How Business Schools Set Founders Up for Failure with Robin Copernicus: An EOFire Classic from 2021

0:28Who's ready to rock today, Fire Nation? skip investor funding. In today's foundation, we'll talk about how success is doing what you want whenever you want to do it, be yourself and be comfortable with who you are, how to empower yourself by building a vertical startup that puts all the power in the founder's hands, enjoy and profit simultaneously, and oh, so much more. And a big thank you for sponsoring today's episode goes to Robin and our sponsors. The next wave, your chief AI officer hosted by Matt Wolf and Nathan Lance is brought to you by the HubSpot Podcast Network, the audio destination for business professionals.

0:59AI technology is transforming the way we do business and the media landscape is fragmented. The Next Wave strives to be the leading podcast on AI technology and how you can apply it to growing your business. Listen to The Next Wave wherever you get your podcasts. Have you ever said to yourself, one day I will write a book? If yes, then I have an opportunity for you. Author 100 is a 100-day program where I will personally guide you one-on-one to create, write, publish, and market your book. I will provide daily guidance and mentorship every step of the way. Head over to author100.com to sign up for a free call with me to chat about the details.

1:38author100.com Robin, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. What's up, Fire Nation? Robin Copernicus in the house And in terms of what is successful, it really depends on what you define as success. So for me, success means doing what you want whenever you want to do it. And that means not playing the game, not playing the games of other people, not conforming to others. This is living a life of no limitations, no consequences. And what this means is if you want to date that person, go date that person. If you want that job or if you don't want that job, go ahead and make that decision.

2:22If you want to go get face tattoos, John, and you still keep all your friends, you still keep all your business, then this is a true freedom that most people can't enjoy. And this, to me, is really what success is. One of the first things that we do with VLO founders is when they first come into the startup program, the way we build businesses is instead of us conforming to the universe, we build businesses that makes the universe conform to us, the founders. So it's really about putting the founder first and making sure that they're able to build a company that's sustainable for them, that they won't get bored of.

3:00And that adds that definition of success where you can truly just be yourself and be comfortable with who you are. I love this message in Fire Nation. I hope you're really understanding the game aspect of it and play your own game, live your own life. I mean, I can remember I had this moment of clarity. It was honestly about like, oh, not 20, but 15 years ago now. I was on an elliptical machine. I don't know why that was part of it, but I was working out and it just suddenly clicked for me that life is a game and it can be a game that we can either choose to play and have fun or a game that we just toil away at and help build other people's dreams.

3:43And I will be honest, I haven't been able to keep that unbelievable clarity I had in that moment with me at all times. It slipped away at some points and I'll be like, man, like I want to just recapture that feeling and have it forever because it was such like this weird moment of clarity. But just because I did have it once, I've been able to go back to it multiple times and be like, John, like stop stressing out so much about X or Y or Z or stop trying to do this or that that isn't lighting you up. Like this is your game. You're in control. Let's play it. Let's have fun so that when we're, you know, in the last few days of our life, we look back and we say, I played my own game.

4:24And that's an amazing message. Now, we're going to talk about how business schools actually set founders up for failure. And we have to be honest. We have to give credit where credit is due. Business schools used to be relevant. They used to be a place where you met other founders and you learn the fundamentals of business. but we're talking about the past there. We're not talking about the present and the future. So how, Robin, has the startup world changed? The startup game is very different. So back in the day, if you wanted to launch a startup, the way that you would have to do it is you would have to go after this huge market size because the idea behind going after a huge market size is if you can capture a small sliver of this huge market size, and this is what they teach you in business schools and traditional accelerator programs like Y Combinator and tech stars is if you can capture this small sliver of this huge market size, well, then an investor can come behind you with his or her capital and help you scale.

5:20So this made sense back in the day. But the thing is, if you ever take an entrepreneurship class, one of the first things that a business school professor will tell you is that 96 % of your companies will fail. And the reason that 96 % fail is because they're having you go after this huge market size, which really just sets the founder up for failure. This makes the investors happy, Because the investors, what they're doing is they're not the ones failing, right? They're not only investing in you as the founder, but they're investing in similar founders just like you with similar companies. And they put all these companies into a portfolio knowing that 96 % will fail but hoping that 4 % will be able to cover for their losses.

6:01So the way the startup game is changing, the way venture building is fundamentally changing is what happened for the music industry is what's happening for the venture building industry right now. So if you think about in terms of the music industry before the iPhone came out, well, if you were a musician and you wanted to go nationwide with your record album, you would have to have these million-dollar budgets. So you would have to get a million-dollar record deal because you need to be able to afford the million-dollar record studios, the manufacturing capacity for your CDs, cassettes, tapes.

6:34You would need the huge marketing budgets you need for a street team in every major city to make sure that this is a good campaign, right? But now we don't need to do all that anymore because we have technologies that bring us in front of our customer on a very cheap budget, right? So technologies such as Facebook ads, Google ads, Twitter ads, YouTube ads, the game has entirely changed where now we can focus on this very small niche. We can dominate that niche. And then as we dominate this niche, then we can start slowly expanding out to other verticals. So what happened for the music industry is now happening for the venture building industry where really the power is in the founder's hands.

7:15We don't have to go to these investors anymore for these huge budgets. we can actually start a very scalable business by doing it very slowly, by focusing on the audience first. I love this. And Fire Nation, I really hope you are understanding that it is so true with this venture capital game and this angel investing game. Like these people are just spreading out a ton of bets, hoping that just 4 % go to the moon or 4 % crush it and knowing the other 96 % aren't. And so they're just not going to care at the level that you need people to care about your business in order for you as an individual, as a company to win.

7:54So let's really get specific, Robin, about equity because a lot of startups give away so much of their equity before they even start. I mean, you see some of these deals on Shark Tank, you're like, should almost be criminal. Why is it important for founders to keep a hundred percent equity? John, whenever founders approach me for the vertical liftoff Accelerator program, one of the key questions that I get is, do you take equity? And the thing is, I do not take any equity because that goes against my entire philosophy because I really do believe that you are not a boss unless you have 100 % of your equity.

8:29Because what happens is as soon as you start diluting your equity, you start diluting your vision. There's going to be other players that are in your business and they're going to give you advice that benefits them. And a lot of times for investors, they're more thinking in terms of short term, where the founder is thinking of a larger vision where they're trying to expand this huge vision. They're more about impact. But once you start giving out this equity, that takes away from this vision. This is usually where a lot of founders fail because they will start giving out equity. And what they'll learn is, especially for visionaries, especially for the natural born hustlers that have so much drive, they will find themselves frustrated because they're doing a lot of the work.

9:09And what they'll find is their co-founders stop putting in their work and they just become dead weight. So they become this dead equity weight where this visionary no longer wants to perform in the company because they're doing most of the work for only a small piece of the pie. So we are totally against taking equity. We're also against giving up equity. There are ways to motivate co-founders or people that are on your team in ways that simulate equity, for example, fandom equity, but just giving away real equity dilutes your vision. And this is one of the quickest way to kill your business. What would be an example of phantom equity?

9:45Like what does that look like? Yes. For phantom equity, the way this works is instead of giving someone equity right from the jump. So, you know, they have this equity and you might have a vesting schedule, et cetera, but you're giving up control. So in terms of keeping control, if you give out this phantom equity, what phantom equity is, is this, if you're giving out equity to a co-founder, for example, and you want to give out 5 % phantom equity, well, they don't get to exercise on this option until there's an exit event. So this equity option is tied to some type of exit event. So it could be maybe your first time you get revenue, or maybe your first valuation.

10:24And then as it's tied to this exit event, this is when this person can exercise on this equity option, but you are still able to keep 100 % of your vision and control because they have no say. They have no equity until this exit event happens. So as a startup founder, you can do everything right. And then you have some success. And then what happens? People love to sniff out other successes and then copy them. And copycats are everywhere. So how can we protect our startups from these copycats? John, this is such a great question. So a lot of founders will think that patents, NDAs, and trademarks will protect them.

11:05But that's not true because you need to have a bank account, a fat stack behind you to be able to defend those assets. So in terms of copycats, I mean, if you have a physical product, for example, and you start putting that onto the market, well, no NDA is going to stop a copycat from launching 10 versions of your product on Alibaba the very next day. You're going to see copycats, right? So the only way in the future where we can start building businesses that are immune to copycats is there's really two points of differentiation. So the first point of differentiation is on price, right? And as we all know, that's probably not a game you want to play because it's a race to the bottom.

11:44But the second point of differentiation is something that your competitors cannot take from you. And what this is, is it's your brand story and that connection with its users. Once you build up this brand story and this connection with its users, for example, John, you have this great connection with the Fire Nation. and if you were to release any kind of products and even if there were similar products out on the market, well, Fire Nation is gonna come and buy from you because they trust you and they are involved with your story. So just because you have this audience, this actually sets up a moat for your business where even if your product fails, even if your product is being copied, you will still survive because you have this connection with your audience and this brand story that cannot be taken from you.

12:27I love that and Fire Nation, I really hope that you're keeping this in mind when you're building your brand, when you're building your company, when you're serving your audience. Now, Fire Nation, we have some awesome value bombs coming up. The most advanced startup strategy that Robyn can share, the number one reason why entrepreneurs fail, and then the 6 % entrepreneur, and so much more when we get back from thanking our sponsors. Picture this. You're at a party and someone asks you what you do as a marketer. How do you even begin to describe it? Not only do you brainstorm new campaigns, create compelling copy, dream up landing pages that will actually convert and generate leads.

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15:00That's author100.com. Robin, we're back. And as I kind of teased before the break, we like advanced stuff here at Entrepreneurs on Fire. So what is your number one most advanced startup strategy? John, I am so excited to share this strategy. So here's how founders are building startups now. They will focus on the product first. and what ends up happening is when they focus on the product first, they'll usually end up running out of money before they can start marketing it or they will have built something that people don't even want to buy. I can tell you that the average startup founder, before they come into the Vertical Liftoff program, they will have spent around$100 ,000 working on their product.

15:45And once they come into the program, what they learn is they start getting traction in their very first week. And what they could have done is they could have saved all that money from developing the product, built the traction first, and then went to go developing the product. So my startup strategy, this advanced startup strategy, I have a community of early stage startup founders. And when these founders come into my community, well, I help them with different products and services that help them on their journey. So one of these journeys, for example, is to be able to help them pre-sell their idea.

16:15So in terms of pre-selling, I'm working on a SaaS tool. It's called Preseller, and it's a pre-sell social proof widget. Well, when I started developing the SaaS tool, at least developing the idea, one of the first things that I did is I did an overview of the competitors that are out in the space. And what I found is I found 40 other companies that are doing the exact same idea. But with these companies, they've already built out their product. And if you actually go look at their websites, they're dusty. They don't have any customers. They don't have any traction. And a founder like me that has an audience of early state startup founders, what I can do is I can easily go to any of these founders that are probably in debt, probably going bankrupt, and I can buy their companies on pennies of the dollar, add my audience to this SaaS tool for instant MRR.

17:04And basically, you can just keep doing this over and over where you're buying companies, you're getting cash flow, you can flip these companies or you can even keep them for yourself and just enjoy that cash flow coming in. So instead of focusing on the product where this is like a fast lane towards failure, what we're doing instead is we focus on the audience, building this customer list so we can have a moat around our business and we can approach other business and products and services like where we don't even have a product, we can go buy up other businesses and just put our audience on it for instant MRR.

17:37And I love Fire Nation, this idea of the moat. You have to be thinking moat. What is my moat? Remember this phrase that I love, the higher the barrier, the lower the competition. How can you apply that mentality, that moat type mentality to your business? How did I do with Entrepreneurs on Fire? Well, my barrier was so high, a daily podcast interviewing an entrepreneur seven days a week that people knew it was a great idea. People saw the success I was having. They were seeing my income reports, but it was just too much work. It was too hard to be replicated easily. If the barrier was low, if it was a once a month podcast interviewing an entrepreneur, then a zillion people would have jumped in and it would have been saturated and everybody would have lost.

18:24We're seeing that a lot right now in the NFT world where everybody's just copying each other on these NFTs. And there is going to be a reckoning where the blue chips will probably keep crushing it to some level, but there's going to be a lot of losers. So what is your barrier? How can you make it higher? How can you build a moat around your business? All this being said, and we mentioned this earlier, Robin, 96 % of startups will fail at some level. So what's the number one reason they fail? The number one reason that startups fail is when founders tell you that they're failing or that they have failed, they will give you all these different types of excuses.

19:04They will tell you that their co-founder left them. They will tell you that the investment that was supposed to come in, the investors now ghosted them or they couldn't get any investment funding or AWS has charged three or four times their server cost and it completely wiped away their runway and now this startup is frozen or Google Ads shut their ad account down or regulations changed. There's all these different types of excuses that a founder will give you. But the real reason that the founder is not telling you, the real reason that founders fail is not because of any of these reasons. It's because founders just give up.

19:39They lose motivation. The way a founder thinks is as an entrepreneur, we see commercial opportunities everywhere, right? We see million-dollar ideas here, million-dollar ideas there. And we just jump on an idea thinking it'll give us freedom. But what we end up learning is it's really difficult to see 10 years out. And once we start putting ourselves into the startup, we're actually just trapping ourselves into a job. And the first obstacle that comes up, a founder will use that excuse because really they just want to give up. They lost motivation. They'll use that obstacle as an excuse on why they failed.

20:13They will tell you all these different things. But the real reason, because I truly believe that if the founder was motivated, they would have figured it out. They would have went around those situations and they would have made it happen. But because they gave up, they realized that it's not something they want to do anymore. They just quit. And this is how the vertical liftoff program is so different is instead of focusing on what makes investors happy, what makes shareholders happy, well, we're all about 100 % equity, right? So that's the shareholder of one. We're all about establishing founder market fit first.

20:45Once you establish founder market fit, what this does is this gives you a thousand year view into your business so you know you're getting yourself into something that's not going to fail. This is kind of like having eagle vision. So an eagle, if an eagle is on the 10th floor of a building, well, this eagle is able to see an ant crawl on the floor. This level of resolution is what you get once you're able to establish founder market fit and you're putting yourself into a business where you know you'll succeed because you love your customers, the customers love you, and it doesn't feel like work.

21:17It just feels like fun. Fire Nation, what are you doing if you're not going after fun? What are you doing if you're not going after every single potentiality that's going to lead to your success, to you building that moat, to you having that barrier being high, to you avoiding that final finality of failure? And Robin, you have a phrase, the 6 % entrepreneur. What the heck is a 6 % entrepreneur? Fire Nation, the 6 % entrepreneur is a very special type of entrepreneur. So the age-old question, are entrepreneurs made or are they born? Well, the thing is, there are some entrepreneurs that are made.

21:57There are some entrepreneurs that are born. This concept of the 6 % entrepreneur, this was actually from a clubhouse room with David Rose. So David Rose, he's a prolific angel investor. He actually teaches other angel investors how to angel invest. But what David Rose says is there's three different types of entrepreneurs. The first type of entrepreneur are consequential entrepreneurs. These are your entrepreneurs who are in some type of really bad situation. They're probably living in poverty. There's no jobs around them. And to get out of whatever situation they're in, they have to turn towards entrepreneurship.

22:25This is the only way out. So this is your type one consequential entrepreneurs. Then your type two entrepreneurs, these are your natural born entrepreneurs. And there's something very special about these natural born entrepreneurs. And these are your 6 % are entrepreneurs and I'll cover exactly what that is. The type 3 entrepreneurs, well, these are your entrepreneurs that have kind of done all the right things. They, you know, went to the schools, they got the jobs and somewhere in this career where they're specializing, they found some kind of commercial opportunity and they want to capitalize off this opportunity.

22:57So they're teaching themselves how to become an entrepreneur, but they're not your natural borns. They're not just like self-driven from day one. Well, these natural born entrepreneurs, they are very different they see the world very differently they evaluate risk very differently there's a lot of pros and cons to these natural born entrepreneurs so they succeed spectacularly they equally fail spectacularly they don't need very much sleep they're hypersexual they there's a lot of things that they do very different that where these entrepreneurs actually start failing these 6 % entrepreneurs is when they start taking conventional advice.

23:36So what I call quote unquote normie advice. This might work for other people, but 6 % entrepreneurs, these are your natural ones. They think very differently. And in terms of this thinking, David Rose, he mentioned this book by John Gardner, who is a psychologist at Johns Hopkins University, my alma mater. And in this book, it is a history lesson of hypomanic entrepreneurs. So what hypomania is, hypomanic entrepreneurs are people who actually suffer from type two bipolar disorder. And this sounds like a scary thing, but it's actually not that bad. But what this means is for bipolar people, you alternate between mania and depression.

24:15Well, each of these levels, mania and depression, this is debilitating. For hypomanic entrepreneurs, however, it's a sub-level of mania. So this actually gives the hypomanic entrepreneur superpowers. And this is your 6 % entrepreneur. In terms of how I came up with that number 6%, this was the only statistic that I was able to find. They did a survey on how many people in a U.S. college setting has this trait. The number was 6%. So this is the number that I went with. But obviously, I think that number is much smaller. there's probably less than 1 % of these natural born entrepreneurs. And for this non-conventional advice, I actually have a podcast.

24:55It's called the 6 % Entrepreneur. And this is all advice for these natural born visionaries, these hustlers that don't do things the conventional way. And that conventional advice just does not work for them. Fire Nation, you don't listen to entrepreneurs on fire for normie advice. We don't talk about normie advice here because you can go get that at any boring place where all the sheeps go, and then you can start buying all the way to a normie lifestyle. And if you want that, go. Good. I mean, that is not a bad thing for some people. In fact, there's a lot of happy people that want that normie life, but that's not you.

25:32Obviously, you're not listening to a podcast focusing on entrepreneurship if you want the normie advice. Real quick, Robin, do we get that book name? The name of that book is called The Hypomanic Edge. And here's a little hint about The Hypomanic Edge. If you're interested more about learning about these type of entrepreneurs, that first chapter is golden. So if you want a little tease, you can easily go to Amazon and just download that first free sample chapter and it's going to fundamentally shift on how you actually see yourself as a hustler, as a natural born entrepreneur, as a visionary. Well, Rob, and I want to end with a bang because you have a book of your own.