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Patrick McGinnis: “The 10% Entrepreneur” | Talks at Google

Patrick McGinnis: “The 10% Entrepreneur” | Talks at Google

Thank you very much. It’s great to be here. I was just commenting that
I live about three blocks from Google in New York. And I have a friend named
Brett Perlmutter, who is leading up all
your Cuba initiatives, so he invites me to lunch. And I must say the Mongolian
BBQ at your headquarters in New York is pretty amazing. So it’s good to be here today. I’m here to talk about my new
book, “The 10% Entrepreneur– How to Live Your Startup Dream
Without Quitting Your Day Job,” or in the UK, “How to Live Your
Dream Without Quitting Your Day Job” And the book came
out in the United States a couple weeks ago. It came out in the UK last week. And I’m over here doing
a bunch of events, and it’s just such a pleasure
to be here with you at Google. What I’m going to talk about
today is 10% entrepreneurship. I’m going to talk about why I
believe 10% entrepreneurship is going to be a fundamental way
that changes the way we work. Then I’m going to
talk about what it means to be a 10% entrepreneur. And in the end,
I’m actually going to give you some tips to
take with you and tools to get you started
on building your 10%. And a lot of you
here in the room, given the fact you
work at Google, already understand this concept. This is part of
the DNA of Google. Obviously, you have
the 70/20/10 rule that you follow that you’re
always working on new projects. And what I’m trying to do
is bring that methodology and that mindset to everybody
and also at the same time get people, in
places like Google, to start their own companies. And so without any further ado,
you’ve heard my background. But what people usually
want to talk about is the fact that I’m the
guy who invented the term, fear of missing out, or FOMO. That’s my claim to fame. I never registered it. I never made a dollar off of it. But if you really
love the term, just think of me when you use it. So the story was, I was a
student at Harvard Business School. This was pre-history, so
this was before Facebook. It was before people
really text messaged, at least in the United States. And my classmates and I
had this social network called Friendster, which if
anybody has ever remembers those days, there was
this Friendster, which was the first major social network. And so we would all post
stuff on Friendster on Monday morning, and you’d
wonder what you’d missed out on Saturday night. And we would also try to
attend every event we could. And so I noticed
this, and my friends and I started talking about
this concept we called FOMO, or Fear Of Missing Out, and
another concept called FOBO, or Fear Of a Better Option. And if you combine the
two, you have FODA, or Fear Of Doing Anything. And so I wrote an article
for the school newspaper back in 2004 called
“McGinnis’ Two FOs– Social Theory at HBS,” And then 10 years
later, I got a call from a reporter who was
looking up the history of FOMO and he said, I’ve
traced it back to you. And lucky that
happened, because that got me meeting with my
wonderful publisher, Penguin, and here we are today. And now, I want to give
you guys the leading edge. I’m trying to create a movement
around FOFU, or Fear Of Up. So think about it. So what is a 10% entrepreneur? A 10% entrepreneur
is somebody who spends 10% of their
time, money, energy, investing, advising,
getting involved in starting new ventures. And just from the
start, I’m going to hit the elephant in the
room, because the question I’ve gotten from everybody I’ve
ever talked to about this is, I watch “Shark Tank,” or
I watch “Dragon’s Den,” or my friend is a
full-time entrepreneur. And what I’ve heard is that
you cannot be an entrepreneur unless you’re willing to
throw everything into it, jump in full time, be willing
to move to the very far reaches of Brooklyn or really
far reaches of London, live in a cardboard box
on the side of the road, eat out of a trash can, and
basically do this 124 hours a day. And what I stress
in the book is, that’s certainly one
approach to take. However, just because
you’re an entrepreneur doesn’t mean that
you can’t find ways to bring entrepreneurship
in your life in different ways that might be. And we’ll see today
what those ways are. But you can bring
entrepreneurship, customize it to your life, and engage with
it in the way that you want and potentially also
create pathways to, yes, becoming a full-time
entrepreneur. But it’s a way of looking
at entrepreneurship in a more flexible way
that really matches the flexibility we see in
technology in our society over the last 10 years. So Googlers here
in the room won’t have to worry about
these kinds of things, because I know that this is
an amazing place to work. But most people really hate
what they do for a living. And Thoreau, he captured
that a long time ago. But it’s still
very much prevalent today in the workplace that,
at least in the United States– and although the United States
is a different country, I mean, we might elect Donald Trump,
for example, we are cousins. And so these are similar trends. One is the fact
that most people are disengaged in the workplace. Another is that
traditional careers that are highly prestigious,
like law and medicine, are now careers where people
actually basically say, don’t do what I did. And then within the millennial
ranks, which many of you are part of the
millennial ranks, there is very little expectation
of loyalty from employers. But at the same time, there
is very little expectation to give loyalty to employers. So you have this
phenomenon in which you have a lot of movement
within the workforce, people leaving their jobs
every couple of years, and it creates a
lot of instability. Meanwhile, in the rest of the
economy, the economy we’re in today right here,
entrepreneurship, we see that there’s
two major trends that are changing the way that
people build businesses. The first is the fact that
technology has disrupted how people build businesses. And as a result, the price
of building businesses has gone way down over
the last 15 years. And we have things like
Google to thank for it, the storage that
you provide, all of the back end tools for
business, all the search tools. We have all of the
guys like the Apples who have created tools
like the iPhone, which is less than 10 years
old, by the way, that allow you to capture and
basically carry your office around in your pocket. We have the fact that
a gigabyte of storage has fallen in price from $8,000
15 years ago to basically free now. And we have the
fact that you have services like Skype
that basically make communication free. And so all of these
things make it so much easier to start businesses
and to publicize them and to get customers
and to get going. And as a result, there
has been a second sort of secular trend,
which is the fact that the financing of startups
has become far more democratic. So the cost of
starting a business means that it’s much
lower than before. And you can also raise
far less capital. And the entry point for
people to invest is far lower. So when I started my career
as a venture capitalist, I vested in a company
called Mercado Libre, which is the eBay of Latin America. It’s now a $5 billion company. And when we did the series
A, it was a $5 million round, and basically that went
to building the website. Today, you could do that
for less than 200 grand, with 10 of your friends
putting in 10 apiece. And so there is a boom
in entrepreneurship, and you all know that. At the same time,
entrepreneurship has been, I would say, misrepresented
by the popular press and by culture as a whole. People think of
entrepreneurship as super fun and glamorous and
sexy and romantic. And as anybody who’s ever tried
to build a business knows, it’s got a lot of
great things about it, but it is not
particularly romantic. Hard work, lots
of hours, failure, rejection– that’s just the
way you build a business. And so I had this kind of
transformative experience where I was in
Medellin, Colombia, because I’m on the board
of a VC fund there. And this young man
comes up to me. He’s all charged up. He had just done a
hackathon, so he was probably high on caffeine. And he said, I have
an amazing idea. I’m going to quit my job, or
I’m going to quit university. I’m going to move to
Medellin from Bogota, and I’m going to launch this
crazy, amazing business. So I said, OK, lay it on me. What do you want to do? And he said, I want to
start Tinder for dogs. And my response was sort
of like, the good thing is actually dogs don’t
need Tinder to mate. They have natural
things happening, so probably not your best idea. But I talked him out of it. And I just thought
to myself, what’s going on out there that
there’s this popular perception about entrepreneurship
that makes it out to be a game and sort of fun,
when it’s many, many things, but it’s not a game. And so I kind of
stepped back and I said, OK, traditional
careers are difficult. At the same time,
entrepreneurship is amazing and it’s a boom. But a lot of people
don’t realize what full-time entrepreneurship
really entails. How do we deal with
that phenomenon? And so I wanted to give people
a little reality of the fact that 75% of startups
don’t necessarily meet their expectations. That’s at a study done by
Harvard Business School, and the fact that 30% to
40% return no capital. And so failure is part of
the game, but it still sucks. And Marc Andreessen will
tell you that himself. And so I wanted to
tell people it’s OK to not be a
full-time entrepreneur. In fact, there’s
five reasons why you may not want to be a
full-time entrepreneur, at least right now. The first is lifestyle, and I’ve
covered that in great detail. The second is the fact that
it can ruin your finances. A startup CEO in London or
New York makes about $50,000. So if you’re used to living in
your cool flat in Shoreditch and you launch your
startup, you may have to move– I don’t know,
to Manchester or something, very far away to be able
to afford your rent. The next is your
[INAUDIBLE] status. So you go to a place like
from Goldman Sachs or Google or a prestigious law
firm or a big corporation to a place where you’re handing
out a business card that you got on that’s got a logo
that you bought on 99 Design, and I’ve been there. People just look at you like,
who the heck is this person? Especially your family–
your parents are like, I just sent you to college. And now you’re making,
like, 30,000 pounds when you could be
making 15 times that at your corporate job. So it’s hard. The affirmation thing is hard. The next is, you may not
have the right idea yet. And the reality
is, “Inc. Magazine” found that 71% of
successful entrepreneurs found their idea
at a previous job. And so you just may not
have found that idea yet. And finally, failure does suck. I had a person that I
knew who had come out of a very good
business school, three different failed startups. So he was 35 years
old, and instead of sitting on a yacht looking
out over the Mediterranean, he ate breakfast across from his
mom at the table back in Ohio eating his Cheerios. And it was definitely
not what he expected. And so that takes us to the
point the point of the book, which is that entrepreneurship
is not necessarily an all or nothing proposition. And in fact, engaging with
entrepreneurship on the side can give you five key benefits. And the first one,
which is clear to me, is that it gives you
downside protection. So what I didn’t
tell you in my bio was that in 2008, I worked
at the private equity group of AIG. Anybody remember AIG from 2008? It was the company that, like,
we would come out of our office building and there’d be people
with little boards that said, AIG Sucks, Go to Hell,
You’re the Devil. And that was my commute
to work every day. And I had nothing to
do with any of that. My division was private
equity and venture capital. We were actually building
businesses in faraway places. But it didn’t matter. When the company went
down, we were all affected. My stock that I owned
in the company fell 97%. My stock, in terms of my
CV, fell equivalently, probably 98%. And it was a
difficult experience. And that happens
over and over again. Happened with VW this year. You could be working at a
great company that’s a leader, and you’re doing your job just
fine, but something happens. And if you don’t
have a backup plan, unfortunately you are exposed. Second is upside. And this is something
that I don’t need to explain to
all of you, but being part of something
entrepreneurial offers you tremendous upside. And in my own
experiences, I’ve been able to– and I’ll tell you
about them later– really generate meaningful upside
financially for myself. The third is that it’s
fun and interesting. Being part of something new and
building something with people that you like just
makes life a lot better. And meet anybody who’s
doing something like that, they’re not going to tell
you about their day job. They’re going to tell you about
all the great things they’re doing on the side. The next one is
that you learn what it means to be an entrepreneur,
so that if you ever want to do it full time,
your eyes are open. You understand
where you’re going and you’ve got a sense of what
it takes to be an entrepreneur. And finally, you
can bring everything that you learned back
into your day job. And I read this article
recently about the CEO of AT&T, the big
American company, and he’s making the employees
take online courses to learn how to think like an
entrepreneur, which is, I think, actually quite good. But it’s very difficult
to learn entrepreneurship without actually doing it. And so you’re far better
off spending your time with entrepreneurs,
seeing how they build their businesses
than reading about it or simply doing a course online. And so as I sat down
to write this book, this book comes out
of my own experience. But I didn’t want it to just
be about me and my friends. And so I actually set
out on this journey of finding people who were
doing this all over the world. I interviewed dozens of
people on four continents and 10 countries. I have Googlers in
the book, actually. So I’ll tell you
about one later. And then I went off
and I looked at people in all kinds of
different industries, from tech and finance and
consulting to fashion. Also, I have a car
dealer actually who started a brewery that’s
killing it in New York City. And then I looked at
people at different stages of life, everybody
from people who were in college or
even pre-college through to people with
small children or people that are later in their careers. So the idea was to paint a
picture of all kinds of people who are doing this, so
that no matter who you are, you can find somebody
who you can relate to and you can say, OK, I get it. I could do this too. And then I also found some
great research, for example, a study out of the University
of Wisconsin in the States, that shows that actually doing
entrepreneurship on the side makes your chances of failing
33% lower than if you just jump in full time. And that actually is just
basic economic theory, because if you look
at real option theory, real option theory
says you create options and then you only actually
strike those options when they’re in the money. So as an entrepreneur, you
can create an opportunity and then decide you may want
to go into it full time once that opportunity
is actually proven and your business
model is validated and you can do it
in a profitable way. So it actually creates
this downside protection, as it were, and sets you
up for greater success. With all the research and
everything, I then sat back and I said, what did I see here? And I came out with five
types of 10% entrepreneurs. And a couple of these
you will definitely know, and a few may be new to you. But the first one is the angel. And the angel
investor is obviously somebody who is
using their capital to buy a share in an
entrepreneurial venture. And the example I’m
going to give here today is one from the Google family. And as we learned earlier in
the pre-discussion Michelle Fan, who is the YouTube
celebrity there, has over 6 million
subscribers on YouTube, over a billion video views. And she is a huge star in
the YouTube star universe. And a friend of mine
actually started a company with her about three
years ago called Ipsy. What Ipsy does is it
sends a box every month with some cosmetics. And then we use YouTube. We have a whole roster
of YouTube celebrities that make videos showing
how to use the makeup and really, we use that as a
channel to acquire customers. It’s an awesome business
that we could not have done without
the YouTube family. So it’s something I
feel very thankful for. And I knew Marcello, the
founder, along with Michelle, because we had actually
worked on a company together in the
YouTube space using YouTube celebrities to basically
send traffic to branded videos. And this was in 2011, when
things were very early in terms of this space. And it was my first side project
was to work on this company that we created
called Real Influence. And this thing was very,
very stitched together. We had two fake employees, one
named Sam and one name Alexia who had LinkedIn profiles. And we had ourselves. And actually, Alexia
actually got– she would get, like, notes from
headhunters trying to poach her away, which was amazing. But three years later– so
I invested in this business when Marcello ended up deciding
to do this business instead of the other one. He said, why don’t you
invest in this new business? And I did, pre-revenue. Today, the company’s doing
over $150 million in revenue. It raised $100 million
and as an investor, it’s a huge home run for me. But it also taught
me a lot about how YouTube works, how
the business works, and also what it takes to scale
a business from zero to where it is today, which is
substantially larger. So that’s the Angel. Second is the Advisor. It’s similar to the
Angel, except instead of investing money, you’re
investing time, your expertise. And here, we have a story about
a company called Silvercar. And Silvercar is an app that’s
reinventing the way that cars are rented currently in the US. Basically, you just get
rid of all the people. And it’s all about
getting the cars. They’re all silver Audis. Raised $50 million, and
Eduardo Saverin of Facebook is an investor. And the advisor that I
refer to in this case is a guy named Peter Barlow, who
is a lawyer in New York City. And he did law for
transportation– cars and planes. And he was sitting
on a plane one day and he met this
person who was trying to start this car rental company
at airports, based in airports. And he was having a tough
time with the business model and with fundraising
and with connections. And Peter said, I actually
know all about this. Why don’t I sit down with you? Let’s get together. I will work with you
on your business plan, and I will help you out. So Peter became a shareholder. He was given the
shares by the founder. Actually became a
co-founder at that point. And the company has then
gone on to raise $50 million, and Peter has never left
his job at his law firm. He actually really likes it. But he’s built up this
very valuable stake in a company that’s
doing quite well. The next one is the Founder. And this is our food example,
our first food example. Luke Holden started a company
called Luke’s Lobster, which is a food chain in the east
coast of the US and Vegas now. Basically, he was
working in finance. He was working 60
to 80 hours a week. But he’s from Maine, like I
am, and he spent his summers– actually, he built a boat
and would fish for lobster off the coast of
Maine every summer. And when he moved
to New York, he missed good lobster rolls,
because we didn’t really have any. And so he started this
company on the side. He got a partner who he found
on Craigslist, which is probably the first time anything
not creepy happened on Craigslist like that. And he invested. He basically got $35,000
he split with his dad. And that’s all he
could really– he couldn’t afford to quit his job,
because he was basically paying off all his credit card debt. But they started
the first store. It paid back the
investment in 17 days. And then they opened
a second store. And then by the end of that
year, he left his finance job, and now he runs this
company full time. He’s got 20 shops. It’s a juggernaut. So he decided to eventually
transition to full time, but he did so once he knew
that the business was really performing. The last two are the Aficionado. An Aficionado is somebody
who does something they’re passionate
about, and they want to have the
experience of doing it at a professional
level, but they’re not willing to do it as a living. So for example, the
story I have here is a guy named Dan Gertsacov. And Dan was the first Google
employee in Bogota, Colombia. So he was my classmate in HBS. And when I was down in
Bogota about a year ago, we had dinner at this place
called La Charcuteria, which is a restaurant that
he became an advisor to and an investor in,
because he loved to cook. The guy– his vacations
would be at cooking schools. But he didn’t want to be a
chef, because being a chef is probably the
hardest job out there. And also, he had a very
nice salary at Google, so he didn’t want
to give that up. So instead he did
this on the side. He would basically cook–
he’d take a week off and cook every night at the restaurant
or cook on a random Saturday and have that experience
of doing it professionally without having to worry about
giving up a lot of things. But he could do so in a way
that was also profitable. He actually sold out his
stake and made a nice return. And what’s cool about Dan
is that he did something that he loved without having to
basically make any sacrifices. Now, the irony is
that today, Dan is the chief digital officer
of McDonald’s Latin America. So he’s moved into a different
area of the dining space. And the final one is
the 110% entrepreneur. And the example here is a
guy named Diego Saez Gil, who is from Tucuman, Argentina. And he lives in Brooklyn
now, or lived in Brooklyn, and started a company that
was an online travel app. And he sold it to
another startup and so he was kind of jumping
from one startup to another. And he had some exit,
but he wasn’t retiring. But he had another idea. And he had this idea to build
the first intelligent suitcase. And he met another
entrepreneur who said, I really want to do this. And so Diego said,
listen, I’m not going to jump into
another company right now. I’ve still got equity and I’m
an entrepreneur right now. And I just I can’t do that. But let me become an
advisor and an investor and let me start with you. And so his partner took it
on and ran it full time. Diego approached a
couple of people, myself included, to become
investors and advisors. And we put this
thing on Indiegogo, which is a Kickstarter
kind of thing in the US. And it raised $2 and
1/2 million in presales in about a month and a half. And so with that
information, Diego said, maybe I’ll do this full time. And so he left. They went to Y Combinator. And today, you can actually
find, on an exclusive basis, these over at Selfridges. So I was there last night. And you can check
out the Bluesmart. But it’s a company that has gone
on to raise as much capital. And the idea of the
110% entrepreneur is the fact that when you’re an
entrepreneur, you are taking, still, lots of risk. You are taking a big bet in one
thing, which is your startup. So why shouldn’t you use all
these incredibly relevant skills on a limited basis to
actually build connectivity into other people’s companies
so that number one, you build upside. But also, if something
happens, you’ve got other things that you
can actually consider doing. So those are the five types. I’d just like to quickly
spend a few minutes on how to become a 10% entrepreneur. And all of you have the book,
which is, thank you very much, Google. I spend a lot of
time in the book. I get really granular. Because I was never a person who
read business books, actually. Not that there’s
anything wrong with them. I just didn’t really read them. And when I did read some,
some of them I found were a little bit
too high level. They didn’t give you
the nitty gritty. And so when I decided
to write this one, my goal was to make this a
very user-friendly manual that you could use
every chapter to do one of the steps of building a 10%. And so I tried to
be really granular. And I probably, to a fault,
get into the details. But the idea is that you
should have everything you need in this book to
actually get going and build your 10%. And so what you need
first is a plan. And that consists of figuring
out what your resources are, then having a very clear
process about deciding what you’re actually
going to do for your 10%. And finally, you
need to figure out how you can leverage your
network to make everything you’re doing work. And so if you dig into
that, your resources are time, financial
capital or money, and intellectual capital. And what you need to do
with each of these steps is really sit down and
look at your resources. And so in terms
of time, depending on what you want to do, you
may need very little time. If you want to be
an Angel investor, it’s not a tremendously
time-intensive thing. A lot of people in the tech
world do it who are very busy. If you want to be a Founder,
it may be much more intensive. So you need to think
about how you connect your life at this stage
and where your life is going with the
kinds of things you might do as an entrepreneur. The second is resources. And one thing I
want to talk about is, I set aside
10% of my capital. And the reason I did that was
that I chose a number that felt substantial yet accessible. It sort of goes back to
the biblical or the Talmud or any religious book
talks about a tithe of 10%. So I felt if that
was good enough for major works of
religious literature, it probably was good
enough for my book. And I also did a little
digging and found that the average Angel
investor actually does invest 10% of their capital
in ventures across the board. And the third thing is
intellectual capital. And this is the one that brings
it all together with resources, because intellectual
capital is what allows you to make smart decisions. So I was at a talk
this morning at Viacom, and we were talking about what
you could do for business. And somebody said, well,
I’d like to build an app, but I don’t know how to code. And so my answer
there was, then you shouldn’t do that, because
that’s really critical. That’s the DNA of
what you’re building. Either find a partner
or find something else, because you want to set
yourself up for success. And so you want to play
to your areas of strength. So I never do anything
in life sciences. I don’t do anything in energy. I don’t do anything
in health care, because I just don’t
understand those industries. But in the industries
where I do have expertise, I engage much more
fully and find other people who
can bring talents to the table alongside me. Once you’ve got
that figured out, then you go into your process. And this is the process
of deciding either you’re going to start something
or you’re going to invest or revise something. How do you decide whether
this is a project that’s first of all, a good
project, but second of all, does it make sense for you? And so there’s three
questions I ask. The two are pretty
standard for anybody who’s ever done investing. The third is a
little bit, I like to think of slightly special
sauce for the 10% entrepreneur. The first one is just,
how does this thing work? How does it make money? Why is it a good business? Why is this industry attractive? Why do I want to be
involved in this business? The second is, who
are these people? Are these people that
I share values with? Are they competent? Do they know what they’re doing? Will they bring
out the best in me? Are these people that
I want to partner with? And the third one is, how can
I actually move the needle? How can I add value myself? Because I’m not interested in
just being an entrepreneur, 10% entrepreneur, just
to watch things happen. If I wanted to do that,
I could buy a stock and just watch the
ticker every day. I want to be involved. I want to find
clients or investors or bring strategic
insights to the table. And I know that if
I can’t do that, I probably don’t know
enough about the industry or the people to actually be
able to make a difference. And therefore,
probably not a good place for me to spend my time. And so once you’ve
done all of that, the last bit is the network bit. And this is the part
where you’re doing 10%, so you can’t be
everywhere at all times. And one thing I learned in my
years in the Wall Street world is that there’s a lot of
reinvention that happens. And what good people
do in that world is, they figure out what they
need to know and then find the right person to give
them the information to do due diligence. And so as a 10%
entrepreneur, you’re going to spend time building
a team of people around you who can help you find great
opportunities, who can help you figure out if there
are good companies who can help you add value. So you may be able to add
tremendous value to a company by saying, you know what? I know a great Android developer
who can come in and make sure that the code looks good or that
you’re doing things that make sense or that are efficient. And so that is
the network piece, and that is the part
that allows you not only to leverage the
skills of others, but actually to build a
network of like-minded people who are going to help
you throughout your 10%. You’re going to
help them and you’re going to basically create this
force that all comes together to try to create businesses. And with that, I’ll leave you
with four principal thoughts. The first is that you should
always play to your strengths. So really think about
what you’re good at and what you enjoy, because
what’s terrible is to– and I’ve seen this
happen– is to do something in your 10% and then realize
you actually really hate it. And so you want to
build a bakery business and start cooking
Grandma’s cookies. And then you realize
that you hate being in a kitchen all
day, or on the weekend. That’s not where you want to be. You want to build
things that you enjoy and that don’t feel like
work when you’re doing them. They should be effortless
for the rest of your life. The second is put your day job
first, and act with integrity. And again, Google– I’m sure
you’ve seen this area 120 new initiative that
Google has created to actually fund the startups
of people here inside of Google. So this is a really easy
place to act with integrity. But one thing that was a rule
for me when I wrote the book was to make sure that
everybody in the book put their full name. Because I didn’t want to
be promoting businesses and businesspeople
that were doing things that were unethical
or considered unethical by their employers. It just doesn’t make sense. Life is too short. You don’t want to steal
paperclips from the office or anything like that. You want to do things in
a way that’s transparent, because your colleagues
and your company could end up being your best
customer, your investor, your source of teammates
and things like that. And so it’s important to
do things above the board. The third is that this
is a long term strategy. So I’m not a big believer in
get rich quick strategies. I just don’t. I tried some of those. I’ve read a couple
of other things where like, here,
set up a business and you’ll never
have to work again and you can live in the islands. And that’s just not– I
wouldn’t be here right now if I had figured that out. And so what this is about
is creating something that you build over time so
that even if you retire someday and you’re not working
at your day job, this goes with you
the rest of your life. And there’s a guy
in the book who’s done over 100 ventures who’s
in his 60s, who basically never has to retire, because he’s
done all these things he loves on the side. And finally, this is
all about mindset. So when I talk to
people about this, I always hear questions
about, I’m really busy, or this isn’t the right time for
me, or I’m afraid of failing. These are all things that I
felt and I went through it my first couple
years doing this. So hopefully, I’ve
lived them all for you and I can tell you
that it’s not worth it. The idea here is this
is so incremental that you can put the pedal
down at the speed that’s appropriate to you
and then ramp it up. And when I first started–
I’m at 21 ventures now. When I first started, the first
thing I did, I invested no cash and I was still totally
afraid of the whole thing. I was like, I’m going to fail. I’m going to look stupid. Then it went just fine, and
then I’ve done a couple more. Recently, I did my
first Aficionado. I invested in the stage
adaptation of “The Last King of Scotland” here in London. So, tickets for
everybody in 2017. But that should really
have me frightened. But I did my due diligence,
and I feel confident, and I did an amount of
capital that felt right to me. And I’m having an
awesome time with it. And maybe I’ll see Keira
Knightley at the premiere. So it feels right. But it really is
about building up a portfolio over time
that will give you all the things we talked about. And also you will grow in your
level of experience and comfort so that you can engage in a
way that makes sense for you. And with that, here’s
how you can find me. So my website’s And you can get a free–
well, you have the book. But you could have
gotten a free chapter. There’s actually a
quiz you can check out to see what kind of
10% entrepreneurship makes sense for you. There’s some more
resources and information. I’m on Twitter @pjmcginnis. I’m on Facebook. And you can also reach out
to me at my website there. I’m absolutely happy
to engage with you guys if you have questions. My real commitment
is, I actually really believe in this. So if you have
questions and you want to find out whether
your thinking is in line or if you have a
doubt, I’m absolutely delighted to talk to you
and see if we can help. And the book is out,
so if you think of it, tell your friends
if you enjoy it that they should check it out. And with that, I think we’re
going to move into a Q&A. So thank you very much. [APPLAUSE] MALE SPEAKER: Thank
you very much. Right, we’ve got 15-20
minutes for Q&A or so. Does anyone have– yes? AUDIENCE: I have a question. MALE SPEAKER: And if you could
repeat the question back, that would be great. AUDIENCE: So it
sounds like you have some experience of becoming
a 10% investor in ventures that your friends have started. But there is a clear distinction
between a kind of mentor and an unpaid advisor and then
having an equity stake in it. So could you talk a bit
about how you broached that– PATRICK MCGINNIS:
Brilliant question. AUDIENCE: And kind of
negotiating an equity stake in a venture. PATRICK MCGINNIS:
Yes, so how do you move from giving people
good advice for free to actually becoming a
partner in their business and being compensated
for equity? So I had a real
challenge with that switch when I first started
out, I think part of it was that I didn’t quite
know what I could offer. And so I wasn’t quite
certain why they might want to work with me. And then from that point,
even if you define your offer, you may say, well,
what’s appropriate here? What is a fair amount of equity
to ask of somebody, or what’s the fair vesting arrangement
and things like that. I think– and I’ve seen this. I was at Wharton Business
School a couple weeks ago, and all the students
were complaining that they’re doing all this
stuff for free anyway now. And so for me, it
started out actually with doing things for free. I gave a little bit
to get something. Because in the beginning,
you come with your hand out. Oftentimes people are not
willing to engage with you because they’re sort
of turned off by it. But once you get going
and once you show people a little bit of what you
can bring to the table, oftentimes they’ll
start asking you, would you want to work here? And you can say, well, no, it’s
not right for me right now. And so what I’ve tended to do
is show somebody what I can do. I’m very clear, and I’ll
actually make an introduction or help them out with a problem
they’re trying to solve. But then I’ll say,
listen, I have a standard way I
work with companies, and this is how it works. And with the advisory work, I
think the critical thing to do is these are not
comfortable conversations. It’s never fun to talk about
money with anybody or equity. But you’ve got to get
it out of the way, because I’ve seen
examples of people who do tremendous amount of
work with nothing written down on paper. And then the company takes off
and they never, ever see it. And so sitting down and
saying, how much time am I going to spend, and then
sitting down and then figuring out at the other end,
how much equity is fair, is something you should
do from the get-go once you’ve decided that
you do want to work together and that you’ve shown them
a bit of what you can do. And for that, there are
pretty standard things. If you’re just going
to be an advisor who is on call for an
hour or two a month, it can range, but maybe anywhere
from 25 basis points to 75 basis points,
depending on the stage and depending on how
valuable your advice is or how critical you
are to the story. And if you’re going
to do something specific or project-based, like
I’m going to build you an app, or I’m going to come up with
your marketing plan, what I like to do is actually
impute a value of that and then try to
figure out, based on the value of the
company at the time, what that converts into. You’re welcome. Anybody else? AUDIENCE: What do you find the
differences are between people in the US and the UK? Because I think Americans are
a lot more entrepreneurship by [INAUDIBLE]. PATRICK MCGINNIS: Well, the
UK is clearly coming around. It’s amazing how much
is happening here. And one of my 10% investments is
a company based here in the UK that is a company called
Affinity, which is big data. And the reason I
know is because I sat on the board of
their parent company. So we’re doing really
cool things here. But you’re right, it’s new. It’s behind the US. But so is New York, actually. New York vis-a-vis
Silicon Valley has really come along
thanks to people like Google, who have
made an investment. But we’re pretty far behind. I think the difference
between the two, I would say, is I’d say that the ecosystem
here is probably just three or four years behind. And what’s going
to have to happen is that people continue
to spend time building all the connectivity in the system. Because what’s been so
powerful in the New York ecosystem that’s really
amped everything up has been A, that we’ve
had super-founders like a Kevin Ryan, who started
DoubleClick, who then went on to create Gilt and a
bunch of other companies, along with other people. But he’s been a
Super Angel that’s created a bunch
of other companies and they’re all
connected together. And second is, we’ve been
really good about connecting internationally. And London is, I would argue,
a more international city than New York. Don’t quote me on that. But I don’t have a
feel for how connected it is in terms of capital
and investment and startups. AUDIENCE: What about
idea generation specifically as well? So people want to
be an entrepreneur, but don’t know where to start. Either they’ve got too
many ideas or not enough. Where would you start with that? PATRICK MCGINNIS:
It really goes back to if you want to
be an entrepreneur, chances are you’re going to
find your best ideas in your job already. It may be that you come up
with an idea out of the blue, but I’ve seen so many
entrepreneurs that sit down at a table
with me, because I get to see a lot of pitches. And people say, I have
this really amazing idea to invent the way we take
pictures and reinvent that, and I’ve got this camera. And I say, well, have you
worked in the camera industry or have you worked
with photo optics? No, no, no, but I’ve
got this great idea. And so I think what I see the
biggest mistake, in the US anyway, and in other
places like Latin America, and I’ve spent some
time in Morocco, is that people come up
with great ideas that are not suited to their skills. And so if you want
to do something that is outside of
your area of expertise, either you’re going to need
to find a great partner and then plug in, in the way
that makes sense for you, or you’re going to
need to invest time into learning an industry. Like Marcello, who’s
the CEO of Ipsy, he didn’t just come
out of the womb knowing about online video. He worked at Funny Or
Die for five years, and he learned how it worked. And he met Michelle
and all these things. So he spent the time building
the intellectual capital he needed to make
that business work. MALE SPEAKER: Any
more questions? Yes? AUDIENCE: How do you
ensure that there isn’t a conflict of interest
between confidential information that you may have
as part of your day job, which could be beneficial
to a 10% project? PATRICK MCGINNIS: Yes. How do you make sure
that information you’re seeing in
your day job does not– confidential information
doesn’t make its way into what you’re doing in your 10%. That’s a critical question. And I think the best way to do
that is to be straightforward going into it, so that
your employer knows what you’re up to. Because number one, you could
set yourself up for a lawsuit, and you don’t want to
end up in a situation where you’re accused of
stealing intellectual property. And so if you’re
thinking prophylactically about that in advance, you
should be in good shape. The second thing
is, you should also understand what your agreements
are at your employer, just to make sure that you
don’t trip into anything. Because most people, when
they work at a company, sign different
types of agreements. And depending on
your jurisdiction, they have different
types of terms. And so you want to
be aware of that, because the worst
thing you’d want to do is do something
where you get accused of stealing information
or doing something unethical, because
it will haunt you to the dying day of your life. And I’ve seen this happen. Ethics are something
that you just can’t play fast and loose with. AUDIENCE: What if you’re not
aware of a friend’s project and a college project that
you feel passionate about, but they’re not really
looking for an advisor, have a founder or investor? How relevant is it to start
a conversation proactively and how would you start
that conversation with them? Like, hey, I’m willing to help. PATRICK MCGINNIS: Good question. So if you have friends
or you know people who are doing something
that you think is cool and you want to get involved,
but they’re not necessarily looking right now. So I’ve had this experience
of my own career, in my own 10%, where I
met an entrepreneur who had a great idea. And I was definitely
ready to get involved. And yet, they
weren’t at the stage. It’s kind of like dating. If one person really likes the
other one and the other person is kind of, [GROANS] sometimes
you just never get together. Sometimes you have to
do a little romance and bring the flowers
and things like that. So what I tend to do is,
I’m very helpful to people. And I make it clear, listen–
I love what you’re doing. I think it’s really amazing. I think I could help you. Let me show you. Let me help you out, just
to show you what I can do. And if you like
it, I’d like to get involved in one way or another. And it can be at the level that
makes sense for both of us. And so let’s have
that conversation. Let’s be straightforward
about it. Because you don’t want to
be the unrequited love who, you’re doing all
these things and then you’re feeling bad about it. And they may not even
realize that you’re not just doing it just because
you’re a nice person. So that’s a way
that I approach it. MALE SPEAKER: Sounds
like openness and honesty is quite good from the start. PATRICK MCGINNIS: Absolutely. MALE SPEAKER: We’ll
take that one there. AUDIENCE: There’s a
fear with a 10% project because it’s only 10% of your
time and money and everything. So how do you make
a 10% succeed? And it’s not a project. It’s something that’s
supposed to run longer term. PATRICK MCGINNIS: Great
question, and it’s one that it’s very case-dependent. Because I’ve seen people who’ve
started a 10% project and then put a lot of money
and energy into it. But it’s something that is not
necessarily something they’re very good at. And so it drags along. And I had a friend
who spent many tens of thousands of dollars
developing an app and then ended up, the
app didn’t go anywhere. And so he basically
lost all of his money. And I’ve had other
friends who said, OK, I want to start a 10% project. And then they start
working on it, and it takes off beyond
their wildest expectations. And then they have
a different dilemma, which is, what should I do? Do I quit my day job,
or what do I do now? And so I think it goes
back to number one, having a really good
understanding of what you think it’s going to take and then
marshaling the resources and then making a commitment,
a time commitment. And so if your goal is
to do something that’s very, very time
intensive, but you’re not willing to spend
the time on it, then you’ve chosen a
project that doesn’t really fit into your plan. And so the other thing
that I would say on that front is– and I’m sure
you are all aware of this– is that nowadays, you
can have a startup that does absolutely nothing but
still looks like it’s alive. You’ve got the web page and
you’re paying the $5.95 a month for Squarespace or whatever. And so companies
never die anymore. It’s nearly impossible
to kill a company. And so it also comes
back to this concept of, as a 10% entrepreneur,
you’re constantly monitoring how things are
going so that you’re not just doing it because it feels–
to look cool to your friends. I mean, I’ve seen people work
on entrepreneurial ventures that have no future,
but they keep it going just so they
don’t have to admit defeat to the people around them. And that is just not a
place you want to be. It’s just a waste
of everybody’s time. MALE SPEAKER: Yes? AUDIENCE: Do you have
a rule about, say, you do a 10% entrepreneur
project and it does take off. Do you have a definite
rule about at what point you jack in the day job. PATRICK MCGINNIS: Right, so
when do you jump from day job to full time? MALE SPEAKER: Or decide to quit? PATRICK MCGINNIS: Or decide
to quit– absolutely. So I got this question
recently from a person I interviewed for
the book who didn’t want to put their
name in, and so I couldn’t include this person. But they were making–
they had a good job and they were making way
more in their 10% than they were in their day job. And they spent their day
running out to their car where they had a separate
laptop doing business, which is mind-blowing. And so my advice was, if
you can live to a level that you want to live or you
can see that coming at you and you’ve got the financial
resources to actually make that jump, you should do that. That being said, if you’re
not quite prepared but you want to continue
doing it and you’re at a point where you can’t
continue at this scale and do both, you need
to look for a partner. And that’s something that
can be difficult to do when you’re in that– that
calculation can be tricky. How do I find a partner? But you don’t want
to end in a situation where you are so spread that
both of them are failing. Because if you do
poorly at your day job, you might not have it
anymore to fall back on. AUDIENCE: So, my question
is, what alternative do you suggest if the
company blocks you contractually or actually
blocks you from [INAUDIBLE]? PATRICK MCGINNIS: Right. So what would I recommend
for people getting blocked? Their company says,
you cannot do a 10%. So I have seen this actually. And it’s far less
common than I would have thought in terms of
general– a lot of times what happens at small firms is people
say, oh, my boss doesn’t want me doing this. But then you find out that
their boss is actually doing 15 things on the side. So it’s a little bit
hypocritical, to say the least. I think if your company does
not permit you to do it, then you shouldn’t do it. That being said, you
could look for other areas where you might. So for example, if
your company says, you cannot do anything
having to do with media, then you might find a 10% in
real estate or something else. Because there are
many different ways to use your intellectual capital
and build intellectual capital in order to build wealth
and to diversify yourself. But again, I’m very
loath to recommend people do things that violate
the terms of their employer, because I’ve just seen
that end very, very badly. And it’s unethical. MALE SPEAKER: Take one
more question– yes? AUDIENCE: How do you
manage the expectation when you are doing
10% [INAUDIBLE] and then you have a
full-time co-founder who’s throwing, like, 80 hours
per week and you say 10%, how do define it all? And then the risk level because
you have a full-time job, you have the financial security
and they’re like, [INAUDIBLE]. How do you manage that? PATRICK MCGINNIS:
Great question. So the question
is, what do you do when one person is in a 10%
and one person is full time? And you have one person
who’s got stability and the other person is
putting all the eggs into it. So that is a real
challenge, and one that I have seen dealt with
in a couple of different ways. So does anybody know
the company Zipcar? Zipcar– great
business, went public at a ridiculous valuation,
and there were two founders. And what was so crazy is that
they shook hands the first day they founded the company. And then basically one of them
did everything, and one of them did nothing. But they had split
the equity day one, which is shameful, actually. You think about
that– I get upset, and I’m not even involved. And so and so there is
a book that I really love that I recommend, and
you can find it on my website by Noam Wasserman called
“The Founder’s Dilemmas.” And he’s a professor at
Harvard Business School, and his book is
really brilliant. And it deals with
the decisions you make at the earliest
stage of a business– allocating equity, vesting,
all these sorts of things. And so what it comes
back to is, number one, is having the hard conversation
like we talked about before and being open. But more importantly–
I mean, you can be open and you can be Pollyanna. But people still
are people and they may do lousy things to you. So you must put agreements into
place that fairly represent the risk reward that each person
is contributing to the project. So if you are basically
funding it all and your friend is working
full time and doing 10%, well, then your equities
probably shouldn’t be even. And if they are, then
you should find a way to share living expenses
and things like that. And so it really
goes back to being smart about that
structure early and having the tough conversation. Because if you can’t have
that conversation when there’s really nothing to
fight over, think what will happen
when you actually have something of value
there in between [INAUDIBLE]. MALE SPEAKER: With
that, you’re going to hang around for a few
minutes to sign books. If anyone has any
more questions. Otherwise, please join in
a massive round of applause thanking Patrick. PATRICK MCGINNIS: Thank you. [APPLAUSE]

  • The guy at the back with is legs stretched is missing out so much on this but he'll never know that he could've learned and talk to Patrick about what could possibly be life changing.

  • He mentions Ipsy. I signed up for it and it was a terrible service. I saw an advertisement for it on facebook, signed up, and then i waited and waited and waited. They basically put you on a giant waiting list with no end in sight and tell you you can skip the waiting list if you spam all your friends about ipsy. It felt like a pyramid scheme. I found several hundred complaints from others complaining of the same thing.

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