It’s a bit of a cliche, but I found being generous is one of the most important things that I can do. However, there is a lot of confusion on what is generosity. What I found is generosity is not just offering value from yourself. I offered too much of myself in the past, and it hurt me. Generosity is offering value to another with boundaries that both ensure that I can provide the value and limits the investment from the other to receive the value. It’s not offering the impossible promise, “I will do anything for you.” It’s helping any way you can at the time.

The value of generosity is tremendous. When someone is generous to me, I feel a wave a gratitude. I was given exactly what I needed for nothing! When this wave of gratitude hits in the context of trying to achieve an audacious goal, it’s an affirmation that boosts inspiration. This compounds and the goal becomes a reality. As my goal becomes a reality, all I want to do is share the benefits of achieving that goal with everyone who helped me along the way.

This is the high-level view of the virtuous cycle discussed in so many startup communities. Whether it’s the lore in Silicon Valley or #givefirst in communities touched by Techstars, this virtuous cycle, catalyzed by generosity, is critical to success in these communities. The problem is that it could take years to experience this virtuous cycle at a high-level.

So I am going to breakdown how generosity can happen several times in organizing a single meeting. It is important to remember that the definition for generosity in this essay is delivering value for such little investment from the other party, that there is a high ROI for engaging with one another. Generosity also spurs emotions of gratitude and inspiration. The hope is to recognize generosity in the seemingly benign things we do everyday.

An introduction: Ask a specific, interesting question

There is one sure fire way that I found to get in touch with anyone, whether it is an expert or an investor, it is to ask a specific and interesting question. It does not matter if I know the person already. If I know someone already, they might meet with me without a specific, interesting question, but I rather not waste their time.

Asking an interesting and specific question is the first act of generosity in a meeting because it is offering up something we all crave, something interesting, for a very limited investment. This is a value proposition hard to deny. We spend most of our waking hours looking for or doing things that interest us because that’s what satisfies everything beyond our basic needs. Being specific is important because it limits the investment necessary to get the value of answering an interesting question. The ROI is so high, it’s almost irresistible not to reply.

It takes a tremendous amount of generosity to offer an interesting and specific question. There needs to be an understanding of what is interesting to the recipient. This is done through research, whether it’s reading blogs or acquiring knowledge over time. Then, establishing the boundaries with specificity takes an understanding of what is truly important. It should isolate the critical information that enables the next step in the plan to the goal. That next step may lead to more questions, which starts this virtuous cycle of correspondence.

Meeting preparation: Context, objectives, and materials

If the correspondence escalates to a meeting, the next generous thing is to prepare for the meeting. Presumably, the meeting is happening because all parties with benefit from a real-time discussion. So there is an inherent value to the meeting. This value will be delivered in the meeting. Preparation ensures that generosity, maximizing the value for everyone while limiting the commitment and time investment required from the participants. Preparation breaks down into three parts: context, objectives, and supporting materials.

Context makes sure that everyone comes to the conversation with the same fact base. Similar to a business school case study, the context should be just enough material that everyone in the room can participate in the meeting. It also explains why everyone in the meeting is there and gets them to think about what benefit they will receive from the meeting. This can be done formally in a slide. It also can be done informally as introductions. It really depends on the meeting, but in every meeting, context explains sets up the value of the meeting.

Objectives affirm why the meeting is happening and what value it brings. Too often this is assumed. When it is assumed and not stated, it can lead to miscommunication, which could really hurt everyone going to the meeting. This is ridiculous because the meeting was agreed to because it was thought to be mutually beneficial. This will be covered more in-depth in a later section, but objectives lead to an ask, which determines the outcome of the meeting. Success of the meeting is not determined by the outcome as much as it is determined by the impression of the meeting. If people walk away from the meeting happy, despite a suboptimal outcome, the meeting was still a success. This derails when the objectives of the meeting misrepresent the ask from the meeting. All parties came to the meeting to achieve something. It is critical to make sure everyone knows what that something is, as stated as a set of objectives.

Materials do multiple things to limit the scope. First, it lays out the plan for the meeting. Next, it creates exhibits of evidence for the discussion. Last, it reinforces that the discussion is about a specific topic not a specific person, removing inappropriate emotion from the conversation. Having a plan with corresponding exhibits keeps the meeting and discussion efficient. It does not mandate rigidity, but rather, instill a framework that guarantees some value for all attendees. If a more valuable issue comes up, adapt. Do not keep a plan for the sake of a plan. However, adaptability is not an excuse to lack a plan that ensures everyone gets value from a meeting. Materials ensure there will be some value in the meeting for everyone.

Removing emotion from a meeting is critical because emotion can totally derail the value for anyone in the meeting. If one person is too passionate, the meeting may spend too much time on one topic and exclude others. Having materials helps declare ground rules to bring a conversation back on track without escalating into an over emotional mess. Additionally, if an argument erupts, the exhibits of facts in the materials help keep an argument objective. Pointing at a piece of paper and saying something on the paper is wrong feels much less like a personal attack than saying, “You’re wrong,” when they are saying the same thing.

Good meetings are really hard. It takes a lot of work to care for all the benefits a team will get in a meeting and ensure that those benefits are achieved in a timely manner. Preparation is really the only key to ensure everyone will get value from the meeting, and it instills strategies that limit the mental, emotional, and time investment in the meeting itself.

Meeting attendance: Execute, think, and listen

Attending the meeting is where the value is delivered. So this section is how to maximize the value from the different perspectives of roles in the meeting. For both the facilitator and the participant, there is a balancing act between contributing and making room for contribution. Optimizing this balancing act is how participants and facilitators are generous in the discussion because it maximizes the ROI for everyone in the meeting.

If I am leading a meeting, the preparation is so critical. It keeps me on track. My duty to everyone else as the facilitator of a meeting is to make sure everyone gets the value that brought them to the meeting. If it’s bringing in an expert, the expert has a chance to share their expertise. If it’s a potential customer, the potential customer has an opportunity to buy. If it’s an investor, the investor has an opportunity to invest. If it’s a customer, they can expect the service offered. Finally, I need to ensure that I get the value that I need from the meeting. Whoever facilitates the conversation tries to ensure everyone, including themselves, gets the value from the meeting that is appropriate to them.

If I am participating in a meeting, it’s my responsibility to deliver the value that I offered to everyone else. It’s the facilitator’s job to make sure I get value out of the conversation. It’s my job, along with all the other participants, to offer something useful or interesting. This does not just mean sharing my own perspectives and expertise, but also creating the negative space for others to share their own perspectives and expertise. The discipline to be direct and the boundaries set that create space for other people to share, makes each word I say more valuable. This limits the investment from everyone else for the value offered, maximizing the engagement ROI.

There are two roles in a meeting: facilitator and participant. The facilitator ensures everyone will receive value from the conversation. The participants maximize the value for each other. Being efficient in the role assigned to you is how you maximize generosity and get the most value from the meeting.

The ask: Be clear and definitive

The ask is the critical conclusion to any meeting. Creating an ask is hard because it is the time people are most vulnerable. The response to the ask is tells whether the outcome from the meeting leads to more or stops. If the outcome is that the discussion concludes, this is not a bad outcome. It is just a reflection of circumstance. Good or bad is determined by how everyone feels walking away from the meeting. These distinctions are so nuanced, it is critical to be clear and precise in this part of a meeting because it will minimize the mental and emotional investment and prevent the value of the meeting from turning negative.

Making an ask needs to be specific. It needs to narrow down to a yes or no response. This ensures clarity. Open-ended questions may follow an ask for clarification, but they are not the ask itself. Beyond being specific in an anticipated response, the terms of the ask also need to be specific. It is asking someone else to participate in an uncertain, delayed gratification. The best example for this is the ask at the end of a pitch meeting: “Do you want to invest?” Before this ask, define the specific terms that you want to offer immediately. The goal is to understand what terms an investor will invest. So anything but an unconditional “Yes,” is a “No.”

If an investor says, “Yes, but on different terms,” it’s a “No.” The investor now countered with their own ask. A safe way to think about this is that each ask has its own meeting. So if there is a new ask from the investor, then there should be a new meeting. The new meeting can be short-circuited with extra preparation by hashing out different terms to different responses. However, if this extra preparation has not occurred, then it’s reasonable to ask for another meeting to discuss the new terms. If this request is denied, then the answer really is a, “No.”

Similarly, answering an ask needs to strive for clarity. This is where an issue often comes up because messages get mixed in the scenario above. Saying, “Yes, but on different terms,” really means, “No, I am not interested in investing on those terms. If you are open to different terms, then I may be interested in investing. Luckily, I know the terms I want.” There is no reason to not have this clarity because clarity ensures authenticity.

Authenticity is a dangerous premise in the whole act of giving or offering any kind of value. It’s really hard to fake providing value. However, it’s really easy to fake the authentic intentions behind providing that value. When people fake their authenticity, it is in a move to take advantage of another person, intentionally or unintentionally. So faking authenticity or coming across as inauthentic is dangerous. Rightfully, people get skeptical when they sense an offer as inauthentic. This leads to distrust and maybe even resentment where all parties are worse off. So clarity of terms and intention are of utmost importance in this circumstance.

The ask of any meeting is the most vulnerable point because it’s the point where everyone reaches an outcome. Regardless of the actual outcome, if handled poorly, this is the point where feelings are hurt and grudges form. Success is that everyone walks away with some benefit from the meeting. Clarity in the ask and the answer is the only way to keep the meeting generous for all.

Conclusion

Over my career, I realized that generosity is really critical to any kind of success. Generosity is not just offering something of value, but offering something of value where it requires relatively little investment from someone else. It’s not just value, but a high ROI for another person. The gratitude the other person feels, leads to reciprocation. It is impossible to see in real-time, the long-term benefits of this virtuous cycle. However, if we notice the details in our daily interactions, it is possible to see how we can be generous everyday.

I am consistently surprised on how the small acts of generosity translated into great things that compound over time. Yes, it’s helped in my career. However, even small things that I never considered, also had incredible results. When I quit playing the drums, I sold a drum kit to a childhood neighbor. I saw that neighbor this weekend for the first time in years. The first thing he did was thank me? Selling him that drum kit set him on the path to become a professional drummer! It was wild. Generosity is not just about the absolute value. Small acts can have a huge impact. It’s about sharing some value that is easy to obtain. That’s what people remember and creates a virtuous cycle of success.

Startups and tech are a special community. It’s the best and brightest who will go to astronomical lengths to achieve great things. The reason people do this is simple: get rich. However, when I boarded the CalTrain in Palo Alto anytime before 9 AM, I wonder what’s the point?

The reason I ask myself this question has nothing to do with me. Rather, it is the sight I see. Hoards of nurses getting off the CalTrain in Palo Alto headed to their shift. There are no smiles, no standing tall, no spring in a step. For me, I see this and shrivel in fear. If I lived in Palo Alto, and I was at my most vulnerable state, these are the people who would be providing care for me? Maybe it’s just a bad moment and no one had their coffee yet. At the same time, I can understand if their feelings are as they look.

Working to make dreams

In 2014, I went to a wedding for my friend’s Chester and Daisy in Nanjing, China, a historically significant city but now a Tier Two city. It was an enlightening trip that starkly contrasted to my work experience in India. The theme of the trip was learning how the local Chinese aspired to live out their own dreams and lives. When I talked with Daisy’s friends — who all spoke perfect English and most had never left China — I asked them about their lives. Everyone — American and Chinese — seemed to have the same problems: worked hard, did well, and figuring out how to create a life they wanted to live.

Coincidentally, the Summer Youth Olympics were held in Nanjing at the same time, and President Xi Jinping was also staying at the Hilton. His presence and the theme from a bunch of millennials hanging out was the Chinese Dream. President Xi’s campaigned for the Chinese Dream seeing what the American Dream did for the US economy. The vision of a great life and more fruitful opportunity really drive a workforce. The irony was that as I talked with Daisy’s friends who still lived in China, I realized that it was hard for me to relate to any dream, despite my intimate familial history with it.

The history of the American Dream to me

I often get tossed flack for how much I believe in the American Dream. While growing up in a white, upper-middle-class suburb, I was often told by teachers or peers how the American Dream did not exist anymore for minorities. True or not, who were they to tell me? I was the only minority in this conversation. I was also one of the few who had memorable immigrants in my family.

My dad’s parents were Japanese-American laborers, who were interned during World War II. I told this story before, but the point is my grandfather made quite a career for himself out of nothing. He became an optometrist because some guy on a bus told him there was an unlimited opportunity in optometry. Then he used his charm to build the busiest optometry practice in Chicago. His clients were all the famous names and organizations from Chicago, most humorously Playboy. Randomly, through the Chicago Democratic political machine, made contact lenses for President Lyndon Johnson. My grandfather was the Horatio Alger American Dream.

My mom’s parents were this American Dream too. They were post-World War II German immigrants. Both my grandfather and grandmother worked on factory lines in rural Illinois. They saved everything and sent my mom and brother to college, who were the first two in the family to go to college. Across all socioeconomic classes and levels of accomplishment, the dream to make a better life with hard work drove a workforce to create a lot of economic prosperity.

This Dream was not one for my parents. By the time my parents started their career, the American Dream had evolved: provide the perfect lifestyle for their kids. The white picket fence, 2.5 kids, and a dog was this Baby Boomer cliche. It’s led to helicopter parents and other things millennials grapple with today. While my parents’ strategy was entirely different and got out of the race altogether for a better life, this new American Dream for Baby Boomers had sweeping implications and drove the workforce to economic prosperity.

The American Dream today

What is the American Dream for millennials? There does not seem to be any. All the pundits just weigh in on how dismal the future is for millennials. This makes no sense to me. Yes, the national debt and forthcoming financial burden of retiring baby boomers make the financial future for millennials look financially dismal. Yes, there is global competition. So what? It’s not like everyone will roll over dead tomorrow.

There needs to be a serious look at what is the American Dream today. I cannot tell if anyone knows it. It’s not, “Make America Great Again,” and I don’t think it’s in anyone’s political agenda. This is because the American Dream is not an answer to today’s problems: more problems will come tomorrow. It’s a vision that brings people together to overcome problems. It’s not an answer; it’s an algorithm. It does not just help the wealthy but brings hope to everyone. It’s not what leaders prescribe; it’s what everyone wants.

A starting point

Since July 29, 2013, I have been in a “quarter-life crisis.” It started with a traumatic assault to someone I loved. Then it got worse in too many ways. I fled to the Bay Area, learned a lot, and it was a relief. However, new darkness emerged and really set in when I moved back to Colorado: in spite of everything, I had achieved more than I could have imagined by this point in my life. Now what? This depressed me for a while.

The comfort and clarity of being back in Colorado, though, let me be my most creative yet. I am no longer at a loss for what was but start to ask, “What do I want? How can I make it better?” So I had to push myself out of the depression and think, “What have I learned that I would pass this opportunity onto my children?”

I do not know the answer. However, where I would start is recognizing that today we live in a networked age. If you let it and make it happen, it’s possible to get access to and build meaningful relationships with anyone. I know because I am a no one, and I still had engaging conversations, over email, with my heroes. There is currently an integration problem with how our networks with our physical presence, but I think if we can start building communities that integrate our digital and physical networks, it’s a place to start, and this is crucially important for our future.

What is the critical question? Why am I not testing it? These are two questions I ask myself every day. I heard Elizabeth Iorns express her frustration when startups didn’t test their critical question. Her point was that if the question is critical to success, then that should be the first thing to test because it’s the most important information. I agree.

“Work smarter, not harder,” is a terrible cliche because no one knows what it means, and, in my opinion, it’s often cited by people who are lazy or by workaholics. My interpretation of this is to ask and test the critical questions. It’s so easy to avoid the critical question because there are so many other things to do: make plans to test it, tell stories why it’s impossible to test, test secondary questions instead, double down on theories and expand the impact (justifying more diligence). This is all a lot of work! However, the work is easy to do and justify.

Working smarter is having the courage to ask that critical question lurking in the back of the mind. It’s emotionally taxing. We are all afraid of failure. However, the risk of not answering this question is far higher than not. Avoiding answering just makes this risk grow, which further justifies delaying answering the critical question, compounding the risk.

The problem with “work smarter, not harder,” is that it is incredibly misleading. It leads someone to assume that you can also work smarter and harder when really these are mutually exclusive. If you are working smarter and answering the critical questions, it’s draining regardless of the outcome. You cannot do any more than process the answer. Maybe it should be, “Work smarter or work harder. Either way, it’s exhausting.”

Last night, a new friend asked about what I meant by risks in my last post. They were confused because they always saw risk as just a financial term. For me, I think of financial risk as really understanding what could hurt the lifeblood of an institution, it’s finances. If I think about risk on a personal level, it’s really what would put my own lifeblood at risk.

What would put my lifeblood at risk would be anything that would keep me from pursuing a life worth living. This is a much more fundamental question that everyone should ask themselves personally. Beyond the basics, what else do you want to do? What else do you value? When I moved back to Colorado, I thought I was pursuing some underlying desire. Randy Pausch’s The Last Lecture confirmed this for me.

In The Last Lecture, Professor Pausch is terminally ill with cancer, and he described how grateful he was for doing everything he wanted to as a kid. Childhood dreams seem like a great place to start.

Celestial navigation

People navigated by the stars before they navigated with a compass. For me, who was the star in my life? My grandfather. He started his career after he left the internment camp, got an education, provided for my dad and the rest of the family to live in the suburbs. During nights and weekends, he volunteered for the Japanese-American Citizens League, a civil rights organization. I was always pushed by him to be the best I could and build on what he started for our family.

However, when he passed away, I realized something else. Yes, Ji-chan really did a lot for the family, I knew that he didn’t have the best relationship with my dad because he worked so much. Whereas, my dad and I still do everything we can together: ski, bike, drink, etc. My parents made an active decision when they were figuring out where to live to not live on the North Shore of Chicago because they knew they would get pulled into the chaos of competing in a major city. Living on the North Shore of Chicago, while much more lucrative for them, would have risked how my parents wanted to live their lives. This meant so much to me, and it was at my grandfather’s wake that I realized I wanted to move back to Colorado. To be Frank, I know Frank would be proud of that decision too.

When we look back at a bad business decision by us or someone else, one common criticism is, “They were too risk-averse.” This is inaccurate. Everyone is risk-averse. Personally, having been through over 50 life-threatening scenarios, having an attraction to high-risk sports, and having made most of the money in my career from my a modest hobby of trading stocks, I know that I am more risk-averse now than ever, and I am still taking a lot of risks.

What’s different is whether people assess and mitigate risks with vigilance versus ignore risks or assume the risks do not apply to them. Everything we do has risks. Growing up in Colorado, I loved to ski and spend time in the backcountry. In every mountain town, there is a t-shirt store with an obnoxious t-shirt listing all the activities that could kill you, ending with sitting on the couch. However, I learned about risks before I could read.

Learning to live with risks

I have life-threatening food allergies (nuts) and, when I was young, had a rare combination of diseases that would have killed if it were not for an experimental drug. So by the time I was 8, I probably had a dozen near-death experiences: people were not as careful with food allergies in the 1990s. It was around this age that I learn my best risk mitigation tactic: treating my allergic reactions with Benadryl and epinephrine. Asking if things had nuts didn’t always work. At the time, some parents ignored food allergies to accommodate for being a picky eater. When one of my pre-school friends brought in snacks, his mom made me a special cupcake because she knew I didn’t care for the chocolate cupcakes she made: the only problem was the special cupcake was a banana nut muffin.

Even now, I am weary when I go out. Restaurants now are so terrified of people with food allergies, I am constantly told by worried wait staff, “our kitchen is a facility that processes nuts.” I brace myself, and admit, “That’s fine. So is my mom’s kitchen.” That’s the truth too. My parents are great cooks and love to try fancy recipes. They have gotten so excited about what they made that they have fed me nuts, multiple times. It’s okay. The point is I couldn’t live the life I wanted to live — going to nice restaurants, eating with people with sophisticated tastes, or shopping at the grocery store — without acknowledging and mitigating risks with a foolproof strategy.

Embracing risks

Growing up in Colorado, I grew to love the mountains. This was an unnatural evolution. When I was little, I loved staying inside playing with Legos. It wasn’t until high school, being forced to be athletic and play sports for over a decade, that I embraced being an athlete and loving the outdoors. However, this really became an undying love. Today, I know that any day of the week for $10 in gas, I can wake up early, hit the trail, and see a sight more beautiful than I can imagine. I am so fortunate that having a unique, once in a lifetime experience is part of my everyday life.

“There are only three sports: bullfighting, motor racing, and mountaineering; all the rest are merely games.”

— Ernest Hemingway

However, the mountains are deadly. Even the “easy” fourteeners — mountains over 14,000 feet — have casualties. Hemingway recognized mountaineering as a true sport because it was one of the few activities where your decisions could mean life or death. So you need to learn how to mitigate risks, and then you need to practice. Instead of paying thousands for a once in a lifetime experience, like Fyre festival (couldn’t resist), I have to pay for these once in a lifetime experiences with sweat equity. Hours of training, weeks of practice, and years of observation. Each day getting better at assessing and mitigating risks. There is a choice: will you pay a guide to give you the luxury of assuming that risk mitigation is taken care of for you or will you own the risks that you take every day. As in the last section, risks happen every day. The better that you get at assessing and mitigating risk, the more spectacular your day.

How I profited from risk

Disclaimer: I am not a professional. This is not professional advice. It is merely a recollection of one trade. Do not interpret this as investment advice. I intentionally call my hobby trading because there is a large component of luck, and I do not want to mislead people to think I am a savvy investor who has some advice to follow.

In college, I learned about the stock market and trading. A family friend was a day trader on the NYMEX, and he mentored me. I studied the markets more than my own classwork. I read Barron’s cover-to-cover for a year. Spent a summer reading Market Wizards, Reminiscence of a Stock Operator, Technical Analysis of Stock Trends, and Elliot Wave Principle. Tested all the theories I learned by tracking paper trades. Started a multi-year debate with a few economics professors on the validity of the efficient market hypothesis after reading A Random Walk Down Wall Street: my professors eventually conceded that I had a unique theory when I argued that the assumption of market convergence assumed continuity, where we know that transactions are discrete and non-continuous, so assuming absolute convergence was a fallacy.

After testing paper trades, I started a small portfolio in college. My philosophy for the portfolio, in the midst of my debate with my professors, “Who cares about theory? I just needed to not lose.” So I started to trade very slowly. It took me a good hour to figure out how to buy a stock on ETrade. I was very fickle. I bought a lot of tobacco and defense stocks. I would have sleepless nights, even while earning an 8% dividend. I knew I needed to add more risk, but I was so afraid of loss. It took years of observation to get over this.

Fast forward to my first big trade in 2011. Three years after opening my portfolio. I was a management consultant working on an insurance client for a short-term project. While getting to know my teammates, I let out that I dabbled in the markets (knowing, but not saying that my portfolio appreciated ~60% over the last 3 years). Suddenly, the whole team erupted about Bank of America! I never traded financial service companies because I valued a bank in an internship in the past and was uncomfortable with the dividend-based DCF model I used. However, everyone was going nuts on how Bank of America could go below $5 again. So I started to watch the stock closely.

On Monday, December 19, 2011, BAC went below $5! Okay, time to test the theories I practiced for years on if this was the bottom. I was looking for a drastic positive reaction followed by a minor reaction, then the next response would be the trend. This happened like clockwork. By the end of the week, BAC was up 5%. The next Monday, the stock dropped two consecutive days. I bought on the following reaction on December 30, 2011. In a month, I was up over 30%: the same as half my appreciation from three years of work.

What made this trade successful was how much leverage I had in the trade: I put everything I had into it, about $6,000. I realized that this trade the moment was where years of studying could pay off. I had to ask myself, “What if I lost everything?” I realized if I saved a lot the next year, I could rebuild my portfolio. Testing several years of work was worth the risk of having to rebuild for a year. I also knew volatility was huge, and there could be a huge upside. Then I reconsidered the worst-case scenario. The worst that would happen was something terrible, like the Accenture flash crash in 2009, where the SEC canceled all the trades. I knew that I had to watch the stock every day, but I had to simultaneously believe in myself and not fear cutting a loss. I don’t think I slept at all the month of December.

Ultimately, December 31, 2011, changed my life in the most positive way possible. Earning an investment income allowed me to take risks in my own career with navigating startups. It also bought me a house and a car. When I came back from the holidays in January 2012, I asked my team, “Did anyone buy Bank of America?” No one did. They said it was too risky. Some people would say this is too risk-averse. I disagree. My risk tolerance never changed. I would argue they did not properly assess and mitigate the risks of chasing a life-changing opportunity.

We are all risk-averse

In startups, founders go in with the intention of legendary results. This is often misinterpreted to just go big. However, just going big is not the full picture. In order to go big, there needs to be a structure to mitigate risks. We are all risk-averse: no one living plays the St. Petersburg Paradox with their life. It’s not until you hit scale, that the organization can seemingly act risk-neutral. So really building a habit of recognizing risks and developing strategies to mitigate risks makes the risk of going big palatable.

Risk mitigation is an essential skill of legends. Legends can go beyond what has been done before. They have the drive and vision to go beyond conception. However, to reaches these heights, they need to become an expert in recognizing and mitigating risks, or they won’t be able to last. Lasting is what makes the legend a legend.

Over the past four years in startups, I have seen a lot of companies say things about the enterprise that didn’t seem quite right. It seems few startups can enter the enterprise, and I just want to point out three things from my past life building business cases for CIOs as an IT Strategy Consultant that could have companies have more success in the enterprise.

Enterprise IT has a lot of scale

When I first moved to San Francisco, one partner told me, “That’s great if you want to focus on small-scale tech.” If you are in the Bay Area, don’t take offense. That partner was right. When I was consulting, the smallest IT budget that I dealt with was over $200M annually. This means the annual operations of the smallest IT department that I dealt with was bigger than all but the Top 50 companies funded by YC ever! How big these organizations are is really hard to comprehend.

How important these organizations are is also really hard to comprehend. One of my clients had one system, where if it was down, would lose the company several million dollars per hour. A breach of this system would cost billions in damages. I also worked in specialty pharmaceuticals, where patients have long-term chronic diseases. The case study and fear for this industry was Genentech, which showed that one recall could bankrupt the company. The organization was incredibly risk-averse.

Value proposition needs to be high

In startups, it’s often understood that a product needs to be 10x better than the competition, and it’s understood that this number is arbitrary. However, for enterprises, I would look at this as more of a minimum bound. Since the risk to an enterprise is so high, the risk of moving data to a new product often exceeds any value that the new product offers.

In addition, there are real change costs to any new software. Even 15 minutes for all 10,000 American employees to learn a new HR tool would cost the enterprise $125,000 before any training begins. It really just gets more complicated and costly from here. Generally, the rule of thumb I had as a consultant was implementation costs doubled the cost of any software.

Finally, it was common practice in an IT organization that any new project had an ROI well over 200%. So while a new product may be 10 times better, we know the total cost of the software after implementation is only 5 times better (or an ROI of 500%). Then the question is if a 500% ROI worth the risk of putting the company’s data on a new system? Often it’s not. Saving 4 times the cost of a single app in an enterprise only increase operating margin by a fraction of a data point. However, any data breach could be catastrophic.

Target problem/users are key

With everything stated above, there are some clear constraints to what you can effectively solve in the enterprise.

Try not to touch critical data

“No one got fired from hiring IBM” is a common cliche. However, when it involves critical systems and data, it’s more like, “No company went bankrupt putting thousands out of work and costing millions of shareholders, for hiring IBM.”

What’s critical? Core banking systems, any automated system in a supply chain, EHRs, etc. If you are doing one of these companies where your system is better than anything else, build a full-fledged competitor because enterprise adoption will probably never take off.

Add capability, don’t reduce costs

This may be obvious but for a non-obvious reason. Adding a new system from a startup is a risky endeavor and the magnitude for these risks are huge. Any new software, especially from a startup, should be redundant to another system for a period of time. So the ROI calculation for a startup’s software really should not include the cost of existing software.

If I am offering a new fulfillment/shipping software, I cannot just be cheaper than the existing software, I need to offer something else better. My technology is the only technology that can ship envelopes by teleportation. 90% of your shipping costs are sending envelopes overnight to inform people as instantly as possible what needs to be done. With our technology, you can still ship envelopes overnight, but we are a much faster and cheaper alternative. Try it with your less critical information.

The business case for email sounds ridiculous today, but it was widely adopted after people were able to try it as something new. The last industry to adopt email is healthcare because they always deal with critical information. NOTE: I still have to fax, mail, or deliver forms to my doctor, but that’s a different issue.

Target users need to be familiar with writing a business case for their boss

It is critically important that your target user is familiar with writing and articulating a business case to their boss. If your target user is not used to or empowered to present a business case to their boss, it’s going to be a tough road. A business case, whether it is quantitative or qualitative, is the only way I have ever seen budget get allocated for anything in an enterprise. So it’s critical that your target user can clearly articulate to their boss that your software is at least 5 times better than the alternative.

One of the criticisms for a lot of enterprises is that they are slow and less innovative. Well, it’s also surprising how few people in an organization are actually empowered to bring a business case to their boss or know how to make one. Salespeople deal with business cases all the time and are constantly calculating how to make more. IT is also extremely familiar with business cases ever since “IT Doesn’t Matter” came out in 2003. However, most other individual contributors are not enabled to give a business case to their boss.

Conclusion

There is a constant request for enterprise startups. However, there are surprisingly few paths to go down if there is going to be any success in the enterprise. I hope entrepreneurs can take this guidance, get creative, and create better companies for the enterprise.

In college, I wrote my computer science thesis on “Structural Complexity Theory and Intractability” because I became fascinated with the theory of computation. In particular, I loved learning about reductions: a mathematical (or theoretical computer science) function that let you classify problems and algorithms in terms of computational complexity. The point is that for each type of problem there are constraints on how efficiently you can solve that problem.

Having worked in startups for the past four years, I think the same applies to startups. I think there is a set of criteria that make any problem a startup is posing to solve solvable at a certain point in time. The methods for testing and processing the data to understand this is published widely. However, some economic realities on whether or not a business could even take off at this point in time are not widely published. Maybe it’s for fear of limiting creativity? Maybe it’s giving away unique market insights? I do not know. I just know I am a total nerd when it comes to economic theory and computer science theory. So I am just writing to test some stuff out.

So far, I know there are three categories of risk that startups face: market risk, team risk, and execution risk. Market risk is, “Will people adopt my product?” I think it’s more complicated than if a market exists, and it more relies on, “Can a get an adoption rate fast enough before I run out of money?” Team risk is just, “Can the team pull this off?” This seems pretty transparent, but I’m sure I’m underestimating a lot of nuances to assessing this. Finally, there is what I am going to call execution risk. It’s been called technical risk, but I also heard from non-tech entrepreneurs as just examining the business model. Overall, there is a component of the hard barriers: Can the product be built? Will people pay for it? Is the price higher than the costs? Does this all hold up over time?

The problem I have is these barriers are very broad and not actionable. I wrote Michael Siebel once, and he advised, as he says in many other places, “Make sure your app is one of the top three apps your customer uses every day.” I think there are a lot more actionable bounds specific to different industries. While this blog is totally self-serving, in that, I can get a bunch of ideas out of my system, I hope I can shed light on better criteria will help people start better companies. I believe highlighting constraints does not limit creativity but enable it because, now, there is a problem to solve.