“Venturing Out: Leaving Big Tech to Start a Startup”: Anna Fuller, CEO & Founder at Halo (Video + Transcript)

In this session, Anna Fuller discusses the important factors to consider before leaving a company, such as personal finances, family obligations, health, and legal status. Throughout the talk, Anna provides practical advice and recommends resources for further learning.

Transcript:

Anna Fuller: Awesome. Thank you so much, Angie. I’m excited to be here with you all. And while I get my slides up, I’m just going to publish a quick question so I can see what type of folks we have in the audience. So, I’m curious. I’m going to be talking today about leaving big tech to found your own company. And I just want to know of those of you in the audience who’s thinking about it, who is actively acting on it, and who is just here because they’re curious. So, if everybody could go ahead and vote, I’ll give you guys a few seconds. Okay. All right, so, we have a lot of folks who are in the thinking about it and curious stages, which is great.

All right, so I’m going to go ahead and hide this poll. You can keep answering, I think, throughout this session. But let me bring up my slides. All right, great. So today I’m going to be talking about starting a company, and specifically, how to start a company when you are leaving another company. So, who am I? I’m Anna. I’m a two-time founder. I’m currently working on a company called Halo, which is weekly flash deals for new moms. If you yourself are a mom or if you have mom friends, please head on over and sign up. I used to be a product manager at Google. And previously, I have a lot of startup experience, mostly on the product side and mostly in e-commerce and consumer.

Okay, so today we’re going to talk a little bit about that all-important question, when is the right time to leave your company? We’re going to go through the basics or what I call the important stuff, the meat of creating that new startup, so idea, traction, team, and funding. If we have time, we’ll go through some of the tactical stuff, but I’m going to leave them behind for you on slides so you can always come back. It’s basically the logistics of setting up a business and all the different software tools that I recommend. And likewise, if we have time, we’ll take some questions at the end.

Okay, why am I here today doing this? So it’s been shown that female-founded startups actually return 2-1/2 times the amount of revenue of others, but still, unicorns only have 14% female founders, only 6.2% of the CEOs in the S&P 500 are women, and under 3% of VC funding goes to women. These numbers are terrible. We need to do something about it. The thing that I would like to do to try and help enable you guys to come out and make these numbers better is share some of the hard-won early lessons from starting a company so that you can hopefully shortcut that process and get there even faster.

All right, let’s dive right in. So, first up. When is the right time to leave the security of your company, your current company, and start your new company? Okay, let’s think through a few things. What do you need to have in place before you leave? There is one thing on this list that everybody needs to have in place. It’s fully required. The others are going to depend on you. So, the stable personal foundation or your personal runway, this everybody needs to have locked into place. What do I mean when I say personal runway? Let’s look at a couple of different things. Think about your finances. What is your monthly spend right now? How long can you make it, how many months can you make it with the savings that you’ve accumulated, and how comfortable are you with burning down some of your personal savings?

Think about your family. Do you have any obligations right now? Are you caring for parents? Do you have young children? Are you thinking about starting a family? You can do a startup with all of those things. I have a toddler, and I’m doing a startup. But for you, you may want to just understand what that looks like and when you’ll be most comfortable to branch out on your own. So, health, make sure you’re in a good spot. Startups are really hard. They take a big toll both physically and mentally. So, just make sure you’re in a good spot with health. And then, lastly, consider your current legal status. So, if there are some folks who are here that are being sponsored or on visas, just think through those implications and make sure that you’re set up for success when you do decide to leave.

Okay, so we’ve got that one locked down. The reason I call it your personal runway is it dictates how much time you have after you leave your company before you need to have your startup providing that stability. And this depends on the length of your runway and also your own risk tolerance. So if you have more runway and a greater risk tolerance, you’re out the door. Go ahead and leave now, and you have time to figure it out. But many of us have a shorter runway. We want to check off a few more of the below before we actually leave our company. And I have the asterisk here. Don’t forget to check about your moonlighting policy. A lot of big tech companies will let you work on your own side projects, but you just need to disclose it. So, just read the fine print there and make sure you’re on the right side.

So think about these next four things, idea, traction, team, and funding, really, as things that we’re going to progressively de-risk. And you may choose to leave your company before any of them are de-risked, or you may choose to wait and leave until they’re largely de-risked, but it’s a gradual process. Okay, let’s talk about this. This is the important stuff. This is the meat of building your business. The idea, this is something that occupies an out sized mindshare. I think before you actually start a company, you have this idea of the founder, and they have this brilliant idea that comes to fruition, and they bring it to market, and everybody loves it. But that is a total myth.

In fact, I think too much emphasis on the idea is actually a bit dangerous because the reality is that as you get in and start working on your startup, the idea is going to change, and you don’t want to hold onto that too tightly. What you really want to focus on is the problem that you’re solving for your customers and how you can best solve that. And that’s likely going to change quite a bit.

So when you look at this handy little chart of this wood carving, at the end, you can see a fully formed statue. We do not want to start there. Don’t assume that your idea is what you’re going to ultimately build. Instead, start on the left side where you see this progressive, this outline of a wooden block that’s going to progress through the stages. So, how do we progress it? It takes a lot of time and effort. And to be honest, this is work that you’ll be doing over the course of your startup.

So, start with a problem area. How do you choose a problem area? Ask yourself a couple of questions. What are you the world expert in? It doesn’t have to be mind-blowing or groundbreaking. It’s just what is your expertise. If you were to start a consulting business tomorrow, what would people actually pay you money to do? Because odds are, if you were to solve that problem for them, there are some problems that you could solve for other people in that domain. So, think about that. Also, think about what are problems and frictions that you encounter in your day-to-day life. And then, lastly, make sure you pick a domain that you’re comfortable spending the next 10 to 15 years in because startups are long, and you don’t want to be bored. You want to be passionate about what you’re working on.

So in the next step, you’re going to navigate what we call the idea maze. So, really, what this is, it’s just understanding what the array of solutions that are already out there in existence are, and how are they solving the problem? How are they not solving the problem? You want to go out and talk to people in your space. You can talk to experts. You can talk to potential customers. You can talk to competitors. Just understand the lay of the land. And then start on your customer discovery. And this is where we start this lifelong journey of a startup because you’re always doing customer discovery. You want to get out and talk to your customer.

So refine your solution, move on, test prototypes, refine again, build your MVP, refine again, go to market, refine again. It’s just a constant loop of refining until you’re solving more and more of your customers’ problems, and what you end up with could look very similar to what you thought it might look like or it could look totally different. So, in startups, we have a phrase called pivoting. Sometimes, you just need to read the market and do a hard pivot, and you’ll find some other problem to solve. A book that’s super helpful as you think about customer discovery and idea validation is called The Mom Test. Go out and get it. It takes about four hours to read, and it’s going to really demystify that whole process for you.

All right, so traction. There’s really this continuum from your idea through validation and traction. But traction similar to the idea has this sort of mythology about it. It’s like, “Well, do you have any traction yet?” So, let’s break it down a little more. Traction itself is too vague. Let’s think about a couple of things. Why do you want to see traction? Is it because you want to de-risk the idea for yourself further, or do you want some validation that this is the right solution to work on? Is it because you want to get investors? Is it because you want to start getting revenue to fund your operations? All of these are valid things. But it’s important to understand why you want to see traction because we’re going to use that to understand what to measure and how much traction you need.

So, in terms of what’s important to measure, this depends totally on the startup that you’re building, but there’s a couple of key metrics that we always tend to go back to. One is users or customers. I differentiate the two because users are just coming back and using your product, maybe not paying directly. Customers are people who are paying you directly. We also want to look at maybe average contract value or gross merchandise volume if you’re a marketplace, anything that indicates that you have money that is either coming in or about to come in the door.

And then how much do you need? This is a really difficult question to answer. You need to set reasonable milestones based on your goals. And one thing to keep in mind is that this hockey stick growth is just not going to happen right away. So, try to prevent getting into the trap of thinking, “Oh, I’m just going to wait to bring on my team,” or “I’m going to wait to fundraise until I launch because then it’s going to be through the roof.” That’s probably not going to happen. So, set measurable, realistic milestones for yourself. I get asked a lot, and I think about this a lot as a founder, “How much traction is enough for fundraising?” And here I’m specifically talking about VC-backed companies.

This is not a straightforward answer, unfortunately, but there are some tactics you can take to figure out what the right answer is for you. So, first off, ask other founders. If you are in a B2C space versus if you’re in a B2B space, the metrics for raising that first round of capital are going to be much different. So find other founders in your space who have maybe just raised their first round and go and ask them. Ask them what the process was like. Ask them what their strategy was and what their metrics were like. Read funding announcements. TechCrunch is going to publish articles about companies in your domain who have just gotten funding. Read those to understand what their current status is. I would say there are two things to keep in mind here. One, founders like to paint a rosy picture, so take what you read with a grain of salt. And two, funding announcements can sometimes come months after the actual round happens, so they may have progressed a little bit further in that time.

And then, lastly, talk to investors. Reach out to investors in your domain. Let them know that you’re not fundraising right now but that you want to get their feedback and you want to get their input on your idea. Then, talk through with them what do they like to see before they write their first check for a company. Other ways to validate your idea. Like I mentioned, it’s sort of a continuum. You want to go through discovery, validation, and, eventually, real traction. So, discovery, there’s a number of ways you can actually figure out whether your solution is going to resonate without even writing a line of code. You can do surveys. You can do customer interviews for that qualitative data. Or you can set up what we call a fake door test where you put up a landing page with a call to action.

Let’s say, “Buy this product.” And you just measure how many people click “Buy the product.” And, of course, you don’t have the product yet. So they land on a page that just explains, “Hey, we are in the process of making this. We want to make something excellent for you. Enter your email address, and you’ll be the first to know.” So, we’ve gauged their demand because they were ready to buy even before we have the product itself. When you move a little bit further into the validation stage, you may want to run a beta with a small, trusted group of customers who will give you good feedback. You may stand up a wait list, people who enter their email address. That’s sort of giving up something of value to them in exchange for getting your product in return. That’s a good way to gauge demand.

Or if you’re in the B2B space, maybe it’s letters of intent. These are just letters that a company will write, or you can send it to them. They’ll sign, saying, “Hey, when you build this thing, I want to try it out,” and it’s not binding. So, it’s low risk for them that you can gather these to understand who your initial design partners will be and show some demand. Then lastly, real traction, customers and growth. There’s nothing that there’s no other secret sauce there. You just need to bring in people who are getting value from what you built. A really helpful book here is also called Traction. I highly recommend this.

Okay, moving on to team. So the traditional sort of triad that you might hear of in a co-founder relationship would be this hacker, hustler, hipster combo. And really, what that means is you need somebody to build the product, you need somebody to sell it, and you need somebody to design the user experience. Now, you don’t need a separate person for each of these things. Maybe you as the founder have two of the skills, and maybe your co-founder has two of the skills. So between each other, you have this overlapping skill set. But you do roughly need to know who’s going to build it, who is going to sell it, and who’s going to be responsible for that user journey.

So, to think about here, what are your own strengths? What do you bring to the table, and where do you need help? I would recommend getting very creative here because think scrappy. You’re going to leave your big company where you have a person to work on every small thing, and they’re a subject matter expert in that, and you need to be comfortable with wearing multiple hats. You might need to be comfortable with understanding what is good enough for now. Maybe you are a product manager, but you can do some wireframes, and so that is good enough to translate to a developer to have them help you build the initial product. Think about how you can get to your end goal and validate your ideas as quickly as possible.

Then, also, contractors and interns are a lifesaver. So, if you have no idea how to market something, you can look to hire an intern marketer who will get a lot of value from helping you in addition to you getting value from them helping. Do you need a co-founder? This is a big question, and I think this presentation is too short to answer it here. But I will just point out that co-founders are great ways to bring on a supplementary skill set for equity in the early days. They have skin in the game. And you don’t have a lot of resources, so you need people to contribute who have real skin in the game.

Also, founding a startup is an emotional roller coaster. So, having somebody there who can go through those ups and downs with you is essential. But make sure, on the other hand, that you’re not just bringing on a co-founder that you don’t know very well because it really is akin to a marriage. It’s going to be a relationship that you need to foster over the next 10 to 15 years of your life, so think carefully there.

Funding. Okay, a very important question. Why do we care about funding first off? So it’s not to say, “Oh, I raised this round of capital.” It’s because you need to fund your own company operations. You need to fund your own personal runway. Eventually, you’re going to run out of your savings. You need something to supplement that. So, let’s think through a couple of different types of company funding. So, we have broken down into three. Venture-funded, this is your typical equity VC-backed company. The exit event here is usually an IPO or a sale. And what to think about for this category is you’re going to go through multiple rounds of funding, so the founders will get diluted. You have to have an exit before the founder realizes all that value. So, you’re not going to have these yearly cash flows. There’s going to be a lot of pressure for growth, and billion-dollar outcomes are expected.

It’s really this big swing all-or-nothing thing. You’re also probably going to need to be full-time before you get that first check. Boot-strapped, usually this is the situation where a founder will put in initial capital, and then it really could go either way after that. It could be venture-funded. It could be revenue-funded. A lifestyle company, think here, these are if you’re going to start a physical business like a restaurant or if you’re starting a passion project like a blog. It’s any type of business that is not the sort of typical venture-backed Delaware C-Corp style business. This is usually revenue or potentially debt-funded. The business pays for itself.

A couple of key characteristics. It will have regular cash flows. So you can get this to a point where it’s actually paying you to operate the business, and you can start taking cash out of it. It’s usually more aligned with a more sustainable growth pattern, and you can start this as a side hustle.

Angie Chang: Thank you, Anna.

Anna Fuller: Okay, how are you-

Angie Chang: [Inaudible 00:17:42] time. We’re out of time.

Anna Fuller: Okay. Great. Okay, well-

Angie Chang: Thank you so much for your-

Anna Fuller: Yep, no problem. If you guys want to download the slides, feel free to grab this deck. And I’m always available for more questions.

Angie Chang: Great. And you can always hit replay in this Airmate software and they can just re-watch this session and get this QR code.

Anna Fuller: Awesome.

Angie Chang: Thank you so much.

Anna Fuller: [inaudible 00:18:08].