What you can learn about building your company from a guy who helps hundreds of entrepreneurs launch and build and grow their startups?
Adeo Ressi is the creator of the Founder Institute, the world’s largest idea-stage incubator. In this interview you’re going to hear about a mistake that has shut down his entrepreneurs–once you hear it, you’re going to kick yourself for making a similar mistake.
Secondly, you’re going to hear the one thing that helps his entrepreneurs succeed more than anything else. We’re going to talk about how Adeo is helping so many founders grow their companies and so much more.
Adeo Ressi, The Founder Institute
Adeo Ressi is the founder of The Founder Institute, a global network of startups and mentors that helps entrepreneurs launch meaningful and enduring technology companies.
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All right, let us get started.
Andrew: Hey there, Freedom Fighters! My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. Over 700 entrepreneurs have come here to tell you their stories and teach you what they learned along the way, so you can build a successful company too, and hopefully sit where that gentleman is sitting, right here, and come back here and do your own interview.
In this interview, I want to find out what you can learn about building your company from a guy who helps hundreds of entrepreneurs launch and build and grow their startups. Adeo is the creator of The Founder Institute, the world’s largest idea stage incubator. And I have been told that I should tell the audience what to expect from the interviews, so here are four big bullet points:
First, you can understand a mistake that has shut down entrepreneurs who have gone though The Founder Institute. Once you hear it, you are going to kick yourself if you are making a similar mistake.
Second, you are going to hear the one thing that helps his entrepreneurs succeed more than anything else. I hope you are doing that right now, and if you are not, you are going to learn directly from Adeo how Founder Institute entrepreneurs have done it, and hopefully implement it in your company.
Third, we are going to talk about how Adeo is helping so many Founders grow their companies. And, if you have ever wanted to mentor other entrepreneurs or build up others, or help others build something, you are going to want to learn from his story, because he has got a creative way through The Founder Institute that he is doing it.
And, finally, I am going to ask him a few challenging questions based on my conversation with other Founder Institute alumni.
Adeo, welcome back to Mixergy. You were one of the first guys to have done an interview. Thanks for doing this one too!
Adeo: Thank you!
Andrew: By the way, I saw you smiling as I was doing those bullet points. How did that come across? That is an experiment here that is based on a past guest’s suggestion.
Adeo: To be honest, I was smiling because I am, like, really? That sounds great! All that’s coming up? Terrific!
Andrew: Looking at the clock, you gave me thirty minutes to do a pre-interview with you, which was very helpful, and that is what we covered in the pre-interview, and that is what we will talk about here.
First, I know the person who is sitting in the audience who is thinking, Founder Institute, what do they do, how does it do it? I think a good way to explain it is to just tell a success story. How about the Udyami story?
Andrew: What did they come into the program with, what did you do for them?
Adeo: So, Udyami joined our first class in 2009, and it was over the summer. It technically wasn’t Udyami, it was a group of Turkish founders who had recently moved to the United States and some other individuals in the class. They were originally working somewhat together and somewhat apart on different ideas. But going through the program, they realized, all right, you really need to pick an idea that is going to be good. One of the Turkish programmers, Aaron, had done some preview work on an education site. He downloaded it one day in a hot seat. Everyone was like, whoa, this is much better than, I think they were doing some sort of LinkedIn service for small businesses.
Everyone was like, this education thing is way better. You should focus on it. Aaron met, and on that day they had known him, but decided to be co-founders. A peer in the program named Gagan. The story of Aaron and Gagan’s ascent basically goes from there. They met in the program. They focused on online education. They came up with the name, Udyami, in the program. They then went out shortly after the program and had some stumbling blocks raising capital. We gave them the advice to come back in, stop raising, get some more traction on the core product.
The traction started going through the roof. They went back out and raised a very large Series A. In fact, a very large angel round, excuse me. I remember they called me up and said ‘Adeo, we have a million dollars of interest’. I said ”Just close on a million dollar angel round. You don’t need it. All this money comes with greater and greater handcuffs. Take what you need. They took a million dollar angel round. They then turned on revenue. Revenue went through the roof, literally. It’s one of the most successful, from a cold start, revenue stories that I’ve ever heard. They came back and said ‘What should we do?’ and I said ‘Well, you should probably go raise a series A because right now you don’t need the money.
You still have a lot of the angel money left in the bank. Your revenue is doing very well.’ So, then they raised a multi-million dollar series A with some top investors and the actual first investors in Groupon were participants. It’s been a great ride for them. Right through the four month program of the Founder Institute where the idea came together and founders met to now where they’re one of the leading, if not the leading, private online education property in the world today.
Andrew: And they walked in with nothing. Not even a fully-built product? Udyami wasn’t in existence when they walked through the door the first day of Founder Institute, it was when they left. They had you to talk to about funding throughout the process.
Adeo: I’m always there. It’s easier if I meet you because then I can put a face to the name but I try to answer every email. I’m not quite at zero inbox but I was at zero inbox recently. You speak to a lot of investors, you speak to a lot of people who help startups and they’re nowhere near zero inbox. They’re at 10,000. I think right now I’m at about 100 unread and that’s, frankly, mostly today. I try to respond to everyone. You’re not going to get the longest piece of advice but you’re going to get something short and sweet and mostly accurate.
Andrew: All right. We’re going to go through everything that I promised the audience in the intro. But if they ever want to register for you guys, you guys used to sponsor Mixergy and I remember saying Founder Institute.com and I said it and thought I did such a good job of it for Jeanine who paid for the spot but I let you guys down. You didn’t get enough people to sign up for it to be worth your while and I feel bad.
Adeo: Not true. Anyway, that’s too long ago.
Andrew: It’s too long a URL? What’s the shorter URL?
Adeo: We have one of the shortest domains I’ve ever heard of. It’s just Fi.co.
Andrew: Fi.co if they want to register and hopefully be another success story that we can talk about in a future interview. Let’s go through. You’ve helped how many entrepreneurs through Founder Institute so far?
A: It’s just under 1,000 human beings and 499 companies.
Andrew: 499 companies? All right. One of the things I asked you in our pre-interview was what did the people who succeeded do right? Do you have one of those messages that you told me about earlier? One of those things they did right?
Adeo: There’s a bunch. We actually covered three. Number one, as soon as you have the idea fully set and you’ve vetted it by doing some customer outreach and talking to people, you should try and get it live to the world as soon as possible. Unless it’s live you’re not getting real feedback on what people think. I think there’s a mistake that entrepreneurs make because they think they just need to get it live right away. That’s not what I’m saying. As soon as you’re sure that it’s a viable idea and that means potentially months of research and analysis then make it live. But make it live as quickly as possible.
Andrew: Give me an example of a product that was pushed out quickly at the right time that another entrepreneur might have waited too long on, might have not recognized that it was time to take those risks?
Adeo: âÄ¦ best half-baked. When they came in the Founder Institute from some research that one of these Turkish founders did while he was living in Turkey, it was really incomplete. Truly incomplete. They were able to add some spit and polish to it. Really, quite literally, glue stuff onto the sides and hold it together and they launched within a few months. Maybe a month and a half of getting out of the Founder Institute. Got a ton of press. I’m sure they had engineers literally hitting restart on the server. But it demonstrated that people liked the core offering enough and, obviously, subsequent to that they’ve completely improved it, redone it, etcetera.
If they hadn’t launched the online education, space would have become incredibly competitive and they’d had the first mover advantage. That’s going to be hard to break. There’s first mover advantage reasons to launch. There’s real feedback from customers reasons to launch. There’s actually saying ‘Hey, I launched something and I’m a real entrepreneur’. I meet a lot of entrepreneurs and they tell me about their idea and there’s a big divide between those who talk about the idea and those who launch the idea. There’s a lot of reasons to launch.
Andrew: I’m going to come back to that if I get a chance and ask you about your launch of Founder Institute. We’ll save it for the second part of this conversation where we talk about how you built up your business. Again, my ulterior motive is that if there’s anyone in the audience who wants to mentor others or help others build their businesses, I want them to learn from your experience. But moving on to the second big point, it has to do with team. Udyami did it right, too, but give me another example, if you could, and tell me what you mean and what you’ve noticed about the right kind of teams.
Adeo: Sure. There’s all these great anecdotes about being able to judge people. That is one of the hardest things. You’ve got to meet people, assess if they’re good and recruit them to your team. In fact, as an entrepreneur, your entire job really is pitching the business to team members, investors, partners, customers, users. You’re always sort of the pitch man in a way. It starts with the team because you’re not going to get investors without a team. You’re not going to get customers without a team. All those other things come after you’ve pitched and won key team members to help you. An example is probably one of my, again from the same class so I’ll keep it in that same year, Retailigence [SP], which is one of the fastest companies I’ve ever seen go through an angel, a series A and a series B company. It’s also a graduate. He was a solo founder who moved here from Asia. But he’s originally German so he has an accent, had been living in Asia, moved back to Silicon Valley completely alone. He came up with the idea in the program. It was a good idea. He could speak intelligently because he had a consulting background. What did he do? Got out, recruited a team and it was a really good team, he actually recruited other founders who had started their own companies. He convinced them to drop their companies and come work for him.
Andrew: How? How do you convince another founder to drop your company? You don’t know. You’ve done that. You’re very good at pitching.
Adeo: Clearly, he’s good at what he does. He sat down and said ‘Look, you have a great business. I maybe have a greater business.’ I know the founder in particular that he convinced to join on was in a related field. So this founder was already passionate about the field and he, Jeremy is his name, had convinced him that this is a good field, so come and join him. It’s hard. It’s truly hard.
Andrew: You know what? I always thought that there would be one point where I would have to stop pitching. You know William Quigley, right? From Clearstone in LA? I remember being at one of his parties and I said ‘It must be great to at least get to your place where I never have to sell anyone’. And he said ‘Are you kidding me? I’m at my own party and a few minutes ago I was trying to get someone to invest in one of the startups that we back. I’m always selling. You always have to be selling.’ There is no time where you get to take a break and stop.
Adeo: Venture capitalists have to pitch they have to pitch you, your investment company, they have to pitch LPs to investment. If you are in business at the top, and not the top of GE, the top of anything in the startup world, you pretty much have to have some basic pitching skills that are well-refined. Otherwise you are going to be at a disadvantage.
Andrew: Where do you learn that? I would like to become better at pitching people.
Adeo: Oh, then, come to The Founder Institute for that. We will make you, literally. In our sessions, founders have to get on stage. They are picked at random, and there are three super-experienced CEOs who are instructed not to lie at all, and you have to pitch. And then we rate the pitches on the spot with tools, and then you get ranked on a leader board on how you and your group of peers pitch. If that does not put pressure on, if we find that your pitches are not improving enough, then we will actually make them what we call ‘do or die’ hot seats. Which means that, if you do not cross a certain score threshold, you are invited to leave the program and re-enroll next semester right then and there.
Andrew: Let me ask you about that, then. I want to divert it away from what works and what hasn’t with entrepreneurs who have gone through, and ask you a question that comes to me from, it is based on a conversation I had with one of your entrepreneurs. He says, it depends on which location you end up with. There are over twenty locations for Founders Institute. If the person who is, what is it called, the facilitator, he said, is busy, you are not going to get time with them, and you are not going to get closed-door conversations with them. If they are available, you are going to get that. If they are really on it, you are going to get these hot seat type events, and if they are not, you are just going to get an entrepreneurs half-attention who has to run a real business.
Adeo: Yeah, no, I mean–
Adeo: Yes and no. So, there is no question that we have famous entrepreneurs, and we have famous people running chapters, right? So, they are not going to have as much time as someone who takes running a chapter as their full-time job. So that is just the nature of the business, right? But that is not the value proposition that we…So, you know, the way I look at it is, we have a system that works and produces very consistent results around the world. Everything is graded, including the facilitator or director.
So, we have a pretty good sense of who is at the top and who is at the bottom. And, to be blunt, we replace the people who are at the bottom. Now, what we found, though, is even in those situations where directors do not necessarily have the time to give extensive officers with the Founders, that should not be the crux of what your success in the program is. The crux of success in the program is, you still do not have the hot seats every week, still meeting matters every week, you know, each-
Andrew: Every week is a hot seat at every location.
Adeo: Every location and every night, except there are some sessions that are one giant hot seat, so the whole thing is a hot seat, if you will. The point of the program is to train you to be a self-starting, successful entrepreneur. And one of the key things that every self-starting , successful entrepreneur does, if they want to talk to someone like a mentor, they walk up, they introduce themselves, and they get the meeting.
So, you know, I was out with a half-dozen entrepreneurs last night at an event in which this lady, who makes cookie mix, technically it was brownie mix in this case, and she went, walked into Neiman-Marcus , met the purchasing manager, and was, like, “You should buy my brownie mix.” And they were, like, “Yeah!” , and then they bought some for that store, and they were, like, “Love it!”, they rolled it out. I mean, she just, literally, that’s not even a cold call. I don’t even know what you would call that, a cold…But, you know, if you can take the initiative, no one is going to take that initiative for you. So we have put on our future entrepreneurs into a situation where they have the greatest minds of local markets sitting right there, wanting to help them.
Andrew: And now it is up to you to go and have the conversation with them. All right. I’m going to come back, and I am going to have more questions about this, about the way you operate, and what works and what does not work. I’m leaving that out there as a tease to keep people listening in. I want to go to the next one, which is, the next big thing that you have noticed, that the guys who have gone through the program who succeeded, had, and the guys who did not succeed did not have which is staying positive.
Andrew: For example, someone who is staying positive in the face of the daily grind as you told me.
Adeo: I mean, everyone. Like, you know…
Andrew: I mean, let’s get really open here. Most entrepreneurs who I have on here will say, “You have to stay positive, there are going to be lows.” Then I say, “What are the lows?” and they go, “Oh I don’t know any, I’ve been really blessed that everything has been good.” Let’s be the two people that go really open.
Adeo: So, right now, I mean, we are…so, there’s a wealth of good news, right? So, let me take it a step back and contextualize this. This is the most successful and most positive business I’ve ever run. By far. And I’ve run a lot of businesses, bought businesses, worked with businesses, helped companies. Our problem right now is…so the thing that sort of nags me…well there are a couple things that nag me. So number 1 it’s, you know, we have like 50 locations in the pipeline, maybe more. Like, we had a call this morning with 20 directors on it for future chapters. I mean…it’s just like that’s a lot. So just imagine [??] 20 new cities in a year. We’ll probably do, conservatively, 20 new cities this year. We have 10 cities right now. So that’s just like…there are no real problems from that, but it’s definitely, like…trekking through the wilderness.
Andrew: How about a time in the past when you were on the verge of not being positive. Or maybe you gave up or maybe you were depressed [??]
Adeo: Yes. And in fact that happened recently…I personally get some negative feedback by the fact that I’m very tough on some founders and that’s very hurtful to me. Because I’ve spent my entire life and everything that I do, like 20 hours a week, 7 days a week, 20 hours a day, 7 days a week, literally helping entrepreneurs. That’s all I do. That’s my mission in life. I make enough where I’m not broke and I’m not rich, but I’m fine in life, so this is like my mission. And so someone says hey, Adeo is an ass, or isn’t helping, or is hurtful. That hurts me and demotivates me because I work really hard to do this and people don’t appreciate it. But I also understand because I’m hard on them. Right?
Andrew: So what do you do when you feel that way? When it was a time you were saying recently when you got negative feedback and people were saying Adeo is not this, he’s that instead. What do you do to get yourself out of it?
Adeo: Oh, you know, that’s a good question. I mean, it’s tough. I mean imagine if you’re building and, I don’t know, your dream company. The thing you always wanted to do, people are saying that sucks and you’re an idiot. Right? So, it’s tough! You know, this is my dream! Like, you know, obviously, you know, what you have to do, what I do, is you have to rationalize it. Right so, all great CEOs get this feedback, right? You know, from, like, the true great minds of our time like Elon Musk going through a dark period when people were saying Tesla was awful to like me…everyone goes through it, right?
And, you know, the trick is that you kind of rationalize it. So you say, ok, well, maybe I was a little tough, maybe I was too tough with this individual, and that made them angry. And, so, I deserve some blame, I made a mistake, but on the whole there’s like a thousand other people that’s saying we’re great and our mission’s awesome and we’re really helping the world. So I can’t let the four or five people that, for whatever reason, can’t make happy, dominate my worldview. Even though they made be incredibly [??] anything else. I mean, unfortunately, it can be, in some cases, especially the more successful you get, by the way, the harder and harder this becomes because you can actually have reporters that hate you, and so every time they write something it’s bad. I know CEOs who are like, oh my god, oh my god, oh my god. They reload the page for when the bylines come up. Because if person publishes a story on them, it’s definitely negative or hurtful.
Andrew: It’s interesting that that happens to you because you’re the guy who created the website where other entrepreneurs can rag on investors.
Adeo: I think about that, too, Andrew. I’m the definitive world expert on ragging on people. I’m kind of teasing. I think the difference is that, and I’ve thought a lot about this, the difference is that, at least in my case, the attacks can be very personal. They’re like ‘Adeo, Adeo, Adeo’. In a lot of these VC cases, they got caught. They were doing something bad and they got caught.
Andrew: Some of it was personal. We’re talking about theFunded.com. Some of it was personal. I remember going through it and seeing things like ‘the guy was checking his Blackberry the whole time we were talking’.
Adeo: Right. But that’s bad, right?
Andrew: I don’t know if it’s true that he was really the whole time on the Blackberry. When you feel hurt you see the world in a different way. I’m not putting down TheFunded. I think it was a great resource and still is. I’m not saying that because that happened you shouldn’t feel the way you are. What I am saying is that-
Adeo: Listen. It was funny. Because I’m like ‘Wow. VCs must feel the way I feel now’ and I know they do. Just launching TheFunded, a lot of people were saying ‘Oh my God, you’re all sorts of names’ calling towards me and that’s fine. I can handle it. That’s another thing. As you get more successful and being an entrepreneur more, you develop this thick skin and this shiny exterior. So no matter what happens you’re always able to look at it with some sort of rationalization that turns it positive. Trust me, that doesn’t make it any easier.
Andrew: But it is good to know that it happens even to you. It happens even to the venture capitalists who are supposedly sitting in the captain’s seat when we’re having conversations with them. It happens to everyone. What I’m noticing works as a way of dealing with this is what you just said which is shift your focus. I remember talking to Mike McDermott when he created Freshbooks. In the early days he couldn’t get customers. Today everyone wants to learn from him because he built this bootstrap company that’s way successful. But back in the beginning no one did. I asked him what got him through it and he said ‘I shifted my focus away from not making enough money’, which is what was going on, to what was positive which was a few positive emails that were coming in. In your case you’re shifting away from the couple of negative people who are out there and paying attention to all the people who are excited about the work that you’re doing.
Adeo: If you go back to what your vision is as a business. I would say rationalize it. I made a mistake or this is wrong. It’s going to get better. So rationalize it. Shift your focus to the positive things and keep your big vision in mind. The world is a slog. You might have a sickness in the family, whatever it is, there’s going to be problems. That happened, unfortunately. I wish it weren’t the case.
Andrew: We as entrepreneurs need to accept it. We need to deal with it. The ones you’ve noticed that succeeded have. I went to a J. Abraham event where the guy sitting next to him said ‘When you look for sales people, you want to find guys who eat no breakfast. Who get excited because they’re going to prove to someone else that they can make it work. Not guys who are going to shrink from it’. I feel the same thing about entrepreneurs.
Adeo: Fundraising will test that like nothing before. You want to go fundraise as an entrepreneur? You’ll eat “no” for breakfast, lunch, dinner, midnight snack. You’ll hear hundreds and hundreds of nos.
Andrew: No. The guys we admire, the guys who end up sitting here across from me, the guys who end up being in the stories that you tell others to guide them are the ones who, when that happens, they hear ‘no’ or things stink, they stay positive. I want to go on to the negative side. I intentionally didn’t start with negative. I want to know, now that we’ve gotten a little bit into this interview, the guys who suck. What are they doing wrong? I want to do it so my audience can avoid sucking.
Adeo: The first thing that is converse to what they do right is I see a lot of founders who stay in perpetual tinker mode. They think ‘Oh, let me move this button over. OK. That looks great. Oh, let me do this’. And they never launch. I would say, I don’t know the exact number, but it’s a big percentage. It’s not insignificant.
Andrew: Always tinkering, they never launch. I’ve even seen experienced entrepreneurs who I’ve interviewed here come back and say that they’d do the same thing. In fact, the more experienced you are, it feels to me, the harder it is to launch an imperfect new product, cause there’s so much expectations out there.
Adeo: You’re kind of right, except sometimes the reason we launched the Founder Institute I was in tinker mode, I must admit. And so we were working on the little knobs, and, ooh, I like it, let’s do this, yes!
Andrew: Like what? What are some of those knobs?
Adeo: Mike Arrington [SP] emailed me and was, like, “We’re running a story that you’re launching an incubator.” I’m like, “Whoa, I am launching an-? I mean, I’m working on an incubator. I don’t realize that I’m launching it yet.” And so I was, basically, and he’s, like, “In an hour.” So I had sixty minutes to decide whether or not to laun–I didn’t have a name. . That’s why our name is kind of wrong. And, by the way, they delayed the story while the DNS resolved. So I could point it to a landing bay.
Andrew: So, because Michael Arrington said “We’re about to run a story”, you finally said, “All right, we need a name. We’re going to launch. We’re on. It’s real.”
Adeo: Pretty much!
Adeo: Yeah, honest!
Andrew: What were you tinkering with? What was keeping you from launching and got you to make the same mistake you’re noticing in other entrepreneurs?
Adeo: OK, well…
Andrew: I love hearing this.
Adeo: Probably get the best case in point here! So, I was living the perfect life, with The Funded was doing great. We made good money.
Andrew: How much money?
Adeo: Oh, I mean, it wasn’t a lot of money. I think the highlight of The Funded maybe made like a half million dollars a year. But I had no employees, right? I had costs, right? It wasn’t, like, a zero-cost business. But I had no employees.
Andrew: What year was it making half a million dollars?
Adeo: I’m not comfortable revealing that, per se. But certainly before the crash, that would have been a [??] statement.
Andrew: Before 2008, you mean?
Adeo: You know, it’s making a lot of money. It was not a lot of work. I probably had the Tim Ferris four-hour workweek. I’d be, like, “Oh, what would be a great thing to help entrepreneurs?” I’d code it. I’d write the media. They’d write stories. It was a lovely existence. The more I got into it, the more I realized why companies unfunded were failing, and that was when I was, like, OK, I have to do this thing about it. We can talk about that a little later, because I know you want to talk about the genesis of the institute. So, anyway, I had been working on it, researching and figuring out what would be the right things, but it wouldn’t launch for another six months, unless that email had come through.
Andrew: What kind of things were you thinking, “I need to have this before I launch?” or, “I can’t launch until I have this.”
Adeo: A name. [??] This proved it really, really early. A domain name, website. At that point, though, I had done a lot of stuff. I’ll tell you something. Nothing, and so this is a trick, by the way, so let’s look at a problem and a solution. So, nothing, nothing, nothing makes you work harder than external pressure. So that frickin’ article coming out. He’s literally, like,
“I’m writing an article about you launching an incubator in sixty minutes. You can choose to comment or not.” And if I don’t comment, I don’t know what’s going to be in this article. One line,
“They’re launching a theoretical incubator without a name. We don’t know any details. Does anyone know?” And it’s, like, no one would know, because it’s still in my head. That’s not a hundred percent true. But, anyway, back to the point. So that pressure pushed me. And, man, did we work fast. I went from the theoretical four-hour work week to really, a realistic, twenty-two hour work day.
Andrew: I remember before and after. I remember when you were running The Funded. It was so cool to hear you think, well, I wanted to have this member section, so I built it. And, as I listened to you, I thought, that’s the way to do it. And then after, we’d have a private conversation, or I thought it was a private conversation, and you’d say, “Oh, hold on, I want you to meet someone.” And it turns out, there was some entrepreneur from The Founder Institute sitting in the car the whole way. You were ferrying them back to the airport or something. It was a point where there was entrepreneurs all the way around you after the Founder Institute.
Adeo: Yeah, there still are. I mean, it’s kind of crazy. That’s the most rewarding piece of the job. But just to finish the point. If you can find some external pressure, something.
Andrew: Like what? What can we, who don’t have Michael Arrington’s publish button hanging over our head use as an external pressure to get us to create?
Adeo: Stupid tricks. Like family mavericks. You value them, hopefully, and hopefully you have good family relationships and you say ‘Hey, mom and dad, I want to launch this. When I come home for Christmas it will be live and we’re going to do this.’ Friends, possibly former coworkers or current coworkers if you haven’t quit yet, say ‘I’m going to quit in April and launch this’. By the way, once you tell someone you’re quitting, you’ve pretty much clicked the button of quitting. Setting an external stakeholder to be involved in that deadline whether it’s family, friends, coworkers is pretty critical. Those are very effective. Another thing that’s even more tangible, which is even more effective, is if you can actually raise a small friends and family round. I’m not talking $50,000. I’m talking like $10,000, so if you go ‘Hey, I’m starting this idea. Give me a little money so I can get it off the ground’ and it’s not even that you necessarily need that money, but once you take that money, you have this commitment that ‘Oh, my God. I better honor what I said I was going to do before I ask them for money’. So that is very effective.
Andrew: Do you guys have a demo day at Founder Institute?
Adeo: No. We have a graduation, which, because the four months of the program people are still fine tuning the idea, the product is only partially complete at best. Some people have more product. Some people have less product. We do a pitch night which isn’t a true demo day. But, once a quarter we invite grads from all around the world to this thing called the Founder Showcase and that’s amazing. So that’s more of the demo day.
Andrew: So that’s like your demo day and that’s where people from all the Founder Institute locations come in and that could be an external push to get them to launch. All right. You also told me before that you’re seeing that people are afraid of success. Now, I’m afraid of heights. Really, deeply afraid of heights. I used to be afraid of going on camera. I understand all these kids of fears. Fear of spiders, fear of motorcycles, but fear of success?
Adeo: Fear of [?]
Andrew: You’re looking good. I’ve got to say you’ve always been a guy with a good look to you. I need a good look.
Adeo: Thank you. I would beg to differ. But we’ll leave that to the audience. The fear of failure.
Andrew: Fear of failure or fear of success. I understand even fear of failure. I have fear of failure. But fear of success? You notice people have that?
Michael: Is it one or the other? They’re the [?] edge. Is it fear of failure or fear of success? I would say a huge number of founders suffer from it.
Andrew: What happens when they’re afraid of success?
Michael: It manifests itself in a lot of different ways. We’ve talked about this hesitation to launch. I think they want it perfect and then it’s never perfect enough because they’re afraid it will fail or it won’t be successful. But then looking later on, it manifests where you say: ‘Well, you have a great product. You’re number one in your category. This is the obvious thing to do and you’re not doing it. Why not?’ It’s weird.
There’s an app and it’s number one in its category and it’s run by these two lovely founders that I truly adore but they’re taking it part-time, it’s [?] profitable, it has a lot of downloads, it’s actually kind of huge. But everything’s part-time. I’m saying ‘What more signaling from the world do you need than you’re making money at a pretty good clip, you’re number one in your category, you’ve got a ton of downloads, people use it a lot. Go for it.’ Some people just hold back. Even when all the signals of success are there, they’re still holding themselves back.
Andrew: I see. In that one story you have so many of the things that you’ve noticed other entrepreneurs make when they fail. First, they’re not committed. Did they have a job in addition to building this thing?
Adeo: Yeah. I mean, if you looked at that, that goes back to the story-
Andrew: His company still has a job, these founders?
Adeo: They don’t have a job in that case, but a lot of founders do have jobs. So if you have a comfortable-, I’ll tell you where this is most pronounced — Washington, DC.
Adeo: So, there was literally one of my favorite ideas to date, and the guy had the cushiest job ever, and he just couldn’t quit it. And I’m, like, this is the best idea I’ve almost ever heard, and I’ve heard some horrible ideas, but at the time that one was the best idea I’ve ever heard. Now it’s among the top five. Still is. Finally, he quit. Finally. But it took him forever, because of the comfort of the job.
Andrew: What was the idea? He knows who he is, it’s okay. What you’re saying is, your idea is so good that you needed to pursue it.
Adeo: I don’t feel comfortable now saying that that’s the best idea that I’ve ever heard.
Andrew: But it was, at the time, a great idea and he-
Adeo: Yeah, and he’s going to do it. In fact, he came by the office not that long ago when he was out here, and demoed it, and everyone’s like, woooo, that’s so cool! So soon, yeah, hopefully, what he’ll get over is that, the distractions of the comfortable lifestyle now that he’s working on it full time. It will be out there in the world soon. I hope you get it.
Andrew: You’re right about DC. I don’t know if they’re the most, but DC entrepreneurs, DC engineers have such good lives, why rock the boat? And I see them, when I talk to them, they’re smart guys. Government is apparently overpaying on stupid technologies that they’re not being challenged, and how hard to get these guys to move.
Number two, I think, is New York. I was in New York doing a Mixergy event, and some of the guys who I was talking to, I loved their lives. They’re making good money. They’re living on Wall Street. I don’t know why they should move.
Adeo: Well, I’m sorry actually-
Andrew: There’s a greatness [??]
Adeo: That’s something that, probably now I am, strangely the world expert on, because we operate chapters in more cities than anyone has ever operated any type of program to help entrepreneurs directly. So, what’s weird is there’s very, you get similar quality of entrepreneurs and similar quality of ideas, but the external factors actually weigh heavily. So, in cities like Paris and New York, where it’s very expensive, there’s a lot of culture, there’s a lot of distractions, it’s much harder for entrepreneurs, so a lot of them throw in the towel. And, again, subsequent to that first idea, I could tell you that idea, because he gave up. I’m, like, you gave up? It’s like my favorite idea? He’s, like, I live a lovely lifestyle here.
Andrew: What was the idea?
Adeo: I’ll tell it in a second. So he lives in New York. He lives a beautiful lifestyle. He makes a good amount of money. It’s one of my favorite ideas, in that top five category, and he gave up. And I was, literally, like, I want to cry. But I understand. You’re living a beautiful lifestyle, you’re not-, so the idea was, it’s very simple. And I apologize to the Founder, but you have given up. I love you, man! I believe it’s one of the best ideas, so I’m going to say it on the air just because you threw in the towel, and I think it’s a great idea. So hopefully someone will eventually do it.
But, essentially, he said, I’m going to pick up the phone and call people who buy products, like an IPad or a car, for the company, so Apple can have these people, and just say “Thank you.” It’s called Thanks and Company. And it turns out he did all this work, and he did hundreds of calls himself, and he realized that the customer satisfaction level went way up. The actual cost was really cheap. He would charge them that seventeen dollars an hour people could be made, you know, thirty calls, just thank you calls, for an hour, so you’ve got the economics really good. Turns out that the customers love it. And then, some of them were, like, oh, it’s broken. And, if it’s broken, this third party call person — and they’re not in India, these would all be in America — and he had this vision that I’m going to have the town that the depression ruined that Thank You saved. That was his big vision. He was going to have a town in America that Thank You saved.
Andrew: Heh, heh.
Adeo: These people are calling and thanking me for things. This is a great idea. The town that thanked me is there? I’m in. [?]
Andrew: I love this idea. You know what? We’ve got to do that for Mixergy Premium. I should experiment with it myself. As soon as someone buys, or maybe the following day, I call them up and I say thank you and find out why they did it.
Adeo: By the way, then what happens if someone complains is he charges the company $5 and he routes it to the right person. Right? Versus you on some old line like press nine if you want to speak to someone about a weird billing issue that you don’t understand. He’d have the pre-numbers for the right people and support staff. ‘Oh, you’re having a problem with a product? I’m terribly sorry. Let me get the right person at the organization on the phone to help you.’ That’s a genius idea.
Andrew: You’ve noticed that lack of commitment, like in this case, keeps people from succeeding. This guy gave up the idea and moved on to do other things.
Adeo: He didn’t move on. He stayed doing it.
Andrew: Sorry. At his job. His comfortable job. You know what? At the end of your life are you really going to look back and say that job was worth living for? If you are, then fine. I can tell that with you, you’re going to look back at the end of your life and say ‘was the funded worth living for’ and I think you’d say ‘absolutely it was’. I think anyone in the audience would understand why it would be. I guess everyone has to make the decision and make up their own minds. Final point was you said people are right on the edge of success and then they pivot because pivoting now is such a hot word that everyone wants to pivot, pivot, pivot. Some people don’t recognize they’re succeeding and they pivot.
Adeo: I literally think entrepreneurs are waiting for someone in the club to make it rain. Because the cash is landing on their shoulders and they’re thinking ‘I’ve hit it’ and then they’re thinking ‘It’s not raining? Got to change’. So when we launched the Founder Institute it rained. But most of my other businesses, it took a long time to get to the rain.
Andrew: Rain meaning what?
Adeo: Well rain, where, make it rain is where you’re in a club and someone throws money in the air.
Andrew: Rain is like a rainmaker?
Adeo: Like, prosperity. It took a long time before we realized the prosperity of the business. I think with the Founder Institute we got lucky. We literally launched and there was magic in the room. We knew we hit it. We knew we hit it the first night. Literally the first night whereas with most other businesses you fight and you fight and there’s one more hill, one more hill. One more- oh! We’re here. That’s OK. I think what has happened now is this concept of change is good, is so prevalent that people are thinking ‘Oh, well it’s not working Might as well change.’ To be honest, I would say today, and there’s actually a discussion on The Funded about this right now, something like 70% of the pivots are not really the definition of what pivot is. They’re more like fundamental new businesses. ‘Oh, you know, we’ve pivoted into car sales’
Andrew: I’m pivoting back to my job.
Adeo: I’m pivoting back to my job. [laughter] I think that “stick to it”-iveness, that ability to triumph through adversity, to the point where you actually do hit it. You see on the fringes, people who are pivoting every five minutes and people who are probably sticking with something for too long. I would say the pivoting every five minute group has been growing dramatically and it’s hurtful.
Andrew: Why are they pivoting so quickly? Why are people constantly pivoting?
Adeo: I think they think that Pinterest was an overnight success. They think that Facebook was an overnight success. They think that Twitter was an overnight success. So they’re thinking ‘Well, I need to keep pivoting until I have my overnight success’. I think the mythology of how easy it is to start a business has obviated the reality which is that it’s really hard. You’re going to be licking the edge of death a lot. Even if you’re massively successful.
Andrew: Which of your companies was the most successful?
Adeo: By what measure, acquisition value?
Adeo: Well, my first company eventually got brought for $675 million dollars, but it was in a subsequent acquisition. My second company eventually merged into a public company that was worth a billion dollars, so the direct value probably was the first one and . . .
Andrew: What is that, Method Five?
Adeo: No, that was Total New York which became AOL Digital Cities.
Andrew: Oh, OK. That was your biggest hit?
Adeo: No. I don’t think so, I mean . . .
Andrew: Which one made you a millionaire?
Adeo: They all did very well.
Andrew: Total New York did not make you a millionaire.
Adeo: Again, I’m kind of uncomfortable talking about that, but I had some definitely negative experiences with Total New York and the [equity] structure. That was because I was young and stupid.
Andrew: You did talk about that in the previous interview, actually, about all the headaches that you had to deal with your investors and all the headaches in general.
Adeo: It’s hard to talk about as an entrepreneur because . . . unless you have a running public company, it’s not worth, it’s like water under the bridge. They work successful, that’s great. All those companies, I mean Total New York lived on fumes. We were basically dead all the time. I was living at home with my parents and giving everything I owned to like literally all the computer equipment in my house was in the office and we lived on fumes.
Same, Method Five which the second company really was like, again like we, we would ha-, we just went through . . . I remember we were like, wow, we can’t pay payroll; well what are we going to say. I mean that, by the way, if you ask the number of founders who’s done more than one company, the number of times that they had not been or been really on a licking edge of not making payrolls. It’s quite a fuel, sadly.
Andrew: Let’s go on to the funding. Can I suggest a way to make this interview really dangerous?
Andrew: One of the best interviews on the site.
Adeo: You mean the founder or the founder institute?
Andrew: The Founder Institute.
Andrew: Here’s my suggestion. How much revenue did the institute bring over the years?
Adeo: I don’t know, a couple million, a few million.
Andrew: A couple million, and so it’s, what do you . . .
Adeo: A few, a few million to be exact.
Andrew: A few million, more than two million. OK.
Andrew: OK. I see you smiling. You know . . . [SS] . . .
Adeo: More than, more than, it’s more than two million.
Andrew: More than two million, and the way it comes in is you have 1,000 entrepreneurs who’ve gone through the program?
Adeo: Something like that.
Andrew: OK, something like that, and they pay . . .
Adeo: We’ve had [nominal]. We’ve had way more than that. I mean it’s . . . I wanna be clear that a lot of which is we are like the ultimate [weird] business, in that our expenses are almost exactly our revenue but by design. If you literally . . . like, I don’t make money. What we do is we take . . . the fees we take in are literally parceled right back out.
For example, when someone contributes a course fee which maybe, let’s say, somewhere between 500 US dollars and around 1,000 US dollars, but it’s in Euros. What happens is that money is allocated to [metro] travel, to catering, to things like that. It literally comes in one side and we funnel it out the other side.
Andrew: So everything goes out. You’re basically at zero dollars at the end of the day?
Adeo: Yeah, [??]. I think we had a net like a very small profit which was just some over that we hadn’t allocated out, so [??].
Andrew: The revenue comes from members who pay somewhere between or entrepreneurs who pay somewhere between 500 and 1,000 bucks give or take. Sponsorship comes in. What’s the sponsorship breakdowns?
Adeo: That’s what covers our overhead more than anything else, plus we have returns on the bonus [pool], our first, one of which just came a couple of weeks ago. That is eventually how we’re going to get . . . we [??] . . .
Andrew: That’s the real upside. Everything else is just keeping things going.
Adeo: Yeah, I mean to call outside again what viewers report back in, but right now, for example we’re in a very humble warehouse in Menlo Park. Literally, you could argue it’s in the ghetto.
Andrew: The ghetto, you said?
Adeo: Yeah, I mean, it’s in the Menlo Park ghetto, which is like, you know…
Andrew: If it’s not here you’ve got a nice setup. So wait, hang on, before I get to returns on bonuses, returns on bonus, I wrote it down wrong. First there’s the membership fees that the members pay, then there’s sponsorship. What percentage of the pie comes from sponsorship?
Adeo: Maybe 10%.
Andrew: Oh, that’s it? [??] What percentage comes from–
Adeo: They actually don’t, off the top of my, it’s funny. I know when you’re an entrepreneur, I actually do know these numbers, and I know our cash balance. If you were like, “What’s our cash balance?” I know this. I mean, I could say it right away. I actually tested this the other day. I was, like, “This is what it is.” I was one dollar off. Sadly, you know your cash balance and things.
Andrew: And so it’s ten percent sponsorship. [??] Is it ninety percent from students?
Adeo: Yeah, it would be eighty-five, fifteen approximately in the [??].
Andrew: OK. And there’s no other revenue that comes in, beyond the returns?
Adeo: Well, we had a bonus pool payout.
Andrew: Bonus pool, OK. The bonus pool is every entrepreneur who built a business within the Founder Institute also gives a percentage of the business, not just to you but to the other entrepreneurs who are in the program and in the mentors, right?
Adeo: They give it to the Founder Institute, and then the Founder Institute contractually allocates it back. So, just like the course fees, we’re sort of [??]. So the course fee comes in, a mentor flies to the location, we send in the course fee to the mentor, right? The bonus pool mainly comes in because the company has a liquidity event. There’s mentors, directors and graduates. We send checks out. So we mailed, like, forty or fifty checks with our first bonus pool input. To put things in perspective, it was a relatively small event, and the average graduate earned about ten times their course fee in the distribution. Some mentors earned more, some mentors earned less.
Andrew: And this is within the one program?
Adeo: Right, so it doesn’t go-
Andrew: So, ten times more what they put in, they got back from the program. As long as they were part of the program. In other words, if the entrepreneur who did well and contributed to this bonus was in DC, and another entrepreneur was in San Francisco, the San Francisco entrepreneur doesn’t benefit from the DC entrepreneur.
Adeo: Right. In fact, it’s not only that, it’s the cohort. So the people who go through the four months of the program with you form a cohort, and that is where the equity sharing is. And that ball sort of goes off, and another cohort comes through, and they share. So we’re doing, you know, between, I would say on the low end, seven, and high end, maybe twenty, maybe twenty-something companies per cohort. So, it’s pretty good risk reduction. I mean, the average venture capitalist will do, you know, they say across ten deals, the hot one or two hits, three or four base hits, and six or seven failures, in that range.
Andrew. OK. And who is the company that gave you your first big return?
Adeo: That wasn’t a big return. I can’t say, unfortunately.
Andrew: Oh, you can’t say who it is, yet?
Adeo: No, unfortunately. I don’t know if I’ll ever actually be able. And, first of all, I’m not in a position to be able to say. It’s their company, it’s their success.
Andrew: OK. Let’s see, what did I promise people were going to talk about? Ah, how you help entrepreneurs. So, the idea came from you seeing what in the marketplace that wasn’t there before? Because the Y Combinator was there. Tech Stars was there.
Andrew: What did you see that wasn’t there?
Adeo: Well, I mean, look. That’s actually a very good question.
Andrew: Thank you. I’ll [??]
Adeo: …small. They’re very small. I mean, that’s a huge part. There’s fifty thousand technology companies in the world today. Those guys combined might do a hundred fifty to two hundred companies a year. That’s not even scratching the surface. If we hit our vision number of a thousand companies a year, and the number of companies dropped to their historic average, might be more like ten, excuse me, twenty to twenty-five thousand companies a year, we’re not even scratching the surface, right? And we’re ten times larger. Frankly, then they’re almost combined, so they’re five times larger than mine. So, first the problem is scales. So they’re having a great impact, and they’re doing great things, but they’re not scalable.
Andrew: I see, so you were looking around, and you’re saying, “I love Y Combinator, but they’re what they’re doing isn’t going to scale as big as the opportunity is to help entrepreneurs. I’ve got a new way of doing it.”
Adeo: So I think that model of incubation is fantastic, but by default that model of incubation does not scale. It takes two million dollars a year, minimum, to run-, well, so I guess if you’re in Indonesia it takes less money, but it takes, you know, in the Western world, t takes about two million dollars a year to run a comparable program, give or take. Unfortunately, morally, mostly add not subtract. And you’re looking at returns five to ten years in the future.
So, you’ve got to put, at least, $10 million in before you’re going to start to see returns, and then it’s just, it scales sort of locally, which is what’s been happening, but it doesn’t really scale where you can have a big impact. And what I said is, look, there’s a big problem in entrepreneurship, right? It’s become easier and easier to go [??], and it’s become harder and harder to build a good company. Someone’s got to fix this, and you have a ninety-something death rate of startups, well, clearly, there’s a problem. If ninety percent of children being born would die, there’d be, like, a [makes alarm sound] everyone in the world would be, like, “Oh my god, this is horrible.” Ninety-some-odd of start-ups die, and they were the best likeness that you have to having a child outside of having a child.
Andrew: And the reason that you thought that your model would scale and help more entrepreneurs is that, where Y Combinator tests–sorry?
Adeo: We don’t invest.
Andrew: Right. Because you don’t money in. in fact, the entrepreneur-
Adeo: To be on our scale right now, I would need to be doing about four hundred million dollars a year of LP fundraising, right? Which is at the borderline of theoretically possible, right?
Andrew: But, you wouldn’t take as many entrepreneurs. You would wait for them to be further along. It’s-
Adeo: Well, that brings up the second problem. And so the second problem is, I believe when I look extensively at the market that the problems with entrepreneurship start at the genesis. Then they manifest, and the more they manifest, the harder it is to unwind in every way. If you have a bad co-founder, kicking that founder is pretty dang impossible, right? So, if you’re the co-founder, and you realize the other person’s bad, you’re pretty much in trouble. Your options are bankruptcy or bankruptcy. I’ve very rarely see equal co-founders. In fact, I’ve almost never heard of it. The other thing is legal, if you get bad legal advice, your documents are all wrong, unwinding that can be literally ten or twenty or thirty or forty or more times as expensive as it costs to set up.
Andrew: OK, forgive me Adeo. I want to make sure that to pack as much into this. I get now the opportunity you saw, and I get now the problem that you are solving. What I’m curious about, and here’s the part that I really admire the hell out of with you. You took this idea. There’s no outside funding. You didn’t-, how much of your own money did you put into it?
Adeo: I think probably close to a million dollars-ish. You know, it’s hard to say. Do I count the fact that I’m not exactly raking in money?
Andrew: Let’s say, no. So, without that, what would you put?
Adeo: I would put close to a million dollars.
Andrew: Wow. So you put that in, and with that little money, and with some people here, a million, it sounds like a lot, but compare it to other companies, other programs that accelerate, it’s tiny. With that, you were able to just keep cranking out hundreds of entrepreneurs and hundreds of companies. You’re able to grow to now what you’re saying is a multi-million dollar revenue business, and it’s impressive that you were able to build this brand, have this impact, and help so many people. What I want to know is, what are some of the milestones that got you here, that went from idea to suddenly every major city is going to have a Founder Institute-
Andrew: To hundreds of entrepreneurs coming out of the program a year.
Adeo: Right, so you’re, like, what are the big setbacks and what are the big–for me, there are different ways, there are different things that make entrepreneurs great, right? In my case, what’s made the Founder Institute great and brought greatness out of me maybe is that-
Andrew: You can be modest. I’ll say yes. Go on.
Adeo: I’m driven very clearly by a vision. You can hit me with a car, you pull my leg off and I will continue to work at this. Whatever the world throws at me, whatever the challenges are, whatever the problems, it’s the vision, vision, vision. That is really making entrepreneurs. We take these people and turn them into entrepreneurs. I don’t mean the modern day definition of an entrepreneur with a 97% failure rate. I mean people who are building companies that are going to be meaningful and enduring. Not only that, we’re going to do it at volume. The concept of doing that at volume, and the first volume hit we’re going to make is 1,000 a year, is what drives me every day. When you have a problem or you have an issue, I’m always framing it like how does it effect my big vision? How does it impact what I want to do? That is, again, at least, in this case, the secret to success for me.
Andrew: So just keep saying ‘how does this connect back to what my vision is?’ helps you avoid bad opportunities? I could see also how it could help you get strong opportunities. But it doesn’t help you grow. Here’s what I’m noticing as an outsider.
Adeo: Let me give you some examples. We say no a lot, right? We’re pretty good at what we do. There’s a lot of stuff that comes at us. I’ll tell you a true story. The Colombian government, a minister there, called me into his office for a ten minute meeting. An hour later he says ‘I want to give you 34 million dollars’ and I said ‘No.’ And he said ‘What?’ I said ‘Yeah. I’m not in the business of spending the Colombian government’s money on Colombian government stuff.’ I mean, it was entrepreneurship, but it wasn’t our kind.
Andrew: What was the string attached to it that you just couldn’t tolerate?
Adeo: It wasn’t even that strings were attached, it’s just not our business.
Andrew: What was the business that he asked you to take on to help Colombian entrepreneurs?
Adeo: He basically wanted us to run the equivalent of startup Chile or the various Singaporean government programs. Their first year’s budget, it was a couple years’ budget, it was 34 million dollars. He hadn’t figured out how to allocate it across forms. Now, as someone who loves entrepreneurship and wants to see Colombia succeed, I want to do that. That’s why I’m here on Earth, right? But it’s not what the Founder Institute does.
Andrew: Why? To an outsider that seems like a really good fit. Hey, he wants help entrepreneurs, Colombia wants to help entrepreneurs. What’s the problem?
Adeo: This is where knowing what really is your mission versus when we take a person off the street and make them into an entrepreneur. $34 million doesn’t do that. $34 million to do stuff in entrepreneurship including that is a distraction.
Andrew: Because there were all these other things you would have to do beyond what your initial mission is?
Adeo: Yeah. Anything I had to do beyond my initial mission is a distraction. Especially with that much money, it’s a big distraction. So you think ‘Oh, big, glittering jewel in the corner of my office.’ It’s like the apple on the tree in the genesis. But it just was not for me and for us. We get presented with that all the time. The Singaporean government has come. The Chilean government has come. We do things with continued education.
Andrew: Let me break it down. Here’s what I see that has helped you grow. First, instead of saying this is going to be the Adeo Institute where Adeo teaches other entrepreneurs to build their businesses because he’s got the experience and you said no. Not only is it not going to be me, I’m going to have local people be the facilitators in their city. Not only that, they are also going to have mentors who are experienced entrepreneurs. So it’s going to be a many to many experience instead of an Adeo to many experience. That allowed you to branch out McDonalds style, you know, people have their place. The other thing is, you charge, which we talked about meant that you didn’t need a lot of capital to help entrepreneurs. But by charging you can also afford to pay versus Textars [SP], when they have, and I love Textars, but when they have mentors come in they don’t get paid and so they’re looking for the company that they’re going to invest in, which is a good thing, but it means that your only getting the people who are looking to invest in the companies that your bringing in.
Adeo: True. So, we fly mentors all around the world, you not like in some business class but they get enough money to stay in a decent hotel, fly in coach or economy plus from here to Sydney, literally all around the world.
Andrew: What about this as an issue, you don’t have a clear curriculum, you don’t have a clear, you do, I mean a clear do this and you’ll get a successful start up, do you?
Adeo: Sorry, if we have a…
Andrew: I mean there is in the curriculum, there’s a marketing day where…
Adeo: Yes, so that is..
Andrew: That is a day, do this to get marketing success.
Adeo: Right, the reason why we have to do it locally, by the way, so there’s a couple of interesting things that you bought up. The reason we charge is not only to sell but it’s another filter because we’re taking people before they would enter, you know, our average app, and we never get into the other programs. The way I like to describe them is we mine diamonds and they make jewelry and so part of the reason we charge is yet another filter because if I’ve got to pay something, I better be serious about it and we are actually very conscious of the price so, you know, there’s some places where we just can’t operate because we can’t charge enough to cover the cost. So, we cannot be, Vietnam, we have two chapter in Vietnam and there basically a loss leader because we can’t charge the entrepreneurs enough to cover the cost of flying people in, the catering and everything else.
Andrew: So the question I asked at the top of the interview is if you want to be a mentor and help others build something important, listen and learn from the way Udyami [SP] did it. Here’s the take away that I have that I think will help those people; it’s don’t be the guy who helps your protÃ©gÃ© once a week on your own. Be the guy who says you know what, I’ve got five really smart friends, I don’t have all the answers and I’d love to sit here like the king who knows it all and just tell you everything and know that you’re going to be successful l but instead what I’m going to do is, I’m going to get together with lunch with five of my friends once a week and your invited to join us and you’re going to learn from all of us or I’m going to send you to each of them once a week and you pull out the best ideas and bring them back to me because I’m dying to learn from them to and that’s the way it is. So don’t say you have it all but…so here’s the issue that I have with that and I have that as the founder of Mixergy.
Adeo: You must learn a lot through this interviews.
Andrew: Right, and so I saw you nodding and it seems like I took a good takeaway for that answer but here’s the issue that I have for Mixergy. There are so many different people who come here to do interviews with differencing opinions, the audience doesn’t want differencing opinions that will expand their mind especially not the hungriest people, they want a clear path. What do you do for people who want that clear path?
Adeo: OK, well, so this is the fundamental question. So, we have three mentors come in every night for, or every night that we have the program for a subject and very rarely, in fact I was in Australia and the three of us said the same thing, I was like holy crap, this is the first time, and I’ve been to hundreds of sessions around he world, that the three mentors said fairly consistent things and it was still different. Often times it’s like do it like this, does it like this, do it like this and they’re very different.
Adeo: But so, I’ll tell you the answer to that question, if fact, part of watching Mixergy, many of your viewers already know this, it’s your dream company, right? So, you can’t copy Tony’s says like delivering happiness customer service thing because it’s Tony’s saying delivering happiness customer service thing and it works because that’s what he wants and Tony has a dream of making this wonderful place to work and he’s done that . So, you can’t be like oh, you know, I’m going to link a retailer, I need to make a wonderful place to work if that’s not your dream.
To some extent, what you need to do is you need to listen to these things. You need to find pieces of advice that synchronizes with the dream you have in your mind. Right? Then, secondly, you need to find people that are like you and have similar dreams and copy some of the stuff they’ve done. There are pieces of advice that synchronize with your dream and there are people that are like you and you can use them as role models and that’s how you make sense of the mess that’s out there of information. But you better be pretty d**n self-reflective. Otherwise, you won’t know what your dream is.
We asked in the beginning of The Founder Institute, it’s really funny, we asked all these what appeared to be very foofy questions. How do you narrate the story of your life? The idea is that we’re trying to get you to think about what is your dream company? How do you perceive this in the narrative of your life? What do you really want? Once you’re clear about that, then the filter works very well.
Andrew: OK. Let me see what else I’ve got here. By the way, that’s a good point. The idea that someone’s going to give you a clear path and if you’re diligent and do everything exactly as you’re told to do, it’s a dream. It feels great and in school it works, but in the real world it doesn’t. There’s no one who can give you that path.
Adeo: It’s not a math equation.
Andrew: It’s not. The proof is that a successful entrepreneur who goes out and tries to duplicate exactly what worked for him the first time is the best guy to duplicate what worked for him and you see that it doesn’t work. It didn’t work for me, it doesn’t work for others. So, I like what you’re saying. Listen to all of them, have a sense of who you are and what you’re looking for and just try to grab the ideas that fit in with that that will help you do what you’re trying to do. Here’s what I’m hearing from the entrepreneurs who I’m talking to who have gone to The Founder Institute. They’re saying if you don’t have a product walking in, it’s really hard to be one of the few people who succeed through the program. Then, you’re just going to school if you don’t have a product.
Adeo: What you need is an idea, not a product so much. No one enters with a product. Well, very few people enter with a product.
Andrew: So, you’re saying it’s an idea. If you don’t have an idea it’s not as effective?
Adeo: Yeah, if you don’t have an idea. I would say that that’s not 100%. Keep in mind the story of Daimio at the opening of the interview. Both people who came together to start it had different ideas in the beginning.
Andrew: I’m hearing that’s an exception not the rule.
Adeo: We give you a psychometric test to enter The Founder Institute. One of the things that weights heavily on your ability to get in is a metric, essentially, that measures your ability to come up with an idea. If you get in The Founder Institute, I know for sure that you have the capability to come up with a good idea, psychometrically. You have it in there. I would say that we also measure, by the way, your ability to realize that something is not a good idea and change.
Maybe, that’s why a lot of our grads pivot. The problem is it’s not just the grads at The Founder Institute that pivot. Pivoting is the new black. But, back to the point. I would say that if you have a good idea it helps. Otherwise, it really doesn’t matter. You’ll definitely struggle a little more in the beginning of the program because you’re going to need to come up with an idea in the first month and a half. But we’ve gotten a lot better. One of the ways we’ve improved The Founder Institute is come up with tools and tactics to help people ideate.
As an example, we launch semesters in cohort. Right now, we’re about to launch a ton of semesters. All the people in the semesters will go on this micro-messaging platform and they’ll be sharing their ideas with each other. That’s one of the ways and one of the tactics we have. If we don’t have an idea, you can bounce different ideas that you’re thinking about off of your peers to improve and get there.
Andrew: What about this? Because you’re charging and you have overhead, that you have an incentive to accept people who maybe aren’t going to do well because you need to fill up the room and cover your cost?
Adeo: No. In fact, we do not compromise our quality for [quoters] period. That is religious. In fact, we run admission centrally to ensure that we . . .
Andrew: So the locals don’t end up with . . . don’t end up saying, I need to have another body in here.
Adeo: Because I could see it on the edge, a guy running a chapter in such a place, saying, oh, we don’t have enough; we need to accept five more. You’ll see that we do this. Like right now, if we don’t have enough people to cover the expenses, one of two things will happen. If it’s really wildly off, we’ll cancel or postpone which we’ve postpone right now in one city. They have actually enough applicants and enough accepted applicants, but the people are taking too long to enroll.
So, we’re like, OK, we’ll wait. It seems like you need more time, we’ll give you more time. Yeah, we would never ever or we either postpone or cancel, so we would literally never ever, ever, ever compromise on quality.
Andrew: All right. You know what? I know that that’s true actually. I mean I can’t say universally it’s true, but why I buy it is because when you guys sponsored there are a few people who did sign up, so I didn’t zero for you guys, for the money you spent, but I remember at least one person, at least one. I can’t say how many because I don’t remember, but I know it was at least one and maybe, and probably more who didn’t make whatever the cut was and as a result didn’t go in the program, and I didn’t get credit for having sent that person over through my sponsorship,
That’s one of the reason why I didn’t kick butt for you. One of the few sponsors that I didn’t kick butt for.
Adeo: No, you guys think, well, we love you. You’re literally . . . Andrew, by the way, credit to you. I mean if you look at the people in the world today who are changing entrepreneurship, you’re top of the list period.
Andrew: Thank you. Now, how can I ask you challenging questions after that? All right, because you said it, I’ve got to. Here’s the last one. I think we talked about this in the pre interview. I don’t know if we talked about it in the interview. Whoever the facilitator is deter-, doesn’t determine, but you get a much better experience if the facilitator is willing to put more time into it.
If you’re an entrepreneur who’s in The Founder Institute and the facilitator is running a business, you don’t get the office hours.
Andrew: That’s a challenge?
Adeo: It’s not a better or wor-, I mean, so, that’s [??] again. We literally want to, one of the things about the Founder’s Institute that’s totally cool is we measure everything. Everything is rated. Every manner is rated which rolls up to rating of the overall section. Every Founder is rated. It’s rated by the manners, by the director, by their peers. The director themselves are rated by the peers.
I have all my . . . we have a dashboard and it’s very clear. Program quality is literally monitored almost up to the minute. If we see, for example, that there’s a slip in program quality at all, we take immediate action. That action maybe if manners were bad, we replace them and get better manners. If the directors were badly, we hop on [horn] and see what’s going on. If Founders are doing badly, we try to get them back on track.
We measure program quality and real time, probably more than you would think humanly possible. With that said, your point is that some directors are more engaged with leading the chapter and other, that is definitely true. Let me give you an example. Dave and Brian in New York are very busy individuals. Dave [??] super famous and travels the world, etc. I know for a fact he’s among the busier directors we have.
However, he does put out office hours. Once every two weeks he meets with . . . he comes to every session. He’s met with every Founder in the program, knows their business, and he’s rated literally by the Founders over a 9 out of 10.
Andrew: All right.
Adeo: That’s crazy. I don’t . . .
Andrew: You’re saying even though he’s one of the busiest people out there, he is getting over 9 out 10, yeah.
Adeo: Nine out 10, that is ridiculous. I’m above an eight, but definitely below a nine.
Andrew: And you run the one in Northern California.
Adeo: I run Silicon Valley. So the irony is that I haven’t run Silicon Valley in over a year, because I’ve been, you know, busy. And so another thing about expansion I that’s really weird is that you tend, as you grow and grow and grow, you do the things you like less and less and less. So, I love to mentor, right? I love office hours, a little less than mentoring, but almost the same. Running a chapter is pretty good, like, running the institute, nah, not as fun as those other two things. So, you know, as you get more successful, you do less and less of the things you love. So, anyway, back to your original point. The directors’ level of engagement doesn’t necessarily correlate to satisfaction of the Founders, and if there is any dissatisfaction, literally we’re on it like flies on, you know-
Andrew: And that goes back to the point that you made earlier about rating, that you are constantly the guys who-the guys. I keep saying guys for both men and women, but maybe that’s sexist.
Andrew: The people who go through it, you keeping making sure that they rate things to help you ensure that, they rate a facilitator to help you ensure that the facilitator is doing the right job, right?
Adeo: And would you, the person-
Andrew: The person who I like is Jeanine.
Adeo: The facilitator is slipping, literally, I hop on the phone, I’m like, “What’s going on?”, literally.
Andrew: If you are in Southern California, I guess San Diego and LA are both handled by her, Jeanine. I called up, I Skyped with some of your entrepreneurs. I was looking to get some dirt on you. I couldn’t get any dirt. I got something about their experiences–
Adeo: I’ll tell you, the dirt on me is, people think I’m a little too tough.
Andrew: A little too what?
Andrew: Tough. You know what, you mentioned that in the pre-interview, the question of being too supportive vs. too tough. But let me finish this thought. I’ll ask you that question, and I want to make sure that, if anyone listening to me is in Southern California, Jeanine in San Diego, and I guess she’s also doing LA now, is that right?
Andrew: I loved working with her, even though she didn’t buy any more ads from me, because I let her down, and I apologize for that. And partially, actually, because she is the one who actually bought ads, I was afraid to say this, but screw it. People know that I’m coming from a good place. As I was talking to entrepreneurs about their experience in the Founder Institute, even people who weren’t in San Diego said that when they were there, and I don’t know why they would be there, but, when they were there, they went to, I guess she has an alumni mentorship sort of thing?
Adeo: Yeah. She has that.
Andrew: Yeah. So she seems like a really gung-ho person, and I really recommend that you guys check out Founder Institute in general, but Jeanine specifically if you can.
Adeo: She’s definitely one of our best directors, and, you know, it’s hard to say that, because, obviously, David is great. But what I mean by that is, she has a modified curriculum right now. And what we do, is we come up with ideas on how to improve the program, and we test them out, and she’s one of the greatest idea creators on how to improve the program. We test it, and we’ve rolled out dozens of Jeanine’s ideas worldwide, on which she has had a higher rating than other people.
Andrew: All right. And the reason I didn’t want to say it is because I feel bad. If I am getting paid by someone, I feel bad recommending them, because I think that people are going to doubt my sincerity, but screw it. The truth is, I think that the ad you guys bought was seven hundred bucks. I make more than that a day from Mixergy Premium. Thank you guys. If you are a Mixergy Premium member, thank you for being a Premium member. Sign up, you are going to get all of those courses that I keep talking about, and all the old interviews as part of your package. Mixergypremium.com. All right, let’s end it with this. Too supportive versus too harsh. I need to know how to get the right balance. Tell me about that being your issue. Tell me about your experience with that.
Adeo: Yeah. I mean, this is a challenge, right? So, we have definitely seen in the world that if you’re too supportive, Founders don’t make nearly as much progress. In fact, my first semester was the–listen, we have had fantastic companies that have come out of it, but we started with seventy-two Founders, we ended the program with seventy-two Founders. And, I only think thirty of them actually created businesses. So, we had to then go back around and be, like, “Hey are you creating a business, or are you not creating a business?” And it turns out, you know, most of them did not.
Most of the forty-some-odd did not create businesses, and we had to then eventually get them out of the bonus. And so now we’re, like, “Listen, do it, or you don’t graduate. It’s that simple.” You know, you can tell me all the excuses in the world, but you know what the date is. It’s like taxes. You need to get your taxes done on this day, or you pay penalties. If you don’t get your stuff done when it needs to get done, you don’t graduate. I experiment with how tough is too tough and sometimes I cross the line, and I feel bad about …
Andrew: Like when? Who’d you cross the line with? What do you say when you cross the line?
Adeo: I’ll give you an example. Recently we had a semester here in Silicon Valley run by a friend of mine and we started it kind of at a bad time, over the holidays. So people came back from the holidays and hadn’t really done work on their idea and they were coming into this review session where everyone gets their idea reviewed. If your idea doesn’t pass the review, we ask you to re-enroll in the next semester. I was really worried, and rightfully so. We lost well over 50% of the class on that review period.
So I came in and I’m like, “Listen guys. You didn’t work that hard over the holidays.” And everyone’s like, “No, we worked really hard.” And I’m like, “No you didn’t.” And they’re like, “OK, maybe we didn’t.” But then a lot of them were like, “No, but we did.” So I implemented … I was a little me. I was like “All right, here. We’re going to do or die hot seat. Let’s see how hard you worked.” And a bunch of people didn’t make it that night. But unfortunately, what I was trying to do was give them the sense of urgency that it’s really important that you take this seriously because you are only here for four months, and if you don’t get it right here, you’re probably not going to get it right later. This is our job, to make sure you are doing really amazing work.
Anyway, I think that the methods were a little too harsh and we ending up really pissing some people off. That’s not my intent. We want to help. So how harsh is too harsh? How soft is too soft and what’s the right needle? We don’t want to be the Marine Corps. But we also don’t want to be Oprah. Everyone has a car! Maybe as a closing point on that, that is what defines that balance line between being too soft, maybe like the Singapore government, and too hard, like the New York City living environment, is very influential in the output of our successful start ups.
So it can be too hard, in which case, life in the city, or whatever else, or just creating a company can be too hard, in which case you get very few start ups. It can be too easy, in which case, people pursue bad ideas, and stupid things too long. So they essentially find themselves with a really bad business because it was just too easy to go in that business.
Andrew: And I would be willing to take the risk of being too harsh, I think, because of the importance of what you’re doing. When you were saying it’s not like the Marines, I happened to be at the time looking at your website, FI.CO [SP] and seeing Jason on there, Jason Calacanis, I know is someone who is like a Marine when you talk to him. Maybe he is a little bit harsher than I would be. But I’d go closer to him than to Oprah. And you do have good entrepreneurs who do bring that toughness to them. What’s he doing by the way? Jason and Jason Azar [SP] are letting people pitch them for a free scholarship to LA?
Adeo: Yes. I was at a conference and this venture capitalist came up to me and it was like a day of if I hear another bad pitch I’m going to jump out a window. Course we were on the second floor so he would have lived. I was like, “All right. I’ll solve that for you.” So I literally went out and I was like it’s a clear problem. And I came up with this one sentence pitch format that works really …
Andrew: [??] Mad Libs.
Adeo: Right. It’s like Mad Libs. Unfortunately, people still don’t do a very good job. And what we do is say Hey, if you can pitch us an idea really well in this one sentence format, we’ll give you a scholarship. In this case Jason Azar and Jason Calacanis are going to be the judges. So it’s going to be an exciting weekend in LA. These are the most fun because we see hundreds of ideas, they are generally articulated well, so you can understand them. That’s one of the more fun parts of my job.
Andrew: All right. And the web site is FI.CO. Adeo, thank you for coming back and thanks for doing the interview.
Adeo: All right. Thank you. Good luck with Mixergy. You’ve done a great thing for entrepreneurs. You should be really proud.
Andrew: I am. And not great enough yet. I’ve got to get this even bigger, but I’m on it, my friend. I’m on it. And thanks for helping me get it to be a little bit better here today by being open about your numbers. The audience loves numbers. I love numbers and we love that kind of openness.
Thank you for doing this and thank you all for watching.
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