August 31, 2016 – James Currier focuses on building businesses with network effects, but he builds those businesses by choosing the right people first. Currier started as a schoolboy entrepreneur, selling worms to fishermen at six and later selling boxer shorts in college. After getting started in venture capital, Currier founded a series of companies and incubators that took advantage of network effects to grow and create defensible value.
He co-founded the social network Tickle and grew it through the dot-com ups and downs until it grew its membership to a quarter of the existing Internet population before it was sold to Monster.com in 2004. “Why would you start a business without a network effect?” Currier said. “Because the value that’s created when you finally hit one is so vast, that that’s really what we’re all looking for.”
Later, in the incubator OogaLabs and the accelerator and venture fund NFX Guild, Currier has looked to the power of network effects to grow successful businesses. But he also recognizes the importance of mentorship and of choosing the right team as keys to success in making those ventures successful. Currier looks for the humility to listen as well as the grit and determination to never give up as aspects of successful teams.
“Choose your people first,” Currier said. “These are tough businesses. These are tough things to do. They are hard, emotionally and spiritually, and they’re hard just physically. You’ve gotta get through it. So you gotta go through it with the people who you admire and respect and trust. And if you don’t have that, then start again. Go get those people and then move forward with them.”
The full transcript is below.
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James on the value of network effects:
If you start to understand what these network effects look like and you understand how defensible getting one of these things will make your business, it’s something that when I look at it, I think, “Well, why would you start a business without a network effect?” Because the value that’s created when you finally hit one is so vast, that that’s really what we’re all looking for.
James on how network effects impact the product:
The other way to use network effect thinking is to think about every feature you build into your product. How can you get that feature to benefit the other users or the customers of your product? And that just constant drip, drip, drip of thinking about that ends up making your product more and more valuable with the more users you have, and that makes the defensibility of your business that much higher, the value of your business that much higher.
James on two lessons from his mentors:
“Treat everyone with respect” was one of the things, and “never give up” was the other. That giving up is not permitted, because you gotta go till the end, all the way to the end of life. Just never give up, and as you go, treat everyone with respect, and if you move through life that way, you’re gonna be the best off. And I think that applies to life as well as business, but particularly in business, because you’re dealing with money, you’re dealing with power, you’re dealing with hierarchies, you’re dealing with some of the more gun-powder-type chemicals that are around in human relationships.
James’s advice for entrepreneurs:
Choose your people first. These are tough businesses. These are tough things to do. They are hard, emotionally and spiritually, and they’re hard just physically. You’ve gotta get through it. So you gotta go through it with the people who you admire and respect and trust. And if you don’t have that, then start again. Go get those people and then move forward with them.
Navin: Welcome back to Chat with Champions. I have the pleasure of hosting James Currier, who is managing partner of NFX Guild, a mentorship-driven startup incubator and accelerator for businesses with network effects. Recently, they were named by Inc. Magazine as a top 13 seed-stage investor. James is an entrepreneur and not only a venture investor. He was an early proponent of social networks and network effect businesses and founded Tickle in 1999, which was acquired by Monster in 2004. James, welcome to the Podcast.
James: Thanks so much, Navin.
Navin: For our audience, let’s start with you sharing your entrepreneurial journey.
James: Well it started when I was about six years old selling worms to fishermen in the woods of New Hampshire near my house. And you know, tons of little money making schemes later, like starting school stores and school grills. We did the Loft Agency at Princeton and started a boxer short company called Hang Loose Boxers while I was in college. Afterwards, I ended up working in venture capital, first in Los Angeles in the entertainment industry and then with Battery Ventures as an associate in Boston. And from that, just learned a lot about how you raise money and how you start these technology companies up.
I started my first venture-backed company in 1999. It was called Emode at the time, and it was one of these early, viral A/B testing type of digital media properties. We grew it pretty quickly. Almost went out of business twice and eventually sold it to Monster, having registered probably about 150 million people, when there were probably 600 million people on the Internet at the time. We had eventually changed the name to Tickle, which is how it was known.
And we went to start a thing called OogaLabs, which was a greenhouse for ideas that we had. We had about 45 people there building four different companies at the same time. This is a model that I don’t think works that well, necessarily, but we did eventually come out with three companies that did well
In 2015, we launched NFX Guild, and the Guild is a platform for us to help groups of entrepreneurs build businesses that we’re very experienced in at this point, which is these network-effect businesses, and that’s everything from marketplaces and networks to IOT companies to AR and VR and a lot of devices. And clearly, with my background in starting this healthcare company, a lot of healthcare plays as well.
Navin: I have had the pleasure of seeing you in action at Poshmark as an adviser for one of our companies, and I consider you as a leading expert in the area of network effect businesses. So let’s start with any learnings you have had. What does it take for a business to have network effects? Can it be created? Or it happens automatically? Does one need to be patient? How does one go about this journey?
James: I think the first part of the journey is to study network effects. And you know, there are five general types.
First is the direct network effect, like a Facebook or a WhatsApp or the telephone network, and that’s the one that is easiest to see. The next one would be a two-sided network effect, which would be something like an eBay or a Craigslist, which is easy to see. There’s a different type of two-sided network, like a platform play, which is like a Microsoft OS or an iOS. Then you’ve got data network effects. You’ve got tech performance network effects like you’ll see with Skype or with BitTorrent. And then you’ve got what we call interpersonal network effects, which are a little more subtle.
But if you start to understand what these network effects look like and you understand how defensible getting one of these things will make your business, it’s something that when I look at it, I think, “Well, why would you start a business without a network effect?” Because the value that’s created when you finally hit one is so vast, that that’s really what we’re all looking for.
The second thing is to think, “Is this business I’m thinking of capable of having, at its core, one of these network effects?” And if it is, then you focus on what is the playbook to build up that network effect and then seeing if you can’t run that playbook in how you design the product, in how you put language on the product, how you position the product in the mind of your customer. And if you can, that’s where you get the big wins. That’s when you have the LinkedIn getting sold for $28 billion, the largest software acquisition ever. That’s when you have a $19 billion WhatsApp acquisition.
These companies get to a point where they’re so defensible, there’s no choice, there’s no option but to let them be public companies and run on their own, like a Monster, which used to be $7 billion of value with the two-sided network effect. Or they get acquired for vast sums. So getting a core network effect is key.
And then the last thing I’ll say is the other way to use network effect thinking is to think about every feature you build into your product. How can you get that feature to benefit the other users or the customers of your product? And that just constant drip, drip, drip of thinking about that ends up making your product more and more valuable with the more users you have, and that makes the defensibility of your business that much higher, the value of your business that much higher.
Navin: Got it. So let’s shift gears and talk about people, right? Like, I have a strong belief that people make products, products don’t make people. So over the last 17 to 18 years as an entrepreneur, investor, having started companies, being CEO, and now running an accelerator, what’s your take on people?
James: The first thing I look for is a humility, because to your point about products making people or people making products, I actually would say that, in my experience with myself and with other companies I’ve worked with, the person makes the product, but then somehow, the product influences the person. It gives them an opportunity to learn more about themselves and how they think. And as they evolve, the product evolves. And that’s one of the things we’re really focused on at NFX Guild is to open people up to that listening to the product, that listening to the customer, that feedback loop between the person and their ability to learn while their product grows.
That, I think, is what ends up making a business like a Facebook. I don’t yet know Mark Zuckerberg well, but my interpretation of what’s happened there is that he was very lucky to start his business with real names in his social network. He was about the 150th social network on the Internet with the same five features. Many companies, including my own, had tens of millions of users before he ever launched, but he was lucky enough to launch with real names. But he listened to that product, and he learned from that product, and his greatness has been in his evolving with the product. And so I look for that humility, and I think the great ones have that.
Then, of course, you have to look for grit, which is the determination never to give up. You look again with Zuckerberg, when they launched their platform Beacon, and they listened to it for 14 days and then retracted it. It was a brilliant move, because it was the wrong product. And then they launched Feed about eight months later, and they listened to it, and people were also complaining about it. But they stuck with it, because they listened just in the right way.
So it’s a grit and a determination to keep moving forward, but also the humility to listen.
Navin: So let’s shift gears and talk about culture. Culture is very important for companies. So how do you build a winning culture and scale it as the company grows in terms of size, geography, stage, and time? So any learnings you have had?
James: Yeah, I’ve seen that getting people to understand each other and know each other and feel comfortable with each other lets them communicate in a way so that if the culture starts veering off what it needs to be, you can course correct.
The other thing I’ve seen that really helps is if the CEO comes at it and is vulnerable, admits their mistakes, backtracks, redoes something, and then it’s better, there’s a trust that’s built up so that you can engage everyone in the company in bringing the company to where it needs to be, because they trust that that leader will make the changes that they require to get you all there.
And so for me, the culture that tends to scale the best and cross geographies and cross time zones and cross different stages of size is one when where the people have a trust in each other and can continue to communicate through the process, which is always very messy.
Gavin: My belief is a lot of time, one learns a lot from struggles, because when things go well, like you think the market is right, you did everything right. You mentioned in your first company that was venture financed, you had two near-death experiences. So can you share the learnings you’ve got from those difficult experiences that have shaped your journey, and what would you like to share with other entrepreneurs?
James: There was a moment during the first near-death experience where we had a term sheet from August Capital, and Andrew Anker was a partner there at the time. And the market in 2000 was crashing, and we were supposed to actually move the money on a Wednesday. And on Monday, the market crashed. And you know, Monday came and went, no money. And I called Andrew, and he was in California, I was in Boston, we were getting ready to move the company out. And this was, you know, a $9 million financing. This was gonna make the company; put it in a position where we could actually build the business.
And I said to him, I said, “You know, we both know what’s happening this week. This is the end. And if you wanna back out, you can.” Because I didn’t want him to buy in, and we were gonna miss payroll the next Monday, we were gonna miss payroll five days later.
Navin: That was a bold move to say that.
James: It was. It was a bold move to say, “It’s okay if you wanna back out.” And he said, “I thought you were worth that last week. I think you’re worth that this week. We’ll do it.” And so on Friday, the money moved. And then we made payroll on Monday.
So that experience of letting go at that moment and letting it be what it was gonna be was a great learning experience for me. It really gave me strength, and it really brought Andrew and me together, because two years later, when we were almost out of business, he stuck by my side, and I stuck by his side – as an investor and me as the CEO. And we went through yet another hard time together. And so that’s something that I really learned, is you trust the people around you and you understand that even if it’s going great now, you respect everyone. You don’t spit on anybody. You don’t disrespect someone, and you always know that it’s gonna go up and down, and up and down, and that’s the nature of life. So be a good person, get your team together, and you’ll get through the hard times. That was the main thing that I learned from it.
In fact, the Harvard Business School made a case out of the Tickle story, and they have a thing called “Exhibit 14” in the case, and it’s a page and a half of all the crazy stuff that happened to us during those years, and whether it was auto accidents at 120 miles an hour, or crazy VPs of engineering taking the employees to a shooting range and drinking alcohol, and all sorts of crazy stuff, and we got through it all. We got through it all, and that was only because Rick Marini, my co-founder, and Stan Chudnovsky, my co-founder and I stuck together with Andrew.
Navin: That’s great. So let’s talk about mentorship. What are your views in mentorship and mentors you have had along the way, and what do you see and advise other entrepreneurs to do today?
James: Yeah, I think mentorship is absolutely critical. I think that’s one of the things that makes for Silicon Valley having a network effect is that we’re all here together having lunch, breakfast, dinner, and working together, and are able to mentor each other through it.
The two mentors that I had, I got very early in my career, I was 22 when I first met both of them. One is a guy named Barry Hobbs, and Barry was my boss at the new ventures group at GTE in Los Angeles. And he showed me how to have fun at work. He showed me what confidence looked like in real life, not just in the academic sense, because I just got out of college. And interestingly enough, he was a Mormon. And I’d never met a Mormon before, and I’m not a Mormon, but he was just fantastic. He was just spiritual, and his family was spiritual. So in him, I could see confidence in the future part of my career. I could see fun in work, and I could see a deep, rich life lived out by this person who was 15 years ahead of me. And that guidance has really has really impacted me.
The other mentor I got was a guy named – Dr. George Rebane. He was a PhD in all sorts of crazy math and, actually, in systems. And he was the one who showed me, really, technology and the future and broadened my perspective. So it wasn’t just about business. It wasn’t just about technology. It was about those things and its impact on society and its impact on the human mind. And the readings that he and I would do and share and discuss during those early years in my career helped set me up to have a much broader view than even going to a liberal arts college like Princeton did, I think.
Navin: So what was the best piece of advice you think you received from your mentors?
James: Certainly, “treat everyone with respect” was one of the things, and “never give up” was the other. That giving up is not permitted, because you gotta go till the end, all the way to the end of life. Just never give up, and as you go, treat everyone with respect, and if you move through life that way, you’re gonna be the best off. And I think that applies to life as well as business, but particularly in business, because you’re dealing with money, you’re dealing with power, you’re dealing with hierarchies, you’re dealing with some of the more gun-powder-type chemicals that are around in human relationships.
Navin: That’s great advice and very well said. So let’s turn back to entrepreneurship and the current environment. So given that both of us play in the venture capital business and you’re seeing the ups and downs that have happened over the last 6 to 12 months, what are your thoughts on the current climate for entrepreneurs?
James: I think a couple of things. One, I think we have to recognize that in the last ten years, three things have happened. One, there’s a lot more venture capital out there. Number two, there’s a lot more entrepreneurs out there. So the competition for the investment has gone up. The bar of what’s required in order to get investment and to hire good talent has gone way up in the last ten years. And number three, both of those things are driven by transparency, by the blogosphere. Ten years ago, we really didn’t have a TechCrunch. We didn’t have YouTube. We couldn’t see through these sort of opaque walls of entrepreneurship and how you do financings and how you run other TV shows about Silicon Valley. So the transparency around our lifestyle and what we do here is so great that it’s caused an explosion of both investment capital and entrepreneurs. And that intense sort of community, that density and size of our community has grown dramatically.
It’s almost when you heat up gas in a box, the molecules smash into each other at much higher rates, and I think you’re seeing that between companies raising incredible quantities of money and companies growing incredibly quickly, and when things blow up, they blow up really quickly. So just to understand that everything’s on steroids at this point as far as the game goes.
And then the second thing I would say is that those three things have changed, but I also think that people need to be aware that they are riding on technology waves. And we got this big wave of the web, the open technology of TCP/IP and all the interlinked connections that we have there, and that has been rolling out now for about 22 years. And the biggest opportunities for those businesses being built with that new technology, some of them came at the very beginning, whether it was eBay or Amazon. Some of them came three or four years later, like a Google. Some of them came 10 years later, like a Facebook. But the opportunity now to build giant businesses with just that technology, with that technology wind at your back, might be diminishing over what it was 10 years ago, 15 years ago.
And then we got another platform that blew through, which is the mobile platform and that’s eight years old now. And we really haven’t seen a massive social media app since Snapchat four years ago. So understand that you are building your businesses in the context of some of these fundamental technology waves, and sort of guess what’s gonna come next rather than seeing what has been.
Navin: Got it. So to close, are there any guiding principles you think entrepreneurs should follow as they start new companies?
James: There’s one, and that’s choose by people. Choose your people first. These are tough businesses. These are tough things to do. They are hard, emotionally and spiritually, and they’re hard just physically. You’ve gotta get through it. So you gotta go through it with the people who you admire and respect and trust. And if you don’t have that, then start again. Go get those people and then move forward with them.
Navin: Oh, this is great. I learned a lot from this conversation. So I really want to thank you, James, for taking the time today, and I’m sure our audience is gonna learn a lot from some of the experiences you have had in your journey.
James: Thank you.