BOB SAFIAN: Hey listeners, it’s Bob. We have a special episode to share with you! Today you will hear our live Strategy Session recorded remotely in-front of a virtual audience full of small business owners and Masters of Scale members. 

As you probably know, in a usual Strategy Session Reid answers a series of questions from a group of entrepreneurs with in-depth analysis on how to respond to the challenges they’re facing in their business. Today is just that, but with much, much more. In addition to this being recorded live, we have many surprises for you along the way.

The episode is co-hosted by Reid, myself, and our executive producer June Cohen. You will hear June kick off the event, and then I’ll join in a bit later. I hope you enjoy it! 

JUNE COHEN: I’m June Cohen. I’m the executive producer of Masters of Scale and co-founder of the company behind it, which is called WaitWhat. And our long-time listeners will know that we regularly run Strategy Sessions in the podcast where entrepreneurs ask questions of our host, Reid Hoffman. In the course of this afternoon, five entrepreneurs will ask questions to Reid.

And if those names look or sound familiar, it might be because each of the entrepreneurs we’ll see tonight asking questions have been featured on Masters of Scale in one of our signature three-act ads. And these ads, which we developed with Capital One, celebrate their entrepreneurial innovation. So, each of them will be asking Reid one of their most urgent questions. And we have a feeling that you’ll see many of your own challenges reflected in the questions and in Reid’s answers.

And along with those serious and strategic conversations, we will also have some fun, which is our way at Masters of Scale. So along with these strategic questions and answers, we will be premiering, for the very first time today, a game show called The Pivot Point where different sets of entrepreneurs will compete. And we think you’ll love it.

And now, I want to welcome to this virtual stage the wonderful host of Masters of Scale. He is the co-founder of LinkedIn, partner at Greylock, board member at Microsoft, legendary Silicon Valley investor, devoted mentor to millions. Please welcome my dear friend, Reid Hoffman.

REID HOFFMAN: Thanks June. It’s awesome. Although I kind of don’t recognize the introduction.

COHEN: You are all of those things and more, my friend. It’s so much fun to have you here, Reid. I don’t always get to sit in on all your Strategy Sessions, but I always listen to them afterward. I always love hearing you freestyle. And that’s something that people don’t always get to hear you on the show. I am looking forward to that. As we get started, one thing Reid and I want to acknowledge is along with thanking Reid for being here, we want to thank each of you for showing up. Each of you listening, you’re leaders. There are fires burning when you’re going home. So we want to thank you for being here.

But before we move on to the full Strategy Session, we have a tradition at the top of every Masters of Scale event, and Reid, I’m wondering if you’re ready for it.

HOFFMAN: I am ready, waiting, and anticipating.

COHEN: Excellent. Okay, great. So most of you are very familiar with the Masters of Scale podcast theme song. It’s sort of an ode to entrepreneurs everywhere. And we have a tradition of playing it at the top of our live events in the form of a cathartic sing-along. So I know I can count on some of you to join in. Let’s hear that theme song now.

[Theme music]

COHEN: I’m really excited to introduce you to the very first founder, or rather co-founders, to ask you a question in the strategy session tonight. Many of you here will remember them from being part of the Capital One Business campaigns. They run a charming cheese shop in Austin, Texas called Antonelli’s Cheese Shop. Will you please welcome to the Strategy Session, John and Kendall Antonelli?

KENDALL ANTONELLI: Whoohoo.

JOHN ANTONELLI: Hey, Reid.

KENDALL ANTONELLI: Thank you so much, June. Reid, we’re so excited to pick your brain tonight, and we’re just thrilled to be here and love the energy you’re putting out. So we’re going to give it back to you.

HOFFMAN: Awesome.

KENDALL ANTONELLI: All right, so our main question to start us off is clearly habits shifted dramatically to virtual engagement during the pandemic. And we hosted over 17,000 people in our virtual events program during COVID, each eating cheese and cheese tastings around the world. But there are signs in areas where things are shifting back. So what patterns do you believe will persist and how much do you think virtual experiences, which really proved central to our own COVID survival, will continue to be leveraged and relevant as we move forward?

HOFFMAN: Well, it’s a great question. And the short answer is it’s going to be both. It’s not going to continue exactly as it is, because obviously people will have time allocations when they get back to things. There’s obviously the fun of doing things in person, as well. But now the entire world has discovered the interest of doing these virtual events, the global distribution, the exact kind of thing we’re doing today. So I actually think that not only are virtual events going to be continuing in a vigorous way, but also, it’s going to continue iterating. You’re going to continue trying to figure out how to differentiate, how to have new kinds of interactivity.

Actually, in fact, I really like cheese. So I’m going to figure out what the next virtual event is and participate in that. Because I can do that from Seattle, Washington. And so I think that the notion is to say it’ll blend, it won’t go back to the previous, and then the iteration and the differentiation will continue in terms of what to do. So that’s what I would by reflex double down on while always paying attention because we’re in uncharted waters.

JOHN ANTONELLI: And that’s awesome. Can I ask a follow-up question?

HOFFMAN: Of course.

JOHN ANTONELLI: So as we’re looking to sort of double down, perhaps, what kind of testing can you undertake as a business to track a fluid trend like this, virtual engagements? And then how do you balance that with the pursuit of actionable data with the need to just go and iterate and be quick? How do I know if our historical data is actually useful, a reliable predictor at this moment? I guess this is more than one question, but what key indicators should we keep in mind as we move forward?

HOFFMAN: No, it’s the exact right set of questions. One of the pieces of wisdom in your question already is you can’t just say, “hey, I measured this piece of data, and that piece of data says X and now it’s stable.” Because the very market might change, not just competitors and all the rest. And so I think you need to be keeping a relatively fluid measurement going, just as you’re gesturing.

Now, usually when you’re doing that, you’re trying to do good, not perfect. You’re trying to do quick and hasty data measurement, like for example surveys or a very quick round robin, like, okay, how is this working? And did you guys like this, or would you like to see more of this? Like fall offs, what do registrations look like?

I actually would do what internet entrepreneurs do, which is paper testing, which is do little, low cost advertising inventory, saying, hey, do you like this, or do you want this? And that gives you some market signal, and you want to do it every so often, as you’re thinking that things might be evolving or changing. And even though some of the data will be noisy, some of it even probably inaccurate – which is always frustrating – you’ll be able to measure through it.

And then I think the last thing that I always do for this kind of data measurement is there’s this kind of philosophy of this, which is data is like fact. It’s like Newton dropping the ball from the tower. And actually, in fact, it all comes from a theory of the world, a theory of how things are today, how things are moving, and where they’re going. And so refining that theory, and that means talking to the other smart people you know, because that can help you evolve your theory. And then in evolving your theory, you can essentially get to: Is my theory for interpreting my data the way that I should be monitoring it?

And then I guess the last thing I’d say is look for kind of cheap, quick ways to measure that are specific to your kind of virtual events. You guys are in it, and you guys are entrepreneurs, and clearly part of the innovative hustle to, well, we went from a physical world to a virtual world and virtual cheese tastings. Sounds really cool.

KENDALL ANTONELLI: We had a lot of fun doing it. Well, we’re taking notes. We’ve got to get to work now.

JOHN ANTONELLI: Taking tons of notes. And thank you for taking some time to answer some questions for us, and let us know where we can send some cheese.

HOFFMAN: I will for sure. Thank you both very much. Awesome.

COHEN: Thank you for that first question and answer, Reid. That was so much wisdom compacted into one answer, including my favorite Reid classic, which is always: talk to smart people, talk to smart people, talk to smart people, right?

HOFFMAN: That’s what I do, too.

COHEN: I know that about you. Moving into the premiere of our strategic game show called the Pivot Point.

So welcome to the Pivot Point. This is the entrepreneurial game show where the answers aren’t trivial. They are strategic. Here’s how the game works. So in each round, I will present to two contestants a mission critical business moment drawn from or inspired by one of the Masters of Scale episodes. No prior knowledge of that show or that business is required, because what we will be asking you to do is consider if you were in the shoes of this business and you were at this point when you had to pivot, what would you do?

Each contestant will have 20 seconds to gather their thoughts and then will share their own approach to the problem in just 30 seconds. Reid will decide who had the best answer there. Then the winner of the two rounds will join a final round and vie for the ultimate prize. So Reid, you will be judging. Can you tell us what you’re looking for?

HOFFMAN: What I’m looking for is less like oh my God, lightning strikes, like you were just genius at this particular thing, but more how it is that you operate at a kind of entrepreneurial speed. Because one of the things that’s very key around entrepreneurship is the speed at which you make decisions, the speed at which you analyze possible outcomes, because part of the thing in almost every entrepreneurial scenario, is you have a limited amount of time for making those decisions.

Now that being said, just like entrepreneurship, you’re going to have to express yourself clearly and quickly, just kind of like the classic three floors in an elevator pitch. But that’s the nature of the entrepreneurial game, is running fast through the dark, in the fog, with uneven ground, and then still keeping a coherent vision and being able to articulate your particular answer to the Pivot Point quickly.

COHEN: And with that, it’s time for the first ever game of the Pivot Point. Let’s go to round one, and let the games begin. Reid, let me introduce you here to our first two contestants. Contestant one is Tara Wilson. She is the founder and CEO of Fierce Lab in Fort Worth, Texas. Fierce Lab is an event series and a network for women to grow their careers. Welcome, Tara.

TARA WILSON: Hello. Thank you for having me.

COHEN: Of course. Contestant two is Tudor Mihailescu. Tudor is the CEO and co-founder of SpeechifAI. That’s SpeechifAI, ending in AI. SpeechifAI is in New York City, and it’s a tool that helps people express themselves more effectively on social media. Welcome.

TUDOR MIHAILESCU: Thank you so much for having me.

COHEN: Great. All right, Tara and Tudor, you know the rules. I will share with you a business scenario inspired by a Masters of Scale episode. You are asked to imagine yourself as the CEO of that company. Faced with a critical Pivot Point under time pressure, what would you would do? This is a question inspired by the Nike episode of Masters of Scale. Your company makes high performance shoes and gear for serious athletes, but there’s a new competitor in your space. They’re just next to your space, and they are making stylish athletic streetwear. You’re pretty sure you’re already losing some sales to this competitor at the edges of your core market of serious athletes. Now, you are not an expert in streetwear design or streetwear marketing, and you’re not sure you want to become one, but you worry if you don’t get into this streetwear space, this competitor will eat your market share. So what is your pivot? You have 20 seconds. And in the meantime, our music director, Ryan Holladay, will offer us some thinking music. 

All right, Tara, I am coming to you first. You’ll have 30 seconds to respond. Tell us, how would you pivot?

WILSON: Well, first, after stress-eating all my Halloween candy, then I’d recognize that startups are, as Reid says, a marathon of sprints. And in this particular case, I’d sprint really fast to my consumers. And I would start to ask them, how else can they imagine our product in their hands? How would they like to engage with it? Who else should know about our product, and how else should we be showing up within their communities? I think it’s best to hear from those that are using your product and those that you want to be using your–

COHEN: Always with a smile here at Masters of Scale. We completely encourage you to run out the clock, just as you did, Tara.

And Tudor, we are coming to you next. You have 30 seconds. Also encouraged to run out the clock. Over to you. How would you pivot?

MIHAILESCU: I would think that the customers have already spoken. They want to see sports shoes as streetwear. So I would try to make that the norm, and I would try to do that by picking stars who are recognized in the sports world, but they’re also recognized as icons for streetwear. And I’ll try to combine the two.

COHEN: Over to you, Reid.

HOFFMAN: So look, both of you are entrepreneurs. So you understand measuring the customer. And both are responding to a limited data circumstance. I’m going to actually say today the winner is Tudor, because I think going to the theory of the case, where you go, okay, I’m going to go with a hypothesis as to where I’m pivoting, in addition to the data and the customer is the right place to go. And I also share the sympathy of stress eating through the Halloween candy, which is the reason I don’t go trick or treating. But both quintessentially smart entrepreneurial answers.

COHEN: Thanks for playing, Tara. We will be watching your company Fierce Lab and cheering you on.

But now it is time to move on to round two. Reid, let me introduce you now to our next contestants. Contestant three is Greg Gallimore, and Greg has two identities. He is an intrapreneur at Gensler Group, where he’s a digital experience design director, and he is also an entrepreneur, as the founder of the patient experience company called WUBI, W-U-B-I, in San Francisco. Welcome, Greg.

GREG GALLIMORE: Thank you.

COHEN: And we have contestant four, Becky Pallack. She is co-founder of Arizona Luminaria. It’s a digital journalism startup that’s based out of the Arizona Daily Star in Tucson. Welcome, Becky.

BECKY PALLACK: Thank you. This is so fun.

COHEN: We’re so glad. That is exactly the right spirit. Here is your question. Now, this question is inspired by our episode with Radio Flyer, the toy company, which is actually part of our episode about Fiat, the car company.

So you and your family own a small toy company. It’s been around for more than a century. You built a solid business around a collection of beloved classic toys, but you’re worried that as the 21st century goes on, kids’ appetite for classic toys, like non-electronic toys, is going to fade away. You want to make sure your family toy company survives for the next hundred years. What is your pivot? You have 20 seconds to think about it while Ryan, can you play us some thinking music, please?

Greg, I’m going to come to you first. Tell us what is your pivot point? You will have 30 seconds for your answer. Over to you.

GALLIMORE: Well, like Radio Flyer, I want to be true to our core product essence, really kind of lean into what we do well, and also analyze the market to see what can we pull in that’s really successful, that’s achieving the goals of children’s learning and entertainment needs. How do we augment the existing product line? How do we leverage our IP and get the most bang for our buck, while having a long tail so that the company does last for the next hundred years? This could be through user testing, through some market research, but really kind of unlocking the value of–

COHEN: Greg, thank you for that. And now Becky, we are coming to you. Tell us, how would you pivot?

PALLACK: All right, so kids are the influencers here, but parents are really buying the toys. So I would focus on the nostalgia factor of the toys that parents remember having fun with. And then I would surround that with great media that has suggestions for family play time that would engage kids, because parents are also worried about too much screen time right now. So give them some ideas of how to use the toys to overcome that fear.

HOFFMAN: I think this time I will pick Becky, because I actually think that the question is also how do you reframe what you think the market is? It’s a classic kind of thing that entrepreneurs need to do and go, okay, obviously there’s the mommy, daddy, “I want,” and that kind of the classic. But yet, it is that decision.

And as you were beginning to sketch your pivot, you begin to sketch things that you could then go measure very quickly and know whether or not that pivot is the right thing to be doing. It’s kind of like analytics, data, theory, customers, all the things that are the things that live and die for entrepreneurs. So thank you both very much.

COHEN: Reid, I don’t envy you, having to choose between these answers, because everybody who’s been on here has just such a great instinct and has a particular perspective expressed in just 30 seconds.

Thank you, Greg. We will be following WUBI as you evolve and grow. Becky, we will see you back for the final round in just a moment.

So before we begin here, Reid, I would like to know if you are curious what the winners win.

HOFFMAN: I am always curious, but I’m super curious in this particular case.

COHEN: So everyone who listens to the podcast knows that our partner Capital One Business has been running a series of ads that celebrate entrepreneurs. They’re in our signature three-act ad format. They run like a podcast inside the podcast. They tell a key part of the entrepreneur’s story and give their business really wide visibility to our sophisticated audience of business leaders. The reason I am telling you all of this is that the winner of this final round will be featured in their own three-act ad on Masters of Scale.

HOFFMAN: You know, I’d like to get in on this action. This sounds good.

COHEN: We’ll think about that, Reid. Well, we’ll see, Reid. We’ll see. So welcome back. I want to welcome our two winners back to the final round. Welcome back, Tudor, and welcome back, Becky.

So here is the final question for you, Tudor and Becky. This is a question that’s actually inspired by several different episodes of Masters of Scale. It’s not just one person’s journey. It’s several different companies’ journeys. So two years ago, you and your team launched an app. Now, this particular app was to help shoppers choose the perfect meal, but it turns out that the market just wasn’t there. People didn’t want to use an app in quite this way, and this happens. You took your shot, it didn’t work, and you and your advisors have decided to call it. You’re going to shut the app and the business down. But the thing is, you have this team, and they’re so good at what they do. You have coders, X designers, marketers, and this wonderful culture of trust and creativity like you’ve never seen before. It seems like a missed opportunity to just let the entire team go, so what’s your pivot? You have 20 seconds to think. And, Ryan, you know what to do. Give us some thinking music, please. 

Becky. I will be coming to you first. You’ll have, as before, 30 seconds to respond. Tell us, how would you pivot?

PALLACK: Okay. I think that I would zoom in on choosing as a job to be done since the app was made to help you choose a meal, and I would turn this into a lab. So I would see what other ideas my team had around choices that people have to make all the time that they find really difficult. And then I would prioritize their ideas and run really quick live experiments, maybe even in person, to watch people’s reactions to the app in case the app is actually just a frustrating experience. I think that–

COHEN: Thank you, Becky, for your gameness. And now I am coming to you next, Tudor. Tell us, how would you pivot?

MIHAILESCU: This is actually inspired by the Slack story, which I find really impressive. In the course of developing this app, there’s been a lot of ideas about how the technology can be built. And in order to make sure we respond to a need that we realized wasn’t there, we actually found out other needs that we are actually solving in the course of building this app. One of them is the speed of–

HOFFMAN: It’s a rough game. I wouldn’t want to be in your guys’ shoes. Right. So I’ll start with the punchline. I think Becky is going to win. Tudor, the challenge was, of course, by referring to the Slack thing, you lost some time in getting your answer out, which is actually, kind of, by the way, a classic for your kind of two-floor elevator pitch. I think you were going to end up in a very similar place, because the notion of diving into the team, the problems that they’ve been solving before, exactly is the kind of lab that Becky was describing, is actually, in fact, a very good way to find it.

You both had some very smart answers, and not envy the very quick answer you have to give, and it’s been a delight. Thank you both.

MIHAILESCU: Thank you so much.

PALLACK: Thanks for having us.

HOFFMAN: What great answers, and a super shout out to Tudor, definitely, for clearly knowing his Masters of Scale episodes. Becky, so excited to have you as our winner, excited to have you featured on a spot coming up.

PALLACK: Oh, this was really fun, yeah. Thinking on your feet is part of the entrepreneur’s job, and it was just so much fun.

COHEN: Great. Thank you so much, Becky. We are looking forward to having you in Arizona Luminaria in a three-act ad, and we will be talking soon.

PALLACK: Thank you so much.

COHEN: And then I want to share with both of you, Becky and Reid, what every contestant wins, because in fact, every contestant on the show, and every entrepreneur on the screen tonight. And, Reid, you actually just upped the ante on it, but they are actually going to receive an Epic gift box. It contains an Apple iPad. It contains a beautifully-designed Masters of Scale mug. It contains five books that Reid has shared with us over the years that are essential reading for entrepreneurs, including The Lean Startup by Eric Ries, Founders That Work by Jessica Livingston, No Rules Rules by Reed Hastings, The Four Steps to the Epiphany by Steve Blank, and High Output Management by Andrew Grove.

I’ll show you the final items in the box. Now, we were already going to include one of our Masters of Scale books, but now Reid will sign it. We have our Masters of Scale hoodie with the signature logo on the front and, on the back, our favorite Reid expression which, Reid, perhaps you can share.

HOFFMAN: Well, starting a company is like jumping off a cliff and assembling an airplane on the way down.

COHEN: So every single person who is on the show today will get that Epic gift box. Thank you. We just loved having everyone. It was such a great experience.

And with that, it is time actually to return to the individual questions from entrepreneurs being posed to you. But one of the things you also know, if you listen to the Strategy Sessions on the podcast, is that we have another host of Masters of Scale. We have our host of Rapid Response who is also our co-host for Reid on many of the Strategy Sessions. His name is Bob Safian, and he is the former editor-in-chief of Fast Company whose career I admired from afar for many years before we got the chance to work together. He is now our editor-at-large at Masters of Scale. Will you please welcome to the screen and stage our co-host and my wonderful friend, Bob Safian.

SAFIAN: Hey, guys.

COHEN: Welcome, Bob.

HOFFMAN: Welcome, Bob.

SAFIAN: Great to be here with you.

COHEN: So from this point on, Bob I’m going to hand it off to you, and I’ll be back on the other side of these four entrepreneurs to close us out. But I’m looking forward to just watching and listening now. So, Bob, you take it from here.

SAFIAN: So we’re going to hear questions from four entrepreneurs from all around the United States. Their businesses are different, but their questions are very broad. I’ve spoken to each of them, Reid, and you will need your thinking cap on. They’re good questions. So are you ready to jump right in?

HOFFMAN: I am indeed.

SAFIAN: All right. Here we go. So the first question is going to come from Brit Rettig Wold. Now Brit is the founder of Grit Fitness, which is a women’s empowerment fitness studio based in Dallas, Texas. Brit also has an MBA from Harvard. She’s worked at big companies like IBM and Deloitte before striking out on her own. Her question echoes one that many entrepreneurs feel. They don’t always voice. So it’s personal and insightful. Let’s bring on Brit to ask her question.

HOFFMAN: Hi, Brit.

BRIT RETTIG WOLD: Hi, Reid. How are you?

HOFFMAN: Good, how are you?

WOLD: Good. Super excited to be here today. So my question is a personal question because I’ve been self-funded from the get-go. I now have built out three fitness studio locations in Dallas, and we thrived through COVID, and business is good now. Would it make me a bad entrepreneur if I didn’t want to open 50 or 500 studios around the world, and I was just content with the three that I have right now? I’m really proud of the model that we have. And I know that there’s a lot of risk with each added studio that we open, also a lot of risk with taking on investors, but as a high-achieving person, the voice in my head says, “Grow, grow, grow.” And so should I really be listening or if we aren’t growing, are we actually dying?

HOFFMAN: Well, first, congratulations.

WOLD: Thank you.

HOFFMAN: A gym business through the pandemic, you must have grit and kind of just that heart of going forward because my heart goes out to you.

WOLD: Thank you.

HOFFMAN: And this may be funny from we’re here on the Masters of Scale and so forth, where you think the answer would be “No, scale always, scale always.” And actually, it isn’t. There’s a couple different things where that could be. One is kind of the question of: if things are working well, if you can project the future and you don’t see competition or disruption coming, either in kind of technological or shift of the market then it’s actually, in fact, not irrational to say, “This works, and we’re going to actively continue it.” You shouldn’t continue it just because you go, “Hey, I don’t have any better ideas.” You should always have that active mind of, “disruption might be coming.” I actually think that that little internal voice you have is part of the reason you’re such a high performer, which is a good thing, which is “No, shouldn’t I be doing more? Shouldn’t I be doing more?” Right? And I think that you want that voice to stay. You don’t want the voice ever to go, “Nope, these three studios, those are what I’m doing.”

Now, growth is always good in terms of business strength, position when it makes sense in the market. And I’m thinking about the Danny Meyer episodes that we’ve done, where it’s thinking a little bit about like, well, how would you test what it would be like to do the fourth studio or the fifth studio? Could you do it without fully committing to it and see if that makes the decision? It’s a little bit like what Danny found when he was doing the hospitality business was to say, “Well, wait, I have such a special experience here. I don’t know what to do.” Now, eventually, that led him to Shake Shack. And that might be the kind of thing that could be really important to you. And so my primary modification of the nudge for you is to think about, “Okay, how do I experiment and try to act to get some answer to the question, not just growth or not growth, and what that could be?” I mean, it could be a … I don’t know. You’re an expert in your business, where I’m a novice, right? But something in that arena. Does that make sense?

WOLD: Yeah, for sure, because there’s other ways to grow besides brick and mortar studios. I mean, we grew with a virtual fitness studio that we have now and operating both.

HOFFMAN: Yeah. And it could be kind of thinking, “Okay, well, let’s expand the virtual a little bit, or maybe let’s think about is there a way to experiment doing a hybrid?” Because just like offices are not just going to be fully distributed or fully back, but there’s going to be more hybrid, maybe that’s something that could have an analog. Is there technology that’s coming or that it’s currently present, people being familiar with the market on these things that could be pretty central to this? Those would be the kinds of things that I would look at. So, Brit, thank you for your most excellent question.

WOLD: Thank you. Much appreciated.

SAFIAN: As always, Reid, so great. Your answer to this question, in some ways, has to do with your own mission about your own business, how much you want to grow, and where you want to grow. And then I did love the Danny Meyer idea. I had not thought of this idea of sort of essentially like a pop-up shop as a way to test your way forward. There are so many great things there. All right. So this next question comes from Matthew Goins. And Matthew is the founder of DC-based Puzzle Huddle, a direct-to-consumer children’s puzzle company that features diverse characters in awesome careers: astronauts, chefs, all kinds of things. Some of you may be familiar with Matthew’s story from his appearance on the Capital One segments within the Masters of Scale episodes. Matthew’s question is one that lots of startup folks ask themselves, and it’s about funding. So, Matthew, why don’t you come in and ask your question?

HOFFMAN: Matthew, great to see you.

MATTHEW GOINS: Hi, I’m so happy to be here. I have the humbling opportunity where I founded a puzzle company a few years before the pandemic. And owning a puzzle company was like owning ring lights or webcams. That was the year to own a puzzle company, in an awkward way because, as the country was suffering, people wanted puzzles in their homes. So the question I have for you is, in pursuing funding, I’m fully self-funded. This company was built off of my bank account, but I often admire some of the headlines that I see other entrepreneurs achieving with seed rounds and venture capital and raising significant amounts of money. And I wonder sometimes if I’m playing myself short by not participating in that dynamic, or if I should be more confident in what I have as a self-funded business and continue to pursue the growth that I’m able to achieve through my own funding mechanisms.

HOFFMAN: So, Matthew, excellent question, one that applies very broadly to very many entrepreneurs, so thank you for coming on and asking it. And one of the things I’m going to have to remember to do is come order one of your puzzles since my family likes doing puzzles, so I’m familiar with the puzzles explosion during the pandemic, and it’s a great place to be. Now, some of it is: you do the analysis. And I obviously don’t know what the puzzle market is. When you kind of make the decision about whether I should get serious capital, hit the rocket boosters, take additional risk, do dilution… Because the risk is not just the capital, not just the dilution, but changing the way you operate.

Usually, when you raise money, you go into the red some, which is scary, especially when entrepreneurs, such as yourself, said, “Look, I did this on my bank balance sheet. I made it work. I’m very cash flow attentive. I calculate the cash daily, weekly, right. I model my growth and all the rest,” all those things that you have done in order have gotten to the success you’ve achieved. And what you have to look at is a simple set of questions. One, are your competitors coming? Because if a competitor comes in, raises a bunch of money, and then attacks the market, that could disrupt you because the capital side of it is part of the entrepreneurial competition. This happens all the time in tech, raising large rounds, going really fast and inefficiently, kind of blitzscaling the speed over efficiency in an environment of uncertainty. So if you have that, that’s a reason. And if you think that’s possibly going to come, you may want to be the first mover in practice. Competition’s one.

Another one is when you look at it, you say, “Well, is there some velocity that gets me to a different level of business,” right? And this could be the “Well, if I had some capital, I could experiment with more channels. I could run some marketing campaigns that maybe I’m not running. Maybe I could have a broader product line. Maybe I could be in markets that I’m not in currently.” And that will change the level and speed of my business because if you change the CGAR and the speed at which you’re going in your business, that might be worth taking the risk, because just like all of the entrepreneurial things, you’re very familiar with this because you went and took the risk of building a bootstrapping business… Didn’t know the pandemic was coming. Just like you had a sense of the market and puzzles and probably had some personal kind of engagement, a knowledge of it. But taking that risk might be worth it to change a growth curve.

And a little bit like when I was talking to Brit, there’s kind of things like, “Well, could you test it?” Right now, I don’t know how you test whether or not there’s non-existing competition, but if you look around at competition, see what they’re doing, see what’s happening.  Entrepreneurs will buy low-cost test ads on Facebook or somewhere else and see if there’s demand for a product within certain things and then say, “Okay, if there’s demand there, then I will go for that, and I will build that out.” Whether it’s a product line or a new market extension, those would be the kind of things that I would look at in considering this.

And, by default, given that you’ve been successful in not raising money, I would say that you’d want to get to an active theory that “I should raise money.” Now, normally, I do tell entrepreneurs raising money is important because once you start demonstrating, within an app or something else, that it’s working, you’re going to get 10 to 100 well-funded competitors not just in China but in other places. And so the general default is go, go, go. And that might be true of the puzzle space, but I don’t know. So does this make sense?

GOINS: Yeah, it makes a lot of sense. Where some people see success, that attracts attention, and other entrepreneurs that want to model the success that they admire. Whereas I didn’t see any diversity-owned children’s puzzle companies, now I count probably 10 that I’m aware of in the ecosystem.

HOFFMAN: Yep. And that might be exactly why you would want to essentially kind of say, “Okay, I’m going to put an order of magnitude difference and an ability to move faster,” and that might be why you would consider it. So, Matthew, thank you for asking a question that is on the majority of entrepreneurs’ minds.

GOINS: All right. Thank you so much.

SAFIAN: Well, as usual, Reid, you got right to the heart of it. As I was reflecting on Matthew’s question, it’s like to be an entrepreneur, you start something, and it requires you to take a certain kind of risk, right? And then, at each stage, you sort of have to take the next risk and the next risk and the next risk. And sometimes it’s scary to take that next risk all the way down. I mean, you’re jumping off the cliff and building a plane over and over and over again.

HOFFMAN: Yeah. And by the way, that’s one of the reasons why we celebrate entrepreneurs because that is scary and difficult and yet so essential for creating the future.

SAFIAN: So let’s go to question number three. Our third entrepreneur is also in the direct-to-consumer space. And that’s where her question is based and, actually, this issue of risk sort of comes into it. Monisha Edwards is the founder of Scent and Fire. It’s a maker of eco luxury scented candles and scents made from domestically-sourced, raw, and recycled materials. Excuse the bad pun, Reid, but her business has been on fire, but she’s a little concerned that the success could in itself make her vulnerable. So let’s bring on Monisha to explain, and she will ask her question. Monisha, over to you.

MONISHA EDWARDS: Hi, Reid. Nice to finally meet you.

HOFFMAN: Likewise, and welcome.

EDWARDS: So as you heard, my business is on fire, literally. Not literally, but so we’re doing really well. I launched two years ago, and things have been taking off. I’ve gotten a lot of press features. And recently, we’ve been accepted into the Amazon Black Business Accelerator. And my issue with that is I’ve been kind of wary about putting my products on there. I only have one product on the platform right now, and it’s because I’ve heard a bunch of people talk about how they will put their products on there and other companies would dupe them. They would copy them. And I want to grow, and I know that these platforms, such as Amazon, Walmart, Target, I know they provide a lot of reach and exposure, but I don’t want to be copied. And I’ve had issues with people copying so far. There’s fake Instagram pages with my brand. There’s another company that has my name backwards.

So my question to you is how much more copycatting risk will I face. Being on one of those platforms, and is it worth the risk? And then also, what can I do to protect my business from something like that?

HOFFMAN: Yep. It’s kind of the classic innovator’s question. You’re doing all this innovation, and you’re putting energy and risk and work into the innovation, and is someone else going to make life difficult by copying your innovation and then challenging it in various ways? And this is, again, a quintessential entrepreneurial problem. And so I guess the question is you know that you’re going to need to grow and be successful. You know you’re going to need to size. And you know when you get to that size, you’re going to have the copycat problem no matter what, right?

It’s not an if. It’s a when in terms of how to play up. So what you want to do is you want to strategize about how you best deal with that when. Now, you could say, “Well, look, I can grow in these other areas that’s not on major platforms, Amazon, Target, et cetera, and get to more elevation before people realize how successful the products are or how valuable they are.” Because one of the problems, of course, on Amazon is people can see how well it’s selling.

So, that’s part of what drives potential, kind of, copycat copiers for this. And so, you might say, “Okay, I want to get some acceleration before I get there,” but you know you’re going to need to end up there. You know you’re going to ultimately want to have all your products on Amazon, all your products on Target, etc., and growing as strongly as possible.

And so, that also then gets to, what are the things that you can do to reinforce your competitive position? One, obviously, I’m sure you’ve thought about is brand because you go, “Okay, how do I have that brand? How do I become synonymous with it?” You might say, “Hey, I’m going to try to get more broad kind of reviews and messaging out there that are already out there on the web, so that that’s harder to replicate because I used that early time in order to make that happen.” And you might actually, in fact, do something like, “All right, so what’s the way that I can move much more fast?” Now, if you can think of things that would essentially give you competitive moats, I think that could be very useful in terms of kind of how you accelerate forward in kind of what you do.

And so, Monisha, awesome product idea. Awesome direction. And thank you very much for the question.

SAFIAN: Whatever you thought your moat was yesterday, it doesn’t get any easier. You have to keep creating new moats. I remember asking Daniel Ek, the founder of Spotify, what was the most difficult phase of building the company? And he said, “It’s always the next one. Because I’ve already done what I’ve done. It’s always the next one. And it doesn’t get any easier, but the rewards get bigger as you go along.” And I think Monisha’s challenge is if people copy you, you’ve got to stay one step ahead of them. And it’s exhausting. I know. I’m sorry, Monisha. It’s exhausting, but it’s the game we’re in.

HOFFMAN: But by the way, the thing is, is it being a sign of success, at least you have the success too, which is the key thing.

SAFIAN: That’s right. And you use that as the springboard that allows you to get to that next place or whatever the next place will be.

HOFFMAN: Yep.

SAFIAN: All right. We have one more questioner waiting. His name is Ricardo Regalado. Ricardo is the CEO and founder of two businesses based in Chicago. One is Rozalado Services, which is a family-owned building services company. And the other is Route, which is a software platform that empowers service providers in the building maintenance industry. And he knows that even though building services is a huge market, he feels like he’s kind of bumping up against some stigma that’s making it harder to ramp up more quickly. So, for the question itself, let’s go over to Ricardo.

RICARDO REGALADO: Thank you, Bob, for the introduction. I’m a founder that is building a solution for the space that I’ve built and scaled to an eight-figure business: the cleaning and maintenance service industry. But my issue right now with the investor market is it’s a non-sexy, boring, blue-collar, and not big enough market space to what they think. So, this has made it a little difficult with fundraising. So, I’ve had to bootstrap myself to get us where we are today.

So, my question is how do I entice that uninitiated investor group to be interested in the space because it’s the future? Or do I focus on investors in the smaller group that does invest in that space? But my worry with that, Reid, is it’s a smaller group. I mean, I want to find those investors and the groups to give me the firepower and support, but it’s a niche space, you know?

HOFFMAN: So, great question, and kind of canonical for all entrepreneurs kind of looking at this circumstance. The first thing that I tend to point out to entrepreneurs in this dilemma, this question is that you’re not looking for everyone to offer you a term sheet, everyone to offer you investment. Don’t need that. You need one or more of the right people to offer a term sheet, offer investment. And so, therefore, implicit already in your thinking and implicit already in your analysis, going to people who would be naturally good partners because if you end up with an investor who didn’t understand it, it’s going to create some turbulence for you, which is substantially less good. So, that’s a good place to be.

Now, on the other hand, you go, “Well, it’s too small, too few. I may just not get the investment that I need in order to grow this really amazing business.” And then the question flops to, “How do I make this business more interesting?” Now, some of that is to kind of describe how big the market is, how much you have a competitive edge in that market, what the actually possible CGAR and other kinds of things because, by the way, most investors, they actually understand the, “Ooh, this makes lots of money? That’s exciting.” Doesn’t have to be the latest Disney film or something else. It’s like, “No, no, no, no, no. I’m excited by high growth, good margin, and defensible businesses where owning shares is a good thing.” So, you could do it that way.

And then the other one entrepreneurs frequently undercount how much a pitch can really make a difference, like, doing a pitch in a way that gets someone kind of lean in and be excited because. By the way, sometimes people go, “Look, I don’t know about your business.”

And so, you go, “Look, you’ve got energy. You’ve got grit.” Sometimes, actually, in fact, they go, “I don’t know this business, but I want to be behind this guy, Ricky,” right?

REGALADO: Mm-hmm.

HOFFMAN: And so, somehow, how you do the pitch and show how you’re excited about it and why you go, “Look, this is an awesome business.” And then that’s infectious. And so, that would be another thing to possibly try it.

But I hear you because, by the way, when I started pitching LinkedIn, people were like, “What is it? Oh, is it like Friendster? What is this thing?” So, I hear you on the difficulty. So, I don’t know. Is that helpful?

EDWARDS: Super helpful, man. I mean, yeah, because it is now the new pivot and the new pitch that I’ve revised for our 2.0 going about it. That’s exactly the response we’re getting, Reid, is like “Oh.” They lean in. I’m like, “Did you just lean in? Let’s keep talking. Let’s go.” That’s what I wanted.

HOFFMAN: Totally awesome. So, Ricky, thank you. Awesome question. And thank you for being here with us today.

EDWARDS: Appreciate it. Thank you guys so much.

SAFIAN: Ricky doesn’t want to be a traditionalist in a traditional industry. And so, he’s got to search around a little bit more, but it sounds like he’s finding his pacing. The storytelling matters.

HOFFMAN: Yep. And I like the fact he was already working on iterating in exactly the direction. So, actually, in fact, people might think it’s strange when I go, “Well, I’m perfectly good that my answer wasn’t useful to you because you’re already doing it,” because that’s what entrepreneurs should be doing.

SAFIAN: Well, Reid, as always, it’s an education to listen to you. I always have fun when we talk. 

HOFFMAN: Thanks, Bob.

COHEN: Thank you so much, Bob. And I have to say, for everyone listening, if you have not listened to the episodes where it’s just Reid and Bob talking about everything that matters in a way that is pretty much the smartest way you’ve ever heard, you need to.

First of all, thanking all the entrepreneurs, thank you so much for sharing your ideas and your challenges. I really feel, by sharing, each of you who shared an individual challenge, it helps elevate all of us collectively. I personally found, as I listened, that I could identify sometimes challenges that I’m having right now, sometimes ones that I know I’m going to have in the future. And I think that’s one of the great gifts of these Strategy Sessions.

Big thank you to Bob Safian for co-hosting. As always, love hearing you think out loud, Bob. Thank you to the entire team at Masters of Scale for putting the event together, along with our partners at Brandlive. Huge thank you to the entire team at Capital One Business for being just such extraordinary thought partners and generous patrons for entrepreneurs.

Finally, I want to thank you, Reid, for being the best host and friend that my co-founder, Deron, and I could ask for. Reid, if I could throw back to you to take us out.

HOFFMAN: I’m Reid Hoffman. Thank you for listening.