. Stephan, welcome.
[00:00:46] Speaker A: Danny, thank you so much for the invite. Thrilled to be here.
[00:00:48] Speaker B: Okay, I'm going to start off with a really, really interesting quote that I saw on your Twitter.
I love it. Actually on Twitter you posted what's a quote? The most important story you can tell is a story you tell yourself about yourself. Tell me about that. What's your story?
[00:01:05] Speaker A: Oh yeah, that is so true. You know, the world is governed by narratives, peoples by narratives. So our organizations, they call it a mission statement. They have the vision, but individuals as well, right? Stories are very powerful, but the most important story at the end of the day is the story that you tell yourself about yourself. Who you are, what you believe in, your belief systems, what you're capable of, what your weaknesses are. We should work on my story.
That's actually a great question, Danny. I never sort of tried to pin down what my story is, but I think one recurring theme in the narrative I keep on repeating to myself is that my life has been, or at least I like to think of it as being one of balance. As in trying to balance opposites. Trying to balance diametrically opposed positions takes insights in order to find the truth. Because oftentimes the truth is revealed as a result of the clash between the thesis and antithesis. So yeah, I guess the story I keep on telling myself, or one of many stories rather, it'll be difficult to distill into one line is my life is a story of balance.
[00:02:12] Speaker B: I love that. And also for the listeners out there, follow your Twitter. It's amazing. I was on there for hours just doing research. I've learned more about anything legal related to startups in that one hour than my throughout my career. Like I've spent years building startups, man, that one hour is so beneficial. So anyone listening? Go follow Stephan's Twitter. I'll post I'll have it up on the description. You should totally follow. It's amazing advice.
[00:02:44] Speaker A: Thank you.
[00:02:45] Speaker B: So you have to pay for stock when you're in corporate. Like I totally didn't do that for my last startup.
[00:02:51] Speaker A: Yeah, yeah, that's important. But to your earlier point, I wish I was more active on Twitter. I've tried to crack game several times to build in public, which is general advice for startup founders. But I'm More active on LinkedIn so are interested in startup insights, startup law insights, and our recent focus is 83B elections. We'll talk more about that during the show. I'm more prolific in terms of content creation on LinkedIn, but I wish I was more as prolific on Twitter as well. But coming to your other point about paying for stock, yes, that is important. There's a sort of like a checklist you want to go through when you're issuing yourself stock in a corporation, you know, as a founder or co founder. And those are including making sure the board actually authorizes the issuance of stock to you, that there's a signed agreement, a fully and properly signed agreement between you and the company. And one of the points is also making sure that you've paid for the stock because you don't want to face a situation where there's a skirmish or some kind of friction between you and the company, as in you and your co founder. And then lo and behold, you get a notice from the company that hey, you never paid for your stock and so there was no consideration involved. And for the legal buffs out there, or rather legal novices out there, consideration is oftentimes one of the three main elements that make up a contract, which is offer acceptance and consideration. There has to be this sort of changing of hands of value. I give up something in return for something else. So if I can all stock, but I haven't given up anything in return, that stock can be considered a gift. Now, just for comprehensiveness, and I want, I don't want to ramble on here, but just for comprehensiveness, one can always argue that my labor for the company, the IP I transferred to the company, is the consideration I paid for my stock. But hey, nothing beats cold hard cash. Preferably a check or a wire or a cash and envelope that goes to the company's bank account to seal that there was consideration.
[00:04:45] Speaker B: I mean that's amazing because then please do go on. Usually at least I'm not sure in la, but where I am Vancouver hourly rate for these corporate lawyers are like $500. So I think everyone's getting a really good deal right now.
[00:04:59] Speaker A: Yeah, same here. But to flag another point that comes up in stocks for founders, and that's sort of our new focus now, is 80,000 elections now.
Well, I know you're based in Canada and maybe a lot of the viewers are based in Canada or outside the United States generally.
This is a US Tax matter. But if you're getting stock subject to vesting and the four year vest on your cliff is customary for founder stock, the 83B election comes into play. We'll talk more about this later. But the one thing I want alarm bells to go off in a founder's mind or a future founder's mind when they think founder stock vesting, 83B elections. And you have 30 days only to file that election and what that is. We'll talk more about that in a moment.
[00:05:44] Speaker B: Amazing.
Okay, a 3B, that's what we're doing right now. But let's go back to the very beginning. Like you had quite the career. I was on LinkedIn, looking through your experiences. What made you quit your job and start this whole, let's just say a very, very difficult life lifestyle.
[00:06:02] Speaker A: Yeah. You know, sometimes you're a founder yourself, right. Like you went from your professional services life to a founder life. You know, sometimes you sort of think, man, this must have been the dumbest move ever.
But hopefully those are just, you know, fleeting thoughts and not. And not permanent thoughts or actively recurring thoughts. But in my case, I think it started. So right after law school, I set up my boutique law practice focused on corporate law, business law, startup law. And a couple years after that, it's about 2014, I developed this, I learned of the concept of new law. That's new law. One word or the new law firm model, and became enamored by it. And just for our audience today, New law is the antithesis of the big law. Whereas the big law firm, think of it like it has a pyramid structure with the partners at the top that feed off the associates, essentially that feed off the paralegals.
Big overhead. They're very wary of using technology for whatever reason.
Contrast that to New Law, which has a flatter structure, it's leaner and it's very tech enabled. So I read everything there is to read on the new law concept out there. Thought leaders in this space include Mark Cohen, who runs the blog Legal Mosaic. There's Richard Susskind from Britain. He's very, very vocal in terms about legal innovation. His book Tomorrow's Lawyer, or Tomorrow's Lawyers, rather, had a Very big impact on me. And there's Bob Ambrosi as well, a legal tech journalist. So I devoured all there is in terms of new law. I really became enthused by that. And every year after that I would debate with myself, in fact, as a New year's resolution. So for the coming year, do I continue building Legal Lab, which was my boutique law firm, as a new law firm, or do I quit law altogether and sort of transition to building technology for new law firms? And so it sort of built within me over the years. But I think that the two driving factors that made me sort of pull the plug and make the shift to building technology was, number one, you realize that there's this idea out there that is not giving you sleep at night, that's driving you nuts. The fact that there is this problem that exists, that nobody is solving it or nobody is solving it properly, is something that keeps you up at night. And it's not just a random night, it regularly keeps you up at night. And the analogy I bring there is like imagine you have a bottle of soda and you're gently shaking it consistently over time, weeks, months, years, and at some point that cap just pops out, which is essentially very similar to what happened in my case. So it didn't happen overnight. Over the years it built up, built up, built up the pressure. And then finally, boom, I transitioned to legal tech. But the second factor is this feeling of, or rather the, the thought that you might have this soul gnawing feeling of regret in 20 years time, 30 years time, when you're 50, 60, 70, you look back and you think, what if I had, what if I had made that switch from professional services to actually following this concept or trying to solve this concept? What would that life look like, would have looked like? And just like with many other things, you mostly regret for this stuff that you did not do, as opposed to the things that you do do. And so those two forces are sort of the primary motivations for making that change. But I also want to add one more thing, because those three together really turn into a powerful force of nature. For what it's worth, having this inner confidence that yes, you're leaving behind a comfortable lifestyle, it's going to be tough, but having that inner confidence that you're going to make it, that nobody can do this better than you, given your, the expertise you've garnered over the years, your knowledge, your insights, and knowing that you're just not going to let this fall, you're going to do whatever it takes. And all those Three factors together. The idea not letting you sleep at night, this fear of regret and inner confidence. Or they come together and sort of push you to leave professional services and start the, start the tech journey.
[00:10:14] Speaker B: So kind of summarizing the whole journey, right? Like you started your own law firm and you worked on it for 10 years, you know, so you're essentially running your own business and it's a difficult business to run.
And how did that experience help transition you into this tech startup thing?
[00:10:34] Speaker A: Yeah. When you're in it and if the idea that you want to go after is seeped in your daily practice, you have a superpower. You've been living your problem for years on end. And if you've been diligent, you've been taking notes about this, maybe journaling. I've been journaling from a young age and I have journals from 2016, 17 where I sort of draw out graphs of what eventually became corpora. And then we eventually scrapped because we realized that there's loop form interest for it at best might seem emotionally very sapping, but we got over it.
So if you really take notes and you get to understand the problem in depth and you have a nuanced grasp of it, that turns into a superpower when you go into tech. I think those professionals that sort of maybe practice a field profession such as accounting or law or medicine or engineering, and then transition to a tech role or start a tech company which is removed from the profession started a disadvantage. But those founders that are sort of blossoming from a professional into a, into a tech entrepreneur, they have a superpower. That domain expertise is their superpower 100%.
[00:11:45] Speaker B: I think YC1 of their guideline where one of the things that they look for is someone with domain expertise that's starting a tech startup that's solving the problem that they face on a day to day. Okay, so Kapora, you know, you started it. What's your first iteration? What was the problem that you first thought you wanted to solve? Because you mentioned that it's a little different than what it is today.
[00:12:09] Speaker A: Yeah. And I want to share a story about this. It's essentially the initiation story of corporate spring 2021. And a good friend of mine reaches out to me and he's like, hey, Stephan, I know you practice law, I know tech startups are your thing. We're about to raise our series seed round. You know, case in point, we're on the seed series podcast and that was the series seed round. Could you take care of our series seed round for us? I'M like, hey, of course, sure. So they had been at it for about four years, got a nice term sheet, we negotiated the term sheet, they signed the term sheet, and then they dump about four years of legal paperwork into my inbox, Danny, so that I start preparing them for, you know, due diligence, the works. I take out my fine tooth comb, the one that I actually don't have because I evidently have no need for it. Yeah. But I take out. You can tell that I've practiced this speech quite a bit, right?
Every fundraising starts with this story.
So I take out that fine tooth comb and I start sifting through the documents in order to prepare them for due diligence or data room. The next day I get a call from my friend and he's like, hey, Steph, you think we'll close this round by Friday by end of week and you must be out of your mind, man. We're not going to close this round by end of the week. I mean, sure, if you want to think of it that way, we will close this round by end of week. Except not end of this week, more like eight weeks from now. You know, fast forward. We eventually do close after several weeks and he got a nice bill from me. I'm happy to say that we did stay friends after that. You know, jokes aside, you know, he was surprised for the bill, but paid it. But the main thing here was it sparked the conversation, why with plain vanilla series seed round, why should it take several weeks, if not months to close on and why should it take tens of thousands of dollars, sometimes $100,000 to close on the seed round? And eventually he introduced me to my, to his friends, my then to become co founder, my current co founder and we headed off and started Corpora. And that's where the idea for the first iteration came, right? It's a long winded answer to a simple question.
Our first iteration of the product was the smart legal drive. As in you bulk upload all your legal documents and using artificial intelligence, we parse it, extract data and give you a data room, a diligence ready data room within moments.
That was our first iteration. We launched beta in April 2023, launched publicly in August 2023 and we got lukewarm interest at best.
Main challenge was distribution. Justin Kahn, who for a brief stint was the poster child of legal tech through Atrium, has a beautiful line that says first time founders are obsessed with production. Second time founders are obsessed with distribution. And that cannot be truer. As a first time founder, we were about building products, didn't think as much as we should have about distribution. We eventually cracked that problem. We eventually ended up speaking with thousands and thousands of founders, with many of them personally to sort of understand their problems, try to iterate in order to reflect.
But we were getting lukewarm interest at best. And founders would book a demo, they wouldn't show up. And this led us to thinking, well, we have distribution problem solved. Maybe it's not a matter of distribution, it's a matter of is there a demand for this kind of product? And our hypothesis with which we started was, well, hey, founders want a new way of getting legal done. And the dichotomy that I brought, and this loops back to the balance comment I made earlier, the dichotomy that I brought was, you know, up to this point, founders have two ways of getting legal done. They either go online, use online resources and eventually screw up big time, or they hire a lawyer. But that lawyer ends up charging for everything. The lawyer doesn't have the tools to take care of things efficiently. Bill racks up very quickly. And so you sort of as a founder, ping pong back and forth even when you have the money. Between self service roles and lawyers, lo and behold, there's this third way of doing things which is you take the best of both worlds. You give founders the self service tools for the easy work where the stakes aren't very high, but you also loop in a top tier lawyer to take care of the bespoke work. And speaking with thousands of founders, we realized that that hypothesis just isn't correct. And so that made us shift gears.
[00:16:33] Speaker B: Me listening to it, I would totally use it.
What was the feedback that you were getting?
[00:16:39] Speaker A: I think the aggregated feedback was founders startups are just so entrenched in running the business, building product and selling it that legal is an afterthought that they'd much rather punt legal, the legal professional, have them worry about it, have them take it off their plates. Which by the way was my sales pitch as a lawyer back in the day. Let me take this off your plate. Rather than go in there, familiarize yourself with a product and try to use that product to bring down legal expenses. The feedback is, you know, I get it, that legal is important, but I'd much rather see if this thing, this thing flies or not. You know, if I get funding or if I get revenue, that's when I'll care about, about the legal aspect of it.
[00:17:24] Speaker B: Yeah, the bit of a chicken and egg problem, huh?
[00:17:26] Speaker A: Exactly, exactly. And building off that. And so you know that that Iteration process is very important that you need a very tight feedback loop. And we iterate at least four times within the course of months. So first iteration was Smart Legal Drive. Second iteration is our current main product, which is File 83V.
Third iteration was the Safe Deal portal, which automates your safe round end to end. Fourth iteration was legal concierge, which helped founders get quick and easy access to insights on startup law through Slack and calls. Each time we iterated, there was this golden nugget of feedback and looping into the fundraising point I made earlier, realizing that startups are mostly interested in raising funds, then legalese generally, when you say I'll help with legal compliance, it goes right over your head. I'll help you with raising efficiently. That sticks. Or that should have stuck. And so our third iteration was the safety portal.
But again, we came to a situation where founders would much rather either pull the YC template to their safe round themselves or else just punt it to the lawyer. And they didn't appreciate, at least according to our learnings, they didn't appreciate this portal that would help them set up their data room and reflect their cap table and reflect their pitch deck and give access to their investors.
[00:18:46] Speaker B: Four iterations, huh?
[00:18:47] Speaker A: Yeah, four iterations.
In that sense, we were very quick. Like that sort of tip or best practice of iterate fast. Iterate fast. That goes very well in our team. We did four iterations in a matter of months. So publicly launching August 2023 and then our last iteration was March 2024 of this year. And then wow. In Q2, in Q2, we realized that we should focus on the 83B elections. And then by the end of the quarter, by the end of Q2, we decided to strategically shift to 83B elections only. But had we not iterated, we wouldn't be here.
[00:19:28] Speaker B: That's really interesting, right, because you mentioned that 83B is your second iteration. How did you iterate out of that and then decide to come back to it?
[00:19:38] Speaker A: So what we did, maybe I misspoke. It wasn't like iterating out of a product, it was sort of adding to the product. As in we started with just a smart legal drive, then it was smart legal and file83b.com and then the safety portal and then the legal concierge. And then out of those four, essentially the main horse that was leading the way was AGB elections. So we sort of started not phasing out, but not actively promoting our other products. They're still available, current existing customers. We just don't sell it anymore to new customers and then focusing on 83B elections.
[00:20:14] Speaker B: I know we kind of touch on A3B elections earlier, but what is it?
[00:20:19] Speaker A: Yeah, yeah, it's important to know this. 83B elections, even though there's a lot of content out there, just seems to always fall through the cracks. But in brief, the 83B election is a tax document that you send to the IRS to tell the IRS that you'd rather pay tax on your stock that is subject to vesting at Grant at the fair market value it has at Grant as opposed to paying taxes on that stock as it vests at the fair market value at which it vests. So for a situation where you get a founder stock that is a fraction of a penny, the common par value is.00001. You'd much rather pay tax on that minimal amount. Like if you're getting 5 million shares of stock, that's $50 in fair market value for that entire 5 million and let's say an effective rate of 30%, that gives you a $15 tax burden. If you file your 83B election versus if you don't file it, you're in a high growth startup. At some point you might get a term sheet. The moment you get a term sheet, even if unsigned, the valuation of your company goes through the roof, right? So let's say, let's say you get a simple example, you get a $10 million term sheet, $10 million pre money, just for simple calculations, you own 50% of the company. That means your stock at that moment is worth $5 million. Now 1/4 of that $5 million or 1.25 million is going to vest in a given year, the year of your fundraise, right? Because by definition, if it's a four year investing schedule, one year cliff and then every year you get one fourth of the entire thing, right? So 1.25 million is vesting that year. Since you didn't file your A3B election, you're supposed to pay tax on that effective rate of 30 or 35%. That gives you about a $400,000 tax burden. And unless you have a rich uncle, you're probably not going to be able to pay that. And lo and behold, investors are not going to be happy with having paying into your company as an investment only to have you take a chunk of that to pay Uncle Sam. So that's how venture, venture rounds go down the drain.
[00:22:31] Speaker B: That sounds. Okay, that sounds really interesting. It must have been a, you know, a founder must have showed up at your door and like, hey, by the way, I didn't follow this. And then, you know, over time, you slowly started to realize that, you know, yes, you've gone through four iteration, but this, this is the one that's hair on fire problem.
[00:22:51] Speaker A: Exactly, Exactly, Danny. That line, that phrase should not be taken lightly. Hair on fire problem. And one tip that I have for our audience today and that I regularly share with other founders or to be founders, is focus on a hair on fire problem. Find that problem. That if you tell someone with that problem, hey, I have a solution to your problem, they will stop whatever they're doing and give you 15 minutes of your time raising a safe round. Isn't that problem. The smart legal drive wasn't that problem. ADP elections are that problem. Because you only have 30 days to file the 83B election. It's a ticking time bomb. You miss it, you're out of luck. And one thing that I forgot to mention earlier is you have to file it manually. You can't just do it online. There's no checkbox to tick off. And you file it to the IRS online. You have to print your document, sign it, and take it to their post office or other carrier service, IRS designated carrier service, in order to properly follow the protocol for making that election. It's a hassle. Take your personal hourly rates, whatever it is, right? Multiply that by three, four, five hours. That's that much value away from your startup just for that one filing. And that's one co founder. Now this has to be done by all the co founders and all the advisors that get stock. That's where we come into play.
Our solution is you do it online. You sign it online, we take care of the rest. We give you your tracking number, we give you proof of delivery, and also your IRS date stamped copy of your election as proof that they in fact received it.
[00:24:26] Speaker B: Like, you have to mail it in.
[00:24:29] Speaker A: Yeah, you have to physically mail it in.
We're working towards and hoping for a day when the IRS will accept electronic filings. But until that day comes, we have this solution, which is sign it online. We'll take care of the backend. We ourselves print it, stuff the envelope, send it out.
[00:24:47] Speaker B: You worked on this for, you worked on Corpora for the past, was it a year and 10 months?
[00:24:52] Speaker A: Was it exactly almost two years.
[00:24:55] Speaker B: What was the scariest moment?
[00:24:58] Speaker A: We haven't, for better or for worse, we haven't yet had a scariest moment, but there have definitely been days when like you just want to throw in the towel. Because things move so fast, the day can sometimes be overwhelming. And if it's a day or a week where you've had rejections on end, whether it's rejections from an investor you pitched and or a customer you tried to sell your product to, or a potential hire you want to bring on board, you just want to throw in the towel. And in those situations, having a co founder really helps. One of the things in my case was since I was non technical, I made this covenant with myself that I will not start a tech startup until I have a technical co founder. And this is a message to all the potential founders out there. Technical or non technical aside, the beauty of having a co founder is that when you're feeling down and out, they lift you up. When they're feeling down, down and out, you lift their spirits up. So not really a scariest moment.
Looking forward to that.
Maybe, I guess learning experience, but definitely it's a roller coaster as they say.
[00:26:12] Speaker B: How do you find your co founder?
[00:26:13] Speaker A: Oh man. So I was lucky enough to be introduced to my co founder by the friend I mentioned earlier who tapped me to their seed round. But I employed a multitude of sort of tools platforms to find a co founder. Those include YC Startup School has a co founder dating algorithm or module rather. Going through my LinkedIn page trying to find potential people I can co founder with, going through my mental files, thinking about people I worked with in the past or want to work with, reaching out to them and then dating each of them right. Dating people that you think might be co founders before you actually shake hands. And I won't be lying if I say that I sort of dated 10 potential co founders before shaking hands with, setup my co founder and starting Corpora. It's a process that you don't want to rush, but you also don't want to drag on either. It's like when you feel comfortable and confident enough that you found a person you can work with in the long haul, five to 10 years, shake hands and move right into it. Because if you wait for this perfect moment, whatever perfect may be in your mind, you're never going to start. And that's true not just for finding a co founder, but also the idea to start the name, to start the domain, to start, whatever, just sometimes. And I guess that's another advice. Just do it. Just, you know, once you feel like you feel good about it, just do it. As they say, perfect is the enemy of good.
[00:27:43] Speaker B: You went through 10. Like what? I guess, you know, say I'm a. I'M a, I'm a founder. I have an idea. I'm non technical. Like how do you as a non technical person, right. Like how do you identify a technical co founder that you want to work with?
[00:28:00] Speaker A: I think it's, it's track record and personality.
I guess it boils down to those two which you know, if you think of it from a professional standpoint are the two pillars of someone you want to work with. As in they are competent and they are a good person. They have the best interests at heart. And I saw both in my co founder and said oh like he's super chill. He's very like laid back but not in the sense of you know, it'll be done. No, like he's, he's on it but like he's, he's a great work with and he also had the precise track record we needed to start this company which is. He worked with a company at called webfontaine which built enterprise software for governments to handle their most sensitive information.
And that company was a, was and is a multimillion dollar company. He was the CEO of this, of this company.
And so you know, once I met setup and we sort of did a small project together, hit things off, shook hands, split the equity. Shook hands and started, started Corpora.
[00:28:58] Speaker B: Did you because YC recommend doing like a work travel like I'm assuming that's the project that you're talking about. Was it related to Corpora?
[00:29:05] Speaker A: Kind of, yeah.
[00:29:06] Speaker B: Yeah.
[00:29:06] Speaker A: I mean the underlying sort of thought process was it's legal tech. We want to help founders get better access to start make sense of it. I think the module we've built was a simple sort of questionnaire that drives you through a workflow where you ask a few questions and based on that makes a suggestion whether someone should be hired as an employee or a contractor and then based on that decision gives you the template documents in order to use to hire that person.
[00:29:32] Speaker B: Gotcha.
That's really cool. And I know this is something that we didn't talk about, but what's a day in life for you? You wake up, what time? What's the day in life for you, Danny?
[00:29:46] Speaker A: I'm still iterating with that.
Right. I've tried. So I mean let me give you a couple examples or a few examples of the day of life. Right.
For a stretch I was trying to sleep early, wake up early, get up at 6am, have breakfast, hit my desk at 7.30am with a cup of coffee, drink and get some very important, eat the frog first and then before the day started because meetings start at 9am Part of our team, our dev team is out of the country. There's 11 hour time difference. They're in Armenia. So we have early morning calls for us and late evening calls for them. So that was okay. This new thing I'm iterating on is a tip I picked up in Lenny's newsletter which is don't have meetings until a certain time. So we still have those early morning meetings on some days, but other days I try not to have meetings until 12pm so that's another iter. But to sort of average out like what it looks like, generally what it has looked like over the past hour, excuse me, past one year, 10 minutes. It's lots of meetings in the morning. So 9 to 12pm I knock out all my meetings and then my calendar is clear, which allows me to sit down and get the most important work of that day done, which is following up with a customer or writing a blog post or looking into our ticket management system to see if there's anything that can be optimized to make the product better, working on the roadmap and so forth. So it's basically, I think one of Paul Graham's articles is having the maker schedule and the manager schedule. I try to divorce those two. My mornings start with the manager's schedule and then they go with the maker schedule. I think that works better for me than the opposite which is using the mornings for deep thought work and then the evenings for meetings. I guess knowing that there's a meeting later in the day keeps me in that mindset of oh, I have immediately prepared for that. Whereas when I knock that out, first thing gives me sort of clarity of mind to focus on the rest of the work.
[00:31:51] Speaker B: Oops, sorry. We should have recorded this in the morning. I apologize.
Just kidding.
[00:31:58] Speaker A: I got your motion schedule and I'm currently in the mode of trying out the Lenny's newsletter tip. Lenny's tip. No meetings in the morning and then having the meetings afternoon. So here we are, same time zone.
[00:32:15] Speaker B: That works too.
To all the founders out there, what is one piece of advice that you would give to early stage founders? Founders that are still going through it, thinking about starting a startup, still working on an idea, or they're trying to.
The early stagers still trying to come up with that idea to build.
[00:32:35] Speaker A: Yeah, it's the advice that I wish we had followed sooner. And we did follow in one instance. And I'll share that example as well. Validate your idea, like make sure that that idea is Worth pursuing. You know, in my instance, since I was in it, I was in the practice of law, I thought my idea was validated enough, but still, we could have done a better job with that. And just so it's not vague, what does it mean to validate an idea? I've written out three tips for the audience today that I want to share. Number one, sell before you build.
Sell as in make sure that someone is willing to buy your product before you actually build it. Now YC says make something people want. It's an incomplete statement. Make something people want so much so that they'll part with their money for it. People might want something, they might not be willing to pay for it. If you're building B2C or B2B on a small scale, not enterprise, consider having a website up with a waitlist. See if people actually sign up for that product before you start building it. If you're enterprise, you know, if it's a point solution which relates to one department of the enterprise company, get an LOI signed before you start building it. Make sure that people are interested enough to give them, give you a couple hours of their time and sign an LOI before you start building. So sell before you build.
And the one instance that we followed this was for our fifth iteration.
We, or rather it was a part of the third iteration. So we built the safe automation tool. But we also rebranded our website to talk about automated series seed rounds. But we didn't build it. We just had the messaging out there with mockups saying, hey, we can do your series seed round for $25,000 flat. And we spoke with our, we called them attorney ambassadors. Attorney ambassadors to make sure that we can collaborate on this. We didn't get a single hit over the course of several weeks, even though actively promoting this, which was a signal that people don't see a problem here, they're totally fine with hiring a lawyer to take care of it, even on a non flat fee basis, hourly basis. So we didn't build that product, which thankfully we did not because there would have been no demand for that. Second tip is talk to potential users. Sometimes I ask founders, so how many users have you talked with? And like we've talked with 20 users. I'm like, okay, should we 200?
[00:35:03] Speaker B: That's rookie numbers.
[00:35:06] Speaker A: If you think you've spoken with enough users, you're wrong. It's still too little. And there's a special way of talking to users. If you disclose what you're working on from the get go, you've failed. That Conversation. You've tainted the conversation. Rob Fitzpatrick's book the Mom Test is a fantastic book. Very small, about 100 pages. It tells you, if you were to have a user validation interview with your mother, how would you present the idea so that she doesn't shower you with praise because you're her son or daughter? Right. If you don't have the time to read the book, check out Eric Migakovsky's Talk Online. How to talk with users.
And the third point for our audience is being intellectually honest. As founders, we're very often culpable of lying to ourselves. Being fantastic lawyer, not lawyers and liars. Being fantastic reminds me of Liar Liar by Jim Carrey. Being fantastic liars to ourselves. Having this narrative in our minds that, oh, this is going to work. And then every time we're faced with criticism or with constructive analysis of our. Of our product, we sort of think, shove it aside. We sort of think, oh, this person doesn't see what I'm seeing. And you're sort of helplessly optimistic, but that's a recipe for disaster. And the antidote there, as a tip for our audience, is actively seeking out disproving points like, try to. Try to see if you only. If you catch yourself only seeing the red objects in the room, and you think, oh, my goodness, this room is entirely red, make a conscious effort to see the yellow objects, see the blue objects. There's an exercise out of Harvard called the ladder of inference. I taught it in law school to my negotiation students as a mechanism for overcoming confirmation bias. And I want to share with our founders today.
Very often I talk with the founder and they have all the best counter arguments to my sort of insights that I'm sharing of why this might not work as best, as good as they think it will. And you can immediately tell if someone is being overly optimistic or has confirmation bias. If they sort of knock out everything you're saying, like off the bat, without listening to you, that's a sign that something is.
So you want to be intellectually curious. So three tips. So before you build, talk to potential users, be intellectually honest. Wow.
[00:37:37] Speaker B: Amazing. I've never heard of the ladder of inference. I need to look this up.
[00:37:41] Speaker A: Check it out. Yeah, it's pretty awesome. It's essentially how assumptions can lead you to an inference and how you want to work your way down the ladder of inference. Wow, that's.
[00:37:52] Speaker B: That's insightful. You know, as we come to the end of the show, you know, I want to give you time so you can share what's going on with your world. Anything you wanted to say? Yeah.
[00:38:02] Speaker A: If you find that there's an idea that's keeping you up at night, and not just one night, weeks on end, months on end, and you feel this burning desire to go after that idea, just do it. Go after the idea. Chances are it's going to be less difficult to quit going after the idea and come back to your former life than you think it is. So give it a shot. Not doing something is a more potent ground for regret than doing something. Give it a shot. Just do it.
[00:38:35] Speaker B: Beautiful. Beautiful. Thank you very.
[00:38:39] Speaker A: That message was not sponsored by Nike.
[00:38:45] Speaker B: Well, thank you very much for your time today and really appreciate it.
[00:38:50] Speaker A: Danny, thank you so much for doing this. I wish there were more podcasts like this when I was starting out, and I hope this was helpful for fellow co founders. It's an exhilarating journey.
[00:38:59] Speaker B: It is. It is. Talk to you next time.
[00:39:02] Speaker A: Talk to you soon.
