The most valuable lesson I learned from a VC

In 2008, I left FOX Interactive Media to join up with Jon Bischke to start eduFire.

It was the first foray into running a venture-backed startup for both of us, and we made a lot of mistakes (I’ll talk about some in another post.)

In the course of raising a $500k angel round, and laying the groundwork for an institutional round (which ended up being ~$1.2M, led by Battery Ventures), we spoke to a crap ton of angels and institutional investors in LA (where we were based) and the Valley.

Four years later, one meeting in particular stands out.

It was with Mike Maples, who despite being fairly new to investing in the Valley, had invested in companies like Twitter and Digg.

He was a nice, humble, and smart guy. It was one of the most valuable meetings we had, for a lot of reasons. You’ll see the biggest reason in a moment.

We pitched Mike on our idea: eduFire was an education marketplace, where you could find teachers of any subject you wanted to learn. Students would be able to learn from experts, and teachers would be able to earn a lot more than they currently did.

“Education,” we said, “is a $1T market. Yes: trillion.”

The most common response we got from investors was “that sounds interesting, but I don’t know much about education…” (Turns out we were early – education is so hot right now, but it wasn’t in 2008.)

Mike gave a similar response.

But then he said something interesting.

Something like:

“You know, I heard about a really interesting company the other day. They’ve approached building their business in a really cool way. They started by identifying the riskiest parts of their business. Then they tested their theories about how to reduce those risks in the real world. They’ve been at it for a short while, are learning a ton, and have removed all kinds of risk from their business. It’s based on a book called Four Steps to the Epiphany. Have you guys heard of Steve Blank…?”

The company was IMVU, co-founded by Eric Ries. Ries has gone on to write a book and lead the Lean Startup movement, based on his experiences growing IMVU.

After the meeting, Jon and I briefly discussed this crazy new risk-reduction approach. We never acted on it, other than trying to get through the dense and academic Four Steps to the Epiphany. Continuing to build was a much more fun and comfortable route to take. (And I’m still not sure why we didn’t ask Mike for an intro to Steve or the IMVU guys – Jon and I both like meeting, learning from, and helping smart folks. Life might have taken an even more interesting turn had we made one of those connections.)

Mike passed on eduFire, we closed our angel round, and continued on the path of building our vision.

I left eduFire in 2009, and after raising their round from Battery, it was sold in 2010 to a company that wanted the tech.

That meeting with Mike stayed with me, though. It took a few years – and a few more “let’s build the vision” approaches and ensuing failures – before the lesson that you should identify and reduce a new venture’s biggest risks FIRST was driven home.

This is one of the valuable lessons about building a business that I’ve learned along the way, but there are many more. (It’s also where this blog’s tagline comes from: “I’d rather learn I’m wrong than waste my life.”)

It’s almost like when I started eduFire, I had a heavily pixellated mental map of how to grow a successful business. It looked something like this:

It’s gotten sharper over the years, and it’s my hope that by continuing to run a business (SocialWOD), help others run theirs, talk to people smarter than I, and share the lessons I’ve learned, my – and your – map will come to look more like this:

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