In his book Zero to One, Peter Thiel talks about the idea that all startups are built on top of a secret. This is a secret that only the founding team has, and the goal for the founding team is to turn that secret from a non-consensus idea into a consensus one. As founders, we all dream of the process of convincing the world that our ideas are not just good, but necessary for the world to flourish. However, what is often forgotten is what to do if you find yourself with a truly earned secret. I thought I understood what it meant to have a secret, until 2020 when I realized what it truly felt like…
The Forward Thinking Founders Experiment
2 years ago I started a podcast called Forward Thinking Founders. Initially the idea was “what if I interview founders I thought were going to be big, but before the market realizes.” Later on, I realized this was just scouting or investing. I started the podcast by interviewing the usual YC suspects like Austen Allred of Lambda School and Kristen Anderson of Catch, but soon I found myself going down rabbit holes on the internet where I found the most interesting founders who no one had ever heard of. I generally interviewed any startup that sounded interesting, regardless of their credentials.
After about 200 episodes, I looked back on some of my early guests and noticed that many had raised more venture capital since I interviewed them. Of course, it wasn't because of me that they raised, but it signified that I had some sense of a signal. Eventually, some startups even came to me. For example, a local startup wanted to come on the show, then told me a month later they raised their seed round from a16z. This kept happening until I realized that I would be a really good venture capitalist! I now have a clear track record of finding and meeting great founders. Breaking into venture capital should be easy, right?
Before continuing, it’s worth sharing the data that I had, and that I was trying to use to get into VC as an investor or a scout. After 510 episodes of my podcast, this is my track record of spotting early stage founders.
61 startups publicly announced fundraises since I interviewed them, going from an average funding amount of $4.6M as of recording to $19M as of today.
17 startups were pre-funding before our interview, and have now raised an average of $2.M each from firms like Founders Fund, a16z, Floodgate, Weekend Fund, Chapter One Ventures, LAUNCH, USV, and many many more.
I did all of the above from my apartment in Phoenix AZ, with no network built up in the Bay
Ok, back to the story
I’ll spare the details, but no VC firm wanted to hire me for any position, including being a scout. When I showed them the data I had, they didn’t know what to think of it. Clearly, I had demonstrated an immaculate ability to get access to startups, but for some reason, no one saw that ability to the extent that they wanted to benefit from it.
I brushed it off and kept going. 300 or 350 episodes in, I start to recognize some behavior patterns in the startups that eventually raise capital and ones that don’t. And I identify which filters I use that get me the highest quality founders that raise the most money. After spending months refining these filters, I thought I could sell data using these filters, then every VC would be able to see startups like I do. Maybe I could help them increase their returns.
So I packaged up all my data with these new types of filters and got on a video chat with a few VCs, and asked them how much they would pay for this proprietary data. Of course, they saw no value in it. They probably wished they could pay to end the phone call early. The filters that allow me to separate signal from noise, in a very noisy world, meant nothing to someone whose job is to separate signal from noise. Am I out of my mind? I thought this way for a while.
Clearly, there’s something going on here. After getting this “no” response from VCs on what I thought was a goldmine, I get on the phone with one I’m a little closer with and tell him exactly what’s going on. I tell him “I meet founders with products in market, with revenue, with a big TAM, nearly every day. Most VCs say they are lucky if a founder has one or two customers, but the founders I meet always have customers, every time. Is there something I am missing?”.
His response was one I still appreciate to this day. It was along the lines of “You know Mat, I have no idea. But you should keep digging and figure it out”. It was at this point when I realized I had a secret. But I had no interest in keeping it.
I have an obvious edge for any VC to take advantage of, but no one, not even friends, can see what I see. And ever since I realized I had a secret, all I’ve been trying to do is get people to see it..to believe I have something important for the industry to know. I have not yet figured out how to do this, but I have learned a few lessons about having a painfully invisible earned secret and how to get people to believe you.
Start With Proof
Anyone who wants to give you a chance to show you’re not out of your mind will ask you for proof that your secret has validity. If you don’t have hard objective proof, and no one believes you, this is a hard place to be. Instead of giving up, simply find proof. If you find some, then you know you’re right. If you don’t find what you wish you did, then at least you know the truth and can decide to work on something else. For me, my proof is my podcast RSS feed and a spreadsheet I have that shows the fundraising numbers of founders I've interviewed. So when anyone asks me for evidence of my claims, I have objective data that no one can deny has validity.
Convince One Person
When you have a secret you wish the world knew, oftentimes you try to get the world to see what you see. But you and I both know this isn’t how things work. It’s more like brick by brick. Instead of convincing 1M people of your secret, convince one. If you convince one, you now have data on HOW you convinced them. You can now use those same tools to convince the second person, and the third, etc. For me, this person was Eric Ries. He invested in my company in October of 2020, but it wasn’t until January of 2021 that he truly believed my secret had validity. Now he is able to convince others of the secret too. All you need is one person.
Don’t Ask For Advice On Product or Market
If it’s true you have a secret, it means you have a glimpse into the future. But most people live in the present. When you ask for feedback on your direction, product, or market, people will answer given today’s constraints. But you’re naturally living years in the future, and no one else sees this future but you. So although it’s hard, push off the need for validation. You won’t get it. Of course, get advice on your personal habits and health, but when it comes to what you’re building, don’t seek to fit in.
Believe In Yourself, Even When It’s Hard
If you truly do have a secret, you will be told you are wrong by very smart people; that you should work on something else. Your family will convince you to get a job, your friends will think you’re a bum, and you’ll likely not make any tangible progress to the outside world for months if not years. While you stumble through the idea maze, it is imperative to believe in yourself as often as you can. No one else is going to do it for you, and if you truly do have a secret about the world, the future deserves to benefit from your findings. Don’t give up on the journey. Get a job if needed, but don’t let go of your secret. Play the long game.
I don’t know where this path will end for me. I may end up building a giant company. I may keep it small and very profitable. I may just turn into an investor sooner than expected. Whatever I end up doing, I know that I will take my well earned secret with me and help make it an obvious fact within a decade or two. The road won’t be easy, it will be lonely for a bit, but just keep pushing. Just remember, every innovation starts as a secret :)