This week, I caught up with a founder from SF. He’s building an AI-based solution in the HR space. Several ideas he’s tried haven’t worked, but this one is gaining traction rapidly. He told me his failures made him reflect; he wondered what he was doing wrong compared to other founders.

He asked one of his old professors (he has a graduate degree in computer engineering from an Ivy League school) why he’s having a much harder time than his peers getting enterprise companies to try his solutions. The professor didn’t mince words; he told the founder he wasn’t leveraging his network. He was reaching out to large companies cold and getting the door slammed in his face left and right. No one would listen.

Armed with this new idea, the founder leveraged his school’s network to get warm intros. The results have been drastically different. Large companies are not only excitedly listening to his pitch, they’re trying his product as early users.

I asked the founder what his takeaway is from all this. He said he believes that getting decision-makers in large companies to try technology from start-ups requires warm intros, and to get warm intros you need a strong brand name or a good network.

If you’re a founder thinking about selling to a large company, consider who in your network can make a warm intro to decision-makers. If the answer is no one, ask yourself what you can do to build your network.

Today I met with another early-stage founder, and the topic of customer discovery came up. He said he’d done discovery, so I dug in and asked more questions. Two things stood out to me that we discussed in detail.

First, most of his customer discovery came from sending out surveys. (I shared my thoughts on surveys as customer discovery earlier this week—see here.) We discussed the benefits of doing more one-on-one conversations.

Second, a lot of his insights were based on a conversation he’d had with one customer. He’d built a lot of his product offering and website messaging in response to what he’d heard in this conversation. Learning from a conversation with a potential customer was a big plus. But one customer doesn’t confirm a pattern that leads to previously undiscovered insights.

Surveys are good, but not for initial discovery. Conversations are the best way to learn about pain that potential customers are experiencing. And you need lots of conversations with lots of people to uncover patterns and gain a deep understanding of problems and why they’re so painful.

This week I listened to the founding team of an early-stage startup describe their current traction. They’ve built a software product and have thousands of (nonpaying) users. To determine what features their customers would pay for, they sent them a survey. Twenty-five percent of the people who responded said they’d pay for a particular feature. So, the company built that feature and launched it recently. The results weren’t good. Only three (yes, three) customers bought it.

So, what went wrong?

The team surveyed customers; they didn’t talk to customers. Talking to customers involves picking up the phone or meeting a customer in person (one customer at a time is ideal). A conversation, if you aren’t leading them, will allow you to dive deeper into the customer’s thought process and experience. It’s iterative. You hear something you weren’t expecting (or didn’t know) and ask questions about it. That leads to something else you didn’t expect, and you ask more questions. The result of that loop is new insights about the customer’s problem. Do that with multiple customers, and you start to see a pattern. You now have a better understanding of the problem and how to solve it for the customer.  

What I described can’t be done with surveys. Surveys may have biased questions that don’t help you understand your customers. And they foreclose iterative interaction with your customers. Sure, they’re efficient and allow you to get a lot of feedback quickly, but the quality is often low, and it can lead you down the wrong path.

The lesson this early-stage team learned was to stop doing surveys of their users and start getting them on the phone. Conversations lead to insights. You can’t have a conversation in a survey.

This week, I listened to an entrepreneur who’s building a software platform that helps online clothing sellers manage businesses that sell mostly through social media platforms, such as Instagram. The thing that caught my attention was that the company is focused on micro SMB sellers, who make up the majority of this fast-growing market. The company is performing well and has generated over $1 million in revenue.

I’ve shared my thoughts on the micro SMB market before (see here). I think it’s a great market that’s overlooked because people don’t know how to find and convert super-small business owners into customers. There’s no proven playbook. My interaction this week with this entrepreneur further increased my bullishness about this market.

Companies are being built right now to serve this market, and they’ll be massive companies in the next five years. By the time people realize the market opportunity, these companies will be so far ahead and so critical to how the micro SMBs operate that it will be extremely difficult to compete with them.

Yesterday, I shared why I love what Andrew Carnegie said about why you should put all your eggs in one basket, which is counter to how most people think. It’s simple, but it’s far from easy to execute. And even if you execute it well, success isn’t guaranteed.

Picking the right basket to put all your eggs in is the hardest part of execution. Whether you’re founding a start-up or making a concentrated investment, this choice is critical. And you must have conviction in your decision so you can weather the inevitable ups and downs. Therefore, you can’t haphazardly pick something based on a whim. You must do the work to deeply understand each of your options. Doing the work often leads to what others might consider an obsession, but it’s what uncovers the insight that others miss—the insight that reduces your risk, tilts the probabilities in your favor, and helps you build the conviction needed to go all in.

Andrew Carnegie’s method isn’t something that everyone is suited for. Making that kind of decision and sticking with it to the end requires mental grit and toughness. But for people with the right mind-set, when it’s done well, it can lead to outsize results.

A friend reminded me of some wisdom attributed to Andrew Carnegie that I’ve always loved because it’s counter to what most people believe leads to outsize success or investing returns:

The way to become rich is to put all your eggs in one basket and then watch that basket.

Mark Twain famously said something in the same vein after hearing about Carnegie's remark (source).

This quote resonates with me because it’s what every wealthy person I know personally did. In either company building or investing, concentration (i.e., extreme focus) on one thing is what led to outsize success. If you focus on one thing, you’re more likely to know everything about it and be able to assess it better than others. You’re likely to spot what others have missed, which reduces risk and tilts the probabilities of success in your favor. When everyone else thinks the chance of success is 10%, you realize it’s 60%.

What I’ve also seen is that after someone has achieved outsize success, they embrace diversification as a means of preservation and reducing downside risk.

Said differently, concentration is for building outsize wealth (or a business), and diversification is for preserving that wealth (or that business).

An entrepreneur friend sold his software company a few years back for over $100 million. We caught up this week, and he updated me on his new company. It’s a non-tech company selling a simple, physical, paper-based product that’s small, light, and easy to manufacture. He started the company about eight months ago and is seeing explosive growth.

The market for this product isn’t sexy, he said, but it’s surprisingly massive. I realized that he’d found a market that’s not attracting the smartest entrepreneurs because the opportunity isn’t sexy and doesn’t attract much attention or publicity. Because of many entrepreneurs’ lack of awareness of this market, they don’t understand the full extent of the market opportunity. The result is that my friend is competing against old-school entrepreneurs who’ve been in the industry for decades and haven’t innovated at all because they haven’t needed to. My friend is running circles around them—so much so that he thinks this old-school industry is going to make him more money than his software company did.

My takeaway is that markets matter a lot, but equally important is understanding the competition in a market. If you can find an overlooked market that’s large, ripe for innovation, and full of players who innovate slowly or not at all, there’s likely pent-up demand for innovation. If you innovate and execute well, the pent-up demand will be unleashed and may slingshot your company to success.

This week, I chatted with a CEO who has a software solution that’s been on the market for a few years. The product is both powerful and complex. It does a lot of things, which is both a gift and a curse. Earlier this year, he was struggling to get traction. This week, though, he shared that things are trending up rapidly; they’ve landed over 10 new customers, each paying roughly $25k a year.

So, what changed? Two things:

• The messaging changed from describing what the product does to describing the problems it solves.
• The company identified several problems that their core customers face and that their solution addresses. Instead of cramming them all on one site, they created a stand-alone site for each problem. Prospective customers with a particular problem can learn more about how this software solves that problem, and they can sign up and try it for free.

All this happened in a two- or three-month period. They didn’t build more stuff; they just focused on the customer’s problems and made it crystal clear, via better messaging, how they solve each of them. Perspective customers now have an oh, that’s for me moment when they visit the site and are converting to paying customers.

Having a great product that solves a problem is critical, but so is the messaging you use to tell the world about what you’ve built.

One of my favorite maxims is from the autobiography of John H. Johnson, founder of Johnson Publishing Company, which published JET and Ebony magazines. Early in Johnson’s career, he worked for Harry H. Pace, CEO of Supreme Liberty Life Insurance. John was upset that Pace had negotiated a settlement with a man who owed the company money and, when Pace tried to collect it from him, was disrespectful to him.

In that moment, Pace told Johnson something he’d never forget:

If you want to succeed in business, young man, you’ve got to learn how to work with people that you don’t like. And you’ve got to learn how to compromise. After you compromise, you have to forget the past and go on to the future. For in business, you have no permanent enemies or permanent friends—only permanent interests.

This quote is powerful. It stuck with me. I took a screenshot of it, and I look at it periodically to remind me to stay focused on my interests and to work with people and compromise to work towards them—even people who aren’t my favorites. I’ve also shared that screenshot with friends when they’re working with people they don’t care for.

To get anything material accomplished in business, you can’t do it all yourself. You must work with people. Some of them you won’t like. But you must figure out how to work with them anyway, compromise, and keep progressing toward what matters to you.

A friend is starting a new company. He’s got a great vision and a great idea, but it’s been hard to get funding. He didn’t let that stop him, though. He got creative and found ways to get the computers and other things he needed.

He didn’t have any money, but he had hustle. He found a surplus organization that has stockpiles of computers and other technology assets. He worked with the staff to figure out what he needed to do for his new company to qualify to receive surplus assets. And they eventually approved him to get computers, monitors, and other expensive assets. Now, with zero dollars raised, he has the resources he needs to get his company off the ground.

My friend’s journey highlighted to me the difference between resources and resourcefulness:

• Resources – a stock or supply of money, materials, staff, and other assets that can be drawn on by a person or organization to function effectively
• Resourcefulness – the ability to find quick and clever ways to overcome difficulties

Many early-stage founders focus on getting money so they can buy the resources they need to get their company off the ground. But in reality, what they need is a resourceful mindset. Entrepreneurs who are resourceful find clever ways to get the resources they need to get their company off the ground, even when they don’t have any money. They don’t take no for an answer. They think outside the box. Entrepreneurs who believe they must have money to buy the resources they need are much less likely to have outsize success or overcome the inevitable cash crunch that all entrepreneurs face at some point.

My big takeaway is that lack of money makes things harder, but it shouldn’t stop you if you’re resourceful.