Don’t drink your own Kool-Aid

Posted on Sep 13, 2009 | 54 comments

Don’t drink your own Kool-Aid

This is part of my ongoing series “Start-up Lessons”.


Startups are hot again.  I have family members asking if they can “get in on some deals,” every town is launching an incubator (or 3) and the papers are filled with stories of fund raisings, product launches & new innovation.

If you’re one of the anointed few who is getting the adoration of the press, investors and employees – enjoy the moment and capitalize on the momentum but stay grounded.

On Kool Aid:

I want to talk about Kool Aid.  Yours.  Don’t drink it.  I know you’re thinking that you have your head on straight but I promise you the experience of finding yourself in this maelstrom will leave any first time entrepreneur spinning.  Fame and adoration corrupts first timers.   And if you’re not careful you might start to believe your own hype.

My Story:

The public coming out for my first company, BuildOnline, was in early 2000.  We had scrambled to get a product to market, built our first website, rapidly hired a technology team, raised our seed round of capital ($1.5 million … yes that was seed in 1999!) and were ready to take off the covers and tell the world.

Around this time B2C eCommerce had been dominating the media but the wheels were starting to come off.  People were starting to get cynical about yet another pet website or another website for buying art.  Everybody thought the real substance was going to come from B2B eCommerce players that would deliver “real value” by disintermediating supply chains … blah, blah, blah.  Chemdex (Ventro), VerticalNet, Ariba, PurchasePro and CommerceOne were the new big boys on the block.

So journalists were looking for a new story to tell.  They always need something new.  We were it in Europe: B2B.  We appeared in a prominent article in the Financial Times.  The phones rang off the hook (we didn’t even think about hiring somebody to answer them).  We had 6 term sheets in no time.  We closed a $16.5 million A round.  Off to the races.  We started building 4 products so that our end-to-end, supply-chain services would be complete (MVP?  Not so much.)

Etablissement public du musée et domaine national de VersaillesGoldman Sachs was an investor.  They got us invited to the Fortune CEO conference in Paris held at Versailles.  Jacques Chirac, the president of France was the keynote speaker.  I dined at tables next to Michael Dell, Jerry Yang, Jerry Levin and the CEO of Sony .. Idei-san.  I had champagne in the private wine cellar of Bernard Arnault (the owner of LVMH, which in turn owns Dom Perignon).  I was on CNN, who taped live from the event.  I sat next to Irwin Jacobs (founder of Qualcomm) on a bus ride.  I felt I had earned the right to be there.

We then had a piece in Time Magazine, The Wall Street Journal, Europe,  we ran front cover of Tornado Insider (the top VC magazine in Europe at the time).  We headlined at the Red Herring Europe conference (they were the equivalent of TechCrunch today).  Gartner, Forrester, Jupiter and AMR Research all had good things to say about us.  Goldman release a report on us.  There was talk of an IPO in 12 months.

We were hot.  Until we weren’t.  That’s OK.  It happens to many companies that ride the wave.  The problem is that we had drunk a dose of our own Kool Aid.  We felt invincible.  We listened way too much to what the press said.  We listened to the analysts tell us how we were going to change the industry.  We instructed customers about how eCommerce was going to change their future.  We knew. (It kind of reminds me a bit of how “social media experts” are talking to customers today).

Mistakes we made?  Raised too much $ (we were changing the world), hired too many people, built product too quickly before customer feedback (we knew what they needed), charged too much for our products (because we could), held too many biz dev meetings, wasted time brokering international licensing agreements (from people in the Philippines, New Zealand, South Africa, Poland who had read our press) and of course wasted too much time on M&A discussions.

This is only the first chapter in my story.  2001-2004 were very humbling but we built a real company.  That story for another day.

Don’t Believe the Hype – take your lesson from Public Enemy (video worth a 4 minute diversion) ;-).

public_enemy1. Don’t listen to what journalists say about your product or company. They’re good people and I have many friends who are journalists.  But they have stories to crank out.  They often don’t have time to really understand what you do.  And their stories certainly won’t attract many readers if they say, “this product is pretty similar to all the other ones I’ve seen.”

They get paid to say, “Company X is the new FriendFeed” just 2 days after Facebook acquires FriendFeed.  That grabs headlines.  You’re not FriendFeed.  Get over it.

2. Don’t get too excited about your new found fame. Your parents are sending your clips to all your cousins.  Your high school friends are reaching out to you.  People who don’t understand think you’re about to be really rich.  Trust me – it’s surreal.  Enjoy your pats on the back but then back to work.

3. Make sure you focus on what matters – your customers.   If you’ve gotten a bit of press,  now is your moment to double up on your efforts to understand your customer base.  Listen to their feedback.  What problems are you solving for them?  What features are missing that would make their lives easier?  Film them using your product to learn about UI issues.  Really make sure you’re measuring what they’re doing.  Strangely – we found many customers telling us how much we had improved their working experience but the logs showed they almost never logged on.  People want to feel like they’re at the cutting edge.  Don’t believe their hype either.  Listen to the data.

4. DO capitalize on the moment in time while you’re still part of the news cycle. If you need VC, no better time than after you’ve just gotten some great press coverage.  Create a great press-kit that you have easily accessible on your website.  Use social media to be sure people are aware of it.  Get stories written.  Just don’t believe what they write about you.

Market, market, market.  Once the cycle has passed it’s harder to capitalize.  And believe me, this current hype cycle WILL end.

5. Enjoy the moment. Record it with video.  Write a blog posts / journals about how you feel while you’re on the ride.  You can’t recapture your emotions properly later.  Bottle it – there is nothing like this moment.  I’m envious.  It is the roller coaster that is a start-up and something that people making your Kool Aid on the sidelines will never truly understand.


I did get to have a second act.  We launched out second company, Koral, at DEMO in 2006.  We went through the hype cycle again but this time I was grounded.  I had a plan.  I knew where I wanted to take all the energy we had created.  I loved the product my team had build – it was truly groundbreaking.  But I never took a sip.  KoolAid is no longer part of my diet.