The Best of Erik Torenberg (Part 1): Big Ideas From His Last 3,000 Tweets
Dear Everybody,
Erik Torenberg is Co-Founder of early stage venture capital firm Village Global. He’s also Co-Founder of On Deck, an online community of entrepreneurs and investors, and host of the Venture Stories podcast. He was the first employee and part of the founding team at Product Hunt.
I organized and distilled his “meta thread” of Twitter threads into a summary of his big ideas, in two parts:
(This Letter) Careers, Company Building, and Management
(Next Letter) Venture Capital and Building Communities
For more depth on these topics, read Erik’s excellent newsletter, in particular his posts on Career as a Product, Personal Moats, and Asymmetric Bets.
Young people, don’t be afraid to look dumb…
You can follow a safe path that caps your downside, not realizing it also caps your upside
Safe paths are often tournament-style competitions, and perhaps not as safe as you think
Early in your career…
Value substance more than status
Enter markets that are small or don’t exist yet
Build relationships with peers and up-and-comers
Don’t worry about finding your passion early…
Your passion may not be invented yet
Premature self-labeling closes off hidden opportunities
Undergo unique experiences, and get good at something with no playbook…
Take high upside bets others won’t take
Figure out what’s hard to reverse engineer
Pick something that isn’t big now, but will be in the future
Quadruple down on what feels like play to you but looks like work to others
Get so good they can’t ignore you…
Build a unique accumulating advantage
Work on what is durable and compounds over time
Acquire rare and valuable skills that give you a moat
Don’t optimize on building your network until you already have a great reputation
Learn continuously and forever…
Deploy your learning as you learn more
To find the right answers, ask the right questions
The goal is to look smart at the end
On Finding Startup Ideas, Co-Founders, and Raising a Seed Round
To find startup ideas, get exposed to new problems…
Lead an interesting life and be curious
Put yourself in a position to viscerally feel problems
Look at ideas that were tried before but failed
Ask why you might now have a different outcome
Figure out what’s now abundant and scarce…
Leverage enabling technologies
Unlock new supply using a fixed physical asset or new digital asset
Look for the constraints that go away and what 2nd order effects might emerge (when what was previously scarce becomes abundant)
Find where you have an unfair advantage…
Don't pursue double miracle startups (or "bank shots")
Pick something that’s so boring, but hard or big, that other people just won’t do it
Find a little thing you can execute for the next few months, that could lead to a larger thing
Don’t be afraid to share your idea with others…
Truly good ideas don’t sound like they’re worth stealing
The feedback you receive is worth more than the benefits of keeping the idea private
Find the right cofounder…
Build top of funnel by telling the world what you’re thinking
Treat your search like any other recruiting process
Find someone who can help you solve core risks to the business
Look for someone who agrees with you on first principles…
Look for complementary skills (how do you together have an unfair advantage)
Look for value-mission alignment (what success looks like)
Look for company alignment (who makes decisions, which tradeoffs to accept/reject)
Once you’ve found a potential cofounder, date before you get married…
Meet their spouse and/or parents if you can
Go on a road trip or other intense experience
Do a hackathon or work together in trying conditions
As early as possible with the founding team, figure out…
Goals
Equity split
Non-negotiables
CEO / tie-breaker
5-20-year vision for your lives
Extenuating life circumstances
Personal runway and salary need
What success looks like (outcome, culture, roles)
How each cofounder wants to scale with the company
Ask each cofounder…
Who has the vision?
Who should be CEO?
In what ways are you crazy?
What are your failure modes?
What’s most important to you?
If this didn’t work out, why not?
What was it like working with ex co-founders?
Treat each cofounder relationship like a marriage…
See a coach
Communicate effectively
Read relationship books
Respect and trust each other
Don’t hate going to work every day
Work on the relationship consistently
If it's too much work, it might not be a fit
Maximize time spent on finding product-market fit
Work well together in accomplishing company goals
To raise a seed round, answer these questions…
What's your unique insight?
What is the biggest risk?
Is the business defensible?
What have you proven so far?
What are the unit economics?
What's your unfair advantage?
How does this become a $10B business?
What is the Go-to-Market strategy, now and over time?
Understand the VC business model…
Out of ten swings, VCs get seven strikeouts, two base hits, and if lucky, one home run
The base hits and home runs pay for the strikeouts
VCs require a credible potential of a 10x gain
Winners need to pay for the losers within 4-6 years
If you don't want to 10x in 4-6 years, don't raise VC!
Paraphrasing Paul Graham…
Pretend you’re a VC, keep your VC incentives in mind, and convince yourself you'd invest
If you can do that, you can convince your partners too
Before starting the process, consider meeting with 3-5 friendlies…
Give them a “first look” in exchange for feedback
Ask them, "What would you need to see to invest?"
While fundraising, it's always a no until it's a yes…
Time is your enemy and the VC's friend
VCs want to lower risk, so their incentive is to let time pass
They want to get more information on the traction and the fundraise
Meantime, nearly all investors say no but you only need one or a few to say yes
You're going to feel like a total failure until someone says yes, then you’ll feel like a huge success
Run a tight process to maximize momentum…
Be 100 percent focused on raising
Get referrals from other founders
Get referrals from strong deal sources
Get referrals from existing investors
Do 20-50 meetings in 2-3 weeks, back-to-back
Parallel track angel investors and venture capital investors
Tell angel investors you can secure their allocations if they commit early
Prepare like mad…
Research firms in depth
Talk with founders in their portfolios
See what else they’ve invested in
Understand their deal size and deal cadence
Maintain the confidence of someone who's going to raise easily alongside the paranoia of someone who won't
Know your milestones and how the money will help you get there…
Before product-market fit, raise enough to get PM-fit (enough = money than you think you should)
After PM-fit, raise enough to exploit the opportunity and get to profitability
Never wing it and your pitch will get better with each meeting…
Every pitch meeting in which you don't consider updating a slide in your deck is a missed opportunity to learn.
Keep an "objection handling" document, update it after every meeting, structure concise answers to common concerns, and practice before every meeting
Don’t read your deck to investors…
Make it a conversation
Unconfident fundraisers talk 90 percent of the time, hammer home hand-wavy talking points, and grasp at straws for what they think VCs want to hear
Confident fundraisers listen 50 percent of the time, ask questions, and admit the risks to investing as well as what they have and haven't proven yet
During pitch meetings, ask…
Have you invested in the space before?
What's interesting to you about this business? What's unclear?
How exactly does your process work?
Do you believe there will be a multi-billion-dollar company in the space?
In the context of our improvement, how would you pitch our business to your partnership?
Ask and answer, “If this failed, why?”
In addition, ask, “What do you suspect the reason we will fail will be?"
You’ll get feedback
You’ll learn if they know something you don't
You’ll learn if they’re smart too
Consider the biggest reasons an investor might *not* invest…
Pre-emptively address those reasons
If you’ve solved for them, point to evidence
If you haven’t, point to how you’ll address them, and the moat you’ve built to date
Simplify it for investors…
Say something like, "In order to invest, you'd have to believe that we can execute on X, so that we have Y, which will lead to a multi-billion-dollar business."
Frame things simply so they can pitch their partners
On Building Communities
Community is the new scarcity.
-David Booth, in conversation and exploration with Erik
We know communities…
Reduce marketing costs
Generate new sales leads
Increase repeat purchases
Reduce customer service costs
Provide feedback and idea generation
Help employee recruiting and retention
Increase retention of existing customers
More broadly, communities are valuable because…
Members stay longer and spend more
Members help each other, resulting in high gross margins due to a lower cost of service
Members help acquire new members, resulting in lower customer acquisition costs and a tight viral loop
A community is…
A group of more than two people with a common sense of identity
A group of people who participate in ongoing, shared experiences to meet their needs
A group of people who build relationships with each other in the process
Communities first bring people around *value*, then hook them with *values*…
*Value* is acquisition (members get some utility that helps them solve a core problem)
*Values* is retention (members build their identity around common mission or interest and bond with others who share it)
A person becomes a member of a community when…
They know how to participate
There is a reward for their participation
The community aligns with their identity
They trust that the community will bring them value
The most vibrant communities…
Meet regularly
Create identity
Distribute ownership
Give early users status
Transition early users into new roles or alumni over time
Build community in public!
Before creating community, know…
Who you’re targeting
What the community’s about
What the goal of the community is
What type of community you’re creating
What do members gain from joining
What principles they’re unifying under
Start by inviting everyone yourself, one at a time…
Ask to feature someone
Ask people to be founding members
Get to know everyone individually, until you can't
Ask for specific engagement that solves a problem or gives them status
Especially in the early stages…
Set an example
Fake it until you make it
Set norms and enforce them
Recognize great contributions
Identify most valuable early users
Ask new members what they can offer the group
Ask new members what they want to get from the group
Respond to people who engage (it’s even better when other people respond, not just you)
Make it as easy and attractive as possible for others to engage…
Suggest topics
Remove friction
Celebrate people who engage
Help solve their problems
As you gain momentum, keep building…
Create unique shared experiences and rituals
Generate positivity floods: have people introduce each other
Create avenues for person-to-person shared knowledge exchange
Onboard all community members with friendly self-disclosure rituals
Have a narrative about why the community started and share that story
Identify the active members who you can later distribute control to, otherwise you can't scale
The best content is content *about* the community…
Interviews & AMAs
Community newsletter
Community announcements
Spotlight community members in real world
Know what stage you’re in…
Inception: <50 percent of activity is generated by the community
Establishment: the community generates between 50-90 percent of activity
Maturity: the community generates >90 percent of activity
Mitosis: the community begins to split into smaller subgroups or separate communities
Remember, building communities takes time…
Don’t scale too fast
Focus more on the activity of members than the number of members
Focus on the sense of community members feel
If there’s too much demand, have a waitlist or break into sub groups
Find ways to make people feel even more special
On Management & Leadership
Good management matters more than ever…
Today’s employees need to be both productive and creative
To do that, they need to be inspired and internally motivated
Management gives you leverage…
Optimizing management creates ripple effects
Managers dictate the experience of most people at a company
Leverage is the art of making small changes that have huge impacts
Remember, employees optimize for their managers as much as the specific company
Founders, own management and leadership…
No one cares like you care
No one’s going to have credibility like you do
No one's going to personalize emails or sell in person like you will
You own functions initially, while building out processes that scale beyond you
CEOs, mind your responsibilities…
Recruit people
Hold people accountable
Nail down the strategy for the company
Deliver the capital to pursue the strategy
Decide what the company will and will not do
Communicate the hell out if things, within and outside the company
Create cultural infrastructure…
Hire for culture upfront
Be known for something or be known for nothing
Culture is more like gardening than architecture
You plant some seeds and pull out weeds that aren't working
You can't be involved in every decision as the company grows
Culture is what people do when you're not there and they don't know you well
Set goals and communicate them…
Often problems come up that seem like communication problems, but they're planning problems
There are different ways to set goals, just make the process clear and transparent for everyone
Allocate enough time to recruiting…
After you raise money, your job is to hire people who can build
More than 50 percent of your time should be spent hiring
Spend time with ideal passive candidates, recruiting over a long time horizon
Whatever your hiring process is, codify it, and make sure everyone has access to it
Take your time hiring…
Hiring should be a last resort
Make sure you have a good job description and need to hire
Don’t decide too quickly whether you should hire a person or not
Understand if the role is for value creation or for value preservation
Get the first 10 hires right (each employee will replicate themselves ten times)
Draft Tom Brady in the 6th round…
Calibrate raters
Hire in-house recruiter early
Treat recruiting like a funnel
Diagram the experience and identify potential leakage
Qualify leads (i.e. comp expectations, ideal role, location)
Find people Google isn’t chasing but have even more talent and grit
Pick five qualities that you want to hire for and design questions for every quality
Some qualities to look for in hiring…
Drive and grit
Bias to action
High integrity and low ego
High slop and learning velocity
A person who is long-term oriented
A micro-pessimist and macro-optimist
People who are good and who are known as good (attract other great people)
Treat recruiting like a scientific experiment…
Try different channels and double down
Have a control group and keep criteria the same
Ask candidates the same questions in the same order
Evaluate them on the same qualities so you can compare them
Have a "scorecard" with attributes per position and how much the attributes matter
Statements and questions for candidate references…
It's a cross check
Rate 1-10 but not 7
Describe the ideal role?
Last performance review?
If this didn't work out, why not?
How do they react to frustration?
What would that person's critic say?
Is this person in the top 5 percent of people you've worked with?
How can we make sure the candidate is successful when they join?
We really like X and we'd be excited to work with them. Curious to ask questions to best set them up for success. (see body language)
Before interviews, have questions ahead of time…
If you joined and then left in 3 months, why would that be?
What was your last boss like? How would they describe you?
If you were me, what kind of candidate would you be looking for?
What were your accomplishments and struggles? (go through last five jobs)
Who did you work closely with and how would they rate you from 1-10, in your opinion?
Don’t just interview the candidate, *sell* the candidate…
Quality interviews
Social time with the team
Consistent communication
Make them feel special, not a cog
Transparent and sensible process
Clear expectations of role across team
Respect their time, particularly with take home work
To close candidates, sell the mission, the team, and the opportunity…
Aim for about a 70 percent close rate
Enlist a reference as an ally in closing
Only make an offer when you're sure they'll accept
Ask the candidate, “If we give you X,Y, and Z, would you accept?”
Identify who influences their decision and take them out to dinner with the candidate
Have an investor close the candidate by describing…
Why they invested
Why it'll be an enormous outcome
How they think about the team from an "unbiased" POV
How the investor likes to invest in employees’ career success (perhaps even back their eventual startup)!
When onboarding a new employee…
Articulate what success looks like
The best indicator of how long they will stay is their experience on the first day
Make sure everything's set up so they can ship something on that day
Make sure they can understand company priorities and where they fit in
A hire isn't truly a hire until…
They've completed a 90-day plan
Have a hire write first draft of an annual review and co-define what success looks like
Then back into a 90-day plan (which should have been backed into from the job description)
If after 90 days the outcome is not good, think about cutting
People aren't born managers…
They need to be trained
Great individual contributors are expected to become managers, but being a good individual contributor doesn't make you a good manager
Let IC's be IC's if they want, and create paths for people to be managers
Have weekly 1:1s…
Update an agenda prepped in advance by the reports
Align on the top three things to get done by the same time next week
Capture and check in on those things next week
Give direct, clear, and concise feedback…
Give it during regular 1:1s
Make sure you ask for it too
You're looking for people to take ownership and show a growth-mindset
Make it a good experience for the feedback giver or else they won't give it
Run group meetings well…
Make sure people are prepped ahead of time
Have a meeting owner to move people along
Have a note-taker to track decisions and next steps
Measure performance and pull compensation levers…
It’s more important to figure out fair compensation within the organization than within the market, (that's what people care more about)
Decouple performance review from compensation bonus (do that before the review)
The goal is no surprises - it's a way to retain people, renew commitments, and reset expectations
Double down on your stars…
It's how you keep great people who would otherwise leave
Promote from within if you believe you have people who have 10x value creation
Improving their abilities is more important than trying to fix people who won't create 10x value
Resolve conflicts…
When people hate each other it's usually because they're not hearing each other
If you can get them repeating back what the other person is saying, you'd be surprised at how conflicts can evaporate
Fire crisply and kindly…
Cut the cord
Don't negotiate
Don't feel too terrible
Don't demote (usually)
Don't have long transition periods
You're letting people go to a different company where they will be more valued, more respected, and more successful
Only when it’s clear you need one, hire an executive…
Don’t hire too senior, too soon (or too late)…
If you're not sure whether you need an exec, don't hire one
Understand whether the role is value protecting or value creating (spec accordingly)
The best executives…
Act like owners
Act as part of a team
Act as primary individual contributors
Act to build organizations, often from scratch
Source executives with a firm, but don't outsource your evaluation…
Create a 12-18-month roadmap
Use data to write specs for the role
Identify the people you need to hire
Identify the people you think you need to hire
Know why you’re hiring and what you're hiring for
Hire the best person for the next nine months, not the next three years
A great exec hire pays back orders of magnitude more than the cost of a firm
Start early and know what greatness looks like…
The average search time is 137 days
The odds of a given executive hire working out are about 50/50
The odds if you don’t know what you’re doing? Way worse
Aggressively meet world-class people at the position, regardless of where they are, so you can calibrate accordingly
Questions for executive candidates…
The best interviews are a mix of buying and selling
What's the business equation of your last company? (You want them to be strategic)
Who are the people you'd bring along with you? (You want them to be a talent magnet)
If you were CEO at your last company, what would you do differently? (You want them to be an owner)
Bring up comp in the beginning briefly to assure you're in the same ball park, and then don't bring it up again until the end when they're sold
After you hire executives…
Manage them
But don’t micro-manage them, except temporarily
Ask people under them semi-regularly how they're doing
Lastly, don’t hesitate to fire an executive…
Judged by output of their organization (are they hiring? training?)
When you no longer trust them to build their org and you feel compelled to micro-manage
Andy Grove said you always fire a bad exec too late. If you're really good, 3 months too late
Thank you for reading!
If you'd like more Big Idea Summaries like this, please do join the email list.
And follow me on Twitter! 
Sincerely,
Justin
