John tells us about how the Lean Startup model changed angel investing, the role of higher education in entrepreneurship, working with family, and dynamic equity.

Today’s guest, John Richards, has a ton of things going on. He’s a prolific angel investor and has invested in companies such as Omniture, Domo, FundersClub, and many others. John founded the Center for Entrepreneurship and Technology at Brigham Young University, and most recently co-founded Startup Ignition with his son to teach budding entrepreneurs what they need to know to launch a startup.

If Startup Ignition or the last name Richards sound familiar, that might be because I spoke with John’s son, Tyler Richards, in episode 40.

We’re going to learn how the Lean Startup model helps angel investors find success, the role of higher education in entrepreneurship, and how Dynamic Equity can help co-founders in a growing startup avoid common points of conflict.

“The Lean Startup framework has really also helped the investor be a better investor.” (click to tweet)

“You’d be surprised at how much you can get done with very little capital.” (click to tweet)

“Actually, the raising of capital prematurely hurts the entire entrepreneurial process.” (click to tweet)

“Startups and companies are meant to be benevolent dictatorships not democracies.” (click to tweet)

In this episode, you’ll learn from John:

• 4:45 – In 1994, John’s life changed after he first encountered Internet. He said, “This is going to change the print business. Some day the print business is going to be very threatened,” and in January 1995 he launched the first internet Yellow Pages. In September 1995, John re-launched the site with a new business model. He merged with a company founded by three ex-Microsoft employees to create InfoSpace.
• 6:55 – John retired from InfoSpace in 2001, and after six months he went to Brigham Young University to teach. He became a professor of entrepreneurship and started pursuing angel investing.
• 11:10 – “I think almost every angel investor has a horror story of their first year of angel investing, and dumb mistakes they made. I certainly did.”
• 11:50 – John has made about 75 direct investments and hundreds of others through seed funds or VC funds. He was a member of Utah Angels, the largest angel investor network in Utah which invested over $100 million collectively, and their biggest success was Omniture.
• 12:25 – What did you see in Omniture, or any of John’s other investments, that made John want to invest? For Omniture it was two key things:
  1. The product was exciting and interesting because it was one of the first SaaS products to go against client-server models.
  2. There was also the team. The founders were going to never say die. The founders were also tremendously protective of investors. “They were just a winning team with a winning product, and that’s the magic.”
• 15:55 – “In the post-Lean Startup era, I’ve become a much better and more savvy investor.  It’s now really apparent that the best way to be an Angel Investor is to do a small amount very early, and then double, triple, quadruple down on the deals as they become winners. That’s how you get the best returns as an Angel Investor.”
• 18:15 – “You’d be surprised at how much you can get done with very little capital, and actually the raising of capital prematurely hurts the entire entrepreneurial process.”
• 20:15 – John shares the story of ForeUP, a SaaS golf course management startup that has taken $60,000 of angel investor money and grown into a  multimillion dollar business with positive cash flow.
• 28:35 – What is the role of formal education in entrepreneurship?
• 29:55 – “The best, best thing that entrepreneurs get about attending a university is the collisions with other peers and likeminded people, where they can have their ideas, get together and merge ideas, form teams and do great things.” Facebook, Google, Apple, Microsoft are just a few companies that were founded by people who met and started collaborating in college.
• 37:35 – John shares the story of Scan, a startup that started in his class and sold itself to Snapchat for $54 million.
• 40:15 – We discuss co-founders. John co-founded Startup Ignition with his son, Tyler Richards, and shares his unique perspective informed by years of experience.
• 40:55 – “Co-founders and that is really the most seriously dangerous part of entrepreneurship.”
• 41:55 – John and Tyler attempted to avoid potential conflicts by not doing fixed equity and instead adopting a unique and new concept called Dynamic Equity. You can learn more about dynamic equity in Slicing Pie.
• 47:25 – “Startups and companies are meant to be benevolent dictatorships not democracies.”
• 48:50 – Quickfire Q&A

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Resources mentioned in this episode:

• Startup Ignition
• Omniture
• ForeUP
• Evercontact
• Slicing Pie by Mike Moyer
• The Startup Owner’s Manual by Steve Blank (affiliate link)
• The Millionaire Next Door by Thomas J. Stanley (affiliate link)
• Wisdom of Crowds by James Surowiecki (affiliate link)
• The Innovator’s Dilemma by Clayton M. Christensen (affiliate link)
• The Count of Monte Cristo by Alexandre Dumas (affiliate link)

Answers to Quickfire Q&A:

1. If you could chat with anyone, dead or alive, who would it be and why?
   1. William Durant, an original co-founder of General Motors.
2. Name a tool, app, or website that you can’t live without and why.
   1.  Google’s suite of tools – Google search and Google Apps. “It’s entertained in my DNA, using those tools.”
   2. There’s a company now called Evercontact that goes into your Gmail and, every time you interact with a new person, it creates a contact entry for that person, “and it does it flawlessly.”
   3. As a new grandpa, John and his family use SnapChat to share private moments with him.
3. Tell us something unique and interesting about you that not many may know.
   1.  John was state chess champion of Washington State, and he is an avid pickle ball player.
4. What is your favorite business book and why?
   1. The Startup Owner’s Manual by Steve Blank (affiliate link)
   2. The Millionaire Next Door by Thomas J. Stanley (affiliate link)
   3. Wisdom of Crowds by James Surowiecki (affiliate link)
   4. The Innovator’s Dilemma by Clayton M. Christensen (affiliate link)
   5. The Count of Monte Cristo by Alexandre Dumas (affiliate link) “Just his raw determination to let nothing stop him from achieving his goal … that kind of determination and grit is what I’m kind of looking for in an entrepreneur.”
5. What is the top characteristic or trait that you look for in people you work with?
   1. “You want honesty of course, but hard work ethic and tenacity and perseverence, those things.”
6. What is something you believe, but few others agree with you?
   1. John has a philosophy: “I personally believe that any company, in its first 18 months, that has a founder with 5% or more ownership in the company, that takes 70% or higher of a market rate salary, that that company will never give venture returns to its founders or any investors.” John issued a challenge that no one could come up with an example. Can you?

How to contact John:

You can contact John at jrichards@startupignition.com if you have any entrepreneurial questions and you can check out startupignition.com to learn more about the bootcamp.

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