Build: An Unorthodox Guide to Making Things Worth Making

by Tony Fadell

They demanded to be shown ahead of time that the unit and business economics of the product were sound. But that was impossible. They were asking us to predict the future with near 100 percent confidence. They were asking for proof that a baby could run a marathon before it had even learned to walk. These guys didn’t know much about babies. They knew even less about how to create a new business.

So when we started work on the Nest Protect smoke and CO alarm, our second product, you’d think it would be easier. That everything we’d built already would let us skip a few steps. But the second you start a new product, you have to hit the restart button—even if you’re at a big company. Sometimes it’s even harder the second time around because all the infrastructure that’s been built up for the first product gets in the way. So you’ll still need to go through at least three generations before you get it right.

You make the product. You fix the product. You build the business. You make the product. You fix the product. You build the business. You make the product. You fix the product. You build the business. Every product. Every company. Every time.

I was exactly the kind of founder investors like. Four failed startups and years of professional disappointment had paved the way for a decade of success. I was forty years old, knew exactly how hard this was going to be and which mistakes not to make again. I’d worked on hardware and software at tiny and enormous companies. I had contacts, credibility, and enough experience to know what I didn’t know. And I had an idea.

Making it beautiful wasn’t going to be hard. Gorgeous hardware, an intuitive interface—that we could do. We’d honed those skills at Apple. To make this product successful—and meaningful—we needed to solve two big problems: It needed to save energy. And we needed to sell it.

There are three elements to every great idea: 1. It solves for “why.” Long before you figure out what a product will do, you need to understand why people will want it. The “why” drives the “what.” [See also: Chapter 3.2: Why Storytelling.] 2. It solves a problem that a lot of people have in their daily lives. 3. It follows you around. Even after you research and learn about it and try it out and realize how hard it’ll be to get it right, you can’t stop thinking about it.

Before you commit to executing on an idea—to starting a company or launching a new product—you should commit to researching it and trying it out first. Practice delayed intuition. This is a phrase coined by the brilliant, Nobel Prize–winning economist and psychologist Daniel Kahneman to describe the simple concept that to make better decisions, you need to slow down.

The best ideas are painkillers, not vitamins. Vitamin pills are good for you, but they’re not essential. You can skip your morning vitamin for a day, a month, a lifetime and never notice the difference. But you’ll notice real quick if you forget a painkiller. Painkillers eliminate something that’s constantly bothering you. A regular irritation you can’t get rid of. And the best pain—so to speak—is one you experience in your own life. Most startups are born from people getting so frustrated with something in their daily experience that they start digging in and trying to find a solution. Not every product idea has to come from your own life, but the “why” always has to be crisp and easy to articulate. You have to be able to easily, clearly, persuasively explain why people will need it. That’s the only way to understand what features it should have, whether the timing is right for it to exist, whether the market for it will be tiny or enormous.

You do not want to start a company only to discover that your seemingly great idea is a shiny veneer over a hollow tooth, ready to crack at the slightest pressure.

A lot of startups have a “fail fast” mentality in Silicon Valley. It’s a trendy term that means instead of planning carefully for what you want to make, you build first and figure it out later. You iterate until you “find” success. This can manifest in two ways—either you knock out a product quickly then iterate even faster to get to something people want, or you quit your job, cut loose from your commitments, and sit around thinking up startup ideas until you find a business that works. The former approach sometimes works; the latter usually fails.

Anything worth doing takes time. Time to understand. Time to prepare. Time to get it right. You can fast-track a lot of things and skimp on others, but you cannot cheat time.

I came back to Silicon Valley and got to work. I researched the technology, then the opportunity, the business, the competition, the people, the financing, the history. If I was going to upend my life and my family, take a huge risk, dedicate five to ten years to creating a device unlike anything I’d ever made in a space I knew nothing about, then I needed to give myself time to learn. I needed to sketch out designs. I needed to plan out features and think about the sales and business model.

We didn’t have perfect data that we’d succeed. No amount of research or delayed intuition will ever guarantee that. We probably had 40–50 percent of the risks of starting this company identified, with ideas for how to mitigate them. But there were still vast, yawning unknowns before us. In the end, even with all our hard work and preparation, this was an opinion-driven decision. [See also: Chapter 2.2: Data Versus Opinion.] So we went with our gut. It felt scary as hell, but it also felt right.

The interesting thing is that delayed intuition generally doesn’t make it less scary. If anything, the more you understand it, the more butterflies in your stomach it’ll give you. Because you’ll uncover all the ways it can go wrong; you’ll know the million things that might kill this idea and your business and your time. But knowing what can kill you makes you stronger. And knowing that you’ve already deflected some major bullets makes you stronger still.

Eventually, each of those risks became a rallying cry for the team—instead of avoiding them, we embraced them. We continually said to ourselves, “If it were easy, everyone else would be doing it!” We were innovating. The risks and our ability to solve for them was what set us apart. We would do something nobody else thought possible.

It took me a decade to decide to build my first thermostat. Deciding to build a second version probably took a week. In fact, we already knew what the second version should be before we even finished the first one. We’d proven the market potential and the technology—now we just needed to refine it. Of course we’d make a second-generation thermostat.

If you’re optimizing, you have data, constraints, and experience to lead you. You’ll already know what it takes to get to V1, so reaching V2 won’t be as much of a stretch. Or a mystery. V2 is never as scary as V1. V1 is always completely, utterly terrifying. Always. Big, great, new ideas scare the living crap out of everyone who has them. That’s one of the signs that they’re great.

There’s always an exception, an incredible wunderkind who rides a unicorn to the moon, but most successful entrepreneurs are in their late thirties and forties. There’s a reason why investors prefer to back second-time entrepreneurs even if they failed the first time around. It’s because these founders spent their twenties screwing up and learning. Most follow the same path I did: they work hard, fail and fail, take risks and go to doomed startups and try out giant companies and take the wrong job and luck into an amazing team and quit too early or don’t quit soon enough. They bounce around like a pinball, constantly smacking their heads into something. They learn. Trial by fire.

But they came out on the other side with a basic mental model of a startup. They understood the operational details and what it might look like if that tiny startup became successful. That’s it. That’s the magical key to success.

The problem is that it takes years to get there. And everyone wants a shortcut.

Even if you have a brilliant idea for a world-changing product, when you’re starting a business, you need to run that business. Making something new is hard enough—the unknown unknowns that keep you up at night should be focused on the problem you’re trying to solve, not on whether to get a marketing agency or what kind of lawyer to hire. You won’t have time to screw up the basics, to waste time learning the fundamentals.

Money burns fast. If you don’t have the confidence to move forward quickly, you’ll have to continually slow down to consult a hundred people about a thousand decisions. You’ll get mired in options and opinions. “What’s the best? What’s the latest?” will rattle in your head endlessly. You’ll lose sight of where you’re trying to go in the face of all the different ways to get there.

But be careful—even if you have a cofounder, there can only be one CEO. And if you pile on the cofounders, you’re asking for trouble. Having two founders works well. Three can work sometimes. I’ve never seen it work with more.

When you close your eyes, you should already know exactly who your first employees will be. You should be able to write down a list of five names without a second thought. If you don’t have that list of names ready before you start, you probably shouldn’t be starting.

For the first twenty-five or so employees it’ll all come down to you and your cofounder—your vision, your network, your ability to convince people that you know what you’re doing.

You need a story people can get behind. [See also: Chapter 3.2: Why Storytelling.] People you respect. People who will help you create something great. Your team is your company. And your first hires are crucial—they’ll help you architect what your business and culture will become.

Every member of your founding team should be proven and great at what they do (consider any failed startups in their past a bonus—that means they know what to avoid this time around), but they also need to have the right mindset. Getting from 0 to 1 is a huge lift that asks a lot of everyone, especially considering it may not pay off.

Titles, pay, and perks should never be your main draw, but that doesn’t mean you should be cheap. Try to be reasonably flexible and structure compensation so it fits the individuals you’re hiring. Some people may prefer cash over equity and that should always be an option. But most of your team should get generous equity packages—they are owners of the idea, too, so they should also be owners of the company. You want your team to have a vested interest in your success so when things go wrong—and they definitely will—those people will stick with you.

In those very, very early days you want people who are there for the mission above all. You’re looking for passion, enthusiasm, and mindset. And you’re looking for seed crystals. Seed crystals are people who are so good and so well loved that they can almost single-handedly build large parts of your org. Typically they’re experienced leaders, either managers of large teams or super-ICs who everyone listens to. Once they’re in, a tidal wave of other awesome people will typically follow.

Bill wasn’t remotely technical, had never been an engineer, but he knew people. He knew how to work with them and get the best out of them. He could tell me how to run a board meeting. He could tell me what to do if my team got stuck. And he could always see issues coming a mile away. When he saw I was about to take a wrong turn, he’d put his finger in his mouth, make a popping noise, and say, “You know what that is? That’s the sound of you pulling your head out of your ass.”

You can make do without a cofounder. You can survive for a while without a team. But you can’t make it without a mentor.

Find at least one person who you deeply trust and who believes in you. Not a life coach or an executive leadership consultant, not an agency, not someone who’s read a lot of case studies and is ready to charge you by the hour. And not your parents—they love you too much to be impartial. Find an operational, smart, useful mentor who has done it before, who likes you and wants to help.

I’ve seen way too many people come out of the corporate world, decide to start a company, and be completely unprepared for what it takes. If they’ve never been on a small team starting from scratch, they’re often a fish out of water. They spend too much money too fast. Hire too many people. Don’t put in the time, don’t have the startup mentality, can’t make hard decisions, are buried by consensus thinking. They end up making mediocre products or nothing at all. Don’t let that be your story. If you want to start a company, if you want to start anything, to create something new, then you need to be ready to push for greatness.

Every time you raise capital, you should think of it as a marriage: a long-term commitment between two individuals based on trust, mutual respect, and shared goals. Even if you take money from an enormous venture capital (VC) firm, everything ultimately comes down to the relationship you form with a single partner at that firm and whether your expectations are aligned.

in marriage, you can’t just throw yourself at anyone who shows a little interest. You have to take time to find someone you’re compatible with—who doesn’t play games or pressure you too much—and make sure it’s the right moment for you to settle down. You don’t want to get married when your company is so young that you don’t know who you really are or what you want to become, or just because all your friends are doing it, or because you’re scared that if you don’t make a commitment now you won’t be able to find another relationship. You also have to understand your partner and their priorities. For example, a VC is beholden to the limited partners (LPs are large-scale investors or entities like banks or teachers’ unions or very wealthy families) who fund that VC—so they may push you to sell or go public before you’re ready in order to show value to the LPs. And a company with a VC arm, like Intel or Samsung, may use their investment in your company to wrangle a better business deal for themselves at your expense. Even if your funders have your best interests at heart—even if your mom is your angel investor—that doesn’t necessarily mean her money comes risk-free or with no strings attached.

The reason venture capital exists is to facilitate transactions—you need money, they give you money. But the reason it works is relationships—the back-and-forth between you and a VC during the pitching process, the way a VC helps you recruit execs or run your board after the deal, the connections they offer for your next round. Venture capital is not fueled by money. It’s fueled by humans.

And the rules for every successful human relationship are the same: before you can jump headfirst into a major life-changing commitment, you need to get to know each other. Trust each other. Understand each other.

Another thing: you’ll never hear “it’s not you, it’s me.” It’s always you. It’s your company, your ideas, your personality that will be judged.

It’s hard to be exposed like that; it’s hard to open yourself up. And that’s true even if everything’s gone crazy—even if it seems like anyone with half a pitch deck is getting funded.

So before you start this process, you first have to know yourself and be sure of what you’re asking for. Because you won’t get a second chance at your first round. You have to be serious. You have to prepare. And you have to know what you’re getting into.

But regardless of what source of capital you choose, everything ultimately comes down to the individuals you’ll work with. Even if you get a meeting with the biggest firm in Palo Alto, you won’t be meeting with the whole firm. You have to impress and form a relationship with one person in that room: the partner. That’s who will decide the terms of your agreement, who will be on your board. That’s the person you’re marrying.

Remember, once you take money from an investor, you’re stuck with them. And the balance of power shifts. A VC can fire a founder, but a founder can’t fire their VC. You can’t divorce them for irreconcilable differences. And if things go south, you can end up in an estranged marriage—still legally tied together, but never speaking. When a VC writes off your company, they basically ignore you. Won’t help you. Won’t connect you to other VCs. Won’t speak up for you to partners. They’ll stand on the sidelines as your company goes bankrupt. So you should always pay very close attention to how a VC treats you when they should be on their best behavior—when you’re getting along in the process and it seems like you might come to an agreement. If they start screwing around with you then, it should always ring alarm bells in your head. Here are a few other warning signs:

Greedy VCs who will invest only if they can take an outsized piece of your company. Typically a VC needs between 18 and 22 percent to make their model work—step carefully if they begin asking for more. And don’t assume they’re the only game in town—if your gut is telling you to keep looking, then keep looking. Some VCs court very inexperienced startups with the intention of pushing them around and telling them what to do rather than allowing the founder and CEO to run the company. Mentorship and advice is one thing; orders that must be obeyed are another.

One thing that many founders worry about but which isn’t usually a warning sign is if a VC has fired CEOs or founders in the past. Do your research—look at their track record. There are some well-known firms who are so focused on the company that they cut off founders’ heads without giving them a second chance, but most VCs are generally hesitant to remove founders. Sometimes too hesitant. And those who do so infrequently will have a very good reason.

The best way to do that is with a compelling story. And knowing your audience. Even in Silicon Valley, most VCs won’t be technical. So don’t focus on the technology, focus on the “why.”

It won’t be easy to fit everything you want to say into fifteen slides—to make it flow in one smooth narrative, to make it compelling emotionally and rationally, to keep it high-level enough so that people can easily grasp the important points but not so high-level that it seems like you haven’t dug into the details. It’s an art. As with all art, it takes practice. You’ll probably suck at it at first. Pitching is hard. You’ll need to constantly tune the deck up, change it around, tweak and revise. So you don’t want your first pitch to be in front of the very top VC in your area. VCs talk to each other, so if one casts you aside, the others in that class may pass as well. If you can, pitch a “friendly” VC first—one that will give you feedback and help you improve and then, hopefully, welcome you back a second time. Remember that you don’t have to come in perfectly polished for that first meeting. You can say, “I’d like to give you an early look at this. Maybe it would be of interest to you. I’d love to get your comments on it.” Listen to their feedback and learn from it. You don’t have to take every word of advice or criticism, but you should understand the reasons behind it and adjust accordingly. Once you understand the pieces on the board, you can better plan your move. You can tailor the story to the individuals you’ll meet. You’ll start to feel ready. Just don’t forget the other factor that can sneak up and kick your ass: time.

It will take longer than you think to get funding. Expect it to be a 3–5 month process. It may end up being faster than that—especially in a founder-friendly environment—but I wouldn’t gamble on it.

Try to get two similarly influential investors to balance each other out. All VCs know each other, all VCs talk—and nobody wants to piss off their potential partners. So if one of your investors starts playing games, the other can tell them to cut the crap. Your business may not matter all that much to them in the long run, but typically nobody wants to ruin their reputation among other VCs and especially the LP community.

Finally, remember that even if you have an incredible meeting—everyone loves the pitch, you love the investors, the room is practically vibrating with good energy—even then the people you met with will have to go back and convince the investment committee to give you money. For every VC that process is different, so keep asking the question: What’s the next step to get us to a yes? What’s the next step? What’s the next step? It’s like playing chess. You always have to think two moves—and two investment rounds—ahead. Even if you’re not interested in VCs yet. Even if you’re just looking for an angel.

Regardless of whether your company is business-to-business (B2B) or business-to-consumer (B2C) or business-to-business-to-consumer (B2B2C) or consumer-to-business-to-consumer (C2B2C) or some-yet-unimagined acronym, you can only serve one master. You can only have one customer. The bulk of your focus and the whole of your branding should be for consumers or business—not both.