Link to Founder’s Mindset Podcast episode: https://pod.co/the-founders-mindset/s2-e4
About Keith Schacht:
What are the psychological building blocks that support a serial founder’s journey from ideation to massive growth to acquisition, to building again—and again?
On this special episode of The Founder’s Mindset, Dr Gena Gorlin is joined by serial Silicon Valley entrepreneur Keith Schacht, who has founded and sold 4 technology companies. His latest, Mystery Science, was being used in over half of American elementary schools at the time of its acquisition by Discovery Education.
Now, he’s working on world-changing venture number 5.
He joins Gena for a candid discussion of how he stays anchored to reality during that elusive, early search for product-market fit; why and when he made the decision to sell his company; and how he approaches starting all over again. Gena and Alice then debrief to explore what other founders can learn from his experience.
These are some of my favorite insights or inspirations from the interview:
Building companies as an instance of building things
As long as I can remember basically, I’ve been interested in starting companies, although I didn’t initially conceptualize it as starting companies. I just I just thought of it as building things. I like to build things and companies ended up being another kind of thing I like to build and a vehicle, for building more things. So I mean, really, when I was in high school, even I discovered the internet and I’m younger than that I discovered programming. But when I discovered the internet, I discovered that people would pay me real money to build things on the internet.
Me: Note that it has nothing to do with making money. In fact, if one’s goal was to just make money you could make the case that entrepreneurship is one of many, and possibly, inferior paths
Keith’s response to the struggle and curveballs native to entrepreneurship
I think it’s not smooth but I just never expected to be smooth so so you’d I don’t get upset when it’s not. So it’s like when you’re off-roading you expect lots of bumps.
An example
An example from my previous company Mystery. I had a very specific idea about something that I thought would be good and it was basically a line of science kits for kids that would help them explore the world. I remember very specifically the spark of that idea came when I was walking through a toy store. I like toys as a product category. And I noticed that there was a particular aisle like the science toy aisle, and it struck me how familiar it was. There was like a two-liter bottle tornado and a crystal growing kit etc. “Wow, this is a pretty stale product category.” I had a lot of experience building these kinds of toys myself just for fun so I thought it would be a really interesting business opportunity here.
That led to conversations with a friend of mine, a science teacher at the time. And so we started this business with this sort of clear idea of maybe we’ll do a lot of science kits, but the broader opportunity was helping kids understand the world. My co-founder and I were both new parents and this is a classic case where I was excited about something particular, but I had a conviction about a broad space. And, you know, we quickly tested this particular idea and it turned out to not be a good idea. We built prototypes and put them in the hands of parents. Multiple parents told us how “we’ll do it this weekend” and then we checked them in with them on Monday. “How was it?”
“Oh, we didn’t get to it.”
And then weeks go by. So we pivoted and was like, maybe we’ll do a different idea. And it was a classic example of having strong conviction about sort of a broad area of opportunity and specific ideas but sort of flexible on whether that particular idea was the right one. It was many iterations later before we finally got something so we ended up building — instead of a line of science kits for kids to do a home, we built a set up for digital resources for elementary teachers to use in the classroom to teach science to kids. We solved the real problem for elementary teachers. [He previously gave some background that before high school, general elementary teachers teach science and many find it daunting.]
Keith, without meaning to probably, reveals how his approach actually looks like science
I think one of the most important things at every step of this discovery process is to be really clear on what you know, and what you don’t know. And not to ever confuse the two.
We prototyped a line of science kits and put them in the hands of a bunch of parents. And it’s very easy, after the moment it didn’t work to conclude “Oh, no one wants a line of science kits” or some broad generalization like that. This is too general.
The right way to hold it is “the particular prototype I built, that I put in the hands of the six parents wasn’t used by any of the parents.”
And when you hold the conclusion that way, it leaves the door open to “maybe it was the wrong set of parents, maybe there’s a different group of customers with the exact same product or maybe the idea of lighter physical science kits was a good idea, but those three that we made were bad for a particular set of reasons.”
And so that’s it’s such an important part of the journey. Be really clear on what you know, what you don’t know what to kind of hold those conclusions in the right way.
And I think that’s what makes the journey feel, you know, bumpy and circuitous but not frustrating. It’s just the process of coming to understand the nature of the world and your customers and your idea.
Product-Market Fit
How did we finally know [when we were on to something]? On prototype number six, we had built something that we tried on parents and a number of parents gave we gave it to their kids’ teacher. We thought that was an interesting clue since didn’t immediately jump on elementary teachers at that point. When we did finally decide to build a prototype for teachers. We initially built one for middle school science teachers because we want to help them teach science. That one didn’t work, either. They didn’t use it. I had a friend of a friend who was an elementary teacher and happened to show her one of these prototypes. And she was excited about it. One of the breakthrough moments was she told us about a set of lessons that she needed to teach soon.
We just offered to help her. “So what’s this particular lesson? Okay, well, what if we prepared the following things for you and sent that over within a couple days? Would that be helpful to you?”. And we sort of followed her lead in a really concrete way, like a specific day a specific lesson, a specific problem, and we helped her and that’s that was sort of like big clue number one. She got really excited about what we gave to her use quickly and asked for more.
You’ll know when you have it
Yes, it’s very abstract to tell someone “make something that people want, and you’ll know when they want it.” But I have built things before that people didn’t want and I built things before that people really wanted. You can really see the difference. People use lots of different analogies like “customers actually wanting something from you and pulling it out of your hands instead of you calling them ‘would you like to try this? Oh, sure. I’ll try it. I sent it over. You don’t hear anything for 48 hours. Did you get a chance to try it? Oh, I haven’t gotten to it yet.’
But you can tell what it feels like when you are the one providing the energy to push this product forward versus your customers bringing the energy and sort of pulling it out of you in those early days. Many times Doug, and I would have the conversation. “Is this one what product market fit feels like?” And I would say to him “Oh no, you’ll know.” You could tell the difference. And when we finally got this first elementary teacher who was excited and asking for more, and then we got a few more elementary teachers, I remember Doug remarking “Wow, this feels so different than those other prototypes we built where no one really seemed to care and we got 200 signups, but then no one would use it.”
There’s a meta-discussion linking back to 2 Y Combinator principles:
- This was an example of “doing things that don’t scale”
- This is what it looks like to try to build something people actually want.
It’s so easy to make something you want people to want, but they just don’t want it. Just the other day I got an email from a friend who has built a prototype and wants to show it to me to see what I think. And just based on the email my first reaction after reading this email was”it doesn’t really matter what I think” because I’m not the customer. I wonder if this person has shown it to five customers by now before building the whole thing. And that was my feedback on this. Because so often people miss that step. And so I really don’t care what anyone thinks except the potential customers that we think we’re going to be serving with these particular ideas.