Ryan Rutan: Welcome back to the episode of the Startup Therapy podcast. This is Ryan Rotan joined as always by Will Schroeder, my friend and founder and CEO of startups dot com. Will we just crossed an important milestone this episode? Maybe the last one, maybe the one before, honestly, who knows at this point? But we have done more than 200 episodes of startup therapy, which seems insane. There

Wil Schroter: are some people that have listened to every single episode, we make the episodes and we've never listened to every single episode. And what's interesting to me is at this point, if someone's listened to 200 episodes, they've listened to hundreds of hours of us, Ryan, hundreds of hours of us droning on,

Ryan Rutan: I'm expecting requests for reparations any day

Wil Schroter: now. Oh, my gosh. If you're listening, if this is your 2/100 episode, you are officially our best friend. Why? Because you've spent more time with us than most of our, our friends have so, so welcome friends to the 2/100 episode. Wow.

Ryan Rutan: Yeah, it does seem like quite a milestone. All right. So today we're, we're gonna talk about as always something that that happens a lot in founder town. As founders, we are never really short on ideas about where to go, what to do next. And often that coincides with a startup, we're currently running. Right. So we're running something and we have another idea and we start to think about how cool it would be to go and do that instead, right. You know, jump out of the pan and into the fire and run for the greener grass near the side of the fence. And what have you? So how often does that actually work out when we decide to go on and do the next one and the next one, the next one? And even as repeat founders, what, what are the odds and how clearly are they in our

Wil Schroter: favor? They suck. The odds are really bad and, and what we're gonna talk about today is what are the chances that if I have a success, even if I don't think it's that much of a success that if I have a success and I say to myself, you know, what I could probably do better on the next one. So let me get out of this thing and go to the next one. What is the probability? And what is the general history of how well that works? And in the T L D R, you know, spoiler alert is that it usually goes pretty poorly. But let me tee this one up because this actually was inspired by a friend of mine who's AAA regular listener to the show and we're at dinner and we're talking about this amazing success that he has in his company. He's, I know he's listening. So this is you buddy. And we were talking about how, you know, what his next deal would be or things like that. And I said, you know, this is gonna sound odd but this statistically is probably the best thing you'll ever do. And he's fairly young. He's been at this for a long time. He's built a great business, hundreds of millions in revenue, all this great stuff. But the reality is the probability of doing this twice or ever. It's really low and no one ever stops to tell you right at a dinner like this, right where they're like, you know, buddy, this might be and probably will be the last time you ever get to this point. And it seems weird. Right. Because doesn't it feel right? It doesn't feel like if we've done it once, we should be able to do it at least as well. The, the next time.

Ryan Rutan: Yeah. I mean, unless you're the Cubs and you're trying to win the World Series. Uh, yeah, but that, it's just not how it works. Right. I mean, the, the statistics are very clear on this, that previous success doesn't ensure future success. It, it barely even shifts the odds. Right. You, you cited the stat and I'll let you, I'll let you spit it out, but you, you cited the stat before the show around what the probability of even somebody who's gone all the way to taking a company public, how well they fare on their next startup. And it's not pretty, you might as well go play the ponies. It's kind

Wil Schroter: of a dated step, but it was a pretty in depth Harvard business review overview of how well repeat founders have done and roughly what it said was, I'm not and I'm approximating roughly what it said was for those that went, like you said, Ryan to public companies like dude, by far, the most successful you could possibly be, which puts you in the most rarified air there is, right, you know, short of being billionaire status, all those things tend to come hand in hand. Yeah, they tend to go together of the most successful founders that were venture funded. All these great things out of that, 30% of them were successful on their next go around, not as successful, just straight up successful at all. And those are the best of the best of the best. What does that look like for the rest of us? Not very good. I'll share some stories. We've talked about this before, but the greatest success I had was my first company. This represents my ninth. I've never replicated that success since then. And I don't think people understand that. Like why I mean, you've been at this for a long time. You, you build startups for a living. You possibly could possibly know and you're building a startup about how to build startups. Like, how much more meta does it get? It doesn't matter, it doesn't matter, it doesn't matter that I've done it before. It doesn't matter. I have experience, et cetera. It helps. But there's so much more to repeat success that have nothing to do with past success. And I think that's what we should dig into today.

Ryan Rutan: Yeah, I think that's fair. It's such a challenge for so many founders because they're looking at what they've already accomplished and, and in some cases, look, they're not even coming off success, right? They're just saying, look, I learned a lot from this first one sometimes all through negative feedback, right? Like I made all the there go, I won't make them the next time. And that would be true if all of the potential and possible mistakes waiting for you were the same as the ones you went through the first time. And yet you and I know having been through this a couple dozen times, they tend to be different each time. Right? There are some similarities and yet when we try to predict the odds of future success based on what we've already done, whether through success and we want to leverage that success or through mistakes and learnings, we want leverage those. It isn't really the straight math that we would hope it to be. And this leads a lot of people into jumping into what they assume will be an easier opportunity that just turns out to be the same shit show slog that the first one was or the third one was or the fifth one or the 10th one,

Wil Schroter: right? You have a lot of parallels here. If, if we wanna try to give some, some people analogies to attach to every musician has their best album, every director has their best movie. Every actor has their best movie. Every athlete has their best championship, right? They didn't win them all. They were clearly the best at that moment. But what people fail to understand is this isn't a linear path. It's not like if I did the best for the first time, the conditions for being the best, just keep repeating. They actually

Ryan Rutan: don't, I graduated a successful founder and I can never go back. Right. Doesn't

Wil Schroter: work that way. And I think where this blows us up is particularly early in our careers because we have nothing to compare it to. We don't understand that maybe a early success that we've had is so damn hard to replicate. Ok? And we'll get back to that in a second. You know, we'll talk about how hard it, all those things have to come into. But let's just talk about more of our mindset at the time, our mindset at the time when things are going well is Yeah, this was hard twist turns all these crazy things. But like, anything in life, if I've done it once it stands for reason that I can do it again. So that's where the logic starts. The second is, this is now my baseline of success. If, if I've done it this well, I'll have to do at least better because everything else in life. That's kind of how it works. Yeah, this

Ryan Rutan: isn't a growth chart though. Right? Just because you reach exactly six doesn't mean you can't go back to three ft two. Right? Like, it doesn't work that way at all. We talked

Wil Schroter: about this before where we said if this was being in grade school, it would be like being able to go from first grade to 12th grade and then spend the rest of your life life in second grade and never getting past it. Right. And again, we can't even comprehend that. And so when we're early in our careers, early in our careers, we're sitting there and we're like, ok, all I've known is success again. I, I take myself, you went through a similar situation where I'm in my twenties. I go from broke kid coming out of welfare to millionaire kid. Right. Like, overnight. And so in my mind, not that I wasn't grateful. Nothing like that. I just didn't know anything different.

Ryan Rutan: Yeah, this is how it works. I apply myself and I get this outcome, I apply myself and I get this outcome. Right.

Wil Schroter: Yep. Didn't have another version of life to compare it to. It's the only one I had going. So that ends up going pretty well. But I headed into my thirties and now I'm thinking, well, dude, I mean, come on, if that was my freshman effort. Right. And this isn't me being like arrogant about it. It's just logical. Obviously, if I've done this well, once

Ryan Rutan: I can do this again and again. Oh my

Wil Schroter: God. I go into my thirties and holy cow. What a splash of ice cold water on my face. Right. I start my next thing and I'm like guns blazing, ready to build in scale. And year one goes by like nothing happens. Year two goes by, it goes 8% better. Year three goes by. And I'm like, what the hell, man? Yep. And now you fast forward over a career of 30 years at night in startups. And now I get it. Now when I'm sitting across from my friend, like, like we talked about at the top of the show and he's talking about it with the success he's had. He's in his mid thirties. He's worked really hard. He's an incredible company. It's like, I'm, I'm jumping in that time machine that we always talk about Ryan. We're like, we're gonna go back and kind of talk to ourselves and we had that conversation if you could zoom back if you could talk to 22 year old Ryan knowing what, you know, now, what would you

Ryan Rutan: say by Google? Um Yeah.

Wil Schroter: Yeah.

Ryan Rutan: Google said, yeah. Actually it would be interesting because I, I think I would definitely revisit. That was right around the point. It was the year after I had sold the first company and I would probably question whether or not that that sale was actually the right move at the time. In hindsight, there was more value that could have been added there. I could have grown that valuation significantly higher and I could have either held or sold at a, at a different multiple than what I did. Right. I was satisfied with the multiple that I had because again, I had nothing to compare it to. And the amount of money that I was offered sounded like, well, it was to me all the money in the world at that point. Right. It was exponentially more money than I'd ever had and I was going to be able to pay out, um, all of my staff and, and it was gonna be, it was gonna be great and then I could go on and do the next thing. Right. And to be honest, and we both talked about this, I was definitely done with the type of work that I was doing within that company from, from a day to day standpoint, I didn't want to be doing that work anymore. And so that part wouldn't go away that part wouldn't change. I built that company opportunistically, it wasn't like I always dreamed of solving this problem for people. Somebody approached me in a hallway and was like, hey, could you fix this for us? Sure. You know, pay me. Ok, cool. Let's keep doing that, rinse and repeat that sort of accidentally built the business. And so in that regard, I think there's two things I would tell 22 year old Brian is be more careful about what you build next time so that you don't end up inside something that you don't want to be inside, be more deliberate about what you build in the first case and be very clear and very willing to stay with it longer than you think necessary and be willing to avoid those distractions of the, the next shiny object. Because very much like, like your case, I went on to do another couple of things that worked out in, in some cases and were abject failures and others, but never achieved that same level of success. The next couple right there, there were things later, but at that point, those were just like base hits compared to the initial home run. And so I thought like, I, I don't even have to play baseball anymore. I just get invited to home run derbies. This is all I have to do now. I just hit balls that right. And I was forced to bunt a couple of times and I'm like, wait a second and this is where my baseball knowledge ends. I can't do that any further. Um So, yeah, but yeah, it was, it was, it's such an interesting process, right? Because you assume, right? Because 22 year old Ryan, here's the fun part, right? 22 year old Ryan's response would have been like, dude, like just crush it on that. What do you talking about? I'm gonna have three or 456, maybe all of the rest of the startup companies ever do are never gonna achieve that same level of success. I never, I never would have believed that at that age, right? The hubris at that point was fueled by, by the exit too. I think that's the other problem.

Wil Schroter: You know, something that's really funny about everything we talk about here is that none of it is new. Everything you're dealing with right now has been done 1000 times before you, which means the answer already exists. You may just not know it, but that's ok. That's kind of what we're here to do. We talk about this stuff on the show but we actually solve these problems all day long at group dot startups dot com. So if any of this sounds familiar, stop guessing about what to do, let us just give you the answers to the test and be done with it. And so stick with that like you're, you're in that mentality and you don't know any better, you know, who doesn't have this problem? Founders in their forties, fifties and sixties because they definitely know better. You've got two things happening at that point. One, you've got your own experience, right? So you've got your own experience of having now had some successes, some failures. You realize how hard they are to replicate. But more importantly, you saw your friends do it, right. That one friend that at 28 looked like they were gonna crush everything and she was gonna take over the world and now she's like loaded in debt. You never hear from her again. She's like a cautionary tale in the, in the startup world, right? The tales that we tell because we've lived them. Now, you've actually seen that. It's really hard to appreciate how easy it is to fail. We haven't really seen much failure yet, but holy cow, you start to get a couple of reps on that one in this. This becomes way more valuable, way more

Ryan Rutan: valuable. You quickly get busted back down from the four star general into just the grizzled noncommissioned officer, right? That the one in every war movie who just knows the answers to everything, knows all the stories, right? And has all the scars to show for, right? That's what you become. And again, it's not a linear progression, right? Just because you jumped a couple of ranks to begin with doesn't mean you get to stay there, right? You are more likely statistically to be demoted back down to a lower rank within the startup world than the one that you just achieved or the one that you're achieving right now. And I think that's a big part of we want to talk about today will is that you're in a startup right now, right? Whatever you're doing to whatever degree of success you have the chances that you replicate that on the next go round for the people who are working on starts right now, don't get distracted, guys. Stay the course again. Not beyond, not beyond the point of reason, right? You know, I don't wanna go well beyond where it was trying to fold tents or anything like that, but be really careful about jumping because you see something else shinier, right? If your thing is obviously head to the bottom of the sea bailout, right? Jump ship, it's good. It's time to go. But if you're still afloat on the sea of startups and you're like, yeah, maybe I'll just, you know, jump off and swim to that cruise ship over there. The chances that you make it are so slim, so slim,

Wil Schroter: right? And look in, in by all means, if it's the right opportunity, it's the right opportunity. However, let's dig into like how badly people make the bet of future success. And I hate to use a gambling analogy, but it just feels apropo startups are not gambling, right. Startups are based on fortune and hard work. Gambling is based on luck. Right. That's not what we're talking about. But bear with me, let's say that you're at the blackjack table you've never played blackjack before. In the first hand you get is an ace and a king. You now have blackjack. There's a 99% chance you're going to win. Right. And what you say to yourself is, huh? Blackjack's not hard. I got it once I'll probably get it again. Now, let's get into the mechanics of where the analogy breaks down a little bit. But where this is just generally true. Just think about like this. If you have any version of a successful startup right now, I'm not talking about hundreds of millions of dollars, I'm talking about, you're still in business.

Ryan Rutan: You, you got more than a month of runway.

Wil Schroter: Yeah. Yeah. Yeah. Yeah. You have the startup equivalent of Ace King right now. Ok. Now again, there's versions of that, you know, maybe your hands not quite as good, but where we make the most junior mistake, I've made it, Ryan, you've made it and a bunch of people listening are probably about to make it. I

Ryan Rutan: don't even know what the mistake is yet, but I can say yes, I'm sure I

Wil Schroter: here it comes. If this hand is this good, I must be this good and therefore there must be more hands to come. Now, let's talk about why that argument just falls to shit. Almost every single time. Statistically not your fault, just stats don't work for you. In order for your next hand, if we're kind of beating up this metaphor here, in order for your next hand, your next startup to work, a whole bunch of things have to happen that you have a very limited amount of control over. Let's walk through. Number one, you have to figure out exactly what the right product is at exactly the right time with exactly the right team with exactly the right capital environment, either bootstrapped or raising to support it and see it through. What are the probabilities that the next thing you do are gonna check all four boxes to make it successful. I could tell you really freaking low. You know what I mean?

Ryan Rutan: Even if they were public, we know it's 30% or less. Right. So that's the thing, right? It's, it's a series of compounding probabilities which just makes your odds smaller and smaller and smaller and talk about

Wil Schroter: that. You said compounding probabilities. And I think that's a powerful point. Can you expand that?

Ryan Rutan: Yeah. Yeah, sure. So, I mean, like if, if you have each one of those things has some level of certainty applied to it, right? So this is just using straight mathematics, but it does apply here. So, you know, if you've got a 50% chance of getting the, the market right? And a 50% chance of getting the team Right. You're already at 25% odds right out of the gate. Right. And as you keep making decisions, choices and facing other market conditions, it just gets smaller and smaller and smaller right now. Of course, there are things that we do to thumb the scale and to fix those odds and to turn things in our favor, assuming the economy is not taking a giant shit on itself like it is right now. And lots of other things that happen on that side of our control, right? There are a number of things that we can't control. We pick the team, we can't control their performance, we can try to encourage it, right. It's people, it's humans and humans make mistakes and humans change and humans, you know, don't always live up to the expectations we have for them. So there's so many things that are outside of our control, not least of which the fact that the rules of the game, unless you are building exactly the same start up you just built in which case, what are you doing? Uh One, number two, that everything is going to be different, right? Literally, you know, I would say out of the, the startups, I've built, well, I'd be curious to get your take on this, but there's maybe like 25 to 30% transferrable knowledge from one to the next and the rest of it is like as close to pure unknown as possible. And that is the nature of a startup, right? We're building something that never existed

Wil Schroter: and look at take companies that do exist and there are no longer startups, public companies and watch their stock tickers over a five year period and watch all those peaks and watch all those values, right? Those are all representations of how much uncertainty there are in businesses that are already certain. Right? Facebook, for example, this is 2023 when we're recording this episode at the beginning of 2023 Facebook stock is down 75% from where it was like a year or so ago. Right? Ouch. Now that's a business mark. Zuckerberg's been running forever. Right? He understands the business. He's still mark, he has more connections, knowledge and everything else than he's ever had and yet the business is down 75%. Well, why? Ok, because we had a delayed recession because the ad market imploded because he made some bad bets metaverse and everything else at the time. Hey,

Ryan Rutan: he might be doing really well in the metaverse. Who knows? I'm not hanging out

Wil Schroter: there killing the metaverse. If it ever comes back, it's a problem. But I guess what I'm saying is like here's something where you have so many things that should be boxes checked, but the world just doesn't work like that. So when we look at here's what worked before. So I'm gonna take this and I'm gonna bring it to what's gonna work next. What we've got to keep in mind that best case and this is, I'm being so optimistic here. Best case will maybe get 25% percent of the stuff from the last gig or the gig after that, that we get to bring into the new gig. And my God. Well, I'm bringing some of my team members over. I'm bringing some of my investors over. It doesn't matter if it were that simple investors would just keep paying the same entrepreneur to build successful companies one after the other, it doesn't work. This isn't

Ryan Rutan: a baking recipe where it's like, hey, look, I already have 50% of the ingredients I need for my next startup now does

Wil Schroter: not work. OK? So let's take this step further. So we all get the fact that even if I'm super successful, I go IP O that I've got a 30% chance of being successful in the next round, I get that what I love the way you put it a bunch of compounding factors, right? That actually get worse as you combine more of those variants, right? So I know things aren't going with me. Cool. What do I do about it? How should I be thinking about this? You know, like, how do I think about in, in writing? I put this to you. If I know that I got something going on, it's not as good as I maybe think it is. We never think it is, but I think I, I probably want to jump to something else. What would you tell you look

Ryan Rutan: like? Yeah, you stay, stay where you are until you are sure that you've maximized the current opportunity and outcome, right? Like the whole thing of a bird in the hand is where two in the bush, right? I'm not trying to kill birds out here. But if I were you go without odds, right? You go with the one in the hand, right? You stay where you are and you, you finish the task at hand. If the only reason that you're jumping is you think the other one is going to be a better opportunity, right? That's a better opportunity. If every bit of that math works out exactly as you hope it will and it never does. Right? So we can be relatively certain, whatever you think that shiny bald, you're about to chase over the fence into greener pastures is, is likely not to be as shiny if you get your hands on it. And the thing that you leave behind was likely a better opportunity, just statistically speaking, because some of the uncertainty had been run out of the rag at that point. I think that's really the thing that's important to understand is that you may look at that and go, well, look, the size of this new opportunity is so much different than the one I'm in now right? There is so much more upside to this thing. Sure if everything works out. But you're starting from a point of speculation on the new thing, whereas whatever you're working on now has some level of certainty. Right. Maybe not full certainty. But even if you're at 25 or 30% certainty on here are the things we now know about this business here are the things that we know aren't true that we thought were true And here's what we think we can go and do next. Based on that data, you don't have any of that with the new one. It's pure speculation as you put it, it's running naked into the abyss once again. Right? And just seeing what happens,

Wil Schroter: we also get a thing where we don't realize that in life. Now, I'm just talking about a liquidity standpoint or a personal wealth standpoint in life. We're lucky if we get one and we're incredibly lucky if we get two like fortunate wealth, event moments in our life, wealth event moment being some pile of cash, of any amount, any amount. And I think people really misunderstand that. Here's an example. I hear this all the time. Well, I only want to cash out if I get at least $30 million but, and we've done a whole episode on this, right?

Ryan Rutan: Won't move for 28. No, sir. No, sir. Exactly. Exactly. And you

Wil Schroter: will, this argument kills me because I think to myself, number one, you realize that you don't get to necessarily make that determination. Now, theoretically, Duke I'll hold out longer and I'll get that money. It doesn't exactly work that way.

Ryan Rutan: The price sticker gun I can put whatever they like, just gonna tag it and set it out by the, by the, by the end of the driveway and just wait for somebody to pick it up. Right.

Wil Schroter: And so in my mind I've already won. And now the only question is how much I'm going to win. And part of that logic is true. Part of that logic is I've had success, right? I've gotten into this part. So I wanna make sure I maximize the outcome. That actually is the right thought process. The wrong thought process is, and I can get whatever I want.

Ryan Rutan: I've set an arbitrary water mark and that's what I will cross before I

Wil Schroter: take it the wrong water mark. You know, I, I talked to founders and actually, uh me and the founder are talking about the top of the episode we're talking through, he's just such a great guy. And we're talking about like, how much would be a lot. And I was like, you know, how much is a lot, a million dollars? And now now now and, and he agreed by the way, because he's good, he's a smart guy. But I mean, he, he's raised hundreds of millions of dollars, right. So, like, you know, his nut here is, is very big and, and I'm like, look, man, a couple of things and we've done whole episodes in this. If you don't have a million dollars, a million dollars is all the money in the world. The problem is you start doing this dumb math, which is, well, I need at least $30 million to live off the interest. It's gonna be 8% of the good market and this is whatever. I love that calculation. And I'm like, dude, if you put a million dollars in your bank account, you will solve 90% of life's problems, right. There are very few problems you'll run into in life that you can't solve with a million dollars of liquid cash at your disposal. I'm not saying that's the end of it. I'm not saying, you know, you never have to work again.

Ryan Rutan: Do you know what an engine on a 200 ft mega yacht cost? Well, I can't, so

Wil Schroter: I wouldn't even fuel the jet. No, but what I'm trying to say is as per this whole maximize the outcome. There is a fallacy where we try to maximize the outcome towards something that we probably won't even get kind of over maximizing the outcome. So it's kind of this balancing act where we're saying, hey, look man, when you have something of value, don't let it go. Right. On the other hand, you have something of value, be kind of mindful as to what it's actually gonna be worth, you know what I mean?

Ryan Rutan: Yeah. Yeah. It's, it's funny, it's so hard as a founder to strike that balance too. Right. To not look at it and go, well, this is worthless. Right. It's not doing what I wanted to do. I have runway but, like, do I want to keep running? Oh, hey, look at that thing over there. I wanna go run after that instead because that'll just be easier. It'll be better. It'll be bigger because I don't know all the challenges. I only see the potential upsides at this point. I've got my rose colored glasses on and amazingly, everything looks rosy and yet, right. The minute we start to do that, we put ourselves into problematic. Same thing if we go the other direction and we're like, this thing is, is amazing. This is worth, you know, 15, 20 X multiple of our best month ever, which we haven't had for 18 months. But hold that aside for a moment. I need $30 million so I can live off the interest. And so that's what we're going to go get right either way. Right. And look any time you do anything extreme, regardless of which direction you're doing it in, you run into trouble. Right. But trying to strike that balance as a founder is insanely hard, but we're expected to be super optimistic about the outcomes, but we're supposed to be extremely conservative about running the business and making sure that it stays afloat. And so how do you reconcile those things? And the answer is you just try to aim for the middle, right? Try to be, try to be reasonable in all things.

Wil Schroter: Here's what I always say, treat this as it's your last outcome, your last exit because statistically it is, and that's really what we're talking about, right? Treat this as it's, you're gonna be your last outcome. There's two ways you can look at that one way you could look at that and go well, yeah, but that kind of tethers me to this thing while it rides to the bottom of the ocean. Right? Sure. But at least you know what it is, right? Kind of the devil, you know, the other side of it is. Well, damn, there's a lot of other things that I could be doing, you know, there, there's this new opportunity, a thing called crypto now and that's obviously only gonna make money, right? Maybe. All right. It a point to pick on crypto, but

Ryan Rutan: so many, so many tweets on that topic that just haven't aged

Wil Schroter: very well. Yeah. Yeah. Yeah. So anyway, my point is there is a threshold where sure we're giving up some future opportunity. But we have to think in this capacity, we have to think in the capacity that this is our one shot. This is the one hand where we got the Ace King. This is our one hand and there statistically probably won't be another. So, do we want to be the founder that threw it all away to try to chase the next hand or do we want to be the founder that cashed in as much as we can on this hand? So we don't have to play again and all right. So that was fun. But let's actually keep this conversation going. You've heard what we think about this. But, you know, Ryan and I would really like to hear what you think and we're online like all day long, pretty much talking about every startup topic you could think of from fundraising to customer acquisition to just really how to get all of this crazy startup stuff out of your head. And there's tons of other founders just like you, they're weighing in on these topics. So you'll get a chance to just hang out and meet some really smart founders. We're also super, super easy to find you head over to groups dot startups dot com and let Ryan and I hear what's on your mind. Let's get to know each other a little bit and let's just start having more of these conversations.