20VC Why Serial Entrepreneurship is Overrated, Why You Will Get Fired If You Listen To Your Board & How To Construct Investor Update Emails The Right Way with Joe Fernandez, Founder & CEO @ Joymode

In this episode of 20 Minutes VC, Harry Stebbings interviews serial entrepreneur Joe Fernandez, CEO of Joy Mode, a company that promotes experience over ownership by renting out products for customer experiences. Fernandez, who previously founded the social media analytics platform Klout, discusses the lessons learned from his entrepreneurial journey, emphasizing the importance of making proactive changes and the pitfalls of overfunding at high valuations. Fernandez also shares his approach to fundraising, team building, and maintaining a balance between vision and realism. He values investor updates as a tool for engagement and transparency, and advocates for making bold bets to drive a startup's success. Additionally, Fernandez touches on the benefits of building a startup in LA versus Silicon Valley and the need for diversity in venture capital.

• Harry Stebbings introduces Joe Fernandez, serial entrepreneur, founder, and CEO of Joy Mode.
• Joe Fernandez's background includes founding Klout and raising significant funding for both Klout and Joy Mode.
• Klout was acquired by Lithium Technologies, where Joe sits on the board.
• Thanks to Satya Patel at Homebrew and Micah at Founder Collective for introducing Joe Fernandez.
• Freshbooks, Terminal, and Hi5 are mentioned as sponsors and partners.

We are back on the 20 minutes VC for another special, founders Friday with me, Harry Stebings on Instagram at H Debbings 1996 with two b's where you can suggest guests and questions for future shows. It'd be great to see you there. And joining us in the hot seat today, we have an incredible serial entrepreneur who has a lot to say on that very statement, serial entrepreneur.

Harry Stebbings introduces the episode, himself, and the guest, Joe Fernandez, highlighting Joe's status as a serial entrepreneur and inviting listeners to engage on Instagram.

• Joe Fernandez discusses his early entrepreneurial activities, including buying and selling used video games.
• His experience living in a small New York City apartment with his girlfriend (later wife) led to his interest in the concept of ownership.
• This interest in ownership was a precursor to the founding of Klout and later Joy Mode.

Yeah, Joy Mode is a really exciting new venture. Funny thing is, I actually was working on this before clout. I had moved to New York City and was in a really small apartment. I met my girlfriend there. We moved in together eventually, later got married, but the place was so small that just to function in it, anytime either one of us bought something, we had to get rid of something.

Joe Fernandez shares the personal experiences that led to his interest in the concept of ownership and the eventual founding of Joy Mode.

• Joe admits to being unemployable, sharing an anecdote about getting fired from a dry cleaner within four hours.
• He reflects on his lifelong tendency toward entrepreneurship and his aversion to traditional employment.

I absolutely am. In fact, in high school my parents used to really get on my case about getting a job and a friend and I had this game where we'd go try to get jobs together to see who could get fired first. I managed to get fired from a dry cleaner in 4 hours.

Joe Fernandez humorously illustrates his unemployability and entrepreneurial spirit through a story from his high school days.

• Joe describes Klout as an intense experience with significant growth and investment.
• He emphasizes the importance of being proactive in correcting mistakes.
• The critical mistake made at Klout was raising too much money at too high of a valuation, which added excessive pressure and hindered the company's long-term potential.

The biggest learning I had was mistakes generally don't kill you if you are proactive about correcting them. And I like to think that we were intellectually honest and faced reality and made changes as we need to. There was one mistake that was really basically impossible to fix and it was raising too much money at too high of a valuation.

Joe Fernandez shares the most significant lesson from Klout, highlighting the dangers of overvaluation and the necessity of addressing mistakes proactively.

• In contrast to his experience with Klout, Joe focused on bringing in the right people over chasing high valuations when fundraising for Joy Mode.
• He prioritizes working with investors like Homebrew and Collaborative Fund who align with the company's vision and goals.

With Joy Mode, I've been really focused on getting the right people in and doing that at the expense of valuation. I'd rather have homebrew and the pleasure of working with folks like Sacha and Hunter and the collaborative fund and te

Joe Fernandez explains his adjusted fundraising strategy for Joy Mode, emphasizing the value of the right investors over higher valuations.## Investor Relations and Fundraising Strategy

• Joe Fernandez aimed to simplify the investment process for his investors.
• He prioritized working with desired partners over negotiating for small gains in terms.

"I wanted to make it easy for them to say yes and not spend time going in circles trying to raise and squeak out a couple extra percentage points here or there just to get back to work with the people I wanted on my team."

The quote highlights Joe's strategy of streamlining the fundraising process to quickly resume work with his chosen team members, valuing time and relationships over marginal financial gains.

• At Klout, the initial hiring criteria were based on the willingness to leave one's current job.
• Klout's team evolved through multiple generations, raising the quality of hires as the company's profile grew.
• With Joy Mode, Joe is able to attract top talent from the beginning due to his established network and company's reputation.

"The early days of cloud was a really ragtag crew... But when I look back at cloud, the team is what I'm most proud of... The pleasure of building joy mode and kind of having that second time around network and notoriety around that is from the start, we've been able to really pull the best possible people and kind of have a top 1% team."

Joe reflects on the evolution of his hiring practices from Klout to Joy Mode, emphasizing the improvement in team quality due to his increased network and the company's standing.

• Joe acknowledges the advantages of being perceived as a serial entrepreneur, such as trust from investors and appeal to potential team members.
• He warns against the inflated perception of serial entrepreneurs and the personal risk of believing one's own hype.
• The reality of entrepreneurship remains challenging regardless of past successes.

"I definitely benefit every day from the worshipping of serial entrepreneurship... But the way people perceive me and the interaction with people act like I am, like I've totally done something that's never been done... And startups are just hard? And I don't think it matters how many times you've been through it. It's going to be hard."

Joe discusses the double-edged sword of serial entrepreneurship, where expectations can create undue pressure and a distorted self-image that must be managed carefully.

• Joe advises seeking out people who will honestly challenge your ideas.
• He has implemented incentives for team members to provide contrarian perspectives to prevent costly mistakes.
• Regular feedback from trusted advisors like Hunter from Homebrew helps him maintain perspective.

"It's really about finding people who will tell you when you're wrong and being open to listen to them... So offering almost a bounty of, let's say, $10,000 to somebody who can concretely say why this is a bad idea and why we'd be better off putting our resources somewhere else is like a small price to pay to avoid taking that wrong turn."

The quote explains Joe's method of ego checking by encouraging dissenting opinions through a reward system to avoid groupthink and making uninformed decisions.

• Joe highlights the difficulty in knowing when to persist with a product vision versus when to accept reality and pivot.
• He believes in committing fully to core business aspects he's passionate about, even to the point of risking the company.
• Flexibility is key for less critical elements of the business.

"I think it's more about knowing what hill you're willing to die on... there are things in our business, for example, we have this notion of a membership which is kind of controversial in our structure, that I'm willing to basically kill the company to prove it is right."

Joe emphasizes the importance of distinguishing between fundamental business principles worth defending at all costs and other areas where adaptability is necessary.

• Speed is a critical advantage in consumer startups, and testing is essential to learning quickly.
• Joe's team focuses on identifying key questions that, when answered, provide confidence to move forward.
• Tests are designed to be actionable and informative, with the goal of validating the company's direction.

"We've spent a lot of time as a team being very methodical about what questions we needed to answer that gave us confidence to move forward and clarity around these waypoints."

This quote describes the methodical approach Joe's team takes to identify and answer critical questions through testing, ensuring they are on the right path.

• Joy Mode sets one or two high-level company goals and aligns team and individual goals with these.
• Time is invested in creating OKRs that are achievable yet challenging.
• The process involves detailed planning, resource allocation, and understanding the business metrics.

"We are really focused on setting one or two high level company goals and then making sure every team has a goal that flows into those company goals and every person into their team goals, so that it's easy for everybody in the company to know what they're working on and how it impacts the overall growth of the company."

Joe explains the company's approach to setting OKRs, emphasizing the alignment of individual, team, and company goals to ensure clarity and collective effort towards growth.## Making Big Bets to Win

• Joe Fernandez talks about the importance of making big bets for startups to succeed.
• The initial struggle of starting up and raising money can lead to a conservative mindset.
• Founders often fall into a 'play not to lose' mentality after the first success.
• The transition from initial success to the next stage requires taking risks.
• Fear of risking the company can prevent founders from making necessary big bets.

"One of the challenges as a founder is it's so hard when you're starting, especially if you haven't been through it before and you've never raised money." Joe Fernandez emphasizes the difficulty of starting a business, especially for first-time founders without experience or connections.

"It is so hard to make it up that first hill that they can't accept the fact that what got them there won't get them to the next stage." Joe Fernandez points out the difficult transition founders face in evolving their strategy beyond the initial success.

• Joe Fernandez discusses the 'burn the boat' strategy, which involves taking daring initiatives that could risk the company.
• A sign of being daring enough is when a significant part of the team and investors are worried about the company's survival due to these initiatives.
• Comparisons are drawn to Facebook's pivotal shift to mobile, which was a risky but ultimately successful 'burn the boats' decision.
• This strategy is about not sticking to safe, well-trodden paths and continuously risking to achieve a big vision.

"I think you should always have an initiative that you are working on that a huge portion of the team and investor base is afraid will kill the company." Joe Fernandez suggests that having a project that scares both the team and investors is indicative of taking necessary risks for growth.

• Joe Fernandez shares his experience with board management and investor communication during times of strain.
• He discusses a specific incident at Klout where a release caused significant backlash, leading to a tense situation with the board.
• Despite the board's reservations, the subsequent release was successful and helped close a deal with Microsoft.
• Joe Fernandez reflects on the challenge of balancing board input with his own vision as CEO.

"One of my favorite sayings is if you don't listen to the board, you might get fired. If you do listen to the board, you will get fired." Joe Fernandez conveys the paradox of board management where listening too much or too little can both lead to negative outcomes.

"I really struggled with board management, just having never been around investors." Joe Fernandez shares his personal struggle with managing the board due to his lack of experience with investors.

• Joe Fernandez discusses his journey from being a first-time CEO to learning board management.
• He faced a steep learning curve due to his inexperience with investors and boardrooms.
• The dynamic of trying to please the board while also leading the company was challenging.
• He acknowledges the importance of using board input as data points rather than directives.

"I felt this desire to please them in the sense of, thank you for taking a chance on me. I promise I won't disappoint you." Joe Fernandez describes the pressure he felt to meet the expectations of his board members as a new CEO.

• Joe Fernandez talks about the evolution of his approach to investor update emails.
• Initially, at Klout, he didn't prioritize investor updates due to regular interactions with investors in San Francisco.
• With his new company, Joy Mode, being in LA, investor update emails became crucial for communication.
• The emails serve not only as updates but also as a tool for expressing concerns and mobilizing investor support.
• The detailed investor emails also provided valuable context for new investors during fundraising.

"I use investor update emails to replace the fact that I don't see them, but that was kind of the initial intention, but it's turned into so much more than that." Joe Fernandez explains how investor update emails have become a significant part of his communication strategy, surpassing their original purpose.

"I want them to be terrified that they put money in this company. We are all in the same boat." Joe Fernandez reveals his unconventional approach to investor communication, aiming to align investors with the company's risks and challenges.## Investor Engagement

• Creating competition among investors is a strategy to maintain their engagement.
• Recognizing helpful investors can motivate others who have not yet contributed significantly.
• Demonstrating appreciation for active investors is key to maintaining a strong relationship with them.

I always want to create competition between my investors. I want the folks who have helped me to be recognized, to subtly shame the ones that haven't and show appreciation for the people who are constantly going out of their way and making introductions and helping us work through things.

This quote highlights the importance of fostering a competitive spirit among investors to encourage them to be more proactive and supportive.

• LA offers great access to talent and a consumer spirit that differs from Silicon Valley's playbook.
• Companies like Snapchat and Tinder are examples of the bold approach in LA.
• The speaker is confident that failure will not be due to a lack of talent.

I love building a company in LA. The access to talent is amazing. The consumer spirit down here you have Snapchat or Tinder or just companies really doing bold things that don't follow the playbook of Silicon Valley.

The quote expresses the speaker's preference for LA over Silicon Valley due to the unique consumer spirit and access to talent that supports innovation.

• "Accidental Superpower" by Peter Zeihan is a recommended book.
• The book provides insight into global affairs based on geography and demographics.
• It offers a perspective that transcends the transient nature of politics.

It's really a look at the world from the perspective of demographics and geography and the notion that politics are like fashion, they kind of come and go, but geography and demographics are really what shape the world and it helps understand a lot of what is going on around us.

This quote explains why "Accidental Superpower" is impactful, as it provides a foundational understanding of world affairs based on long-term factors like geography and demographics.

• Diversity in venture capital is a current and important theme.
• There is a need to give opportunities to those who do not fit the traditional Silicon Valley mold.
• The speaker is passionate about changing the exclusivity of the "academy."

You're not from the academy. And I didn't know what that meant. And I was like, what do you like? Oh, well, you didn't go to Stanford. You didn't work at Google. You're just not from the academy.

The quote reflects on a personal experience that highlights the exclusivity and bias in Silicon Valley venture capital, pointing to the need for greater diversity and inclusion.

• One should not spend too long learning the rules before engaging in action.
• It is important to be quick, audacious, and willing to make bets.
• Overthinking can lead to paralysis, so taking action is crucial.

How long do you want to spend learning the rules before you start playing the game?

This quote serves as a reminder to prioritize action over excessive planning, emphasizing the importance of being dynamic and decisive in business.

• The speaker believes that crises are inevitable and maintaining composure is key.
• As CEO, dealing with major challenges is part of the job.
• The speaker draws an analogy to boxing, suggesting that resilience is essential.

I think it's really a belief the shit is always going to hit the fan. So not getting too up or too down, and whatever good day you're having is going to be followed by tough days.

The quote stresses the importance of expecting and managing crises with an even-keeled approach, much like a boxer remains calm under pressure.

• Joy Mode aims to make access better than ownership.
• The speaker envisions a future where owning less is normalized.
• The goal is to focus on experiences over possessions.

Our goal with Joy mode is to make access better than ownership.

This quote encapsulates the company's vision to shift consumer behavior from owning items to accessing services, reflecting a broader trend towards a sharing economy.

• FreshBooks offers easy-to-use cloud accounting software.
• The software is designed to streamline administrative and paperwork tasks.
• FreshBooks provides a range of services beyond accounting.

Freshbooks makes cloud accounting software that's so ridiculously easy to use.

This quote is a promotion for FreshBooks, highlighting the simplicity and utility of their accounting software for small businesses.

• Terminal provides remote operations services for building technical teams.
• HiFive offers a conferencing platform that enhances business collaboration.
• Both services aim to improve business efficiency and communication.

Terminal help you create world class technical teams through remote operations as a service.

The quote promotes Terminal's service, which aids companies in assembling and managing remote technical teams.

Hi five simplifies business collaboration with a conferencing platform that builds connected cultures.

This quote promotes HiFive's conferencing platform as a solution for improving business communication and fostering a connected company culture.