OWN YOUR FUTURE – LIVE 2020 took place live (from our homes) on July 9th 2020. The video included here was recorded at that event.
Ali Aydar is the CEO of Sporcle. Prior to Sporcle, he was the co-founder or first employee of three VC-backed digital music start-ups in Silicon Valley, including Napster. He has a BS in Math/Computer Science from Carnegie Mellon and an MBA from UC Berkeley’s Haas School of Business.
Twitter: @eyedar
Foundational business constructs learned from 2 decades in Silicon Valley
Having worked 11 years in venture-backed and 10 years in bootstrapped businesses within Silicon Valley, Ali has recognized that there are just 3 things that have an outsized effect on a business. It is these three things, and only these three things that matter when it comes to the success or failure of a business.
Video Transcript
We’ve got just a couple more guests to go today. I’m excited for this next guy. He is someone who worked, I worked in the music industry at the beginning of my career, so this guy kind of specifically piques my interest just ’cause of his history. He was actually the first non-founding employee of the infamous music technology company called Napster. He went on to be the first employee and the COO of SNOCAP a digital media services company, which was acquired by imeem where he continued as a COO until imeem was acquired by MySpace, so essentially, if there was a major name in 2000’s tech, he was a part of it. Nowadays, he serves as the CEO of Sporcle, a trivia behemoth serving both the internet, and pubs, and online trivia, these days across the United States. He’s coming to us from his house in Northern California, so please put your virtual hands together for our friend, Ali Aydar.
Thanks a lot, Ben. I’m excited to be here.
Thank you.
All right, let me share my screen, and make sure I get this right and get these slides right. Hang on. Ah, gosh, is this the right one? Let’s give this a try and see what happens. All right, is that working, Ben?
[Ben] Looking good.
Looking good. Okay, all right, so I’m gonna talk today about my two decades here in Silicon Valley, and what I’ve learned, and I like to call what I’ve learned the Foundational Constructs of Business. So I’m gonna get into three specific areas that I have learned about business that I believe are really, really foundational to building any company.
So first, I know Ben just went through this a little bit, but let me characterize it a little more. So I currently run Sporcle, I’ve been doing that for 10 years. Sporcle is a media and entertainment business focused on trivia. And Sporcle, the interesting thing about Sporcle, and it’s relevant to one of my constructs is that Sporcle was bootstrapped. So we don’t have any outside money and in fact, we don’t have any inside money. We just started making money from day one. And then prior to that 11 years other three companies that Ben mentioned; Napster, SNOCAP and imeem, all venture backed these three companies together raised a little over $200 million dollars, and–
[Ali] Okay, good. All right, so as I was saying there are three components that I feel like a lot of folks don’t think about as they’re building their businesses. And it’s these are things that I noticed as I look at others, and as I look at my past quite frankly, and I’m gonna go through each of these; So one is Corporate Structure, the second is what I call Core Beliefs, and the third is something called Well Differentiated Leadership.
So first I’ll start with Corporate Structure. Okay, and so there’s this question around the difference between venture-backed and bootstrapped, and I can even extend this to say, not just say venture-backed, but to say any taking any outside investment whether it’s friends or family or a small partner that you bring into the business versus bootstrapping it yourself. This is a question that a lot of folks just kind of ignore, and sometimes people are going straight to just raising money, because that’s what they read about in the press, that’s what’s exciting, or they think that that’s really the only way to make it work. And sometimes depending upon what you’re trying to build that is the only way to make it work. But there are also a a lot of businesses that could be bootstrapped, that are venture-backed instead and they went into trouble as a result.
So let me talk about the differences here. So firstly, I’ll talk about venture-backed, and I use this picture of a guy snowboarding off a cliff, and I like this picture because it really represents the thrill and the risk, if you will associate it with a venture-backed opportunity. So there are high returns available here, but there’s also very high risk, and what we read about in the press are typically the ones that are really successful.
What we don’t read about are the 70 to 80% of venture-backed firms that don’t work out, that don’t go out of business. They’re quickly swept under a rug, and so we’re biased to those types of high returns and as our understanding of the outcome of venture-backed businesses. The second thing is you get less autonomy in a venture-backed business. You got board members and investors who want a tremendous amount of control.
And then finally, you’ve got a less life balance. So I don’t like calling it work-life balance, because in many ways work ends up being life, whether you’re venture-back or bootstrap, but when you’re venture backed time is really important. You’re trying to generate return for your investors, and in order to maximize their return, they need that returned to come in as, the earlier it comes in the the higher rate of return they make. And so you’ve really got to, you’ve really gotta focus your life on the venture. Then with bootstrap company, so I like this picture here that kind of depicts a bootstrap company of a guy digging a hole.
And there’s a few things to notice in this picture; first of all, digging a hole like this is hard work, and it takes time you can’t just go and dig a hole this big and just be done with it. But also I like to note the craftsmanship here that hole was really well dug, it’s almost perfectly done. And you can imagine that it took a grind for him to dig that hole. And so in the bootstrap world you’re grinding out what I would call traditional rates of return and not exponential returns that means you have lower risk. But what you get for that is you get sole autonomy, you retain control, a lot of times in situations where investors come in even friends and family, you end up being driven by their financial expectations, their financial goals and not by your own goals.
And so when you’re bootstrapped, you really keep that autonomy. And then finally, your life profile is different, life is what you make of it. And if you want to or need to work today then you do, if you don’t then you don’t. And that’s where the autonomy and control extends to not just in your business but in your life. So this is something I actually tweeted about a few months ago. I believe that this is one of those things that is the single biggest decision around a company at its formation and at different inflection points when you’re deciding how quickly you wanna grow the business because you end up whichever way you go, and again, there’s validity to both ways whichever way to go affects how you treat your customers, how you treat your employees, how you operate internally, and how you go about your life.
So then the question then is how do you choose? And look if you’re buying businesses on Flippa, and if you’re buying a larger business, and you require outside money. Or you’re stitching smaller businesses together, you will ultimately one day potentially have this choice. And there is validity in either, and as you saw of my career I’ve done both. What’s important is understanding how you choose, and for me it really, I can really boil it down to one word, and that word is trade offs. And everything really here is a trade off.
So trade offs being are there really large potential returns here, or are the return small? Do you want to deal with high risk, or do you want to deal with low risk? Do you want complete autonomy, or are you okay with partial autonomy? Do you wanna just be focused on this and your life is really focused on this, or do you want to be multi dimensional? These are the types of trade offs that you have to make, and when you make this choice, and it’s okay, whatever you pick, as long as what you’re picking, you’re doing it with your eyes wide open, and you’re thinking about the fact that you’re making these trade offs, because if you don’t, you end up like this guy.
So this is a quote that I heard from somebody a startup entrepreneur here, who made the choice of going venture-backed and was so overwhelmed with being in a venture-back startup. He said, “Should I just divorced my wife “so I could work more?” And so don’t be this guy, think about this choice make an active choice, and then proceed.
Okay, so that’s the first fundamental construct, so the second thing is around core beliefs. And there are these three core questions around this; so what do you believe? What is your purpose, and what are your values? So these questions are critically important, and before I get into the reasons why and why not, I’ll just say that outside of this section that when I say this to folks, a lot of people kind of roll their eyes, and it’s like, oh, this is about this, like, this is too touchy feely, or it’s too woo-woo, or whatever. But these are, these the answers to these questions really form the foundation for lots of things that your business ends up doing, so let me get into that.
So this quote from Jason Fried who wrote the book “Rework”, this is from the book “Rework”. “When you don’t know what you believe, “everything becomes an argument. “Everything is debatable, “but when you stand for something decisions are obvious.” And this is why understanding your core beliefs is so important, because when you don’t understand your core beliefs, you go off on your tangents, you waste a bunch of time, and you’re not on firm ground.
So here is just as an example of my current company Sporcle, and how we encapsulate our belief, purpose and values. So our belief is we believe in making knowledge fun for everyone. Our purpose is to create mentally stimulating divergence that bring people together, and our values are do better truth and inclusion. So because we have these three things everything else naturally flows from them. When we were at a time where these weren’t clearly defined, there were constant arguments debate, should we do this, should we do that?
One person thinking we’re doing one thing, another person thinking we’re doing another, and it becomes messy and confusing. So when you do define who you are, and you define the belief, purpose values, you get this internal alignment, especially if your business grows. And as your business grows what happens is not everybody, as the business gets bigger not everybody can talk to everybody every day. And so if you don’t have these things to defined, people won’t necessarily row the same direction, right?
So having this things defined allows people to row the same direction, that allows people to have this same decision making lens, and it allows people to communicate clearly, there is a language that people are familiar with, that they understand, that allows them to communicate clearly. And when you don’t what happens is misalignment.
People often rowing different directions, sometimes even against each other, you don’t have consistent decision frameworks, and so decisions are just made on wins, or personal views that one might have at the time. And oftentimes, you can be in agreement with someone yet because you don’t have that shared language. You’re, it doesn’t appear that you’re in agreement, because you’re talking past each other.
And so that’s the power of having this bully purpose mindset setup in your organization. Now again, I’ll say like a lot of people are like, “Well, I don’t really have to do this, “it’s a little touchy feely.” I’ll tell you I as a startup veteran, as a CEO, and as somebody who has been invited in as a consultant or a advisor to dozens of startups in Silicon Valley the last 21 years, the companies that don’t do this are the ones that end up having a turning into a bit of a mess. And you see this time and time again when you go into organization, so if you don’t do this that’s your choice, but proceed with caution. Finally, the last thing, the last fundamental construct as I’m calling it is this concept of a well differentiated leader. And let me just, like that’s often a thing where it’s like, well, what does that even mean, does that mean a good leader? And it means a little bit more than that.
So let me describe what that is, but first, let me give you this quote. This one comes from a guy by the name of Edwin Friedman, who’s a Jewish rabbi, but also a therapist, and an executive coach for 30 years. And so he had this very wide ranging view of families, individuals and organizations. And he’s got this book called “A Failure of Nerve” which I believe is one of the best business books of all time. Certainly the best leadership book of all time. I mean, he says this in that book, he says, “Without question the single variable that most distinguished companies that survive and flourish from those that disintegrated was the presence of a well differentiated leader.” So let me talk about what that even is, and what even is a well differentiated leader. So a well differentiated leader is someone who has established clear goals about him or herself.
So there is no murkiness about where that person is going and why. A well differentiated leader is also somebody who is connected with their people, and with what they’re trying to do, but also is separate enough so that there’s comfort in who they are and enough space there to challenge the people around them. So in other words, they’re not so comfortable that they’re charming that they’re then afraid of pushing their organization in certain ways. And then finally, and this is actually most importantly, the ability to manage one’s reactivity.
So to the extent you’re, a well differentiated leader is one that can manage their own reactivity, while everyone else is reacting, and that allows them to react calmly, and take stands in times that are difficult. Now, you might be thinking, “Whoa, where did all this come from?” Like I was talking about corporate structure a minute ago, and now I jumped the shark all the way to well, something called well differentiated leadership. My reason for that is just how universal this really is, that this really applies everywhere. I just saw this tweet from last night, and I decided to add it at the last minute to my slides. That kind of encapsulates one part of where, of what I’m talking about here.
This is a venture capitalist, Josh Felser. And he says, “I’d take a stellar founder “with a mediocre idea 100 times over a mediocre founder “with a stellar idea.” And yet, it’s not just that the stellar founder knows what they’re doing and has experience or whatever, but as Friedman says that type of leader is less likely to become lost in the anxious emotional process he’s swirling about. And this is so important because when you’re building a business, you’re gonna come across difficult things that are where you have to make some very difficult decisions. And if we’re caught up too much in our emotions around it we tend to make the wrong decisions, because we’ve got so much anxiety we’ll make a decision that is more for a satisfying, or pacifying our anxiety than it is for as the right thing for the business.
And so this is the type of thing that you see in organi, anytime again, I’m brought into organizations where there are problems. Almost universally, there is leadership that has not been able to handle the emotional processes that is swirling about it. Now the one thing you’ll note here is I could have talked about all these other boxes here. ’cause when traditionally when people talk about well what makes a business successful. Well, it’s product market fit, or it’s got a good business model, or there’s good distribution or sales strategy, or talent or technology or whatever, and to be sure all those things are critically important.
The argument I’m making today is these layers underneath core beliefs, well differentiated leadership, and corporate structure are the foundation that makes all these other things possible. And if these foundational things don’t have good structure, or start to crumble then these things above it start to fall apart. So that’s that’s all I have today. I’m sorry for the weird audio issues, and this is how you can reach me if you wanna get in touch I love geeking out about this type of stuff.
Appreciate it, it’s fantastic, Ali. We have a couple minutes, I’ll see if your video wants to work. Now I know you’re having an issue before.
There I am.
There you are, beautiful, and you’re stunning. I will tell try to fit a couple of quick questions in here. We only have about three minutes till our next speaker. We had one come in a little earlier from again from Hari who has been with us the whole time. I was curious if the core beliefs that you’ve had for the businesses you’ve run if those evolved over time and if you’d change those.
Honestly, they haven’t. They depend on how long you run it. They can certainly evolve a little bit, but they really become the bedrock for who or what you are, and if you stay true to that bedrock over time, it actually calcifies even more, because that’s where all of your attention goes, so they actually get stronger, so it’s actually very rare that it changes that much.
Interesting, and you obviously you went from digital music to with the world of online trivia, there is core beliefs kind of shift to that, or how, what was the connection between the opportunity that you saw or the core beliefs that you had in starting Sporcle?
Well, look for me music, I had to get out of the music business, don’t do anything in the music business people. It’s a tough business unless it’s like an ad supported website. The music is tough. I saw a lot of opportunity just to building an online community, and it was the community building aspect of Sporcle that brought me here over to Sporcle, because it was easy to build our communities around music, those kind of exist also in the offline world. Around trivia there really wasn’t one, and so I could bring my community mindset to Sporcle.
Yeah, you know, that makes a lot of sense. It’s such a tribal aspect to music that to be able to bring that to trivia, or anything else is pretty special. Let’s see if I can get you one quick question. We got probably 60 seconds here before our next speaker. I know that you are a registered buyer at Flippa, what are you looking for when you’re kind of browsing our marketplace?
Well, something I’ll be consistent, something that fits with our core beliefs, something that fits with what we believe our purpose is, and our values and anything that allows us to enhance our belief in our purpose is what we’re looking for.
Fantastic, really appreciate you being here today. I know you’ve got a busy schedule and quite a bit going on in your personal and business life, so–
[Ali] Yes.
Thanks, thank you a ton.
All right.
It’s fantastic.
All right, thanks a lot.
