The $5M Keg

In 2007 I was 23 years old, working full time as a product manager at ZoomInfo while moonlighting on a number of entrepreneurial side projects. I had previously started a few companies with angel funding and a couple small exits, but certainly nothing of scale. In a whirlwind of a month, all of that changed based on an inebriated conversation while standing over a keg of beer. As the title of this posts suggests, this random keg conversation transformed into finding an amazing technical co-founder [1], building a prototype, and raising $5M dollars in VC funding. These major events that typically take months (sometimes years), happened in less than 4 weeks. [2]

While I don’t consider these items as the definition of startup “success,” [3] it does represent a period of my life where I made a giant leap in progress on my professional career and passion. Consequently, I have invested a considerable amount of time thinking about what caused this leap of progress and if they can be recreated. What I found isn’t a short answer, quick fix, or a hack to starting a company and raising money. Rather an answer that if we invest the time in, will lead to progress in our personal and professional goals that is unachievable through other common avenues.

Following Success

Many entrepreneurs (including myself) spend time following and reading other successful entrepreneurs. Whether it’s countless business books, blogs, or Quora, there never seems to be a shortage of content of someone telling their success story and how they got there. We try to emulate aspects of these success stories in our own life. However, most success stories are told in hindsight with a predefined ending in mind. In an effort to tell a good story, they often gloss over the real learning experiences, such as near death experiences, failures, and moments of luck. We can find great inspiration in stories like these, but we will never find the answers to our entrepreneurial challenges.

Workaholics

While some have their head in a book, others just have their head down. It is easy to think that the more hours you put in the more progress you will make, but this leads us to incremental and linear progress, when we need to be on an exponential path. Ultimately, the progress produced by working harder is limited by the hours in the day and the capacity of the human body. The entrepreneurs who brag of 100+ hour work weeks, are also the entrepreneurs that burn out the fastest.

Networking

For every entrepreneur with their head down, there is another competing in an endless of game of “Who can collect the most business cards.” It’s not what you know. It’s who you know. Right? While it is great to have a large rolodex, these types of relationships are extremely limited. You may get introductions and other light help from these relationships, but when you or your business faces real challenges and problems, are these going to be the people that are able to help? Most likely not. As a result, a large network of light relationships leaves us feeling like something is missing.

Mentors

In addition to a large network, every successful entrepreneur has great mentors in their life, but this is even limited. A mentor relationship is typically one sided. The flow and balance of knowledge and experience is heavily weighted in one direction and we become limited to the Mentor’s available time and generosity.

Linear Progress vs “Scale”

The startup world talks about how startups and their business models need to “scale.” “Scale” is depicted by the typical “up and to the right graph” where the return on investment is exponential, not linear. Similarly, our path to success requires exponential personal progress where every unit of investment we put in, we are getting more then one unit of return. All of the activities described above share the same limitation. They lead to linear progress, not exponential.

“By Our Powers Combined…”

If all of these avenues are limited, what was it that lead to my whirlwind of 4 weeks in 2007? Six months before starting Viximo I was lucky enough be one of the original members of Betahouse, the first ever co-working space for technology entrepreneurs in Boston [4]. It was a diverse group of individuals who were each working on our own projects, but there was no hesitation to collaborate and overcome problems on each others projects. We were invested in seeing each other succeed. Everything that happened in the early days of Viximo I can credit to Betahouse. The original idea was formed by Greg Gibson, another Viximo co-founder, and myself. Betahouse member, Dan Choi, built the early prototype of Viximo, and my technical co-founder, Sean Lindsay, was introduced to me by another Betahouse member. The funding came from VC’s within the network of Betahouse members. Oh, and that famous keg conversation? It was at a Betahouse party. It wasn’t the skills, network, mentors, or great beer selection from Betahouse that was the catalyst to this leap in progress. The catalyst was the relationships between members of the group. At the time, Betahouse was the beginning of my first Core Peer Group.

Core groups are composed of a small set of exclusive relationships that provide unfiltered, honest, and deeply invested relationships. Core groups become so invested in each other that a positive feedback loop occurs. As one-person gains success, so do the others. They build off of each other’s knowledge, networks, and brands, leading to exponential progress. As a result, Core groups can help achieve things that an entrepreneur can’t on his own, producing results unattainable with the largest network or list of mentors.

One of the most widely known examples of a core group is the “Paypal Mafia.” These early members of Paypal have continually invested in and alongside each other. Post PayPal they have gone on to found (with each others help) companies like YouTube, LinkedIn, Slide, and Yelp. Most attribute the ongoing success of the PayPal Mafia to the success of PayPal; however, the reason they are successful in the first place is because of each other.

Changing The Economics For Entrepreneurs and a Tech Community

The concept of core groups for personal growth isn’t new. Multiple books have been written about the subject including “Who’s Got Your Back” by Keith Ferrazzi, “Vital Friends" by Tom Rath, and “Think and Grow Rich” by Napoleon Hill. I am realizing the impact that these types of groups can have for early stage entrepreneurs, and furthermore, a startup community as a whole. Yet, core groups don’t get as much attention as they should.

The books about core groups discuss high level effects such as personal accountability, motivation, and achieving your life goals. Betahouse and other experiences have shown me that core groups also have very practical effects for early stage startups. They help raise funding faster, find co-founders and early employees, and acquire your early customers. These are often considered the toughest items in starting a company. As core groups help you increase these components, it can increase the probability of success, and therefore the economics of entrepreneurship.

As exemplified by the PayPal Mafia, the effects of core groups impact more than just individuals of the group. The benefits created overflow and become a cornerstone of a successful community. As the PayPal Mafia continues to invest in each other, their success helps fuel the entire technology community; creating a new breed of entrepreneurs, angel investors, and ultimately core groups.

Core groups have substantial impact, but they aren’t easy to build. They require a significant time investment. The people, elements, and expectations are a unique combination of four principles that form an unstoppable force:

Deep Relationships

Core groups can’t exist without deep relationships between each of its members. These are relationships that go well beyond your average professional relationship or even friendship. It’s a unified bond with one common goal: Excellence.

These relationships aren’t built over coffee, lunch, or networking events. They are built over repeated interactions with each other within, and well outside of the professional context. They take time and investment in each other.

When interacting with people in our network, we often discuss what we want to achieve. In core groups, the conversation is focused on why we want to achieve these goals. Knowing why requires understanding someone’s motivations, personal history, family background, and impactful life events. Knowing why leads to a deeper sense of investment in each other and paves a clearer path to actually achieving those goals.

Any path to great achievement isn’t easy as it faces great challenges and failures along the way. While it is difficult to discuss these things, they contain the largest opportunity for progress. With deep relationships, we can openly admit our challenges, weaknesses, and failures and quickly get on the road to growth.

Brutal Honesty

Oddly, we tend to lie to ourselves more than anyone else in our lives. It is extremely difficult to be brutally honest with ourselves. Much of the time what we think is the truth is just emotional rationalizations. We’re human. Everything we do, especially in startups, contains components of emotional investment. But, emotional investment is not rational investment.

One of the golden rules in sports gambling is to never bet on your favorite teams. You know the most about that team so theory should have it you have the best chance of winning with that team. But too often the emotional stake skews your decision making ability. We also see this in romantic relationships. We’ve all had that “friend” in a detrimental relationship who ends up rationalizing the relationship for longer then they should. Emotional investment once again skews are ability to see the truth.

Furthermore, the people that we typically go to for advice in our lives aren’t able to provide us with brutal honesty. Parents, siblings, friends, advisors, investors. Most of the time they aren’t knowledgeable enough about our specific goals to truly help. Even if they are, their opinions and advice are biased with their personal incentives. While they have good intentions, then subconsciously push you in the right direction for them, not the right directions for you. [5]

We avoid brutal honesty with ourselves and others because it’s uncomfortable. But the truth isn’t going anywhere. If you turn your back to it, it will bite you in the ass. Avoid it, and it will surface eventually. Accept the truth, and you can start to move forward.

The deep relationships between members of core group allow us to be brutally honest with each other. We can remove the filter that prevents us from saying what we really think because we can challenge each other with out fear of alienating others. With brutal honesty, interactions become more blunt and genuine. We can get to the core of issues much quicker and focus on solutions. We push each other to the max and keep each other on course for what truly matters. As a result, real progress is made quicker then you could ever make it before.

Peers

As you search for your core group, it is easy to become engrossed with brand name individuals or those that have had more success. Most assume a positive correlation between how successful a person has been and how much they can help you.

However, success is a large misleading indicator of one’s ability to help you. In hindsight, people tend to take more credit for success than is actually due. There are a lot of factors that go into being successful, one of them being luck, whether they admit or not. Most commonly, those that have been successful in the past aren’t in touch with the current challenges you will face in today’s rapidly changing market.

We underestimate what we can learn from our peers. The path to success is one giant obstacle course. Just like an obstacle course, those that are at a similar point on the obstacle course are in a much better position to help you than those already at the end. The power of core groups is when members can all help and challenge each other as equals; it leads to deeper investment and relationships in each other.

When we see previously successful people achieve something new we tend to attribute this achievement to something we don’t have ourselves. But when you see a peer who is on the same playing field as you overcome a challenge and achieve something, we have no excuses for why we can’t do the same. It makes us more aware of what is possible and motivates us forward.

Diversity

We naturally gravitate towards building deep relationships with those that are similar to ourselves. We do this because it’s easier. While its easier, these aren’t the relationships that will challenge us the most. We end up doing the same things, having the same conversations, and getting opinions too close to our own. Einstein summed the result of this by saying, “Insanity is doing the same thing over and over, and expecting different results.”

Core groups thrive on diversity of skill sets between its members. It isn’t about surrounding ourselves with people smarter than us, it is about finding people who are smarter than us in different areas. This gives us the opportunity to invest in our own strengths, yet fill holes where we are weak. Trying to be strong in every skill set on our own just leads to mediocrity.

Those with different skill sets have a different perspective of the world. They analyze and approach problems from a very different direction then we do; as a result, they often end up at a solution that we would never come to on our own. We typically attribute this to someone “thinking outside of the box,” but in reality a person is just approaching a problem from the same lens they always do. It is just different from our own.

I have benefited from having a great professional network and personal mentors through out my professional path, but as I wrote this post, I discovered that I could tie every period where I made giant leaps in progress, to the fundamentals of Core groups. As for what happened after that 4 weeks, Viximo quickly out grew the space available at Betahouse so we had to move out. Viximo is now about 30 employees and one of the premier publishers in the social game industry. Nevertheless we have never forgotten our roots, and as a result have housed numerous startups within our office space. Betahouse lived on for a few years and went through various evolutions through the leadership of Jon Pierce, but is currently on hiatus.

Beyond Betahouse I have continued to facilitate the strengths of core groups through organizations such as PopSignal[6] and ReCatalyze[7]. I truly believe the next great companies and entrepreneurs will be born from core groups. The closer we are to having the deep, honest and diverse peer group relationships, the closer we are to building the most successful and innovative companies of our time.

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Thanks to members of my own core group for reviewing and inspiring this post. Specifically Ariel Diaz and David Kadavy. Also, a special thanks to Antonio Rodriguez for contributing his thoughts to the subject.

—————-Footnotes—————-

[1] That amazing technical co-founder is Sean Lindsay, who beyond Viximo, has also established Founders Mentors.

[2] Success will only be determined over the long term of the company.

[3] Raising that much money, that early is something I don’t recommend to other entrepreneurs. Another day, another blog post.

[4] Other original members included Jon Pierce, Greg Gibson, Brian Del Velchio, Dan Choi, and more. Betahouse back then was very different to what has become the norm for co-working spaces today: non collaborative desk filling environments.

[5] Parenthood is a perfect example of this. So many kids end up being exact replicas of their parents, rather than their own person.

[6] PopSignal is an invite only networking group created by myself and Jay Meattle. Every couple months we invite a group of core members who all get +1’s. This core group acts as a signal to noise ratio. The events have lead to co-founders finding each other, companies being funded, quality partnerships, and numerous relationships built.

[7] ReCatalyze is still in the experimentation phase, but details will be released soon.