Being entrepreneurial about entrepreneurship

A conversation with David Booth of On Deck

TLDR: No one is ultimately more qualified than you to judge what particular path to take, or what advice to follow, or what institutions to accept or reject. Just stake awake to the fact that it’s your life on this earth you are building—and then choose accordingly.

David Booth is the quintessential “builder of builders” (BoB): as founder and CEO of On Deck, he is on a mission to “help more people start better startups”. And he’s doing pretty well so far, with 1,000+ companies founded and launched via On Deck programs and going on to raise upwards of $2 billion.

In this episode of the Founder’s Mindset, David joined me and Entrepreneur First (EF) cofounder Alice Bentinck—one of my other favorite BoBs!— for a wonderfully free-ranging conversation about the makings of successful builders, as informed both by his own personal experience and by the patterns he’s observed among the thousands of founders he’s brought together at On Deck:

Here are my biggest takeaways, with relevant snippets from the episode under each (paid subscribers can access the full transcript below).

1. You need the spark of agency

In reflecting on the start of his own personal founding journey, David recalled encountering “lots of little opportunities to… follow conventional wisdom within a system, or to break out and build something outside of that system.” He talked about how this choice shows up everywhere, if you look out for it—even in trivial decisions like “well, my friends and I are going to go to the same music festival as everyone else, or I'm going to organize a house for my friends, and we're going to go have a party there…” One such choice, which he now recognizes as pivotal, came in his first year of university studies:

“Going into university, I actually had like a little bit of a negative experience… and didn't really hit it off with people. And I remember a moment where I actually thought—maybe this is projecting in hindsight, but I distinctly remember saying—‘should I invest in fitting in here, and like joining and climbing the social hierarchy? Or should I go do something else?’ And I did the latter.”

So he went off and started a small clothing company and an events company during his studies, which resulted in making “a bigger, broader group of friends” and eventually “making friends with some of the folks in the hall anyway.”

Looking back on that and many subsequent decisions, David noted a common theme of asking himself, “what is the expected path? Graduate, be a lawyer, be a doctor? Or what is the opportunity to exit that expected path and do something different? And that's how I constantly prompt myself now, and those around me.”

David and Alice both spoke of this spark of agential initiative—this willingness to deviate from the well-charted or conventional path in pursuit of something more ambitious—as a prerequisite to benefiting from the kinds of resources that On Deck and EF provide. But they also spoke about how a lot more people probably have that latent capacity within them than would have been apparent prior to the advent of such communities and resources. Quoting David, “I don't have [the] magic bullet as to how to foster that spirit and drive, more than just to help to get the people who have the smallest spark of it together and help them realize that together.” Alice agreed that “ultimately, it is about bringing people together who can role model for each other what good looks like. I think that can support people who already have this as an intrinsic, but it might be a latent intrinsic. And so the group or the community is the catalyst for that.”

2. Culture is the kindling and fuel

It is no accident that so much of the technological innovation of the last half-century has been concentrated in Silicon Valley. This is not because people living in the Bay Area are somehow innately more agential; it’s because entrepreneurial culture is a massive multiplier of human agency.

How exactly does this multiplicative effect occur?

David shared one personal story from his teenage years that illustrated this effect very concretely:

“There was one moment that I do remember distinctly from, I think I was around 12 or 13. As a young go-getter I started importing iPods into New Zealand, where I was living at the time, buying on Amazon and reshipping to our local eBay equivalent. And it worked for a while, I imported batches of 5 and then 10. And then I got more ambitious and teamed up with a friend of mine, to raise a little bit of money from both of our parents, and buy a really big shipment of iPods on Alibaba. We promptly went to Western Union and sent a lot of cash to somewhere in China, we believe, [which] obviously never turned up again. 

And it was actually what happened next, which was one of the formative moments of my mindset, I believe: upon losing both the business I'd built and the capital I'd invested to go for it, [I] had a conversation with my parents, who took the opportunity to sort of convert it into a teachable moment and say, "this is how businesses can work. And there's this concept of limited liability; what you should really try to do is get back out there and build another one and try to make it back.

And I contrast that to my friend's story, [whose] parents said, "no, you can't lose money like that, you have to go and get a job and earn every dollar and pay us back."

Thus David’s parents had exposed him to a radically different narrative about the meaning of his failed venture—and, by implication, the range of future ventures that might be possible and worthwhile for him—than did his friend’s parents. Listening to this story, I couldn’t help but form a mental image of David’s entrepreneurial spirit burning brighter and hotter, while his friend’s slowly flickered and dimmed.

That said: what if we didn’t have the benefit of entrepreneurially minded parents? Or even if we did, what if we then find ourselves in a cultural environment where exemplars of ambitious entrepreneurship are few and far between? Quoting David again:

“The first chapter of my career was in New Zealand, [and] it's very isolated. And in particular, most of the ambitious people here figure out quite early on that they need to leave to go and capture the opportunity of their lifetime. They've moved to London, Singapore, New York, San Francisco. And so our, you know, the New Zealand diasphora is, around 25% of our population lives overseas. And often that is the most ambitious, you know, successful ones. Which is a problem when you think about people who are going through college and looking for mentors and role models locally and haven't yet had the opportunity to step outside of that fishbowl.

So this is a big part of the answer, and one that David has baked into the community-centered model of On Deck: go where you can be surrounded by inspiring mentors and role models. Speaking about this further, David reflected:

There's a writer I want to shout out, a friend of mine, Henrik Karlsson, in a blog called "first we shape our social graph, then it shapes us"... It just takes the idea of "you are the average of the five people you spend the most time with," and makes it more intentional…. How do you go out and seek out people who you want to draw from culturally? And this has always been something that has inspired me around On Deck; I've said, you know, the best way to get from A to B, is to go out and find a group of people who are all going from A to B, and get on that journey with them.”

What is it about having this community of fellow travelers that shapes your own success? The intuitive answer might be that you get more and better advice on how to do what you’re doing. And that is almost certainly part of it. But there is also a counter-narrative that being “high agency” should mean resisting advice. Shortly before recording this podcast conversation, I’d listened to Lex Friedman’s interview with Marc Andreessen, who, when asked what advice he’d give to aspiring founders, said something to the effect of “founders don’t ask for advice. If you’re asking for advice, you probably shouldn’t be a founder.”

When I quoted this back to Alice and David, they both offered some helpful perspective. I was especially compelled by Alice’s point that Andreessen’s statement best applies to founders already steeped in the Silicon Valley milieu:

“Mimesis is real; like, the idea that the people around you will influence your preferences, choices, desires. And this, I think, is particularly true around founding, and where, if you are based in Silicon Valley, and you're surrounded by the world's best founders, best VCs, knowledge, early startup employees, etc, you will probably learn, most of the time, the right things to do. I think there is a bigger challenge when your ecosystems are much more nascent… If you're in Silicon Valley, and you're like, oh, I don't know, should I become a founder? Should I not? Like, is there someone to hold my hand? You're probably not a founder. If you're in London, or Paris, or Singapore, or wherever it may be, going, ‘Oh, I don't know if I should be a founder or not,’ that's probably a viable question to ask. Because for the entirety of your life, you've had people telling you, ‘do not do that. Do not do that. Go become... an APM at Google, whatever it is, a legible career path. And so… I'm still very much in the same camp as David that the world is missing out on some of its most ambitious, high potential founders, purely because [of the] culture that they're in.”

David built on this further:

“Advice” is often this very explicit, "find the person who knows a thing and can tell you a thing." To me, [what founders need] is much more implicit; [it’s] surrounding yourself with others who have been on similar journeys, who are going on similar journeys. And it's the sort of feeling of being connected into that directional graph, which is actually what you need. And that's what, as Alice says, Silicon Valley has by default, [and] that's what most other ecosystems do not.”

The value of being connected to such a community, David went on, emerges out of every member’s active commitment to getting what they want from it:

“…[O]ur main job is to get the right people in the room, just create the conditions for you to support each other, and then get out of the way. You're not here to learn from us. You know, I'm no expert. We just think of operating within a community as: you need to be selfishly motivated; to the extent that you put value out there into the community, you contribute to it, you host a session, you teach people, because that's actually the best way for you to get the most value from it.”

Alice also eloquently described the “mirroring” function of mentors and community members:

“I would say advice nudges [the best cofounding teams]; it does not dictate their success. The most important advice we give actually is acting as a mirror. So particularly for a team that isn't particularly effective. One of the interesting things about co-founding teams is that, by the time someone gets married, they've usually had multiple romantic partners, and have formed some sort of mental model of what good looks like. Weirdly, with co-founders, most people find a co-founder and are like, "cool! Sign the co-founder agreement, we're all in." So largely, the role that EF is often playing from an advice perspective is saying, I've seen lots of teams, I've seen lots of co-founding teams. This one is not in my top quartile. These are the reasons why: you're not productive, you're talking over each other, you don't seem to have any respect for each other. And so it's more that sort of nearer and nudge of ‘let me give you the context I have, which is I know a lot about what co-founding teams look like, and let you use that information to make the decision for yourself.’ …And it's interesting, watching people who've been on the EF team who've given huge amounts of advice and mirrors and nudges, then found startups themselves: you can't be your own mirror.”

So in sum, what founders—and ambitious innovators generally—often need more than explicit advice is a certain kind of modeling, mirroring, and inspiration that only a community of inspiring exemplars can provide.

3. No substitute for your own judgment

By contrast to these various positive use cases of advice and community, we discussed what it looks like when, apropos of Andreessen’s comment, these resources come to serve more as crutch than catalyst. Here I shared an important difference I’ve observed in how very early-stage founders interact with whatever community or accelerator program is on offer:

There are these two very different approaches that they might be taking: where certain people, they leverage the network, and you see them kind of "turning on"; like, they hungrily take the advice and the resources, and they make it their own, and they do something with it that you didn't even expect. And they go and make these calls that are totally different from the calls that you've discussed having them make, but that actually make more sense than whatever you were originally suggesting. And you just see, okay, they've been activated, the fire has been fully lit within them. Like, maybe you saw the spark and you lit the fire, and now they're off to the races.

Versus, each step is like pulling teeth. Like, you're giving them another thing to do, and another thing to do, and they're coming to you for the next thing, right? That isn't going to work, at least if what you're trying to do is found a company.

We also talked about how this difference in approaches—let’s call them the “epistemically active” versus “epistemically passive” approach—manifests in people’s motivations for starting a company in the first place. For instance, David reflected on the phenomenon where people “seek external validation as a way of outsourcing their own judgment of readiness” to start a company. He continued:

One place this regularly shows up is in very talented people who [are] sort of seeking the next level of credentialism as they go, credibility or badge collecting, if you want to be cynical. I went to a great high school, and then I got into a great Ivy League university, and then I got a job at McKinsey. And then I got a job in investment banking. I went back and did an MBA, and then I went back and, you know, there's always a "next thing." And one thing that I don't have a very strong opinion on, but that I know that at some point, there's sort of... you climb ladders, and then you've learned enough where you need to get off that ladder and go build. Sometimes, in some industry, it actually makes sense to climb further; like, [if] you want to build a FinTech company and go into the depths of finance, maybe it does make sense to go and have a career in banking first. If you want to build something that's like a social app for Gen Z, maybe you should do that when you're 18 or 20. And try and fail a few times. So I don't think is a perfect answer. But there's definitely a connection between people who... don't trust their own judgment, don't put enough weight on their own judgment that "now is the time that I can take the leap and go build." So they'll look for an additional form of validation, additional credential, climb that ladder a bit higher. And for a lot of people, they get stuck there, they get trapped; the "golden handcuffs" are on, you're going to have some mortgage and everything else.”

Resonating with this, Alice recalled how becoming a founder meant having to unlearn her own prior tendency to outsource judgments of “success” to her managers and superiors:

I've always been very ambitious. And at McKinsey, it became clear that the way to succeed was to make your manager love you and get a really great performance review. And then you would get the top rating or whatever. And when I was leaving… I found it very hard that now I was going to be producing work that no one was going to look at. And it took me about a year—and Matt, my cofounder, used to literally just look at my work and be like, "well done, Alice, you've done a great job. This is great!", because I was so desperately missing that kind of external approval that I was doing the right stuff. You know, after about a year, I probably got over it. But, Gena, how much can you actually influence that internal intrinsic motivation?

My answer was that, of course, you can influence it a lot, since I don’t actually believe it is “intrinsic” but rather self-created. And the way you self-create it is by taking the epistemically active approach I mentioned above to whatever it is you’re doing, whether it’s working a job, or going to school, or running a company, or something else entirely. This brought us back full circle to the question of how someone processes advice, including the advice to “take the leap” and start a company:

Did you 1) take the leap because you judged it right? Maybe for terrible reasons; and maybe with a lot of input from a community, from a resource, from On Deck or from EF; but did you judge it based on reasons that now can go and be tested? Because now you're going to try, and you're going to check your hypothesis against the world? Like, you think that you can build it now, but maybe you can't, because there were unanticipated ways that the technology is more complicated, or you realize you need these skills first, so then maybe you go back to school, you course correct; but [whatever happens]: is your judgment ON?

[Likewise], do you take [your mentors’] advice and process it through [your] own very personal context, and say, "Yeah, you know what, I hear you, but like, I'm actually going to go ahead and try it anyway", or, "I hear you, but I'm actually going to stay in school for another two months, because I have a hunch that after I've taken this class, it'll open up this network"; and [you] might actually be wrong, but the fact that [you’re] doing that is a really good sign?

…OR, did you 2) [let the mentors or the accelerator programme do your thinking for you?] We've talked about this, Alice, [how some] people who go through your program, [they] are so excited that they've been accepted into this program; and now they have a stipend, and it's a sure thing for eight weeks where they just are going to be told how to be founders, and... they're going to be on a scoreboard, and they're gonna get their sticker at the end of it, and they'll win the investment committee hearing. And now they're just so completely departed from what it means to be a founder.”

3a. “Validation” versus its counterfeit

Exploring that difference in approaches also led us to revisit a theme that’s often come up on our podcast: the healthy and unhealthy forms of “validation-seeking.” For instance, David spoke of founders needing to be motivated by some mix of “external” and “internal” validation:

“Like, if you over-index for external validation, then you're just going to optimize for the flashy announcements and you're seeking hype over substance, you build this hype deficit that has to be paid down… [whereas] if you optimize for internal validation, like, ‘fuck the haters, I'm right, I don't care what anyone else thinks,’ then you just got your blinkers on and you're not listening to your team, you create a toxic environment…”

I took this as an opportunity to clarify what I’ve found to be a common and confusing equivocation between two very different senses of “validation”:

So I think validation is a term that's used equivocally. I think sometimes when we say "validation,” we mean proof; like, can you validate or invalidate this idea? Like, is there actually a market for this? Are there people who actually are going to pay you for this? Can you build this? Validation from reality, in effect. And sometimes when we use “validation,” we mean another person's impression as a substitute for your own judgment. We mean something that I think is actually a counterfeit of the first thing. We mean, like, well, I want to know that you think I can be a founder, so that I don't have to actually judge it for myself, because I don't trust my judgment, and I don't know how to decide. But you, because you're not me and you don't have my biases, like, somehow you'll be able to tell….

Those to me are fundamentally different sources of motivation... [where] the one easily mimics the other, but can be disastrous to the extent that we're not realizing the difference. And I think with it comes another axis... which is the extent to which you've formed your own authentic vision of something you really want to build. Like, the extent to which there's something that you can say, "I want this to be in the world." Like the kind of Steve Jobs, "I want everyone to have a bicycle for the mind. And I can just almost see, you know, it's going to be beautiful, and it's going to be symmetrical... and it's going to have this nice, lovely touchscreen." Like, "I want to make this thing exist," versus "I'm avoiding a bunch of stuff. I'm avoiding failure, I'm avoiding bankruptcy, I'm avoiding disappointment, in myself or in other people..." To me, that's [also] a fundamentally different motivation, [which is only possible to form if you’re consistently on the premise of seeking genuine validation from reality, not its counterfeit.]

And if… you can actually form your own judgments and trust them enough to act on them, to bet on them, and those judgments are pulling you toward a vision of something you want to make real—then you'll also be able to do the things you're talking about, David, where, like, sometimes you need to [gather more customer feedback], and sometimes you need to [tune everyone out.] Sometimes you need to be a wartime CEO, and sometimes you need to be a peacetime CEO. And sometimes you need to be vigilant because you're about to run out of money... but, like, all that will fall out of these fundamentals of, I'm looking at reality. I'm using my own judgment, and I'm doing whatever it takes to build this thing I really want.

4. Entrepreneurship is not for everyone—but thinking entrepreneurially is.

To the question of whether “everyone should be an entrepreneur”, David said:

“Absolutely everybody should be thinking about their own lives, their own decision trees, in terms of: should I do the thing inside the system? Or should I build the project outside? You know, should I do something different? …Like, every single person in the world should be approaching their lives from a position of, how should I uniquely break the conventional wisdom or the institutional status quo to do a thing that interests me or I find curious?”

As to whether this decisional process should specifically lead you to start a company, “it's a very personal decision, that's a very economic and circumstance-based decision, should I go and do that versus stay in a job?”

The specific decision to start a venture-backed company is one that makes sense for a only a relatively small number of people who find themselves in certain relatively specific circumstances. Quoting David:

“the people who choose to step up and take substantial amounts of venture capital money and take substantial swings, do need to [be able to say]: by taking this capital, I'm making a commitment to myself, to my team, to my investors, that I'm going to really step up and take a swing. And to be aware that that will come with pain, that will come with a long-term time horizon, that will come with a set of expectations of you, both internally and externally. And that that is not for everyone.”

By contrast, David also spoke of the increasing number of founders in his community who are starting their own companies by bootstrapping (i.e., using their own funds) instead of seeking external investor funding:

“A lot of those—and this is refreshingly more of a trend of late—a lot of those people who do go on to start companies are thinking more about bootstrapping them. And maybe they're a freelancer, maybe they're a creator, maybe they're building a small, vertical SAAS business online or a small tech-enabled service locally.”

…More common among repeat founders, people who have perhaps some of their own capital to start with, maybe they come from a position of privilege, others coming from a position of, well, I don't need to raise as much anymore because I've got AI at my disposal, I've got smaller, more highly leveraged teams, I've got, you know, a faster route to revenue coming in.

Alice elaborated on the tradeoffs involved in starting a venture-backed company, particularly with the changing economic landscape:

If you're taking venture capital money, you sort of have to increase your risk of failure. You know, VCs will only invest in a company where they believe that there is a small chance of a massive return. And for VCs who have a portfolio, they don't care if 90% of their portfolio fails. And I think often venture capital is seen as the glossy glamorous route. And we, we build venture backed companies; EF is venture backed. But it is a very different route to build companies. And we're recording this in 2023. I'm very curious to see what happens over the next couple of years. The venture capital market has changed, its contracted significantly. And the push now is to build businesses that can generate revenue and generate profit. Now, if you aren't used to work with VC-backed businesses, you might say, "Hang on a minute, isn't that what business is about?" For the last decade, it's been a push for growth, growth, growth at any cost. And I'm curious to see what will happen to the type of founders that start coming into founding high growth businesses where there's just a slightly different onus on what the business has to do: "I need to build something that people want pretty fast in a way that makes money."

This resonated with David, who reflected on how On Deck’s business model has positioned it to be more focused on supporting the individual and their journey than the company:

There's something which, more by accident than by design, when we reflect on the OnDeck journey, we've designed ourselves such that the individual and their journey is our focus, as opposed to the company. And what that allows us to do is take a cohort of people, say 100 people, and help them, or help build a community that helps them, rather, find the right outcome. Now the right outcome might be selling the company, but it might also be shutting down the work they've done so far and joining someone else's company, it might also be getting another job, it might also be being an angel investor, starting a not-for-profit; all of those things are deeply aligned with our interests.

Adding his own reflections on the changing economic landscape and how it is shaping startup culture, David observed of the most recent On Deck cohort:

“My quick take is that the need for very early stage ‘get off the couch’ capital increases, because most people don't have the ability to sustain themselves for 3 to 12 months, while they get that initial product-market fit; I think that the need for huge amounts of growth capital for a small number of frontier businesses increases; more companies that need to load up on GPUs, or do innovation in atoms, building things in the real world; but that is a decreasing segment of the total number of companies started. [And then] there'll be this huge increasing segment of companies that might need that initial capital, but don't need anything beyond that. And I'm really, really curious to see how the market evolves to respond to that, whether it's a new form of financing, [or] whether it's a new set of institutions and credentials that come along with it.”

In sum: entrepreneurship, in the narrow sense of running your own business (much less your own venture-backed business), is not for everyone. Indeed, the very meaning and standard model of “entrepreneurship” is a fast-moving target.

What is for everyone is thinking entrepreneurially—actively, deeply, rationally, from first principles—about whether and what kind of entrepreneur you want to be. For some people, in some circumstances, this might mean taking a job within a well-established institution like McKinsey; for others it might mean going outside established institutions and starting something new, with or without investor funding; for others it might mean going to school, or taking time off to raise kids, or waiting tables to make ends meet while learning to code or auditioning for acting roles or working on a novel. No one is ultimately more qualified than you to judge what particular path to take, or what advice to follow, or what institutions to accept or reject. Just stake awake to the fact that it’s your life on this earth you are building—and then choose accordingly.

Full episode transcript with timestamps (paid subscribers only):