Patrick Lee: Running a startup is like poker

Founder of Rotten Tomatoes, Hobolabs shares lessons at Vator Splash Oakland 2015

This year's Vator Splash Oakland 2015 had three Breakout Session tracks. Track 1 was on "Entrepreneurship - tips on scaling, fundraising, assessing risk, etc." Track 2 was on Investors - tips on how to strategies. Track 2 was the "Startup Toolkit" track, with speakers giving advice on legal, accounting, workspace, marketing and more technical questions most every entrepreneur faces.

Here's one of the six Breakout Session Talks from Track 1 - The Entrepreneur Track.

In this segment, Patrick Lee, Co-Founder and former CEO of Rotten Tomatoes, co-founder of Hobolabs, spoke about the Virtues of bootstrapping".

Here's some highlights [moderately edited]:

- On fundraising

Don't spend your time fundraising if you just have an idea. Fundraising takes time, and if you're spending the three to six months to raise money, you're not spending time on the product. So best thing to do is bootstrap. Don't get an office space. Don't worry about legal and finance, because that can get expensive. At Rotten Tomatoes, we raised $1 million in January 2000. Then the bubble burst. We went from 18 employees down to 7 in 18 months, and everyone's salaries were cut in half, and a couple of us went down to zero. 

- Keep it simple

Sometimes you don't have to do the entire backend infrascture to know whether something works. At Idealab, they wanted to sell cars online. But rather than create relationshps with car makers/dealerships, they put up a website to see if there was demand. If a customer was interested, Idealab would then go out and buy a car and the resell to the interested customer. 

- Only one thing matters - Traction

Traction is the only thing that matters. Traction can be 1) How many users, installs 2) Engagement 3) Revenue. Revenue is the toughest in the early stages. But you only need one of the three to show traction and to potentially be able to raise money. Also, figure out what is the most important metric to track. If you're a marketplace, it doesn't matter if you have a ton of supply or a ton of demand. What matters is if any transactions are happening on your website. 

- Numbers are better than anything

Numbers beat out a good idea or a good team. People often say they look for team. That's the No. 1 factor in backing a company. I disagree. If you have the traction, it beats out the team, the idea, etc.

- Running a startup is like poker

Poker is a game of skill and luck. Luck is when you get your hand. You don't know what you'll get, so it's random. Skill is applied when you start playing your hand. In like vein, your hand is like your idea. There are a number of them and so it's a bit random. For instance, if you were to tell someone the idea of Twitter, or Rottent Tomatoes, they might not have been interested or cared. The idea is random. But the execution of that idea is where the skill comes in. And in poker, there are different ways to play that hand. Some players are loose - they play every hand. Some are tight - they fold a lot when the hand is poor. Some players bet conservatively and some are aggressive. The best way to approach a startup (in poker parlance) is to be a tight, aggressive player. Keep folding until you find a great hand (idea / market / team) and then be aggressive against it.

Thank you KPMG, Kapor Center, Wendel Rosen, Javelin, Rackspace, The Port Workspaces, Alaska, Gensler, Parelius, and Bread & Butter for sponsoring! 

Splash LA 2015 is around the corner. We already have a great lineup. Check it out here. Register early for Super Early Bird tickets. And if you want to apply to present in the startup competition, apply here.