This Type Of Store May Actually Survive The Amazon Era


On a recent Thursday evening, hours after closing, Francine Delarosa pulled up a moving box in the dismantled office of her 4,000-square-foot boutique. She sat down on the makeshift chair for a moment and cried. Then she got up, and continued packing.

“I had a little crying moment about the fear of change,” Delarosa told HuffPost over the phone from her store in North Miami Beach, Florida.

When Delarosa first opened her capacious children’s boutique store, Give Wink, in the early 2000s, the veteran retailer was optimistic about her success ― so much so that she signed a 15-year lease on the space. Like most other store owners at the time, she couldn’t have anticipated how the internet, and Amazon in particular, would upend the entire retail industry.

Today, Delarosa, must scrap and fight for every sale she makes. And just like other small retailers, she’s had to reinvent her brand to keep a steady stream of customers coming through her door and not just online shopping from the couch.

Francine Delarosa, owner of children's store Give Wink, is evolving her business to combat new challenges in the retail space

Francine Delarosa, owner of children’s store Give Wink, is evolving her business to combat new challenges in the retail space. Delarosa is downsizing her store and focusing more on her concierge efforts, which include personal shopping and nursery design.

Delarosa is in the process of downsizing to a 1,000-square-foot space and cutting her staff from 10 people to three. She’ll continue to personally curate every item in the store and on the site, and will soon design and manufacture her own private labels. She’ll also be focusing more of her attention on the concierge piece of her business – nursery design, personal shopping and baby registries, because in the end, her deep-seated knowledge of the industry and hands-on approach is what distinguishes her from other dot-coms that sell children’s products.

“In 2018, the success of the retail brand … isn’t the physical space or even the product selection,” Delarosa told HuffPost. “The reality is, all of that is replicable. What’s not replicable is the relationships and the knowledge, and the way you put all of that together.”

To survive today, retailers have to carve out a niche that makes them indispensable. But what Delarosa’s store and other children’s boutiques may have working in their favor compared to other stores is that parents, especially new ones, are so anxious about getting the big-ticket items right.

Whether shopping for a stroller, car seat, crib or mattress, they’ll make more of an effort to walk into a physical store and talk to a retailer who can field multiple questions and direct them to the products that best suit their needs.

Because new parents are eager to get the best and safest products for their kids, they may be more likely to visit an actual

Because new parents are eager to get the best and safest products for their kids, they may be more likely to visit an actual store to get advice from retailers. 

“For a new baby, safety is a big concern,” said Peter Roberge, store manager of Albee Baby, a New York City-based children’s boutique that’s been around since 1933. “They want to make sure they touch and feel something; they want to make sure they know how to operate the products they’re purchasing and get the product that operates best for them.”

Boutiques, in general, are having something of a moment right now, particularly among young people. According to Forrester, a research and advisory firm, 43 percent of millennials, those who are 25 to 34, say they would rather shop at small local stores, as opposed to big national chains.

Overall, the stores that have the best chance of surviving today are either big, maximum tax-paying and low-leverage retailers ― like Macy’s, Marshalls and Target ― or specialized, experiential and small-scale stores, said Jan Kniffen, a former retail executive who now consults for investors in retail properties.

“People like shopping in these sweet little stores because they like the feeling and the experience,” Kniffen said. “Retail is becoming extraordinarily experiential. Even the big stores are trying to be much more experience-oriented. They’re trying to feel like the little stores.”

It’s one potential bright spot in a very grim period for brick-and-mortar stores.

Retail is becoming extraordinarily experiential. Even the big stores are trying to be much more experience-oriented. They’re trying to feel like the little stores.Jan Kniffen, former retail executive

More retailers closed last year than during the height of the Great Recession. That was due to a number of factors, including growing online sales and consumers’ preference for inexpensive, fast fashion. E-commerce sales accounted for 13 percent of all retail sales last year. A decade ago, that figure was just 5.1 percent.

Parents, however, may be defying some of those trends, which could be good news for owners of children’s stores. According to Cassandra, a trend forecasting, research and brand strategy firm, 78 percent of parents in the United States would rather shop in stores than online.

But they’re not going to shop just anywhere.

Millennials are parents to half of today’s children and make a “significant” contribution to the $1 trillion parents spend yearly on stuff for their kids, according to the National Retail Federation. This demographic also prioritizes good service over convenience, according to NRF. And 44 percent of millennials say they only support brands that align with their political and social views.

For many mom and pop children’s stores, it’s about getting that customer in the door once and showing them what they can gain from shopping in person.

Jessica Rone, 35, a resident of Manhattan and mom to a 1-year-old, told HuffPost that she does most of her research for products and shopping online. At any given time, she’ll have “1,000 tabs open” on her computer, investigating the best items to buy for her son.

On a Friday afternoon earlier this month, Rone ventured into Albee Baby on the Upper West Side for the first time because she had a gift certificate that was expiring. She said she was surprised by what she was able to learn there.

“I’m shocked by how much stuff they have,” she said. “There are so many things here I didn’t know existed.”

For others, there are elements of nostalgia and doing the right thing. On that same day, Bart and Joan Auerbach were also shopping in Albee Baby for bath toys and other knickknacks for their granddaughter. The last time they were in the store was 40 years earlier when they were shopping for their own son.

“It’s a famous store,” Joan Auerbach said. “A lot of stores are closing in our neighborhood. It’s really a loss for the neighborhood.”

But while many parents and grandparents may appreciate picking the brains of veteran retailers, that doesn’t necessarily translate into sales, which is one of the most frustrating challenges retailers face.

Francine Delarosa, owner of children's boutique Give Wink, said at the root of her business, are the close relationships she

Francine Delarosa, owner of children’s boutique Give Wink, said at the root of her business, are the close relationships she developments with customers. According to Cassandra, a trend forecasting, research and brand strategy firm, 78 percent of parents in the United States would rather shop in stores than online.

“We get customers who use our knowledge, allow us the opportunity to show them aspects of various different products,” Roberge said. “But when they’re ready to pull the trigger, that may happen while they’re sitting at their desk at work or at 3 a.m. while they’re on their laptop.”

Some customers may have no intention of ever buying from the store and just lap up all the information they can get. Then, once they decide on a product, they’ll hunt down the best price on the internet.

We get customers who use our knowledge … but when they’re ready to pull the trigger, that may happen while they’re sitting at their desk at work or at 3 a.m. while they’re on their laptop.Peter Roberge, store manager of Albee Baby in New York City

One way Albee Baby has tried to solve this problem is by building up its web presence, considered a venerable force in the industry. The company offers competitive pricing and has enough inventory in its warehouse to “fill a stadium,” Roberge said.

The store itself also offers a warm, welcoming feel that a website can’t. Staff members dole out treats to pets who come through. Breastfeeding moms stretch out on the comfortable gliders in the back of the store and feed their babies.

Delarosa faces the very same problem and said she’s moving toward only housing products in her store that “support” her business ― those that strictly enforce “map pricing,” for example. (That’s a minimum price resellers agree they won’t sell below.)

While children’s stores may have a slight advantage over other retailers, they’re not necessarily safer. Gymboree, a major children’s clothing brand, filed for bankruptcy in 2017 due to growing competition, mounting debt and the demand for cheaper prices, CNBC reported. The company underwent a rebranding and relaunched in July. Children’s Place, another mainstream retailer, will close 300 stores by 2020 and will also expand its presence on Amazon.

In 2017, Gymboree, a major children's retailer, filed for bankruptcy. The company rebranded and relaunched in July. 

In 2017, Gymboree, a major children’s retailer, filed for bankruptcy. The company rebranded and relaunched in July. 

Smaller-scale children’s stores are not immune to the risks, either. Giggle, a specialty children’s boutique that had stores in San Francisco, New York City and Denver, was considered a leader in the industry and one that Delarosa looked up to, she said. Without much warning, the stores suddenly closed in 2017.

“If Giggle, who was the most solid specialty store name in our industry, went under, any of us can go under,” Delarosa said. “If we don’t change, none of us will survive.”

The children’s stores that will make it, according to Kniffen, are those that assiduously listen to customers and cater to and respond to their needs.

“The children’s stores that have survived a long time, they have treated every customer like their kid is the most important person in the world,” Kniffen said. “As the times changed, they walked right alongside that customer, they figured out what was important to that customer, and they altered their store to reflect that. The ones that don’t, they go broke.”

This is part of our six-story series spotlighting the current state of retail in America.

The real reasons why a VC passed on your startup


You’re more likely hear about the companies that venture capitalists said “yes” to — the big funding rounds, the success stories, and the unicorns. But the day-to-day reality of being a VC is that we spend ~99% of our time saying “no.” It’s a core competency of any VC. Or at least it should be.

Receiving that “no” as a startup founder is often hard. It’s not fun for us either, though. We’re empathic to how difficult it is to build a business and the effort and belief it takes. It can be painful to tell the human being you’ve just spent time with why something they’re building is not a fit for you or your firm.

Most of the time VCs have one or more discrete reasons for saying “no.” Although it would be ideal if we relayed them to founders clearly and openly, we sometimes feel pressure to take the less confrontational path and say vague things “this is too early for us” when the truth is more difficult to hear. VCs have a code around rejection language that often leaves founders scratching their heads to interpret, but candor is usually better for both parties long-term. Truthfully, the reason for the “no” often has little to do with the founder or the details of the business, but lots to do with that VC’s personal interests, portfolio, or history.

Below I’ve listed the most common “no’s” I’ve seen. I describe them through the lens of early-stage technology venture because that’s what I do. “Early stage” for this purpose means pre-seed, seed, and Series A. If you’re a founder and you’ve gotten one of these reasons, my aim is to expand on what motivations or thoughts may underlie each. And if you’ve heard one that I’ve missed, I’m curious to know.

There’s one caveat to almost all of these reasons for passing, though: VCs will make exceptions to every one of them when we think the founders are absolutely incredible. This bar is extremely high and is based on our personal experience with them, their track record, or both.

Market-related reasons

“The opportunity’s not big enough”

VCs want to invest in companies that can grow to become massive. We strive for 10x, 100x, even 1000x returns. You’re building something that might be a great, sustainable business, but we don’t see it being venture-scale. E.g., you make software for US-based entertainment lawyers who focus on celebrity endorsements, and you’re charging a SaaS subscription of $100/month. There might be a thousand of those lawyers in the US, and even if you got all of them to sign up and had zero marketing and 100% margins (which you won’t), you’re making $1.2M per year. That’s too small for venture capital.

“You’re too early to market”

The investor may like your idea but thinks it’ll take significant time for the market to come around and recognize its value. Funding the company now means that it’ll take a few checks to keep it alive until the world realizes it needs to pay for the product or wants to use it. Imagine fundraising for a mobile gaming startup in 2004 when the iPhone didn’t launch until 2007: even if the founders are visionary and know that mobile gaming will be big, how will they cover expenses for the 3+ years it’ll take for that to happen?

“No (or weak) competitive differentiator”

Someone else could come along and build this exact thing easily. Even if you’re the first to market, competition could cut down your position and your ability to command a high price whenever they choose to. We often say this about startups that don’t have a strong technical element to them. The less technical an idea is, the simpler it is to copy. Having a unique brand may feel like a competitive differentiator — and some of the most successful companies have built themselves up on brand — but a bad PR scandal or well-executed knockoffs can derail that fast.

“Unfavorable macroeconomic or regulatory trends”

It feels like the wrong time to start this business, whether because of shifts in technology, behavior, or regulation. For example, Apple announcing they were dropping the headphone jack was bad news for companies making non-Bluetooth headphones, whereas Apple switching to USB-C charging cables was great for companies who had already embraced that standard. A regulation that bans facial recognition scanning in retail stores would be tough on a company selling those systems to malls.

“An existing, more established company could do it easily”

Big companies with tons of product lines, employees, and resources can quickly release products that encompass a startup’s entire concept. Building something that falls in the realm of one of these companies’ roadmaps — think Amazon, Google, and Facebook — can instill fear in VCs. Sure, it makes you a potential acquisition target, but most investors want you to aim to create a large, sustainable, standalone business first. They’re more valuable. For example, if I meet a startup that creates animated avatars for augmented reality, I’m wondering whether Snap is going to roll out the same capability next week.

“This is a crowded space”

The VC thinks there are too many competitors already working on this problem. Break it down further, though, and it could suggest a few nuances. Maybe the investor is worried about your sales and marketing abilities to stand out from the crowd. Maybe they think you’re not the one to bet on in this group. In any case, competition is fierce and the thought of having to battle for visibility, users, ad space, and market share is making the investor wary. Instead of joining a competitive space, VCs would rather you start a new industry from scratch or heavily disrupt an existing one.


“Founder or team dynamics”

This reason can be uncomfortable to explain to a founder, but it’s a frequent one for VCs. These negative dynamics can take many forms, but at their core, they signal that the team either isn’t meshing well today or won’t in the future. Examples include:

  • A dominant founder who belittles and speaks over the others, who appear frustrated
  • Too many co-founders (usually more than three), whose job titles and expertise appear to intrude on each others’; e.g., a COO, CEO, CSO, and CFO is far too many non-technical founding members at an early stage startup
  • Having both a CEO and a President, which suggests that there are two egos and neither wants to look “lesser” than the other
  • A married or dating founding team (not always a red flag, but many VCs consider it to be one)
  • Multiple co-founders from academia who aren’t involved in the business day-to-day
  • A very seasoned founding team from big corporations or consultancies that doesn’t have any startup experience
  • Any other palpable tension, awkwardness, or discomfort between the founders that seems abnormal

“Missing a key person”

This is a chicken-and-egg problem: founders raise money to hire great people for their teams, but having great people on their teams is what enables them to fundraise, especially at the very early stages when they don’t have much product or traction. Sometimes we see a founding team that’s missing a skillset that’s so key to that business that we have to pass. E.g., you have an autonomous vehicle startup with a business model that requires you to integrate your system with car manufacturers, and your team is all technical and doesn’t have any business development ability. Not having a business-focused founder, especially one who’s worked with auto OEMs, is problematic.

“Founders aren’t mission-driven”

This is another way of saying that the founders just don’t seem that into the idea. They should care deeply about the problem they’re building the company to solve, and ideally have experienced it themselves. They may reference the draw of making money, which is never the right reason to found a company; not even an absurdly high salary will keep people fighting during the inevitable dark periods that startups have to face. Or they refer to doing something else in a few years and don’t see this company as long-term. E.g., the past few months VCs have been seeing a lot of “blockchain for X” pitches where the founders don’t seem to have a great reason for including blockchain, other than other people’s hype.

“Lack of focus”

The VC thinks you’re trying to do too many things at once. This could apply to several spots in the business, including product (you’re trying to build too many things), go-to-market (you’re trying to sell to an array of customers without understanding which one’s truly best), business model (e.g., you have freemium, paid with multiple pricing tiers, and enterprise sales, but you haven’t sold anything yet), team (multiple part-time people who should be full time, including founders who haven’t quit their day jobs yet) or operations (e.g., you have a time-consuming services studio in addition to the startup business).

“Personality/behavioral red flags”

This is another one that VCs may not tell you directly unless you press them on the reason why they passed. It’s uncomfortable. But there are cases when a founder comes in and displays sexist, racist, rude, or otherwise negative behavior that makes us write off backing that person. Things I’ve seen: men only engaging with male investors and not with female investors present in the same meeting (that includes speaking, hand-shaking, and eye contact); people who are obnoxious to office support staff or waiters; narcissistic people taking 45 minutes of an hour-long meeting rambling about their bios; and spouting off sexist or racist opinions. VCs are gauging whether you’re the right person to lead a team and provide those people with a safe workplace that’ll act as a second home. We don’t want to entrust that to you — at least not with our capital — if you’re an asshole.


An investment means a relationship that spans years, even decades. Honest, open communication is critical. If VCs think that founders are lying to us, we’re out. There’s intellectual dishonesty, where founders aren’t honest with themselves or investors about how things are going; they will minimize problems and play up successes, making it difficult for investors to help them and shocking when the true status of the company becomes clear. Then there’s run-of-the-mill dishonesty where founders lie outright about facts. Examples I’ve seen include inflated metrics (“we’re growing 50% month over month” when they’re not), manufactured advisors (saying that high-profile Silicon Valley CEOs are advisors when they aren’t), and exaggeration of product readiness (claiming that a platform is fully automated artificial intelligence when it’s really just humans on the backend).

“Distributed team”

Most VCs view a distributed founding team where people don’t work out of the same physical location as a negative. It can work, but typically only after the company started in one place and then expanded to multiple offices as it grew. Exceptions include crypto investments where a decentralized platform and business model lend themselves to a decentralized team, and very early companies who outsource their development teams to countries with cheaper workers.

“Negative references”

Someone the VC trusts had something bad to say about one or more of the founders or a key person on the team. VCs don’t stick to the list of references you provide; we’ll also look through LinkedIn and talk to people you’ve worked with but didn’t mention to us. There isn’t much you can do in this situation because the VC most likely won’t divulge the person who made the comment. Be thoughtful about the LinkedIn connections you have and delete or don’t accept those with people who you don’t truly know well.

“CEO or founder isn’t compelling”

The founder who will assume the most public-facing role should strike an investor as exceptional and special. There has to be something about them that is moving, a je ne sais quoi that compels people to listen and to care. This same presence will be what allows them to raise money, convince employees to work for them when they have lots of other options, sell customers, build partnerships, give great press interviews, and more. There is not one right way to come off as special; the extroverted salesperson CEO often comes to mind, but the introverted technical genius who breaks down complicated architecture into simple quips fills that role too. “I’m just not that into you” is perhaps the most difficult-to-articulate reason to pass on a startup, but one of the most common.

Individual investor or firm-related

“Not in our geographic area”

Most VCs have geographies in which they do and don’t invest. Pay attention to the VC’s current portfolio: where are those companies located? Where are they relative to the investor’s offices? Most firms will put their preferred geographies on their websites or social media accounts. Don’t waste your time pitching your UK-based company to a US firm that only invests in the US and Canada.

“It’s just not something I can get excited about”

VCs are people with individual tastes and interests. Not every startup idea thrills every VC. And that’s okay — as a founder, your best investor match is with someone who really loves and understands what you’re trying to do. Sometimes VCs do take pitch meetings with companies that don’t interest us on paper, but we’re hoping the founder’s enthusiasm will be contagious. That can happen, but it’s more likely that a VC who’s already excited about a certain industry will get it, as opposed to converting one into a believer who isn’t.

“Too capital-intensive for us”

In non-VC jargon, this means that we think it’s going to take a ton of money to get this business to work. Different firms have different comfort thresholds with capital-intensive startups; bigger funds are often better suited for them. If you’re starting a virtual reality headset company — a complicated hardware play — don’t expect a $50M pre-seed fund to be a great match. Certain industries, like cybersecurity and hardware, tend to need more funding to reach product-market fit than others, like consumer mobile apps or SaaS platforms. They’ll need a VC who understands that it’ll take a few checks (and years) to get it off the ground.

“Too early for us” / “too late”

All VCs have a stage or range in which they invest. That stage considers how far along the product is, who and how many people are on the team, how much funding they’ve raised, what amount they’re seeking to raise and at what valuation, their industry, and more. If a firm mainly invests in Seed and Series A companies, one that’s just at the idea stage with nothing built and that’s seeking $50k in funding is too early. One that has 200 people and is seeking a $50M Series C round is too late. Not aligning within a VC’s investment stage(s) is one of the most common reasons for a pass. Some VCs make personal angel investments in companies that are too early for their firm but that they love and want to stay close to as they grow.

“Too small a round” / “too big a round”

Like with company stage, VCs have round sizes in which they prefer to participate. Many VCs are conscious of ownership and seek to buy a certain percentage of a company when they invest. For example, Accomplice looks to put in $1M-$2.5M first checks for between 10 and 20% of a company. If a founder is raising a $15M round, our investment won’t make up a significant enough piece of it to hit our desired ownership. But as with stage (too early or too late), VCs will sometimes make exceptions to their model to have a small ownership percentage of a company that they think has huge potential.

“I couldn’t convince my partnership”

The individual investor you’ve been working with loves you and the idea, but either one of their influential partners or the partnership as a whole vetoed it. If you’ve been talking to an associate who can’t write a check without a senior partner’s approval, it’s probably the senior partner that they work most closely with who’s saying “no.” If you’ve been talking to a senior partner, it’s probably that person’s equal at the firm (like one general partner talking to another). Another possibility is that the VCs are knowingly using each other as scapegoats to avoid giving a real reason for passing and preserve standing with you (“it’s not me; it’s that other person”). One of the benefits of a partnership is absorbing the fall for each other in situations like these.

“I’ve seen a similar company try this and fail”

VCs have scar tissue from the companies we’ve backed that haven’t worked out. Even indirect knowledge of a startup’s failure can dissuade a VC from investing in a similar company. This pass reason is more about the VC’s personal baggage than the founder to whom they’re saying it.

“Unreasonable expectations around the VC’s role”

Some founders (wrongly) expect VCs to help the company where it’s weak, but far beyond what’s normal or useful for an investor. I’ve seen founders who have a company with a very minor tech component built to date ask tech VCs to join “so you can help us build the software.” That is not our job. If you want a tech VC to back you, the tech should exist or come from you in the future. We’ll help where we can, but you shouldn’t want us involved in the minutiae of the business because it’s not the best use of our time for either of us. Of course, good VCs help with a wide range of things across a company’s lifecycle: recruiting, product testing, conflict resolution, marketing launches, strategic vision, equity and compensation, etc. But we aren’t employees, and we aren’t your crutch for essential parts of the company that need to come from you.

“Competitive with a portfolio company”

If you’re a founder in a certain industry, it’s smart to pitch VCs who have already made investments in that industry as long as it’s broadly defined. If you get too specific with the similarities, though, you risk the VC telling you that your company is competitive with one of their existing investments. E.g., if I’m on the board of Niantic, which made Pokemon Go, I would pass if you pitched me a new company’s idea for “Pokemon Go but for kittens” (even though someone should make that). But a mobile gaming company in general may be a good fit.


“Problematic cap table”

VCs will ask to see your cap table, especially as they get more serious about the investment. Short for “capitalization table,” it’s a spreadsheet showing which people and firms have ownership in the company and its financing rounds. Problematic cap tables may have format issues (like being out of date, not reflecting recent funding rounds or equity grants, broken models, or mispriced option grants), ownership issues (like angels who got way too much of the company for a small amount of money, not having employees on a vesting schedule, advisors who think they have equity but aren’t on the cap table, or confusing agreements like warrants or verbal promises that don’t show up in the document), or both.

“Bad presentation materials”

This is another pass reason that is awkward for VCs to say, so just because you don’t hear it doesn’t mean it doesn’t apply to you. Ask someone you trust to be straightforward with you about your pitch deck. It doesn’t have to be a design marvel, but egregiously ugly decks are distracting and make VCs worry that you don’t prioritize aesthetics now and won’t in your product later. The same goes for spelling, grammar, and legibility: be precise and clear. Communication matters. If you make these kinds of mistakes in your pitch deck where you’re aiming to put your best foot forward, it suggests you’ll be even more negligent about the rest of your business.

“Valuation issues”

Usually this means that the VCs think your valuation is too high. A high valuation means that the VC will get a smaller ownership piece for the same amount of funding, plus you’ll have to raise your next round on an even higher valuation. That’s tough: you’ll have to hit lots of milestones and execute flawlessly, and that’s never guaranteed. Depending on how much higher your desired valuation is than what the VC thinks is reasonable, you may also risk appearing overconfident and out of touch with reality. Too low a valuation is also a negative signal: it suggests a lack of sophistication around fundraising, the market, and the value of what you’ve built.

“Undesirable terms”

There’s a long list of possible issues that could go wrong in negotiating a term sheet — it’s outside the scope of this article — so you should push a VC to give you specifics. Some of the most contentious areas include classes of stock, pro rata rights, liquidation preferences, founder vesting, the board makeup, employee stock options, drag along rights, information rights, and voting rights.

“Co-investor dynamics”

The VC doesn’t like the investors you already have, those you want in the current round, or both. Strategic investors, those associated with corporations, can be especially problematic because they have more complicated incentives beyond just making a return on their investment. They might invest to get a view into a product that they want to build themselves, or to get more information about your company to see if they want to buy it later. They often move slowly, ask for unusual terms stemming from their unique interests, and can create conflicts of interest with their competitors (like if your robotics company takes money from Panasonic, and then Samsung won’t partner with you because they’re worried you’re too close to their competitor). Taking funding from a strategic investors can also signal that you didn’t have interest from “regular” institutional investors. But “regular” VCs can be the problem, too: you never know which individual VCs have feuds with others, or which firms dislike working together. VC firms and individual investors can have long, dramatic histories that founders won’t be aware of. Although co-investor dynamics are largely out of your hands as a founder, you can sometimes get the inside scoop by asking other founders who the VCs you’re meeting with have backed before.

“Fundraising tactics”

The way that founders run their fundraising process reflects a lot about them. There’s a fine line between invoking psychological and sales tactics that keep VCs interested and being unethical. Saying you have multiple term sheets in hand will inflame VCs’ competitive natures, but don’t say it if you don’t. Trying to force scarcity or create a rush to get an offer when there isn’t one is usually obvious and can backfire.

“You need to find a lead”

Some firms do not lead investment rounds or only do in rare cases. If they tell you they want you to find a lead, that lead will not only put in the largest check in that round, but they’ll set the terms that the rest of the syndicate will follow. However, some VCs who don’t have enough conviction around your company will ask you to find a lead as a pretext because they want to hang back and see if you can convince a quality firm or person to join. That removes some of the risk that they’re struggling with.

“Unpersonalized cold pitch”

Sending a cold pitch over email is a bad way to get investors’ attention. I only know of one founder out of hundreds we’ve backed at Accomplice that came in through a cold email (nice work, Mikael from Unsplash). You want the VC to invest in you, so you should invest the time in personalizing your email to them. Taking the extra few minutes to get a warm intro from someone the VC knows well, ideally a founder they’ve backed, is well worth it. If you must do a cold pitch over email, at least make it rise above the crowd. Cold email pitches should:

  • be personalized, explaining why this firm and these partners are a good fit for you and your idea; don’t just copy and paste the same thing to every VC
  • be very brief, with just a high-level idea, who you are, and maybe a link to a slide deck for more info
  • have a reasonable ask for a first meeting (like “do you have 15 minutes for a call?” not “we would like to pitch your entire partnership this Friday”)

Product or tech-related

“Not enough tech”

This “no” is specific to technology investors. What defines “technology” is super broad these days — almost every business has a website or an app — but most tech VC firms have a baseline amount that they need to see. What isn’t technology? Life sciences, medical devices and biotechnologies, simple e-commerce, capital-intensive businesses, pure gaming companies (because success is too dependent on how individual titles perform), editorial content/media, consumer packaged goods, or heavily offline businesses. E.g., “we sell this physical widget online” is not enough if the widget itself doesn’t involve any tech.

“Not enough product”

Some VCs, usually pre-seed or micro VCs, will back startups that are nothing more than an idea. Others require a finished product that’s been researched, tested, and launched.

“Feature, not a product”

The VC may like the idea, but it doesn’t feel significant enough to be a standalone business. This “no” is related to market size: the VC doesn’t think the concept can hook a lot of people, or inspire them to pay or use it frequently. One way to counter this assumption, if you believe it isn’t correct, is that the feature may be the focus today but it’s the first step in a larger product plan.

“Product dysfunction”

Not having any product built is bad if you’re fundraising at a point where an investor expects to see it. But having bad product to show is also, well…bad. If you have a tech demo, make sure it works. Prepare for demoing on different devices and in different settings, from coffee shops to conference rooms. If you’re claiming the product does X, make sure it really does X. It’s better to under-promise and over-deliver than to hype up an investor on everything your product can do and have it flake out. Exaggerating your product capabilities can come off as disingenuous or naive.

“Licensing or IP issues”

Many founders, especially those who are highly technical or academic, seem to think that securing patents is important to VCs. Actually, VCs don’t care much about patent portfolios; they’re expensive, time-consuming, and can distract you from all the other things you need to do to build the business. Instead, intellectual property issues in fundraising usually have more to do with a startup’s questionable use of existing IP. A few examples:

  • The founders spun the technology out of a university but haven’t negotiated rights to use it yet or got a bad deal
  • The founders used a development studio to build an app and now owe the studio a high percentage in royalties forever
  • The founders came from a previous company that has patents protecting a certain thing, and whatever the new startup is building looks dangerously similar to the previous company’s tech; there may be an infringement lawsuit ahead

Business model or progress-related

“Not enough traction”

VCs have a bar for the amount of traction that they’re comfortable with. Depending on the type of company, that could mean users, downloads, paying customers, revenue, partnerships, etc.

“Dislike the business model”

Something about the business model is a red flag. Maybe the VC thinks you’re targeting the wrong customer, or that you don’t understand which customer is the most valuable. Maybe your pricing seems off. Maybe that VC doesn’t have confidence or enthusiasm about that type of business model. Some investors just don’t like e-commerce; others love it and do only that. Maybe the model requires working with many different stakeholders and seems confusing and time-consuming. Ideally the VC tells you exactly what put her off about your model. If not, it’s okay to ask.

“Dislike the go-to-market”

Usually this pass reason means that the VC thinks your go-to-market (GTM) plan is non-existent, not well thought-out (e.g., “we’ll do a launch, and then users will just…find us”), or they don’t think tactics mentioned will work. I’ve seen really high-tech products with ill-fitting, old-school GTMs, like trade shows and direct mailings for a big data company. Or simply saying “we’ll do Facebook ads” for a consumer product doesn’t cut it because they’re competitive and expensive; plus you should have an organic strategy for users to find you without paying for them.

“Supply chain concerns”

Many VCs have horror stories about hardware startups: they tend to be a lot more expensive and take much more time to get to market than anyone expects. Many of these issues relate back to problems with the supply chain. If you’re pitching a hardware business, you or an expert on your team should know exactly how and where you’ll manufacture every component and what it’ll cost.

“Not a scalable model”

Venture-backed companies should be scalable, meaning that they can multiply revenue with minimal incremental cost as they grow. Studio or high-touch service models that need more people to do their work aren’t scalable. Software scales; people do not. Many models start out with heavy reliance on people or slow processes, but they should move to scalability as they evolve.

“Unclear value proposition”

In the investor’s opinion, you’re solving a problem that the world doesn’t have. The solution that the company provides should be essential, not nice-to-have; it’s a painkiller, not a vitamin. Maybe the value proposition is strong, but it’s not coming across because of complicated or confusing messaging.

“Weak metrics/unit economics”

One or more aspects of your unit economics were concerning. Maybe you calculated something wrong (like you report your burn rate as much lower than it really is, or you’re claiming 50% month-over-month user growth but your user numbers don’t support that), you’re presenting something that seems low (e.g., the ratio of your customer acquisition cost to your customer lifetime value is one or below, or your margins only 15% in a software business), or the investor is calculating something additional using the metrics you provided and doesn’t like the result (like using acquisition cost and lifetime to determine that payback period is extremely lengthy). Weak metrics hurt your viability; false metrics hurt your credibility.

I’ve talked about the stated reasons VCs give for passing: those that have to do with the market, founders, individual VC or firm, fundraising process, product or technology, and business model or go-to-market. But sometimes actions (or inactions) speak louder than words. If a VC goes silent on you at any point in the fundraising process, they’re not that interested. It’s poor form and you deserve a reason, but overflowing inboxes, portfolio company emergencies, and unwieldy and unpredictable schedules are the norm in our jobs. VCs will lose interest. Speed kills in venture, so as a founder you should work to create and maintain momentum.

In the spirit of transparency, the two most common reasons why I pass are first, not feeling strongly about the founders, and second, a lack of personal interest in or conviction about in the space. I’ve seen how hard it is to build a successful venture-scale company. It’s riddled with adversity. Pivots and crises are the norm. If I don’t have a real connection with the founders in a space that they are mission-driven to care about immensely, it’s a pass. Success takes a rare combination of exceptional people, timing, and technology. It’s a long, drawn-out battle, and VCs will crawl over broken glass for the founders we’ve chosen to back.

Having conviction in either of these two components (or ideally both) will overcome almost any other reason for passing. VCs make exceptions for people and ideas that we think are truly exceptional.

What’s Really Disrupting Business? It’s Not Technology


If women wanted to shake up their makeup regimen 10 years ago, Sephora was the place to go. Beauty product junkies loved Sephora’s candy store-like display of sample-size face creams, glittery lip glosses, and eyeshadows in every shade imaginable, allowing them to test out new products at non-committal prices.

That is, until Birchbox came along in 2010 with an innovative offer: Pay a monthly fee and receive a curated box of beauty samples by mail.

“They said, ‘We’re going to start off doing this one part of the customer value chain, which is helping you identify the better products, and we’re going to do it more conveniently,’” says Thales S. Teixeira, author of the new book Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption, which debuts tomorrow.


Many established companies lament the disruption they’re facing at the hand of technologically savvy startups. But Teixeira, the Lumry Family Associate Professor of Business Administration, argues that these newcomers simply spotted and served an emerging customer need faster, taking market share from established companies that didn’t see them coming.

Are companies looking at disruption the wrong way?

Danielle Kost: In your book, you argue that technology isn’t the main force hobbling many companies today—it’s changing customer needs and behavior. How did you come to this conclusion?

Thales Teixeira: When I started eight years ago looking into what was going on in certain industries, what came out initially was this idea that it was technology, right? We all talked about Google, Amazon, Facebook, and Apple. But in many industries, both the disrupter and the disrupted had similar technologies and similar amounts of technology.

The common pattern was that the majority of customers in those markets had changing needs and wants, and their behavior was changing.

Kost: Many of the companies you’ve studied gained a foothold in the market by capturing one piece of the customer value chain, or by following the steps a customer takes to select, buy, and consume a product or service. You call these situations “decoupling.” Could you give an example?

Teixeira: A great example of decoupling is an insurance startup called Trov. It’s an app that allows you to quickly insure expensive belongings for short periods of time. If you’re traveling to Rio de Janeiro next week and you just bought a $700 camera that you fear you’ll lose, you can upload some information about the camera to the Trov app, swipe right, and insure it from the moment you embark. One week later, when you come back, you can swipe left and it will stop insuring it.

You don’t have to do all the activities you normally would do with a traditional insurance company. You don’t have to talk to an agent, look at the policies, list the things you own, pay for the policy, use it, and then cancel it.

[Most] insurance companies don’t want to sell you one week of insurance for one product. They have thousands of employees, big budgets, and huge infrastructures, so that they can offer more or all of the activities in the customer value chain.

Kost: Incumbents that survive disruption often embrace it and change their business models to forge new sales channels, revenue streams, and customer segments. Could you give an example?

Teixeira: Incumbents tend to respond to decoupling by gluing back the part of the value chain that was broken. The other alternative is you just live with the fact that it’s broken. That’s called “preemptively decoupling.” Instead of waiting to be disrupted, you just break it.

When Amazon started selling electronics online, it created apps that encouraged customers to go to a store and check out the prices and products, but order them at Amazon. This is called showrooming.

Best Buy initially tried to prevent customers from showrooming. They considered changing the barcodes on products to make them hard to search for online. The company even tried to use signal jammers, like the ones they use to keep prison inmates from using cell phones.

Eventually Best Buy executives realized that Amazon and showrooming are not going away. They decided to charge manufacturers for putting those items on the shelf. When a company like Samsung puts TVs on display at Best Buy, Samsung is benefiting whether you buy it from Best Buy or Amazon. So Best Buy decided to charge for that value they create.

Kost: Many companies obsess about their direct competitors—how to undercut their prices, outpace them in R&D, or steal their talent. You argue that companies should focus on customers and meeting their needs. Why is that so hard?

Teixeira: You have few competitors, so it’s easy to look at what they’re doing and emulate or respond. When Coca-Cola launches a new product or reduces prices, it’s easy for Pepsi to identify that. It’s easy to go to the board or to your boss and say, “Our competitor is doing this. We should respond.”

It’s very hard to understand your customers because you might have millions of them scattered around the world. It’s hard to see what they’re doing and to understand why they are doing what they’re doing.


Kost: So many executives are trying to predict the next wave of disruption. You recommend that executives look for early signs of behavior change in seven consumer categories. Why?

Teixeira: When I started doing this research, I realized that 90 to 97 percent of consumer spending is concentrated in seven categories. I call them the categories that better consumers, from their point of view: where they live, what they eat, what they wear, how they move, how they heal themselves, how they educate themselves, and how they entertain themselves.

When consumers change their behavior, the first signs can be seen in one of these seven industries, and it quickly multiplies.

Kost: What lessons do you hope executives will take from your book?

Teixeira: That the game has changed. In the past, there were a few big companies competing with each other. Coke versus Pepsi. Airbus versus Boeing. GE and Siemens. Now there are thousands of startups in any market, and they’re competing with the big companies without having the resources.

But in most cases, consumers are disrupting markets, not startups and not technology. Your way out as a business executive requires adapting and evolving your business model.

Danielle Kost is senior editor of Harvard Business School Working Knowledge.

All Things Sales! 16 Mini-Lessons for Startup Founders


As a former CEO and software engineer (Citrix, XenSource, VERITAS, etc.), board member of GitHub (recently acquired by Microsoft), and lecturer in management at the Stanford Graduate School of Busines, a16z general partner Peter Levine is constantly asked “Why sales?” by entrepreneurs and technical founders. He himself used to hold the “engineer-centric” view that if you build a great product, customers will come. But the fact is, all world-class companies must have a strong sales force. So — how do they get there? How does a technical founder begin to build a top tier sales motion?

In this series of snack-sized videos — which you can watch all together, or mix-and-match for your particular questions and needs — Levine distills the fundamentals that every founder should know about sales. The 16 lessons in this “mini-MOOC” offer everything from definitions to concrete guidance for the following:

1. All Things Sales! 16 Mini-Lessons for Startup Founders [Introduction]

2. Understanding and Defining Sales Channels

3. Engaging Sales: How Much to Spend on Marketing vs. Sales?

4. Segmenting Markets for Go-to-Market

5. Why Build a Sales Organization?

6. Building a Sales Org: Who, When, How

7. Setting the Sales Number

8. A Short Coda on (Sales) Quotas

9. Mapping Go-to-Market to Customers: ‘The Coverage Matrix’

10. Managing a Sales Org: Forecasting

11. Managing a Sales Org: Revenue Composition

12. How to Compensate Sales Reps

13. Simplifying Sales Compensation

14. Sales Force Productivity: How Do You Know?

15. Predicting Your Pipeline

16. Takeaways for Technical Founders: How to Think about Sales [conclusion]

Acknowledgements: With thanks to Mark Leslie and Jim Lattin for their contributions to the concepts — including the “sales learning curve” (see this 2006 Harvard Business Review article by Leslie and Charles Holloway) — in this series. Many of these concepts are developed and discussed in an MBA elective course we teach at the Stanford Graduate School of Business, “Building and Managing Professional Sales Organizations”. 

Can Lambda School Become a $100M Business? A Growth Case Study

When I graduated in 2014 with a 4-year marketing degree, I realized how little I learned that was directly applicable to the needs of employers. It wasn’t until spending an entire summer taking online courses that I landed my first job in the tech industry. Since then, I’ve been deeply interested in any novel approaches to education. From MOOCs to coding bootcamps, I knew there must be a better way. That’s why when I recently heard about Lambda School, I was intrigued.

If you haven’t heard of them, Lambda School is essentially a coding bootcamp with a twist: you don’t pay them anything until you land a job bringing in more than $50,000 a year, after which you pay them a portion (17%) of your income for 2 years. This makes a coding education accessible to people with less savings to spare and, more interestingly, makes Lambda fully invested in their students’ success.

It’s an interesting model with a huge potential for impact, sure. But can Lambda really become the next big alternative to higher ed? In this series, I will try to answer that question by deconstructing their potential for growth. Along the way, we’ll determine if Lambda is cut out to be a $100M+ business, see what growth loops could drive the business forward, and dig deep into their funnel.

Part 1: Can Lambda School Become a $100M Business?

To answer this question, I’ll be using Brian Balfour’s “Four Fits” framework, which elegantly breaks down a $100M+ business into four interconnected parts:

  • Product-Market Fit: Does Lambda have a product that a particular market wants?
  • Product-Channel Fit: Does their product fit well with a scalable acquisition channel?
  • Channel-Model Fit: Does their business model enable this acquisition channel?
  • Model-Market Fit: Will their business model combined with their market enable a big business?

Product-Market Fit (PMF)

Let’s start with Lambda’s target customer: people who desire a more lucrative career but lack the financial resources, support, and know-how to get there. Their founder, Austen Allred, claims it is a mixture of people who “got the wrong degree”, abandoned their degree, and never went to college at all. All of these groups share common problems: they’re in low paying jobs and may have debt to pay off. Hence, Lambda’s key value prop of not making you pay a dime until you get a high paying job is very compelling. But only if their curriculum (product) works.

Market Problems Solution
  • Got the wrong degree, abandoned degree, no college
  • Desire a more lucrative career
  • Low paying jobs
  • Debt
  • Coding bootcamp you can take from home
  • Don’t pay until you get a high paying job

Does their product deliver on its promise?

To start, we can look at customer feedback. Bootcamp ranking site Switchup has Lambda School at a 4.92/5 rating and it is among the top 20 coding bootcamps on the site. Not bad. There are also countless reviews like this one:

That’s not to say Lambda isn’t without its detractors (see Reddit), but on the whole, customer sentiment seems very positive. As alluded to by the student above, Lambda seems to be iterating on their product to strengthen PMF. They’ve also taken efforts to improve their filtering of potential students (i.e. refining their target market) which I’ll discuss further in a future post.

Next, we can look at student retention. If they’ve truly built a product that serves this market, a high percentage of students will make it to the end. Austen claims that while in the early days as little as 50% retained (not so good), they’ve increased that to 80-90% (May 2018). That’s much more sustainable. And with curriculum iteration a core part of their playbook, it seems likely they can push it further. Of their graduates, Lambda claims 83% get hiredwithin six months.

So, it seems like Lambda delivers. But there’s also evidence that they overdeliver. I’m amazed at how much their students advocate for them (Twitter, blogging, etc.) — and this word of mouth is a key growth amplifier for them (more on this later).

Product-Channel Fit

Even if students think Lambda has a great product, they’ll never make it to the big leagues if their product doesn’t fit well with a scalable acquisition channel. They don’t make the rules of the channels, so their product must be designed with one in mind.

Before we assess some potential channels, let’s consider a Lambda customer’s journey to becoming a student:

  1. Interested visitors come to their website
  2. They fill out an application form
  3. Lambda assesses the potential student’s fit
  4. An offer is made and an agreement is signed

Looking at it this way, Lambda has an admissions process similar to a B2B sales funnel. So their goal with an acquisition channel will be to generate student leads.

Given that, let’s consider some commonly used B2B channels.

Outbound sales

In theory, this would work with their product because they could offer a pretty compelling 1:1 sales pitch to students this way. But this would be way too costly and wouldn’t scale.

Content marketing

This definitely has potential. Lambda could create high-quality content (blog posts, etc.) and try to rank for keywords that their audience is searching. There’s a strong fit with their product because the content would demonstrate Lambda’s expertise in web development and build trust with potential students. However, the problem with this channel is that it relies on people having search intent. Many potential students probably don’t even know a career in web development is a possibility for them, and the chances of them searching for a variety of web development terms is probably slim.


Lambda’s best chance at large, affordable audience is paid acquisition. Facebook ads, for example, are a perfect fit for their product for a few reasons:

  1. Facebook’s interest and demographic targeting allows them to reach their latent target audience of lower-income people who desire a career upgrade
  2. Lambda’s “don’t pay until you get a job” pitch makes for a compelling ad, and
  3. Photos and video allow them to deliver this pitch in a captivating way

Where ads could break down in terms of fit is trust. Clicking on an ad and immediately filling out an application for a school you’ve never heard of is a bit weird (when exactly is this company going to steal my identity?).  To prove that they’re the real deal, Lambda needs a way to provide value right away.

How they’ve chosen to solve this problem is a perfect example of adapting your product to fit the channel. Instead of directing ads traffic to an application form, Lambda offers free intro courses so students can test them out. As a bonus, these courses act as an important quality filter to see if incoming leads have the potential to succeed as full-time students.

Channel-Model Fit

Okay, so paid channels sound like a good fit for Lambda. But is spending all that money for leads sustainable? Can their business model support it? Let’s take a look.

This will depend on two things: their average annual revenue per customer (AARPC) and their customer acquisition cost (CAC). Time for some quick math…


  • AARPC = $70,000 (Lambda grad median starting salary) * 17% income share agreement = $11,900
  • This is a sizeable amount of revenue per customer and leaves the door open for more costly acquisition. And it will be costly because getting a student to commit to a 9-month course is not an easy task. As leads come in from ads, they’ll need the hands-on attention of the admissions team not only to help move prospects down the funnel but to ensure these students have a high chance of success.


  • As I alluded to, their CAC is on the high end of the spectrum because of the friction involved:
    1. Bring traffic in with a compelling offer —> Ads ($ for clicks)
    2. Deliver value and assess fit —> Nurture and score mini-bootcamp leads with a CRM ($ for labor)
    3. Close with high potential students —> Schedule phone interviews with admissions staff (more $ for labor)
  • Okay, that’s starting to sound pretty expensive. But here’s where it gets interesting. As mentioned before, Lambda seems to be benefitting from a ton of word of mouth. This means for every customer they pay to acquire, they can expect them to bring in more for free. Every dollar is amplified and their CAC decreases as a result. If they can keep their product quality high, they’ll continue to reap the benefits here.

Given the above, Lambda looks like it has a channel-model fit that can sustainably support their acquisition strategy. However, as they scale they’ll need to be mindful of their cash flow, given their lengthy payback period. From lead to employed software developer is a 12+ month road.

Model-Market Fit

Everything is fitting together well so far, but none of it will matter if there isn’t a sizeable market willing to take the Lambda plunge. So, the question we’ve been waiting for: can they reach $100M? Time for more math…

First, let’s determine how many customers they’d need to reach $100M:

  • $100,000,000/AARPC
  • = $100,000,000/$11,900
  • = 8,403 paying grads needed per year

Now, let’s see how feasible that is:

If students can’t get jobs, Lambda doesn’t get paid, so there needs to be a demand for developers in the future. This one definitely doesn’t seem to be a constraint. We’re good here.

Just a rough estimate

They also need motivated people who can spend time learning to code. That could certainly constrain the market. Time for some more math…

  • There were 20,000 code bootcamp grads in 2018 (US and Canada), coincidentally who paid $11,900 on average. Not a huge market.
  • But — given that the median American household savings account balance is $4,830, traditional code bootcamps have a comparatively teensy market compared to Lambda. The percentage of the population with $12k to spend up front and potentially move to a city for a bootcamp just isn’t that big.
  • So, if 20,000 grads are coming from (I’m being generous) ~10% of the total potential market (200,000), then Lambda is left with the other 90% (180,000). So Lambda only needs to capture ~5% of the market (=9,000 annual paying grads) to have a $100M+ business. Not a cakewalk, but seems doable!

It’s also worth noting that the above analysis only considers their software development bootcamps for the US market. There’s potential to expand into adjacent markets (they’ve already started to do this with design and data science), but this would require assessing all of the four fits again. For example, a data science bootcamp is a new product for a new market (would-be data scientists) and it may require tweaks to their channels (maybe would-be data scientists don’t hang out on Facebook) and business model (the job market could be quite different for data science).

The Answer

Can Lambda School Become a $100M Business? I think so. And I really hope so. Because everything that makes good business sense above also helps students. If they do hit $100M, that’s 9,000 grads who have unlocked a new future and are creating more innovation. That’s pretty cool.

But if Lambda really wants to become the future of education, they’ll need a strong growth engine. Next in the series, I’ll see what growth loops could drive the business forward and dig deeper into their funnel.

4 Assumptions That Are Hurting Your Business


Assumptions hurt businesses. Remaining blind to the causes won’t make you immune to the damaging effects.

As an entrepreneur, you devote time and energy to your business, pouring money into new products and services. If you’re like most visionaries, you’re stubborn. You don’t like to be told what to do, and you might not be interested in hearing you don’t know what you don’t know.

This mindset risks creating a pattern of willful ignorance. What if challenging some of your own assumptions could reveal answers that transform your business for the better? Have you considered hiring a consultant, seeking honest input from employees or surveying your customers?

Here’s a quick list of biases to double-check as you look for ways to shatter your assumptions and work smarter in 2019.

Assumption 1: You’re a known name in your market.

Among my businesses is a pizza restaurant that’s operated for a decade in a town of about 5,000 people. A few years ago, while shopping a block away, I introduced myself to the store’s owner and mentioned my own business. “I’ve never heard of that place,” my fellow entrepreneur said. “Where is it?” I walked with her to the front of her store and pointed to my restaurant.

I assumed everyone in town noticed my shop more than they actually did. It was a good reminder to keep pushing to break through the noise, even a smaller competition pool. Your sales could be suffering from obscurity without your even realizing it.

Assumption 2: You’re the best.

I have yet to meet an entrepreneur who doesn’t believe his or her product or service is the best. I’m no different. I “know” my business is superior. You probably would say the same about your company, too. There’s only one, glaring problem: If you think you’re already doing everything you can, there’s no room to improve.

Odds are, you aren’t viewing yourself in an accurate light — and you’re unlikely to correct that vision on your own. It’s like trying to be objective about your own children. Bring in a qualified, credible someone from the outside and approach your conversations with a learner mindset. Do your best not to think or speak from a defensive position. Rather, seek to get a broader perspective so you can make smart decisions even when the truth is hard to hear.

Assumption 3: Everyone in your organization feels your level of ownership.

No doubt your vision for your business is highly personal. Maybe you also believe your employees need to care about your company as much as you do. That combination can have negative effects, leading you to churn through employees until you find people who match your own level of accountability.

Your team members might care a lot about your shared work, but they’re never going to make the same kind of sacrifices you will to pursue your vision. Don’t saddle your crew with those expectations. Instead, marry your vision with their personal vision. What does this company mean to them? Do they see opportunities for development and advancement? Is the work fulfilling for them? Align your common goals, and you’ll build a team of employees who will run through a brick wall for you and your company.

Assumption 4: You serve everyone.

When you try to serve everyone, you actually end up serving no one. You will become indispensable to customers and acquire raving fans if you get very specific about whom you exist to help. Along the way, your company will pull in customers who live beyond your target’s perimeter. Think of them as a bonus, but never lose track of your base. When you narrow down your focus, your advertising becomes more specific, your products become more helpful, and your business will become more profitable.

Blockchain Can Wrest the Internet From Corporations’ Grasp


AS THE INTERNET has evolved over its 35-year lifespan, control over its most important services has gradually shifted from open source protocols maintained by non-profit communities to proprietary services operated by large tech companies. As a result, billions of people got access to amazing, free technologies. But that shift also created serious problems.

Millions of users have had their private data misused or stolen. Creators and businesses that rely on internet platforms are subject to sudden rule changes that take away their audiences and profits. But there is a growing movement—emerging from the blockchain and cryptocurrency world—to build new internet services that combine the power of modern, centralized services with the community-led ethos of the original internet. We should embrace it.

From the 1980s through the early 2000s, the dominant internet services were built on open protocols that the internet community controlled. For example, the Domain Name System, the internet’s “phone book,” is controlled by a distributed network of people and organizations, using rules that are created and administered in the open. This means that anyone who adheres to community standards can own a domain name and establish an internet presence. It also means that the power of companies operating web and email hosting is kept in check—if they misbehave, customers can port their domain names to competing providers.

From the mid 2000s to the present, trust in open protocols was replaced by trust in corporate management teams. As companies like Google, Twitter, and Facebook built software and services that surpassed the capabilities of open protocols, users migrated to these more sophisticated platforms. But their code was proprietary, and their governing principles could change on a whim.

How do social networks decide which users to verify or ban? How do search engines decide how to rank websites? One minute social networks court media organizations and small businesses, the next minute they de-prioritize their content or change the revenue split. The power of these platforms has created widespread societal tensions, as seen in debates over fake news, state-sponsored bots, privacy laws, and algorithmic biases.

That’s why the pendulum is swinging back to an internet governed by open, community-controlled services. This has only recently become possible, thanks to technologies arising from the blockchain and cryptocurrencies.

There has been a lot of talk in the past few years about blockchains, which are heavily hyped but poorly understood. Blockchains are networks of physical computers that work together in concert to form a single virtual computer. The benefit is that, unlike a traditional computer, a blockchain computer can offer strong trust guarantees, rooted in the mathematical and game-theoretic properties of the system. A user or developer can trust that a piece of code running on a blockchain computer will continue to behave as designed, even if individual participants in the network change their motivations or try to subvert the system. This means that the control of a blockchain computer can be placed in the hands of a community.

Users who depend on proprietary platforms, on the other hand, have to worry about data getting stolen or misused, privacy policies changing, intrusive advertising, and more. Proprietary platforms may suddenly change the rules for developers and businesses, the way Facebook famously did to Zynga and Google did to Yelp.

The idea that corporate-owned services could be replaced by community-owned services may sound far-fetched, but there is a strong historical precedent in the transformation of software over the past twenty years. In the 1990s, computing was dominated by proprietary, closed-source software, most notably Windows. Today, billions of Android phones run on the open source operating system Linux. Much of the software running on an Apple device is open source, as is almost all modern cloud data centers including Amazon’s. The recent acquisitions of Github by Microsoftand Red Hat by IBM underscore how dominant open source has become.

As open source has grown in importance, technology companies have shifted their business models from selling software to delivering cloud-based services. Google, Facebook, Amazon, and Netflix are all services companies. Even Microsoft is now primarily a services company. This has allowed these companies to outpace the growth of open source software and maintain control of critical internet infrastructure.

A core insight in the design of blockchains is that the open source model can be extended beyond software to cloud-based services by adding financial incentives to the mix. Cryptocurrencies—coins and tokens built into specific blockchains—provide a way to incentivize individuals and groups to participate in, maintain, and build services.

The idea that an internet service could have an associated coin or token may be a novel concept, but the blockchain and cryptocurrencies can do for cloud-based services what open source did for software. It took twenty years for open source software to supplant proprietary software, and it could take just as long for open services to supplant proprietary services. But the benefits of such a shift will be immense. Instead of placing our trust in corporations, we can place our trust in community-owned and -operated software, transforming the internet’s governing principle from “don’t be evil” back to “can’t be evil.”

Help! I want to pitch VCs but don’t want anyone stealing my idea

Q. How do I raise seed money but protect myself from someone else stealing my idea? I’m meeting with angel investors and small VCs, and some people want to make introductions to big players in my space. What do I do?

–Founder of a matchmaking firm now launching an app in the dating space

Dear Founder,

Don’t worry about someone stealing your idea. Everyone thinks what they are doing is so important and big and special. But here’s the surprising part: That doesn’t mean other people will want to go do it. Companies and investors are busy and have hundreds of other existing priorities. This is your one priority, so just go do it.

Amazing things happen when you share your idea. When Marc Benioff started Salesforce, he didn’t initially share his idea with a lot of people, but over lunch, his friend Bobby Yazdani, the founder of Saba Software, encouraged him to, saying that the number-one mistake entrepreneurs make is they hold their ideas too closely to their chest. Marc considered that and shared what he wanted to do. “It’s very good you told me,” Bobby said, and then introduced him to three contractors he had working for him who soon became Marc’s cofounders and helped him build an incredible service and company. Today, Marc has described meeting Parker Harris, one of the original three developers, as ”the luckiest thing in my life.” That’s synchronicity and it happened because Marc articulated his vision and shared it with someone who had experience, understanding, and a desire to help.

You’ll find way more synchronicity and power in sharing your idea than you will danger.

In fact, you’ll be more at risk if you are too closed off. It can be a real turnoff to investors if you are too secretive or cagey. We recently met a founder we really liked and we wanted to invest in her startup. We recommended that she meet a contact of ours at a big company who we thought could be helpful. She was afraid he would knock it off and build it on his own, so she refused to meet him. Her worry about being knocked off trumped her curiosity and dedication to build the best service possible, which was concerning to our team. It was such a big deal for us that we decided not to invest–even though we were very excited about what she was building.

Being too shy about what you are doing is a defensive move, not the offensive move you need to get money and to succeed. VCs are investors, not builders. Get them excited about you and your company, and get them on board so they can share their resources: money, connections, experience, and wisdom.

Of course, please remember, you don’t have to share everything. You can speak broadly but enough to make sure they are interested. I imagine it’s similar to what you would tell your clients. When you first start dating someone it’s imperative to share who you are, what you do, and what your values are, but you shouldn’t go into detail about your crazy sisters or bring anyone home to meet Mom and Dad on the first date!

As far as meeting someone who is in your space, do that later. Sharing your idea with investors is one thing, but you will not want to meet potential acquirers until you have traction. Control your own destiny as long as you can. Raise the money you need without going to those who can gobble you up.

Finally, if someone can steal your idea and do it better, then shame on you. But for now, let’s focus on what you can do if you stay focused on what you uniquely know. If you focus too much on the competition, you lose sight of where you are going. It’s hard to run up the stairs when you are always looking right and left, and for who’s coming up behind you. And, it’s not always as important as you might think.

Please allow me to share an example. Right when I joined eBay, Microsoft and Dell launched an online auction site called FairMarket. Everyone was very worried about this initiative. Could this be the end of eBay?

Obviously, we now know how this story ends: FairMarket never became a real threat and eBay wound up buying it a few years later. Had we gotten bogged down in competing against them we would have lost track of what we were doing, changed our strategy to be influenced by theirs, and given them validation in the market they didn’t warrant. It was more powerful to focus on what we wanted. We prioritized what was most important: scalability (we had significant service issues due to our success), trust (we had to make transactions safer for consumers), friction (most of the payments were by check or money order as opposed to PayPal, etc.), and user experience. We also expanded into multiple countries, either via new launches or acquisition. So, while we kept an eye on what the competition was doing, we spent most of our time making our successful service better, safer, easier to use, and more global.

Remember: You are your most important competition and ultimately your biggest threat. If you don’t build a product or service of relevance, it really doesn’t matter what your competition does. Believe in yourself, stay focused, and go out and create something amazing.

The most powerful person in Silicon Valley


It’s a bright September morning in San Carlos, California, and Masayoshi Son, chairman of SoftBank, is throwing me off schedule. I’d come, as he had, to meet with the people he’s tapped to run the Vision Fund, his $100 billion bet on the future of, well, everything. After almost four decades of building SoftBank into a telecom conglomerate, Son, an inveterate dealmaker, launched this unprecedented venture two years ago to back startups that he believes are driving a new wave of digital upheaval. He has staked everything on its success–his company, his reputation, his fortune. We’d both arrived with the same basic question: Where is this massive vehicle heading? But because I wasn’t the one footing the 12-figure allowance, I understood that I’d be the one to wait.

In the hubbub of Son’s visit, my 9 a.m. meeting gets rescheduled multiple times until it’s set for 4:30 p.m. When I finally arrive at the Vision Fund’s offices, just off California’s Highway 101, I’m struck by how mundane they are. Son is known for big, showy statements. He reportedly paid $117 million for a home in Woodside in 2013, the highest price ever in the U.S. This glass and concrete building, on the other hand, could be found in any part of suburban America.

The room where I wait is spartan. There is an empty desk in one corner, and a conference table with a fake-wood veneer. I try to read the pale gray scribbles on a whiteboard, hoping they might shed light on what happens in this place, but the surface has been too well scrubbed. The interior glass walls of the conference room have been lined with a white, papery substance that turns anyone on the other side into apparitions.

Finally, Rajeev Misra, CEO of the entity overseeing the Vision Fund, rushes into the room, smiling broadly and apologizing profusely. Misra, who has flown in from London for these meetings, looks exhausted but jacked up, as if he’s gotten a shot of adrenaline. Son has this effect on people. It is an exceptionally busy day at the Vision Fund. Not only is the big boss in from Tokyo, but unbeknownst to me, the team is preparing to announce billions of dollars in new investments: a $1 billion round for Oyo, the Indian hospitality startup; $800 million split evenly between Compass and OpenDoor, two real estate disrupters; $100 million for Loggi, a Brazilian delivery startup. It also would lead a $3 billion round in Chinese startup ByteDance, which makes several popular news and entertainment apps, including TikTok. At the same time, Son and his partners are in the midst of launching a second $100 billion fund, with plans already underway to raise an additional $45 billion investment from Crown Prince Mohammed bin Salman of Saudi Arabia—the Vision Fund’s primary backer. Neither Misra nor I knew it then, but this relationship would soon get complicated.

“So what do you want to know?” Misra says, clapping his hands loudly. “You want the road map? I’ll start from 10,000 feet. . . .”

On the surface, the story of the Vision Fund is about money. How could it not be? The numbers are eye-popping. The Vision Fund’s minimum investment in startups is $100 million, and in just over two years since its October 2016 debut, it’s committed more than $70 billion. Son, 61 years old, will also back companies he likes via SoftBank itself or other means: He’s put some $20 billion–and counting–into Uber and WeWork through a combination of financial instruments. (Son’s machinations have always been highly complex and it’s not worth getting lost in the minutiae; regardless of the means, the deals are at his behest.) His big-money bets agitate the venture capitalists who have long inhabited the dry stretch of lowlands between San Francisco and San Jose, a place where any fund over $1 billion was head-turning as recently as three years ago. Turns out, nobody likes competing with a bottomless-pocketed behemoth. “Have you seen the movie Ghostbusters? It’s like the Stay Puft Marshmallow Man tramping around,” one VC tells me before I visit SoftBank. Then he asks me to ask Misra the question everyone in town wants to know: Who is Son investing in next?

[Illustration: Señor Salme; Source for Big Picture: Savillis World Research. *Estimated investment]

Underneath, though, lies a more complex story. Computers, Son believes, will run the planet more intelligently than humans can. Futurist Ray Kurzweil coined the term “the singularity” to describe the moment when computers take over—and he predicts it will be here by 2040. The Vision Fund could move up this date. And Son is pouring unprecedented amounts of capital into the people and companies employing artificial intelligence and machine learning to optimize every industry that affects our lives—from real estate to food to transportation.

When Son first detailed his vision, during an investor presentation in 2010–slides depicted chips implanted in brains, cloned animals, and a human hand giving a robotic one a valentine–there were plenty of scoffs. Many see this machine-driven future as frightening, or even dystopian. But Son believes that robots will make us healthier and happier.

He has long told people, “I have a 300-year plan,” and that declaration is not just the fantastic ambition of a billionaire. He has the means to pursue these dreams, and they’re starting to become very real. He is one of the few people with the power to make decisions that could have global consequences for the future of technology and society for decades, if not centuries. As Facebook and Google have demonstrated, machines take on the attributes of their makers. Algorithms, software, and networks all have biases, and Son likes to bet on founders who remind him of himself, or at least share his ideals. Son’s values, then, will become our own, dictating the direction of this machine-powered world.

So where is this massive vehicle heading?

Our story begins with a dinner Son hosted one summer night in 2016 at his nine-acre estate in Woodside. The table was set in the garden so the guests could enjoy the crisp summer air of a northern California evening, as well as the breathtaking hilltop views of San Francisco horse country.

Among the attendees was Simon Segars, who had no idea when he sat down to eat that this would be one of the most important events of his life. Segars, CEO of chip designer Arm, had imagined that he might win some new business from Son–perhaps SoftBank would agree to put Arm’s chips in the cell phones it sells through its telecommunications businesses. He didn’t fully appreciate at that moment that one of his dining companions, Ron Fisher, has been one of Son’s trusted consiglieri for more than 30 years and is almost always present when Son is considering a major deal. “We started talking about AI and all these future-looking technologies,” Segars recalls, and Son grew visibly animated. They discussed how Arm’s technology could be used to turn anything–tables, chairs, refrigerators, cars, doors, keys–into a wired object. Son pressed Segars: If money were no constraint, how many devices could his technology create? As the leader of a publicly traded company, Segars had never been asked to think this way before. “I remember Simon’s eyes getting very wide,” Fisher recalls.

A few days later, Segars was at his desk when a call came from Tokyo: It was Son, who said he needed to see him and Arm chairman Stuart Chambers right away. Chambers was on vacation, on a yacht off the Turkish coast, but Son didn’t want to wait. He sent a private jet to fetch Segars and persuaded Chambers to dock his boat in the Eastern Mediterranean.

[Illustration: Señor Salme; Source for Big Picture: Orbis Research]

The day unfolded like a scene from a James Bond movie: Segars landed at a small airstrip near the village of Marmaris, Turkey, where two security men picked him up and whisked him to an empty restaurant overlooking the marina. (Son had arranged to have it cleared of other customers.) “It was surreal,” Segars says.Son got right to it: He wanted Arm and was willing to pay for it. In a deal that would astound Wall Street for its speed and audacity, SoftBank offered $32 billion for the company, 43% more than its market value at the time. Son negotiated and closed the deal in two weeks. A photo of that trip to Turkey shows Son standing by the port of Marmaris, boats bobbing on the sea behind him. He is smiling, as though he knows how big this moment is.

To pursue his sweeping vision of interconnecting everyday objects to create intelligent machines, Son would need more money. So he created the Vision Fund. The first investor was the Saudi Arabian Public Investment Fund, with a $45 billion commitment that October. It’s hard to overemphasize the significance of the Saudis coming in at this stage. The entire global venture capital industry invested just over $70 billion annually, so the idea of a single $100 billion fund seemed fantastical. The move conveyed such confidence in Son’s vision and ability to execute on it that it quickly attracted other investors, such as Apple, Foxconn, and Qualcomm. By the following May, the fund had secured $93 billion. As Son explained at the time, he needed this much capital because “the next stage of the Information Revolution is underway, and building the businesses that will make this possible will require unprecedented large-scale, long-term investment.” Now he was ready to start what Bloomberg has called “an all-out blitz on the heart of Silicon Valley.”

When I step off the elevator at WeWork’s headquarters in New York City one Thursday morning in October 2018, a dozen or so children have taken over the reception area. They’re students from WeGrow, an elementary school the company launched a year earlier, and they’re hosting their weekly pop-up vegetable stand. “Would you like to buy something?” asks a girl of around 6 or 7, holding an iPad listing products and prices. I’m here to learn how Vision Fund’s money is being spent and would rather not walk into my meetings holding a head of lettuce, so, feeling like the Grinch, I tell her I’ll pick something up on the way out. She shrugs; there are plenty of other customers.

Sunlight pours in through tall windows overlooking West 18th Street. The open floor plan lets me see from the reception area across rows of tables populated by WeWork members tapping away on laptops. At the far end of the space, there’s a wall of glass, behind which Adam Neumann, WeWork’s CEO, is taking a meeting. He looks like a rock star, with long, dark curls brushing his shoulders, black jeans, and a wide-brimmed black fedora, and as far as the Vision Fund is concerned, he is. “There is a sense of massive opportunity,” says Fisher, who sits on WeWork’s board. Son has even called WeWork his next Alibaba. In 2000, he put $20 million in the untested Chinese commerce startup. Today, Alibaba’s market cap is nearly $400 billion.

WeWork’s potential lies in what might happen when you apply AI to the environment where most of us spend the majority of our waking hours. I head down one floor to meet Mark Tanner, a WeWork product manager, who shows me a proprietary software system that the company has built to manage the 335 locations it now operates around the world. He starts by pulling up an aerial view of the WeWork floor I had just visited. My movements, from the moment I stepped off the elevator, have been monitored and captured by a sophisticated system of sensors that live under tables, above couches, and so forth. It’s part of a pilot that WeWork is testing to explore how people move through their workday. The machines pick up all kinds of details, which WeWork then uses to adjust everything from design to hiring. For example, sensors installed near this office’s main-floor self-serve coffee station helped WeWork discern that the morning lines were too long, so they added a barista. The larger conference rooms rarely got filled to capacity–often just two or three people would use rooms designed for 20–so the company is refashioning some spaces for smaller groups. (WeWork executives assure me that “the sensors do not capture personal identifiable information.”)

“We can go to Berlin,” Tanner says, tapping another monitor. He’s now using Field Lens, project-management software that WeWork acquired in 2017. Field Lens helps WeWork track building construction and maintenance. A live image appears. Zooming in, Tanner shows me how the system can pick up granular details about a site. We’re 4,000 miles away, but I see a nail sticking up from a floorboard. “We’ll have to get someone to fix that,” he says nonchalantly.

I ask what else we can spy on. He taps the screen and calls up a large map displaying each of the 83 cities in which WeWork operates. From here, we can drop down into any of them: Around the world in 80 nanoseconds.

“Basically, every object will have the potential to be a computer,” adds David Fano, WeWork’s chief growth officer, who is overseeing development of this new technology. “We are looking at, what does that world look like when the office is this highly connected, intelligent thing?”

[Illustration: Señor Salme; Source for Big Picture: eMarketer and Stratista. *Estimated investment. **Projected]

This is why Son is investing billions in WeWork. As of mid-December, the tally was up to $8.65 billion (including debt and funding of subsidiaries), and the real estate company was valued at $45 billion. [In early January 2019, SoftBank invested another $2 billion.] To meet Son’s lofty expectations, WeWork is spending as fast as it can to spread its footprint. It has more than doubled its locations in the 15 months since SoftBank’s initial investment, and WeWork has acquired six companies and invested in another half dozen. It has grabbed so much office space that it is now the largest commercial tenant in New York City, Washington, D.C., and London. It has expanded into Brazil and India. In the fourth quarter of 2018, the company planned to add more than 100,000 desks. This pace may only accelerate: SoftBank is in talks to take an even larger stake in WeWork for up to $20 billion, according to a source familiar with both companies.These moves have accelerated WeWork’s revenues but also its losses. In the first nine months of 2018, WeWork shed $1.22 billion, even as it grossed $1.25 billion. The company owes $18 billion in rent from office space it has leased. When WeWork issued bonds last spring to raise another $700 million, ratings agencies labeled them of lower quality, aka junk. “We cannot get comfortable with the company’s financial and operating position, which includes a massive asset/liability mismatch that is usually a recipe for disaster, significant cash burn, cyclically untested real estate business model, and uncertain path to profitability,” CreditSights analyst Jesse Rosenthal wrote at the time. The price of those bonds dropped almost 5% below their list value in their first five days of trading, a signal of investor skepticism.

As a result of WeWork’s hypergrowth, both physical and technological, the company is increasingly viewing itself less as a real estate company than “a spatial platform,” helping connect humans with intelligent machines. A 2018 internal WeWork presentation depicted the scope of the company’s aspirations as a series of concentric circles. On the outermost ring sit its actual business units, from its school to its gym to its live events (such as its annual adult summer camp, a mashup of the Governors Ball Music Festival, Bhakti Fest, and Burning Man). The next layer is the fundamental elements of human existence–live, love, play, learn, and gather–which those products seek to fulfill. Then, at the very center: We.

Neumann has always been the kind of entrepreneur who thought about having 100 buildings when he had three, but with Son backing him, WeWork’s expansion has been extraordinary. “Adam and Masa have a special relationship,” says Artie Minson, WeWork’s CFO. Those who work closely with them say Son sees in Neumann a younger version of himself–hungry and willing to move at top speed. Those inside WeWork say that Son’s mentorship has been critical. “He’s helped us move from asset-based thinking, how a building is performing, to how an account is performing,” says Fano, who joined WeWork in 2015 when the company acquired his building management startup. WeWork’s aim, he explains, is to “shed ourselves of any remnants of being like a real estate company.”

“Masa wants to meet with you. Can you get on a plane tomorrow?”

For many, the call to Tokyo comes out of the blue, as it did with Stefan Heck, founder and CEO of Nauto, a startup that builds AI-powered cameras to enable self-driving vehicles. Heck had been preparing for a board meeting and was reluctant to cancel it, but one of his board members told him to get going, saying, “People spend their whole lives trying to get a meeting with Masa.”

Every entrepreneur who receives money from the Vision Fund eventually sits down with the SoftBank boss. The Vision Fund’s 11 partners (based in California, London, and Tokyo) decide which entrepreneurs are ready at a weekly meeting, after months spent getting to know a company and its founders. Usually, CEOs are ushered into a large conference room atop SoftBank’s sleek Shiodome tower in Tokyo, which has expansive views of the harbor and beyond, a metaphor for how Son searches wider than almost all other venture capitalists for his investments. One of Son’s Vision Fund VCs, Jeffrey Housenbold, ex-CEO of the photo service Shutterfly, is leading an effort to build a system to track emerging startups, which he hopes will help the fund identify its next investments even faster and more efficiently.

Son is small in stature and soft-spoken. Those who know him well say he’s quick-witted and humble, with a self-deprecating sense of humor. When friends teased him about his vague resemblance to Charlie Brown, he put a Snoopy doll on his desk. One time, at an investor conference, he called himself “big mouth.” He loves the movie Star Wars. “Yoda says, ‘Listen to the Force,’ ” he told an interviewer, who asked him in May 2018 how he makes his investment picks. He rarely wears suits. When Nauto CEO Heck met Son for the first time, Son was dressed in jeans and slippers. “I have seen young founders come in very apprehensive to meet Masa,” says Fisher, who is often with Son during these pitch meetings. “By the end they are talking to him about their dreams.”

Colleagues say Son is at his happiest when chatting with startup founders–brainstorming, strategizing, inventing. “If Masa could spend the whole day doing what he loves, it would be meeting with entrepreneurs,” says Marcelo Claure, SoftBank’s chief operating officer and the former CEO of Sprint (the wireless carrier that boasts SoftBank as its majority owner).

Son is not focused on profit margins during these meetings. What he wants to know is, How fast can the company go? This has a hypnotic effect on his portfolio CEOs. “Masa told me, ‘The entrepreneur’s ambition is the only cap to the company’s potential,’ ” recalls Robert Reffkin, cofounder and CEO of the real estate brokerage platform Compass (who says Son also asked him the question about what he would do if money were no object). Sam Zaid, CEO of the car-sharing platform Getaround, remembers Son inquiring, “How can we help you get 100 times bigger?” before ultimately giving him $300 million in August 2018. Even proven winners are not impervious to Son’s motivational gifts. “It is people like Masa who can accelerate our world,” says Uber CEO Dara Khosrowshahi, who counts Son as his biggest investor. Khosrowshahi says Son’s backing will be key to helping him build Uber into “the Amazon of transportation.” And when Housenbold first met Son, the SoftBank chairman told his future Vision Fund partner, “We are going to change the world.”

Dave Grannan, cofounder and CEO of Light, another startup building 3-D cameras to be the eyes of self-driving vehicles, met the SoftBank leader in Tokyo last spring. (Son’s strategy is to make multiple bets in the same categories; the house wins either way.) Grannan was in Son’s office presenting how his technology works when Son grabbed a camera that the founder had brought with him as part of the demonstration. Son aimed its lens at a picture hanging on the wall, a portrait of a man who looked like a Japanese samurai from long ago. He then handed the camera back to Grannan without explanation. Later, Grannan, feeling that it might be significant, looked up the image. The subject was Sakamoto Ryoma, a famous ronin adventurer who rose from humble beginnings to overthrow the feudal shoguns of the Tokogawa era and launch Japan into the modern age. He is Son’s childhood hero. “Every morning when I come to work, it reminds me to make a decision worthy of Ryoma,” Son once told an audience. “Ryoma was the starting point in my life.”

Son grew up poor on the remote island of Kyushu, in southern Japan. His family had emigrated from Korea in the 1960s at a time when racism and anti-foreign sentiment were rampant. His parents had named him Masayoshi, the Japanese word for “justice,” because they hoped an honorable-sounding name would deflect cultural prejudices that cast Koreans as crooks, liars, and thieves. It didn’t work: Son was bullied at school.

Son drew strength from his relationship with his father, who was convinced that his child was destined for greatness. Once, while in elementary school, Son told his father, Mitsunori, that he wanted to be a teacher. Mitsunori, now 82, told him he was thinking too small about his future: “I believe you are a genius,” he said, according to Japanese biographer Atsuo Inoue in his 2004 book, Aiming High. “You just don’t know your destiny yet.” When Mitsunori was struggling to start a coffee shop, he asked his son to help him find customers. Son told him to offer free coffee to lure them in–and make up the losses once they came through the door. Mitsunori handed out drink vouchers on the street, and soon the café was full.

After earning a degree from UC Berkeley in economics and computer science, Son returned to Japan and launched SoftBank in 1981. He had only two part-time employees and no customers, but he had mapped out a 50-year plan for the company that started with selling computer software. It didn’t matter that, back then, very few people had computers and there was virtually no software business. When he told his two employees, “In five years, I’m going to have $75 million in sales,” the pair promptly quit.

To drum up business, he even followed the same advice he once gave his father: He handed out free modems on the street. Another time, Son reserved the largest booth at an electronics trade show and spent everything he had on fliers, displays, and a sign that read now the revolution has come. His booth drew a crowd, but still no sales. But he persevered, and by the mid-1990s, SoftBank was the largest software distributor in Japan and Son took the company public on the Japanese stock market.

Son was drawn to the burgeoning internet boom of that era, and his attention turned to the United States. Success with investments in Yahoo and E-Trade led the company to make others, and by 1997, Silicon Valley’s local newspaper labeled SoftBank the most active internet investor. “Our über-strategy is to get everyone’s eyeballs, then their money, then a piece of everything they do,” one of the company’s VCs later told Forbes. In January 2000, two months before the peak of the dotcom era, Son claimed to own more than 7% of the publicly listed value of the world’s internet companies, via more than 100 investments. As Son has told the story, at one point his personal net worth was rising by $10 billion per week; for three days, he was richer than Bill Gates. But SoftBank’s stock slid as investors started to question Son’s relentless dealmaking, particularly his decisions to acquire a bank and bring the Nasdaq stock market to Japan via a joint venture. Rivals and skeptics believed these moves would be used, respectively, to fund SoftBank investments and take them public. Then the U.S. markets crashed, in April 2000, and the stocks of such SoftBank high-fliers as, Webvan, and even Yahoo collapsed. Son, a true believer, only sped up his investing in the face of the dotcom apocalypse. By March 2001, The Wall Street Journal reported that SoftBank had bet on 600 internet companies. By that count, he’d more than tripled his exposure in 14 months. During that same time, SoftBank’s stock fell 90%, and $70 billion of Son’s net worth disappeared.

“Most human beings who’ve had the kinds of experiences he’s had become tentative,” says Michael Ronen, who has worked with Son for 20 years, first as a banker at Goldman Sachs and now as a partner in the Vision Fund. But Son, friends say, thrives on the edge. “You’ve never seen someone so fearless,” says Ronen.

Even as Son’s empire was tanking, he invested $20 million for a 34% stake in a then obscure Chinese e-commerce site run by a former teacher. Fourteen years later, when that company, Alibaba, went public, that stake was worth $50 billion.

“Twenty years ago, the internet started, and now AI is about to start on a full scale,” Son told investors and analysts this past November while reporting SoftBank’s second-quarter results. Standing on stage in Tokyo, he laid out the numbers to back up his assertion. Behind him, a slide featured dozens of companies in the Vision Fund’s portfolio, many now valued at more than $1 billion (in part due to SoftBank’s largesse). The Vision Fund’s returns–after selling its stake in Indian e-commerce company Flipkart to Walmart in May 2018–had boosted SoftBank’s operating profits by 62%.

Son and his colleagues refer to his strategy by using the Japanese phrase gun-senryaku, which can mean a flock of birds flying in formation. (Son also refers to his investments as his cluster of number ones.) Collectively, these enterprises are moving faster–and more forcefully–than they ever could individually. Those on the inside say it is even more rapid than anyone on the outside realizes. Over the summer, Son asked Claure, his COO, to start a new internal division devoted to “value creation.” Its purpose is to help Vision Fund entrepreneurs access SoftBank’s vast global resources and partnerships. Claure currently has 100 people working on the team, technically known as the SoftBank Operating Group, and expects to have 250 dedicated to these efforts by sometime next year.

A key element of this value creation comes from connecting companies to help each other grow. Son hosts dinners and events to bring people together, and he suggests they use each other’s services (a strategy he also deployed in the 1990s). For example, Compass and Uber rent space from WeWork. Mapbox, an AI-powered navigation system, inked a deal with Uber last fall. Nauto has met with executives from GM Cruise, the self-driving software maker in which SoftBank invested $2.25 billion last spring. Son’s introductions help entrepreneurs feel more connected to a bigger purpose. “The family concept really does work,” says Nauto CEO Stefan Heck. “There is a level of trust among us that we are all building toward this vision.”

[Illustration: Señor Salme; Source for Big Picture: McKinsey Global Institute. *Estimated investment]

One evening last fall, Son hosted a dinner at his home for his senior investing team. Gathered around Son’s dining table, the group discussed the company’s future. Son mentioned some companies he’d recently met with in Asia that were finding new ways to apply artificial intelligence to their businesses. He explained why he believed AI could cross into so many different industries, which spurred a lively conversation about the new opportunities others at the table were seeing. There was a sense of enormous forward momentum. Where else could they go?Sometimes, though, the universe pre­sents an unexpected detour. Right around the time of the dinner, news broke that operatives working directly for SoftBank’s biggest investor, the Saudi Arabian government, had murdered Saudi journalist (and American resident) Jamal Khashoggi. Almost immediately, Son was thrown into a geopolitical maelstrom. SoftBank’s stock plummeted as investors fretted about the implications of his close ties to Crown Prince Mohammed bin Salman, whom the CIA concluded had personally issued the kill order. Only a month earlier, after committing $45 billion to back a second fund, bin Salman told Bloomberg that without Saudi backing, “there will be no Vision Fund.”

As gruesome details about the murder emerged, the pressure on Son became intense. “Right now, any CEO taking money from SoftBank would put him or herself at risk of an employee revolt,” one top Silicon Valley investor told me a week after the murder. “No one wants to be connected with blood money.” Some of Son’s Vision Fund companies publicly tried to distance themselves from Saudi Arabia (Compass’s Reffkin issued a statement saying, “The death of Jamal Khashoggi is beyond disturbing because the freedom and safety of the press is something that is incredibly important to me.”) Uber’s Khosrowshahi and Arm’s Segars pulled out of a major Saudi investment conference in Riyadh in October. Son did as well, but another Vision Fund partner did participate—and Son met privately with bin Salman that week in Riyadh. What they discussed has not been disclosed, but it is clear that somehow Son was reassured. In November, he announced plans for a $1.2 billion solar grid outside of the Saudi capital. “As horrible as this event was, we cannot turn our backs on the Saudi people as we work to help them in their continued efforts to reform and modernize their society,” Son said in a statement. “MBS seems to be riding out the controversy,” says Karen E. Young, a resident scholar at the American Enterprise Institute, pointing out that for anyone interested in doing business in the Middle East, Saudi Arabia cannot be ignored. “[Son] is a businessman. He is not going to turn his back on $45 billion.”

The global network that Son has built during his four-decade career is as vast–and important to him–as his war chest, friends say. It includes business leaders such as Bill Gates, Warren Buffett, and Jack Ma, and world leaders such as China’s Xi Jinping, India’s Nahendra Modi, and Donald Trump. “You have to remember who helped you along the way and the loyalty that one has to show for your partners during good times and bad times,” says one person close to Son.

Son is working to ensure that the Vision Fund can survive, with or without Saudi money: SoftBank secured some $13 billion in loans from banks last fall, including Goldman Sachs, Mizuho Financial, Sumitomo Mitsui Financial, and Deutsche Bank. Son has also made clear that the Vision Fund is very much open for business, announcing a slew of new deals, including $1.1 billion for View (a maker of “smart” windows), $375 million for Zume (which builds robots that can cook), and that lead investment in ByteDance and its AI-powered news and video apps. “This is just the beginning,” Rajeev Misra tells me in December. Over the next year, the Vision Fund plans to back dozens of new AI-driven startups, almost doubling its portfolio from 70 to 125 companies.

There is no one on the planet right now in a better position to influence this next wave of technology as Son. Not Jeff Bezos, not Mark Zuckerberg, not Elon Musk. They might have the money but not Son’s combination of ambition, imagination, and nerve. The network of companies within the Vision Fund, if they succeed, will reshape critical pieces of the economy: the $228 trillion real estate market, the $5.9 trillion global transportation market, the $25 trillion retail business. We won’t be able to turn Vision Fund–backed services and technologies off like computers and smartphones. They will, ultimately, have minds and thoughts of their own.

Of course, Son is not an unstoppable force. Any number of factors–economic downturns, geopolitical crises, government regulators–could upend his best-laid plans. There’s always the possibility he could be betting on the wrong companies. Son, however, doesn’t have time to traffic in doubt. “There are good times and bad times,” he proclaimed when he launched the Vision Fund, “but SoftBank is always there.”

After 25 years studying innovation, here is what I have learned

It’s been more than 25 years since I wrote my first book, The Innovator’s Dilemma. Since that time I’ve learned that the best answers to the enormous problems we are struggling with always starts with asking the right question. I’ve since written 11 other books (and more magazine articles than I can count) but each has always started with my desire to answer a simple, but perplexing question. The Innovator’s Dilemma asked: Why do great firms fail, especially at the hand of smaller and less resourced upstarts? The answer: Disruptive innovations. These are innovations that are less expensive and poorer performing than existing products on the market. Disruptive innovations are often targeted at customers for whom products on the market are either too complicated or too expensive. The Innovator’s Dilemma has helped entrepreneurs, managers, and investors understand how these upstarts could eventually upend their market.

More recently, I’ve asked what may be the most important question yet: Where does lasting prosperity come from? The answer: Market-Creating Innovations. These are innovations that transform complicated and expensive products into products that are simple and affordable so that many more people in society can access them. In some cases these innovations are disruptive, but in every case the new markets that are created serve as a strong foundation for sustained economic growth.

Over the years, I have had the opportunity to learn how to ask good questions from so many people — my family, my students at Harvard Business School, executives of major corporations, and Presidents and Prime Ministers of nations. But the goal of asking questions is always to get to better answers. So I offer here some of the most important answers I’ve found over my years of teaching to life’s most challenging question.

1. Not all innovation is created equal

The word innovation has become a buzzword routinely used to describe things that are new, shiny, feature-rich, and, in some cases, breakthrough. While all those are certainly characteristics of innovations, they are less helpful when trying to understand how companies and nations can organize themselves in ways that can truly foster growth. And so, for clarity, I use this definition, the same one I used in my first book: innovation is a change in the process by which an organization transforms labor, capital, materials, or information into products and services of greater value. That definition helps us understand that, from an economic development standpoint, there are primarily three types of innovation: market-creating, sustaining, and efficiency.

Market-creating innovations do exactly what the term implies: they create new markets. But these are not just any new markets; they are new markets that serve people for whom either no products existed or existing products were not accessible for a variety of reasons, including cost or the lack of expertise required for their use. Market-creating innovations include transforming complicated and expensive products into ones that are so much more affordable and accessible to an increased number of consumers who are able to buy and use them. In some cases, such innovation can create entirely new product categories. For example, when Henry Ford developed the Ford Model T, he made the car simple and affordable for millions of Americans that so many people were able to buy the product. The new market Ford created led to many other markets that provided a solid foundation for growth and prosperity in America.

Sustaining innovations are improvements to existing products and services already on the market and are typically targeted at customers who require better performance. For example, when an automaker includes new features such as heated seats, power windows, and adaptive cruise control, these are all sustaining innovations. They are important for companies and their host countries to remain competitive, but they have a very different impact on an economy than market-creating innovations. For instance, companies rarely need to build new sales, distribution, marketing, and manufacturing engines when they develop sustaining innovations in a mature market because they are selling to an existing customer base from relatively known segment of the population using already-developed channels.

Efficiency innovations enable companies to do more with fewer resources. Examples are outsourcing a firm’s activities to take advantage of lower wages or using technology, like automation, to reduce costs. With efficiency innovations, companies can become more profitable and, critically, free up cash flow, but they often sell to already crowded and competitive markets.

When we understand that there are different types of innovations, we begin to see how each impacts both a company and an economy differently. It turns out that, contrary to the conventional wisdom that a society must “fix” itself — its infrastructure, courts, legislatures, financial markets, and so on — before innovation and growth can take root, our research at the Christensen Institute suggests that innovation is the process by which a society develops. Innovation funds our infrastructure, cultivates our institutions, and mitigates corruption. When a country’s prosperity stalls despite a lot of activity within its borders, that country might not have a development problem. It might have an innovation problem.

2. Data is not the phenomenon

More than ever before, we are awash in data about virtually everything. Data about products, customers, economies, poverty, and progress. We need data. But what does data really tell us? Data, metrics, and statistics are not the phenomena of many of the things we seek to understand. Data simply represents the phenomena. But substituting data for the phenomenon without truly understanding what is going on underneath that data can lead to devastating outcomes. Consider how it often plays out in corporations.

Dell Computer hit its stride in the 1990s and quickly became one of the most successful and profitable computer companies in the world. But over time, in an attempt to continually improve its efficiency metrics and financial ratios such as RONA, the company outsourced many of its operations to a Taiwanese company, Asus. Profitability skyrocketed and Dell analysts rewarded the company accordingly. The data on Dell’s balance sheet looked good. But the phenomena behind the data — the innovative prowess of the company — didn’t. In 2005, after Dell had outsourced enough activities to Asus — effectively putting the company into business — Asus announced the creation of its own brand of computers. And the rest, as they say, became history. All along, the numbers had looked good to Dell. But what the numbers had not shown was the impact these decisions would have on Dell’s future.

3. Management can be a noble profession

One of the theories that gives great insight on the question — “How can I be sure I find happiness in my career?” — is that the most powerful motivator in our lives isn’t money; it’s the opportunity to learn, grow in responsibilities, contribute to others, and be recognized for achievements. Over the years, I have told my students about a vision I had while I was running a company I founded before becoming an academic. In my mind’s eye I saw one of my managers leave for work one morning with a relatively strong level of self-esteem. Then I pictured her driving home to her family 10 hours later, feeling unappreciated, frustrated, underutilized, and demeaned. I imagined how profoundly her lowered self-esteem affected the way she interacted with her spouse, and her children. The vision then fast-forwarded to another day, when she drove home with greater self-esteem — feeling that she had learned a lot, been recognized for achieving valuable things, and played a significant role in the success of some important initiatives. I then imagined how positively that affected her as a spouse and parent. It was then that it hit me: Management is perhaps the most noble of professions if it is practiced well. No other occupation offers as many ways to help others learn and grow, take responsibility and be recognized for achievement, and contribute to the success of a team.

Management isn’t simply about P&L statements, meeting quarterly growth and profitability targets, and creating brand awareness. Those are byproducts of good management. Management is about waking up every day and helping people become better people so they can do better work and live better lives.

4. Don’t reserve your best self only for your career

Your decisions about where and how you allocate your resources — time, energy, and talent — ultimately shape your life’s strategy. For me, there are many things that compete for these resources: I’m trying to have a rewarding relationship with my wife and five children, contribute to my community, succeed in my career, contribute to my church, and so on. And I have exactly the same problem that a corporation does. How much do I devote to each of these pursuits?

Allocation choices can make your life turn out to be very different from what you intended. Sometimes that’s good: Opportunities that you never planned for emerge. But if you make poor choices about how to invest your resources, the outcome can be bad. When people who have a high need for achievement have an extra half hour of time or an extra ounce of energy, they often unconsciously allocate it to activities that yield the most tangible accomplishments. And our careers provide the most concrete evidence that we’re moving forward. You ship a product, finish a design, complete a presentation, close a sale, get paid or promoted. In contrast, investing time and energy in your relationship with your friends and family typically doesn’t offer that same immediate sense of achievement. Kids, for instance, misbehave every day, and it’s not until 20 odd years later that you can say, “I raised a good kid.” You can neglect your relationship with your spouse, and on a day-to-day basis, it doesn’t seem as if things are deteriorating. People who are driven to excel have this unconscious propensity to underinvest in their families and overinvest in their careers — even though intimate and loving relationships with their families are the most powerful and enduring source of happiness.

5. God does not hire accountants

As I have thought about all the things I have accomplished as a Harvard Business School professor, the co-founder of many organizations, and a husband, father, and friend, I learned one of the most important lessons of my life: God does not hire accountants in heaven.

In essence, because human beings have finite minds, we need to aggregate. And so, every year, we aggregate sales, costs, and figure out earnings. We aggregate responsibilities and the person who is responsible for many things is valued as such. The CEO, for instance, is the most valuable person in an organization. It’s the way we — finite beings — make sense of all the things going on.

But God is different. Because he has an infinite mind, he does not need to aggregate above the level of an individual. As I thought about this, I realized that the way God would measure my life is different than how we measure each other’s. Instead of aggregating all my accomplishments, comparing them with the accomplishments of my friends and colleagues, and then giving me a grade, he would simply want to know how I helped other people. It will not be about my degrees, books, or awards, but about the lives I was able to assist along the way.

Solving our toughest problems may not be as simple as asking better questions, but it’s certainly the right way to start. This requires us to challenge our assumptions, see the problem through new lenses, and open ourselves to ideas and approaches that may be difficult at first. But as Marcel Proust once said: “The real voyage of discovery consists, not in seeking new landscapes, but in having new eyes.”

Clayton M. Christensen, Efosa Ojomo and Karen Dillon are the co-authors of The Prosperity Paradox, How Innovation Can Lift Nations Out of Poverty, on which this article is based.