What I learned as a young entrepreneur living in San Francisco
I like to think of San Francisco as my other alma mater — the way that many people my age, who are just completing PhD programs or medical residencies, would view their graduate school campus.
I came to The City in the summer of 2005, having recently graduated from Middlebury College, a tiny liberal arts school in Vermont. At small colleges, Economics is the major of choice for people who “sort of want to do something business-related.” And that was me. I was the guy who knew a lot about theoretical things, and had not a single marketable ability.
San Francisco changed all of that.
It proved to be an intellectually transformative experience in a way that no college or university could mimic. It wasn’t always clear if I was living in the “real world” or some sort of alternative reality. But it worked. And I am convinced that it provided me with the perfect blend of learning, hard work, partying, and perspective-shaping.
Here is a small selection of what I learned during my time:
San Francisco taught me to stop revering the institutions that I was “supposed to” revere
San Francisco’s perceived immaturity can earn it a bad reputation. And, some of it is deserved.
The city celebrates two Halloweens each year — one in October and one in May, which is called “Bay to Breakers." The latter event is a booze-filled race where local businesses are used as urinals. It’s debauchery. It’s disgusting and fun and symbolic of why so many outsiders take issue with San Francisco.
Countless publications have confronted the culture of San Francisco in recent months. Nathan Heller’s story in The New Yorker highlighted the bizarre contradictions inherent in the lifestyle. The perception of immaturity and the out-of-touch vibe are not exactly winning San Francisco many fans. These outsiders aren’t necessarily wrong, those things exist. More than ever.
But there is something more to it. San Francisco’s quirks, immaturities, and Peter-panisms rotate around a fantastical world in which all of the previously-existing rules can be laughed at. Mocked. Taken to the wood shed.
And so many sacred institutions — especially Education — are often viewed in San Francisco as just another “system” that has duped us into believing that the world is going to be a certain way. Life in San Francisco is about rejecting such dogma. It’s about rolling your eyes when someone brags about their Harvard MBA or their time spent at Goldman Sachs.
“They” always told me that I would have to “pay my dues” before I could do meaningful work or make meaningful money. Fuck that. In San Francisco, I could not only do meaningful work in my early-twenties, I could change the world at that age.
“They” always told me that “perception” and “face time” were an inescapable part of the professional realm. During my brief stint as an investment banker, my boss told me to stay at the office until 10pm every single day, even when I was done with work.
In San Francisco, we broke so many rules of social convention, that we naturally applied the same irreverence to just about every professional rule. And it worked. And it’s still working.
The magic of San Francisco is, in part, the absurdity itself. The way a broke kid in his twenties can look at a Fortune 500 corporation and say “Screw that company, I can build a way better one.” And mean it. And do it. Sure, he might fail. He will probably fail. But he will see others succeeding and lend a hand when he burns through his own money. The ecosystem absorbs itself.
It’s a stupid simple lesson, and one that can theoretically be learned in ten seconds. And, yet, for most people, it takes years of living in San Francisco to actually believe that there are routes to wealth beyond white-show law firms or hedge funds.
Peer pressure is a bad thing — except when that pressure encourages you to take on impossibly high levels of career risk.
San Francisco taught me to work as a team or die.
Having spent a lot of time in New York (as I prepare to move there permanently), I see a common pattern in the sorts of industries and careers that people pursue. There are a lot of loners.
Freelance writing is a dream for many — and those who work as editors in big companies want nothing to do with the “business” side of the organization. Financiers can’t wait to leave their banks as soon as possible to start their own hedge funds. That’s where the money is. Top lawyers are bigger than the firms at which they work. So are sales executives. And New York’s most famous consumer startup — Tumblr — is uncharacteristic in that it has a single founder. It’s difficult to even think of another recent startup so singularly one person’s vision and execution.
People want so badly to stand out in New York. Or at least the money that comes with individual distinction.
But in San Francisco, that does not work. One can hardly imagine a startup in which engineers, designers, founders, marketers, the CEO, and the token MBA guy can’t all work together. Well, you can imagine it — you can imagine it falling apart. Your fates are tied together. And that is a powerful incentive.
I’ve seen conversations in San Francisco that basically come down to this: “I fucking hate you, but, neither of us is getting rich if we don’t get this damn product built.” I’ll take teamwork any way I can get it.
And that is how things work in San Francisco, and more gets done as a result of it.
Bleacher Report often felt like "Revenge of the Nerds" reimagined. Coders who didn’t give a damn about basketball were trying to solve problems for the guys wearing the Kobe Bryant jersey at the office. Salesmen in Armani suits and gelled hair begged the quiet, slightly-hipster women in the design department to prioritize their mockups.
Everyone just had to work together. That’s why so few Sports startups work, and why ours did. It’s not that New Yorkers are incapable of forming teams. Rather, so much of the existing corporate culture stresses the individual. That’s great for some businesses. But it’s not great for launching companies. There’s a reason why co-founders are basically mandatory for your first startup (and explicitly so for Y-Combinator).
Seeing highly-sophisticated teamwork in place and working effectively — it’s rare, and it’s something you never forget once you experience it. It exists in many places, but nowhere is it embodied more so than in San Francisco.
San Francisco taught me things that — were they to appear in a book — they would constitute the most boring and important book ever written about entrepreneurship.
Do you know how to calculate the downside impact on an acquisition when your investors hold a ‘participating preferred’ clause with a three-times multiple and you sell the company for only 2x your previous post-money valuation? I didn’t either. Until I actually started a company, raised money, had to navigate a ‘participating preferred clause’, and then ultimately sold the business for a level just above that threshold.
But, here’s the thing… This is one example out of hundreds of concepts that you just have to experience firsthand to learn and understand. No book will do. No MBA course will do. Frankly, even if I earned a PhD in Venture Studies, I would forget all this jargon.
Until spending five years in San Francisco, I couldn’t possibly understand the idea of “over-valuing” a company… I mean, the idea sounded inherently counter-intuitive. Now, I can give you countless horror stories of founders who lived to regret the high valuation that ruined their business. Because most of this stuff is meaningless until it bites you in the ass. And once it does, it is a lesson learned for life.
And insofar as building a company is the only real way to learn or understand entrepreneurship, San Francisco is the ultimate classroom.
The second best way to learn, of course, is through your friends’ stories. And most of your friends — or even the guy at Iron Cactus sitting at the table next to you — can give you horror stories (or victory stories) that frame these complex scenarios far better than a professor ever could.
That’s what it’s like living in a city where so many people are starting companies. You just start to learn things through osmosis. It feels like you are just chatting over beers at Bloodhound or gossiping about some failed startup, but really you are teaching one another some pretty complex lessons.
And you are hiring key employees who you meet on the bus (yes, that is where we found our lead UX designer) or with people you meet at the airport (yes, that is where I found our West Coast Sales Director). That’s the ecosystem at work.
San Francisco is the best place to learn about building businesses. Plain and simple. If you spend four years here, and really embrace it, you will feel like you have earned a PhD in Venture Studies 10 times over.
And, now it is time to leave…
I’ve written before about how I am leaving San Francisco.
There are a lot of reasons. Some have to do with my frustrations about the city’s infrastructure. Or the state’s taxation policy. Or a handful of other annoyances. But I also feel like San Francisco was a chapter of my life — a successful one — and, much like high school or college, it is time to move on. And when people leave San Francisco, that is actually a good thing. It’s an expensive city. Someone else can live there and enjoy that experience for the first time.
Like an Ivy League campus, San Francisco is old, barely creating more housing, and there are ten people who want to live there for every one who manages to get in. Once you have graduated, please get the hell out so that somebody else can experience it the way you did. If you linger too long, rents will go up, and the casualties will be the young and elderly.
To clarify — San Francisco will never, ever build enough housing to keep up with the huge demand to live there. Prices are never coming down to “normal” levels. And the citizens will never accept a hundred new skyscrapers in just about any charming neighborhood (which is most of them).
And so maybe it’s a sort of civic duty to leave San Francisco after several years. After all, you left your college campus after four great years… even though it was a comfortable and amazing place to hang out.
I’m starting a new company now, and as a second-time entrepreneur, I am much more comfortable doing it on my own in a new environment. But I am fully aware that there is a zero percent chance that I could have done it like this the first time. Hopefully, now that I’m leaving, some 22-year old who was just like me can arrive in San Francisco. (Or, better yet, somebody who doesn’t look like me, since the city could benefit from more diversity).
I’ve learned what I need to learn from San Francisco. Move there. Love it. Learn from it. Make your fortune there.
Then get the hell out so that somebody else can afford to do the same.
[Image Credit: photopedia]