ChatGPT, America’s Cup Sailing, and Creating Entrepreneurs
TA McCann is the Managing Director of Pioneer Square Labs, a Seattle-based software development studio that creates and launches technology startups. As a serial entrepreneur, he was the Founder and CEO of Senosis, acquired by Google, Gist, acquired by Blackberry, and Rival IQ, a leader in marketing analytics. TA is an active angel investor, an Adjunct Professor at the University of Washington Foster School of Business, and a TechStars mentor. Before his startup career, he was a professional sailor, having competed in two America’s Cups and the Whitbread Round the World race.
Welcome to The Future Is Borderless podcast with David Nilssen, we feature top entrepreneurs and thought leaders from around the world, those who bring a global mindset and a unique perspective to their life and business. Now, let’s get started with the show.
David Nilssen 0:22
Hey, David Nilssen here, I’m the host of this podcast. On The Feature Is Borderless, we connect with business leaders around the world who have what I like to refer to as a borderless mindset. And the purpose here is to share ideas and new innovations, best practices, things that will help us grow both personally and professionally continue leading in a rapidly changing world. Now this episode is brought to you by DOXA Talent. DOXA helps businesses to source full-time highly skilled workers from all over the world. And as a result, these companies can scale faster, increase margin and improve culture. If you want to learn how to grow your business with offshore workers simply visit doxatalent.com. All right, well, I’m excited for today’s show. My guest is TA McCann. TA is a seasoned entrepreneur, an investor with a remarkable track record of building and scaling successful businesses. He’s been the founder of many companies, including Senosis, Gist, which was acquired by Blackberry and Rival IQ, a leader in marketing analytics. And prior to his startup career, a TA was a professional sailor who competed in two Americas cups. And I should note actually winning one. And he is an active angel investor. He’s on many boards. He’s also an adjunct professor at the University of Washington’s Foster School of Business and a mentor at TechStars. So with that, TA welcome to the show.
TA McCann 1:37
Good to be here, David.
David Nilssen 1:39
Yeah, this will be fun. I’m excited to talk about your entrepreneurial journey and some of the lessons learned along the way. But I’d love to start maybe at the very, very beginning and just sort of understand how did you first become an entrepreneur? What was that moment that sort of led you down that path?
TA McCann 1:53
I started my first business when I was 12. And I think that there were, I wanted to be in control of what I was doing. And I thought that making money for myself felt important. And so I started mowing lawns, which turned into a landscaping business. And then I grew up on Lake Michigan, outside Chicago. And I was always around boats. So you mentioned my sailing background. But as always around boats, my parents were on boats. And so I was hanging around the yacht clubs and the docks. And so I started a second business, maintaining boats, starts off washing them, and then doing all kinds of maintenance. And then I started another business alongside that one, which was a specific soap business. And so I was actually making more money selling soap to myself and to other people working on boats than I was doing on the boat cleaning business itself. But I was doing all of that while I was still in high school, middle school in high school. So in some ways, I was an entrepreneur from very, very early on.
David Nilssen 2:55
Very cool. I mean, from that experience, did you know then that at some point you wanted to sort of start your own larger-scale business? Or was that still something that was undetermined at the time.
TA McCann 3:07
And it would be you know, as 15 16 17 year old, I’m not sure I had that level of foresight. But a lot of people I sailed with were entrepreneurs. And the people whose boats I clean were entrepreneurs, and the people who lived in my neighborhood whose lawns I mowed were entrepreneurs. And so I had a lot of exposure to those types of people. I think I had a lot of interest in, what kind of business do you run? And how did you get into that? And how does it work? And what does it do? And so I had lots of that, around me, in my kind of teen years, but I didn’t go to college thinking, Oh, I’m going to become an entrepreneur, or I’m going to get this kind of educational skill or even after college, I didn’t think that was going to be my path, because I’m not sure I knew what that even looked like, at that time. You sort of get into college, and there’s sort of like a natural career track. And I don’t recall sitting there thinking, Oh, I can’t wait to get out of college and start a business. The way I see lots of undergrads today, or certainly graduates today are very much thinking about that as they go into college or as they’re going through college, or even coming out of college of where they’re trying to go is to start a software technology-based business.
David Nilssen 4:20
Yeah. Why do you think I mean, it’s funny, because I think back to when I was in school, I also didn’t know that I would start a business someday or multiple businesses, that was never really, I think, something that I aspire to it just sort of accidentally happened. Why do you think now today, so many kids are, they sort of had that mindset, like they need to be entrepreneurs. What is something changed there?
TA McCann 4:44
I would say that. One is when we talk about entrepreneurship. I think you naturally default into technology-based entrepreneurship, of which there are many flavors of entrepreneurship. But I think when you ask like are you thinking about being an entrepreneur, many people will immediately equate that. And if you’re in that genre, then I think it’s the fact that I mean, if you’re a one-year-old today, I mean, you have had access to the internet, you’ve had access to mobile phones, you’ve had access to products that allow you to write code, build products, test products, your entire life. And so you’re naturally into thinking about that, I’d say number two is that the lore of entrepreneurship. I mean, when you think about who are people admiring, oftentimes, you know, you talk to any kid and you’re thinking, Oh, it’s, uh, Elon Musk, or Steve Jobs or something like that a technology entrepreneur is who they have sort of started to think about as what does quote unquote, success look like. So that’s, I’d say, a second theme. And then it’s just become part of the water as it were, especially at certain universities. I mean, everybody’s talking all the time about the entrepreneur club, or the kid that started the side business or the mobile app that somebody built. And so it just becomes part of a natural way to think about it. And I’d say the last topic is accessibility to lots more people like you or me. And the ability for them to be connected to technology-based entrepreneurs, in their collegiate experience is much, much greater now than it might have been when you or I were in college.
David Nilssen 6:22
Yeah, well, I mean, talking about today, and let’s, let’s talk about what you’re up to, because I, you know, I, as I shared in your bio, you’ve had a lot of great successes. And I’m sure some battle scars along the way. Now you’re working with entrepreneurs, as the managing partner of Pioneer Square Labs. I’m not 100% certain that everybody is listening to this podcast is familiar with the concept of a startup studio. So could you talk a little bit about that model? And maybe how that differs from traditional venture capital?
TA McCann 6:49
Yeah, let me just take one step back to go two steps forward. So as you mentioned, so I’m a five-time founder, I’ve had three successful exits. And after I sold Senosis to Google, I was thinking about going and starting number six. And I called out to a very good friend and mentor of mine named Brad Feld. And he was an investor in previous companies that I’d worked in, and he was a large investor in PSL. And so I asked Brad, I said, hey, I’m thinking about doing another company. And he was like, cool, I’m excited, like, I’m ready to invest, let’s go do another one. But he said, you’ve done a lot of this, maybe you should consider spending a little time with a lot of companies instead of a lot of time with one. And that was a very good sort of kick to me to say maybe this is a good change to sort of think about a new type of thing. Now I knew the PSL crew. PSL at that time was about two, two and a half years old. I was an early angel investor in PSL because I know a lot of those guys. But I, I made the choice partly to continue to work with Brad, partly to see if I could productize a lot of the knowledge that I sort of gained as an individual entrepreneur, and partly as a new challenge is to say, hey, this is like another phase shift in my professional career. So I joined PSL five years ago. And what Pioneer Square Labs is, is two parts of our business. So the startup studio, which is many people might equate that with an incubator. So we literally come up with brand new ideas, we run a process internally, and we turn those into software companies. Over the last seven years, we have tested about 350 ideas to get to 33 companies that we’ve spun out of the studio, so that four or five companies a year we are creating from scratch. And then we have a second part of the business, which is a venture fund. So we have $100 million venture fund, and we invest in the companies we start and we also invest in early-stage companies based here in the Pacific Northwest, which generally would be Portland, Seattle, Vancouver. And so those two pieces work together in the sense that we are seeing and working with many, many different early-stage ideas and early-stage entrepreneurs.
David Nilssen 9:00
So you guys have tested 300 Plus ideas, but only 30 ish of those are ones that you chose to move forward. Like, what’s the filter to move them from one stage?
TA McCann 9:15
Yeah, so we have loosely or strictly defined sort of a five-stage process at PSL and I say loosely are strictly because this is a little bit of art and science. Sometimes you just know and you find the right person with the right idea. And you’re like, you know what, we’re just doing this company and you don’t run the full process. And other times you try to look for repeatability consistency, especially when they work or they don’t work and they sometimes work or don’t work after they’ve come out of the studio. So you look back and say like which part of the process didn’t we do right? But if you were to allow me a general structuring of the process would be ideation, validation, creation, spin out, scale up and there are specific things that happen in each of those stages? So validation being the most important, and the one that where most companies die? Yeah, excuse me. So in validation, the ideas tend to die quickly on competitive landscape. So we come up with a brand new idea, we define it with who’s the customer? What’s the value prop? What’s the feature set? What’s the business model, you go Google it, you find five guys already doing the same thing who are funded by amazing investors. And you’re like, Okay, that’s dead. The second and those die very quickly, sometime between a day and a week. Or you repurpose and refigure, it becomes a new idea. Because of that information, maybe with the same ingredients, but a different dish. The more common death is really very quickly, and usually by day two of an idea are attempting to go find early adopter customers. And we have kind of an internal process which we ICP or ideal customer profile, to VOC or voice of customer to EAC, early adopter customer, ICP, VOC, EAC. And a lot of stuff, guys, because we can define an ICP. And we start shouting out to the internet and our networks and no one cares. Quite common, yeah, you can’t find them, they might be there. But we’re pretty sophisticated on all our different strategies of finding potential customers and for whatever means we can’t find them. The next would be we find them, but they have very inconsistent needs, pains and wants. So we think we’re going to build a product with feature a, b, and c, and we find that some people want a and b and some people want C and D and some people want D and F. And we can’t find consistency on the pain or problem, or even the product that we might build for them. So inconsistent depth problem definition. If we find consistency on that, then we find oftentimes limited ability and willingness to pay the customers like oh, this is a huge problem. And then we say, well, could you pay $1,000 month to solve that problem, or $100, or whatever. And they’re like, no. And so the idea dies on ability or willingness to pay. If we get through all of those hurdles, we can find a bunch of customers who want it who have a reasonably consistent pain point that want to be solved, where they have ability and willingness to pay. Then sometimes the ideas die on unit economics. So the customer wants to pay $100 a month, but it costs us $80 To acquire them and $50 a month to deliver the product. And all of a sudden, like the economics of the business don’t work out well enough. The next thing that kills an idea is every now and again, we find something that’s technically impossible to do, we thought it was possible, but we can’t actually make the product do what the product does. But that’s relatively rare for us. And then the last thing is investor interest. So we are only building investable, venture-scale ideas. And some categories are very attractive for venture investors. And some are not very attractive. And even when we find all of the things I talked about, sometimes we go talk to 10 20 30 investors, and they just kind of yawn at us like yeah, nah, not really my thing. And so we don’t move a project forward because of lack of investor interest. And so that generally runs on kind of a timeline. And it’s a little bit of like, do not pass go and collect $200 until you’ve done this sort of round. And they’re not fully linear. But every week, we are running that process of saying how many more customers we talk to how much more consistency? How close are we getting to really be able to find a product, and then getting a team to lead it, whether they bring the idea to us or we go find the team. But those are the reasons why most of those 320 ideas have died along the way. And if you look at something like TechStars or Y Combinator or even VC funds, and you look at why companies die, most of them run out of money because they just can’t find customer traction in the amount of time that they have. So we’re just front-running that whole process of if we can find customer traction, then let’s kill the idea before we get going.
David Nilssen 14:16
Why hasn’t the rest of the industry sort of adopted that practice?
TA McCann 14:20
Well, because you don’t get to repeat. So when you say industry, you could say there’s a broad industry of startup entrepreneurship. Yeah. And you could say, well, because the entrepreneur doesn’t have the skills or the reps to go do that. They don’t and they believe too much small signal. So if you went talk to five customers, and they said, Oh, yeah, I totally want this thing versus talking to 50 you may come to a different conclusion. So our target usually for any of our ideas is no fewer than 30 and more like 30 to 50 ideal customer profiles are all living in a spreadsheet where restack ranking them every week. And we are saying like can we find real customers and hear, but your average entrepreneur, like they might talk to three to five, before they make the choice to go start a company.
David Nilssen 15:06
I’m sort of laughing about this ta because I’m reflecting on my own entrepreneurial journey. And I’m thinking in this case, it worked out for me. But my first business, I might have looked at small signals and just jump straight in with two feet. So, thankfully, it worked. But you’re right, that’s probably not uncommon.
TA McCann 15:23
And it can work for lots of these if you have enough time. Right. So if you think about it, if you have enough money, or enough runway or enough of your own fortitude, you may be able to assemble that 30 to 50, over a six-month period of time, as opposed to a six-week period of time. And we can be doing that much, much more rapidly. If you narrow from general entrepreneurs, to more like venture capital and in studios, then VCs don’t have the time or expertise to do that, either. They’re primarily money managers, or capital managers, they have a relatively short amount of time to make a decision, especially for a good investment. And so they might be able to talk to three or four or five potential customers, for any given idea. But they can’t do it fast enough to make that part of the decision. And oh, by the way, they generally don’t have that much of the expertise sitting in a VC firm. If you narrow into studios, then this is a lot of what studios do. Right? This whole process of customer discovery, customer development is usually a core component of a venture studio, of which we’re one of many in the world now.
David Nilssen 16:32
Yeah, and whether you guys came up with the idea or an entrepreneur has come up with the idea and brought it to the studio, do you run it through the exact same process?
TA McCann 16:41
Yes. 100%. Same process.
David Nilssen 16:43
So I mean, what percentage of the businesses the 30? Did you say 33? Yep, yeah, so the 33, what percentage of those were ideas that someone brought into the studio versus you guys, came up with the idea and then found the entrepreneur to sort of lead from there.
TA McCann 16:58
In the early days of PSL, they were much more PSL led, in the more current iteration than they’ve become much more entrepreneur-led, or in certain cases, corporate LED. So we have a few corporate partners that we work with. And they may be looking at a category or business area that they’re excited about, but don’t have the internal resources or expertise, or even they want it one standard deviation away from the core business, and they’ll work with us. So we would have PSL-led ideas, entrepreneur-led ideas and corporate-led ideas. And if I were to say the, for the last 10 ideas, I bet it’s 40%, entrepreneur-led 30%, corporate-led and 30% PSL-led, a third ish, but we would all things being equal, we would much rather be entrepreneur LED. Yeah, because you’ve already solved the major variable, which is who’s going to run it. And you’ve also solved the time variables. So we’ve had plenty of times at PSL, where we’ve come up with an idea. We validated the idea, we validated demand, and we went to look for CEO and it took us six months to go find the CEO. And the opportunity was evaporated in front of us. So if you know you have the entrepreneur, you can evaluate them as a founder CEO, it while you’re evaluating the idea itself, and you’ve already saw one of the big variables. And you can start to even imagine the team you might build around them based on their own unique core competencies.
David Nilssen 18:26
Yeah, I recognize based on the business model, maybe the industry, perhaps guess the type of business that it is, maybe there’s nuances that this type of SEO that you would look for, in the cases where you’ve come up with the idea now you need to find someone to sort of run with it. But are there common threads that you see? I mean, is there a similar type of person that you’re looking for? Just I’m trying to think like, there’s a lot of people that think, well, maybe I’ll be a CEO someday, what could you give them in terms of like, the things you guys look for?
TA McCann 18:56
Yeah. So we are building specific kinds of businesses, right venture scale businesses, and that is maybe a specific kind of person. So I want to build that scale of business at that pace with that type of other set of people sitting around the table with me. So that’s, first filter, and that places no judgment on somebody who might like to open a restaurant or a lifestyle, business or many other things. So I venture scale technology business, which is what we build, that person should start to think about, well, what experience do I have that looks anything like this? So oftentimes, if you’re a general manager, or senior product manager at a technology company, maybe you ran a business unit there, you’ve got some experience, which is pretty similar, right? It’s not the same but it’s similar. Somebody who says they would think they want to be an entrepreneur, I would say what ideas are you working on right now? And generating an idea and working on a side project, trying to build something even if it’s not the idea yet mean the right entrepreneurs are almost always coming up with new ideas and like all the time thinking about them. The third is how are you spending time with other people who are building ideas? Right? So if you get sort of unfortunately in like large tech, oftentimes you lose touch with the startup community. So are you hanging around with other people who are building businesses today and learning from them? Are all things that would sort of lead someone in the right direction? And oftentimes, regardless of whether they work on our ID, or otherwise, someone walks in and say, Tell me about what it is you’re working on? Why did you try them before? What did you do to validate them? So those are one and then two is when they start to engage in the studio. If it’s their idea, or even our idea doesn’t really matter. We basically say like, let’s run a month-long test together. Let’s do a date, right? Let’s do hire by audition. And we are really looking for people who can drive a process like week-over-week progress. And a lot of times, you know, people can’t drive that fast. There’s like, oh, I that’s a lot of decisions I had to make this week that we’re looking for people who are good at customer engagement, right? Most CEOs are good founders, they have to be the first salesperson, and maybe they’re the first salesperson for a long time, for selling the biggest deals, the most complicated deals. And to be a salesperson, you have to feel very comfortable reaching out to customers doing the cold calls, doing the negotiation, thinking about pricing, and starting to think like a product manager. So a product manager and most technology companies would have these sorts of skills of how can I find the customers? How do I engage with the customers? How do I listen enough to their problems, and then fit in my solution? How do I think about what other thing what I might have to build in order to get them to become a customer? And then how do I think about pricing and packaging? So pricing and packaging, which are different things, if you’ve got some level of experience there, ends up being helpful for those kinds of potential entrepreneurs?
David Nilssen 21:57
Yeah. So it’s funny I’ve been, I’m sure people will see this recording for a long period of time, at the time that we’re recording this right. ChatGPT is, fairly new in the market. It’s created, I think, really interesting awareness for people around the capabilities of AI, especially for non-tech individuals. But it’s been around for a long period of time, like, how is technology, it’s changing so quickly. And I see it as a catalyst. That mean, it’s obviously helping. It’s making it easier for people to create companies. But the landscape changes so quickly, like how do you guys sort of balance that in terms of how you think about building businesses and the companies that you’re working with?
TA McCann 22:43
Well, if you, you know, I’m old enough, and maybe you’re old enough, or some of your listeners are old enough to remember sort of the internet, right, the mid-90s, the internet happened, and everybody started to say the almost the same thing, like, wow, this is an amazing new technology, and things are changing so quickly, I’m not quite sure how to get my handle around it. And what happened was a gigantic proliferation of new kinds of companies. Right, the rate by which people were creating new companies using this new piece of technology called the Internet, building a website, building a data-driven website, etc. That was mid-90s, then this thing, like the cloud happened, and it happened again, and then this thing like mobile happened, and it happened again, and then social happen to happen again. And then payments happen to happen again. And so in many ways, while I firmly believe that we are at one of those seminal moments, that these enabling technologies just create opportunity for entrepreneurs who can leverage them. But it also creates a proliferation, a huge amount of companies that just rush into that, using that new technology. And so if you just follow like a ChatGPT, or GPT, more broadly, or innovations in AI, more broadly, of the last year’s period of time, on any given week, there are like hundreds of new companies being created to do in many cases, much the same thing. And so there’ll be a different differentiator that will help some of those companies succeed because the technology just like mobile, cloud, social intranet becomes just part of the infrastructure that everybody has access to. That said, the average company, mid, large, small, does not understand how rapidly this technology will change their world. And how many other companies are building something that is likely to disrupt their world?
David Nilssen 24:35
Yeah. So it’s funny because you were talking about the internet, which of course, I remember mobile payments, like all these sort of significant shifts in technology and the way that we work and connect. I remember all of those and I remember each one of them feeling like they were an enabler to the next thing. This is the first sort of technological shift that I recall, where people are really concerned about what is this mean for Jobs long term. What does this mean for people? How do you see that?
TA McCann 25:04
Well, I would argue that if you were a little bit more like, if you worked at a newspaper industry, right in our magazine industry, and you thought about, hey, what is this internet thing mean for me? Yeah, if you worked at a bank, what is this payments thing worked for me? I mean, for me, if you were a telephone company, what does this mobile thing mean? For me, I mean, think about the disruption and shift of how we use what we used to use from Expo that we now use from WIPO. Now, that said, I think that the broad technology enablement of human productivity is massive, and has been changing quite dramatically over the last 20 years period of time. But at this moment in time, the last year’s period of time, specifically with ChatGPT. And more broadly, prompting an AI engine to do something for you, right. ChatGPT is effectively creating content, but summarizing content, searching for content, doing a better job of managing my schedule, even managing my health choices, etc. Like all of that is that we’re at a turning point in time. So I think it’s just the people who choose to embrace, augment and experiment on an individual level, on a small team level or at a corporate level are the ones that are just like with the internet, or mobile or social. I’ve built businesses, it kind of each one of these phase shifts that are loosely or tightly aligned to that phase shift. And this is just yet another one that we are working on. And part of the fun of being in a studio is you can apply these kinds of technologies across many different applications.
David Nilssen 26:48
Yeah. So I want to shift into a couple of different topics here. So first one I want to cover is really around remote work. This is a big topic today. I talked to entrepreneurs all the time, it’s question is, should it be in an office should be hybrid, it should be out of the office? What are you seeing across your portfolio company?
TA McCann 27:07
All of them are hybrid or remote. So that’s sort of a given. And that’s a both a hangover of COVID. But I think every newbies I mean, I started a business, what during COVID, we built it, scaled it and sold it and I never met any of the people physically in the world. And then I met them after the whole thing was done. I was like, Oh, your Sheila, that’s amazing. Like, okay, and so never met him in the journey. Never met him full time. I mean, obviously, we’re online, but we never physically met in the real world. And they were in Seattle.
David Nilssen 27:46
Wow. So they even had physical proximity. You guys were really committed to that.
TA McCann 27:50
Yes. So those kinds of businesses and what it forced us to do is to start to really build from the infrastructure from day one, to think about you have to start with the opportunity to be hybrid or remote. And part of the studio benefit, again, is that we can bring these best practices over and over and over and over again, and the tools to support a best practice over and over again, for example, like, how do you hire and manage a remote team? Well, if you baked that into your culture from day one, it’s not a problem. Yeah. And it therefore enables you whether you’re having an EA that’s in the Philippines, or you’re having a CTO that’s in Oklahoma, or a developer that’s in Ukraine, like all of which we have the opportunity to set that up from day one with both tooling and process is absolutely there. And I think any CEO who doesn’t embrace that is just missing out because I mean, it feels so quaint to think, Oh, you must move to Seattle to start this company with us. If you’re anybody who’s not the CEO, and the CEO, I think benefits tremendously by physical proximity with us, especially at these early days of the company. Things changed so rapidly, the whiteboard time, the collision in the office. And so PSL runs effectively two to three days a week in the office, two to three days a week at home, different roles and responsibilities in slightly different ways. We have one or two people who work remotely, but they struggle, because we’re mostly on-premise kind of a company. But mostly because we started before. And we also haven’t scaled much more broadly and the nature of our work, disproportionately benefits by being physically in the same place. But all of our companies now are starting as either exclusively we’re going to start from being remote, or we’re going to be hybrid, and then they build their own process around that.
David Nilssen 29:42
Yeah. Interesting. You talked about remote work. You were talking about? Think you said executive assistant a second ago, maybe you didn’t maybe I thought that but I want to talk about because I know you have a virtual assistant and I’m just curious because a lot of the people that I talked to that have remote work are struggle with how to make those relationships productive. And I’m just curious from an executive support standpoint, like, how do you work with your VA? And how have you made that productive?
TA McCann 30:10
Yeah, so I’m a gigantic fan of virtual assistants, I recommend them for all my CEOs. And I think I’ve trained at least five that start with me. And then when I’m doing a project with the CEO, they start to get to know the EA, and then they spin the company out, and then I give them the EA. So I trained the EA both in the way that ta works as the productive CEO. But also we get the opportunity to overlap and work together while that company is spinning out. And the CEO is going through very stressful times where we both are doing all this stuff to form the company and name the company and hire the first employees and all of that sort of stuff. So the EA can be massively helpful there. All of my EAs have been virtual. So I’ve gotten quite comfortable with that. And I and my, my EAs are VAs just get quite good at using different tools. So we are good at the Monday morning stand-up. We’re good at the workflow tool, which is our bulleted list, we’re good at the monthly quarterly priority list in Google Sheets. And I can in most cases, work much more efficiently with the EA in a remote way than if they were physically on site.
David Nilssen 31:26
Yeah, yeah. I love it. I’m a big fan as well. But I’m obviously biased. I want to talk about your sailing career. You were in two Americas cups had a chance to win one, which is super exciting. I guess the thing I’m curious about is how did this intersects with your journey and entrepreneurship? Like what is it that you’ve learned being a sailor that has influenced or sort of helped your career today?
TA McCann 31:53
I have a whole long blog post about this, which maybe I’ll include in the show notes. Sure. I think it’s titled something like How Winning The America’s Cup Is Like Doing A Successful Startup. And so it draws some of these parallels. But number one is an engineers mindset. So at the high end of sailing, and similar to like Formula One, a lot of the winning and losing happens by engineering, the engineering is done. And it translates into boat speed or track speed. And if you get good enough, it basically if your votes three or 4% faster than anybody could switch any member of the teams, and they’re still going to win on the fastest boat. And in many ways that can be abstracted into what happens in a technology startup, you sort of assemble a bunch of engineers, you start with a hypothesis on where you can be innovative, and where you’re just going to be same as everybody else. And then you try to get the engineering talent there. And then you run on these iterations. And certain iterations to build a boat takes a six months period of time to build a brand new sail might take three weeks period of time. So you can iterate sail design much more rapidly than boat design, as an example, the same way as you might think, an infrastructure versus a feature on a product. And so the engineers mindset, number one, trying to create a boat speed advantage, via primarily engineering and iteration. And then there’s a tremendous amount of grit that goes into it. And there’s a tremendous amount of you have a lot of hypothesis, many of which don’t work out. So failure, failure, failure, failure, failure, and the opportunity to continue while looking retrospectively at Why didn’t that thing produce the outcome that we wanted, but getting very resilient in, we’re going to keep experimenting, in the right level, where we have high confidence, medium confidence, low confidence, but if we have low confidence, and we should have high potential upside. So it’s kind of that big-bet mentality. And then, in addition to that is how much capital so the more capital you can raise, the more experiments you can run, the more capital you raise, the more big bet experiments you can run. And every now and again, those big bets turn into something very, very meaningful. Like in 1992, we ran a big bet experiment that we could create the first ever carbon fiber sailcloth, the carbon fiber is very brittle, it’s generally very rigid. And we thought if we could use carbon fiber to create sailcloth, we could have a huge advantage. And I can tell you that we blew up many, many, many, many sales. And every time they’re blowing up, I mean, it’s 10s of 1000s of dollars every time and yet we kept going and kept going and kept going. And ultimately, we’re successful with that, that innovation and our sales were 20 or 30%, stronger and 20 or 30% lighter. And while it wasn’t the only innovation, it’s an example of an innovation that required a big bet, a lot of commitment, a tremendous amount of innovation, and ultimately a lot of capital to support it.
David Nilssen 34:57
I remember at one point having a conversation with you about this and you know, I think of the Americas Cup as the sailors sitting on the boat, but actually, it’s a pretty large production. Could you share just quickly? Like, what is the team look like? What is the investment that often goes into this, you know, over the course of the year or what have you until you guys are actually in the water?
TA McCann 35:17
Yeah. So a current America’s Cup team will be somewhere between two and three years long, a campaign of which the end, actual America’s Cup, the cell will be like 10 days at the end of it all. So you are iterating, many, many years in front of that. A team today might have hundreds and in the case of 92, I think we had nearly 200 people on the team. And we had 36 sailors, so it was two full sailing teams, which was also expensive. Many times, you’d basically have one full sailing team and a bunch of alternates, or have two full sailing teams or a half sailing team and some of the shore team. But in our case, we wanted to do two boat testing a lot. So this was for us who are technology, this is a B testing, like and we would build the A and the B and we would hold one variable constant and we change the other variable. And if you wanted those boats to have a very good AB test, you’d want to have the best possible sailors on both boats, not just A team and a B Team. Because that variable you wanted to hold consistent. So we had two full sailing teams. And we had all the short team, and we all the design team. And we had all experiment team. So there was in our case, because we had a lot of capital, we had material scientists and chemists and things like that, that were on the team where, like, if you didn’t have as much capital or didn’t want to do as many experiments, you might not be able to afford that level of people. But nearly America’s Cup today will cost somewhere between 50 and $100 million to go do. And it’ll be two to three years long. And it will be that type of production the same way you would do, it looks like a Formula One type of team.
David Nilssen 37:00
Yeah, it’s just amazing. I you know, again, you see it on television, you know, you know, it’s a big production. But when you hear in that context, it’s significant. TA I always love asking entrepreneurs about some of the biggest mistakes they’ve made are bigger than lessons maybe is the better way to put in, I always reflect for me, in 2007 2008, I did not have a framework for which I would respond in a crisis. And it was a huge challenge with how we handled that at that time. But learning that set me up for great success when the pandemic happened, I feel like we really executed well during that period of time. And I’m just wondering, in that context, if there’s a moment in your career that you can reflect on that you learned a pretty significant lesson that’s helped influence you and others going forward.
TA McCann 37:45
Yep. So on the lesson side, I’ll say two one is firing somebody based on culture. So there were a few times in my career where I had a very, very important employee who didn’t live to the level of culture in my organization, and I didn’t fire them fast enough. And it wasn’t egregious. It was just, oftentimes, certain roles don’t respect other roles at the level they should. And that level of disrespect while may not be overt, and sometimes avert. I didn’t fire fast enough on that particular level. So, in retrospect, now, I really pay a lot of attention for how are different roles and responsibilities respecting, contributing, collaborating inside an organization. That’s one lesson, two is, I applied it a lot now, is I never did enough customer discovery, customer development. And with every company that I’ve done, it’s become progressively and usually orders of magnitude more customer discovery, customer development. And that’s a lot of what I talked about from a PSL perspective. And part of that customer development is ability and willingness to pay. I can’t tell you how many opportunities and entrepreneurs I talk to where they say, oh, I’ve talked to tons and tons of customers, I go great. If you had to stack rank them based on how many you’re going to pay and how much they’re going to pay. They haven’t asked that question, because most people don’t want to give them that answer. So finding this customer discovery, customer development and early adopter customer, which effectively is defined by they are now giving me money for the thing I’m building is a lesson. And while it’s not a lesson or mistake, it’s something is advice I give oftentimes, since they’ve now done three different acquisitions is that business development is the first step toward acquisition. And really thinking about at every step along the journey, especially when you raise more capital is like who could kill me, like which big company could kill me? And do I understand their strategy? And can I align with their strategy well enough, so that they can give me some momentum in the field. Step and that might be an acquisition the second step. So that’s business development leading to M&A. And most entrepreneurs, they never think about that until it’s too late or till it’s the end. And yet, I think they should be thinking about that, yeah, once a quarter, once every six months. And if I asked the question of like, who do you think could kill you? And do you know the product managers at that company? And do we have any way in which we can accelerate what we’re doing today by aligning with one or more of those companies in the short term that oftentimes leads to the acquisition in the medium to long term? So BD leading to M&A?
David Nilssen 40:34
Yeah, all important. All right, well, hey, look, I know we’re getting close to the end of our time. But I always, I want to finish this by asking you about what you’re learning today, I found that entrepreneurs are lifelong learners. So what is it today that you’re trying to learn more about sort of invest in your own sort of development?
TA McCann 40:51
That’s a good question. I’m trying to learn more. I’m very comfortable in a hierarchical decision-making framework where I’m the CEO, and I know how to take everybody’s input and say, okay, we’ve discussed it long enough. Now let’s go do X. And PSL and other companies often run in a more collaborative and more partner-oriented decision-making framework. And so who gets to make the decision? And who has to input on the decision? Does it always end up with different people making those decisions? And so I’m learning a tremendous amount about that both because I have to as part of PSL. But also I think it’ll make me a better leader in general, by distributing the decision-making a little bit more efficiently across the whole organization, as opposed to that more hierarchical decision-making.
David Nilssen 41:47
I love that one of our earlier guests on this podcast was getting Lex Sisney who talks about teaching people how we make decisions, so you could push more authority and autonomy into the organizations themselves. I think that aligns really nicely. All right, well, we’ll leave it there. We’ve been talking to TA McCann, the managing director of Pioneer Square Labs. TA, where can people go to learn more about the work that you’re doing?
TA McCann 42:08
So we have psl.com is a Pioneer Square Labs. And I have my blog, which is tamccann.com and I blog a lot about entrepreneurial topics and what we’re learning here at PSL. So those are two places where you can find me and certainly on LinkedIn as well.
David Nilssen 42:22
Awesome. And we will track down that America’s Cup Is Like A Successful Startup blog post, but then in the show notes for everyone here. TA thanks for being on the show today.
TA McCann 42:31
Super fun. Thank you, David.
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