20VC How To Create FOMO For Investors, How To Manage VC Conversations & A Repeatable Process For Learning New Things with Anna Shedletsky, Founder & CEO @ Instrumental.ai

In this episode of "20 minutes VC," host Harry Stebbings interviews Anna Shedletsky, founder and CEO of Instrumental, a company revolutionizing consumer electronics manufacturing with data-driven quality assurance. Shedletsky, an ex-Apple engineer, shares her transition from designing for the Apple Watch and iPod to creating a startup addressing manufacturing inefficiencies. She outlines her methodology for rapidly scaling the learning curve in new areas, emphasizing the importance of setting clear goals, researching, planning, iterating, and having a plan B. Shedletsky also discusses the challenges of fundraising, including creating a sense of urgency (FOMO) among investors and the pitfalls of prematurely closing conversations. She highlights the value of building relationships with VCs and other founders, often through personal advice sessions and networking dinners. Additionally, Shedletsky touches on the potential of machine learning in manufacturing and the significance of maintaining a diverse and passionate team culture at Instrumental.

• Anna Shedletsky is the founder and CEO of Instrumental, a startup assisting consumer electronics companies in shipping quality hardware on time.
• She previously worked at Apple as a product design leader for the Apple Watch and as a product design engineer for the iPod.
• Instrumental has received funding from first-round Capital and other notable investors.

"Now, Anna is the founder and CEO at Instrumental, a startup that helps consumer electronics companies ship quality hardware on time."

The quote introduces Anna Shedletsky and her company, Instrumental, highlighting its role in the consumer electronics industry and its success in securing funding.

• Anna started her career as an engineer at Apple, where she gained extensive experience and responsibility, allowing her to learn quickly.
• She focused on learning how to build millions of quality products, a significant challenge in hardware manufacturing.
• Anna's aha moment to leave Apple was influenced by a personal tragedy and the desire to contribute to a world she wants to live in.
• She founded Instrumental to solve a significant problem in manufacturing and to contribute to the robotic revolution she believes will happen in her lifetime.
• Anna emphasizes the importance of automation for maintaining a competitive edge.

"And ultimately, my goal there was to learn how to build millions of things. And that's exactly what I got to do."

This quote summarizes Anna's learning objective at Apple, which was to understand the process of mass-producing quality hardware.

"And instrumental is working to solve a big, expensive problem in a really unloved space."

Anna identifies the motivation behind Instrumental: to address a substantial, overlooked issue in the manufacturing industry.

• Leaving Apple was challenging, especially parting with her team, but the prospect of building something new was compelling.
• Anna believes that despite Apple's resources, there is excitement in creating something potentially better on her own.

"I think the most difficult part of it was leaving my team, I really loved working with the watch product design."

Anna reflects on the emotional challenge of leaving her colleagues at Apple, indicating the strong bonds formed during her tenure.

• Anna's biggest strategic takeaway from Apple was exposure to the consumer electronics manufacturing space, which led to understanding customer problems.
• Instrumental aims to assist hardware engineers in identifying and resolving manufacturing line issues to avoid production delays.
• Tactically, Anna adopted core values from Apple, such as making decisions in the customer's best interest and focusing on detailed design.

"Essentially, I'm building a product for what I used to do."

Anna explains that Instrumental is a solution designed based on her own experiences and needs during her time at Apple.

"And the two that we've adopted are to make the decisions based on what's best for the customer."

This quote highlights the customer-centric approach that Anna has brought from Apple to Instrumental, ensuring that team efforts align with customer needs.

• Anna's approach to learning new aspects of business involves breaking down the learning process to scale the learning curve rapidly.
• She emphasizes the importance of being systematic in acquiring new knowledge and skills.

"That's a great question, and it's something tha"

Although the quote is incomplete, it suggests that Anna is about to share insights into her learning process, which is a critical part of her transition from employee to founder.

• Anna Shedletsky shares her experience transitioning from a mechanical engineer to learning new business skills.
• She has created a repeatable process for learning new things, which she can walk through using an example.

That is so I'm a career mechanical engineer, at least I was. I still feel that way at my core. And so while I know all sorts of information about the organizational structures of hardware teams. That's about it. I don't know anything about building software teams or finances, et cetera.

This quote highlights Anna's background as a mechanical engineer and her initial lack of knowledge in other business areas, emphasizing the need for her to learn new skills.

• Identify the goal.
• Identify the problem that makes the goal not trivial.
• Research extensively, including reading, speaking to advisors, and seeking advice from a network.
• Define a plan based on the gathered information.
• Iterate until success, learning from mistakes and improving the process.

And so I've realized that I've created this repeatable process for learning new things and new parts of building a business, and I can certainly walk through it.

Anna explains that she has developed a systematic approach to learning new aspects of business, which she can explain in detail.

• The goal is to hire the first software engineer.
• The problem is the lack of ability to judge candidates due to Anna's mechanical engineering background.
• The research involved reading online resources, debating coding assignments, studying interview questions, and getting advice from the network.
• The plan included setting up a hiring interview flow with specific questions.
• Iteration involved improving the hiring process, reducing time to assess candidates, and managing candidate expectations.

And so in the case of hiring a software engineer, I read a lot online about what makes a good software engineering for an early stage company.

This quote explains part of the research phase in the learning process, specifically about hiring a software engineer and what attributes are desirable for an early-stage company.

• Always have a plan B for company-critical tasks.
• In Anna's case, hiring a contractor served as a plan B while searching for the right employee.
• The plan B evolved into successfully recruiting the contractor as the first engineer.

I think there's one more thing that's really important, and that's to start a plan B on the side. Anything that's company critical, like hiring this first hire or fundraising or whatever, you need to have a plan B.

Anna emphasizes the importance of having a backup plan for critical business operations, using the example of hiring their first engineer.

• Culture screening is used to quickly assess if a candidate is a good fit.
• The screening process asks if the interviewer would want to have another conversation with the candidate.
• Anna believes in screening for passion, asking candidates about their passions to gauge if they would be a good cultural fit.

And then the other thing we've had to iterate on is how we offer and who we offer to.

Anna discusses the need to refine the offering process to candidates, indicating the importance of learning from hiring experiences.

• Anna addresses the concern of culture screening leading to a homogenous team.
• Instrumental's team consists of individuals with different "angular" qualities, united by passion.
• Candidates are asked to talk about something they're passionate about to assess cultural fit and diversity.

Absolutely. And it's a great question and one that's really important to us.

This quote is Anna's response to the question of maintaining diversity while using culture screening in hiring, highlighting the significance of this issue to their company.

• Anna and her co-founder, both mechanical engineers, began with no knowledge of managing a software team.
• They keep a running stack rank in a Google Doc of potential engineering initiatives.
• Initiatives are scored based on business goals set quarterly.

Yeah, great question. I think what's really our kind of advantage here is that my co founder and I are both mechanical engineers, and somehow we've started a software company.

Anna explains that their unique background as mechanical engineers gave them a fresh perspective on software engineering prioritization, turning it into an advantage.

• Initially, the company set goals like building specific features to increase product value.
• It was challenging to assess whether these features truly enhanced product value.
• The stack ranking process evolved to include a top-line business goal, such as a revenue target.
• The playbook consists of metrics and strategic initiatives that support the top-line goal.
• The stack rank is publicly accessible, allowing engineers to prioritize their work effectively.
• Public stack ranks enable team members to make informed decisions about work prioritization.

"And so a business goal might be something like build XYZ feature to increase product value. What we realized, though, is that that didn't work out amazingly well, because while it's easy to tell whether the team built the feature or not, it was difficult to understand if that actually increased product value."

This quote explains the initial challenge with setting business goals that were not directly measurable in terms of product value and how this led to the evolution of their stack ranking process.

"And then we have what we call the playbook, which are the individual metrics underneath that support and build up to that larger goal."

The playbook is introduced as a set of metrics and strategic initiatives that underpin the top-line business goal, providing a structured approach to achieving the overall objective.

"And the best engineers only ever want to work on the best and most important things to the company. And so making that really clear in kind of this public way makes it so that nobody's working on something that is less important."

This quote highlights the importance of transparency in the stack ranking process, aligning engineers' work with the company's most important goals and ensuring efficient use of resources.

• The public nature of the decision-making process allows for new information and ideas to be fairly compared against other priorities.
• Technical leads scope initiatives in advance, enabling parallel work streams even in smaller engineering teams.
• The approach balances individual autonomy with the team's alignment toward common goals.

"Oh, man, I think that's a really hard question. I think the way that we resolve that is that because it's all public information, how we're making this decision, if someone brings new information to the table or has a new idea, it enables it to be fairly ranked against other things in the list, in the stack rank."

Anna Shedletsky emphasizes the benefit of transparency in decision-making, which allows for individual contributions and ensures alignment with the company's priorities.

• The company's fundraises were unusual due to the creation of FOMO and raising funds earlier than planned.
• FOMO was generated without initially having a term sheet, leveraging a Y Combinator interview as a catalyst.
• Building relationships with VCs and founders was crucial for successful fundraising.

"I think the things that made our fundraises unusual were that in both cases, we were able to kind of fabricate like a fomo, a fear of missing out."

Anna Shedletsky describes how creating a sense of urgency among investors (FOMO) contributed to the uniqueness of their fundraising efforts.

"And so what we did, and I cannot take credit for this, I fell into this. But I think that there's something really interesting here for others to take away, is that a few months after taking angel funding, we applied to Y Combinator, fully intending to try to get in because we thought it would be a great network for our company."

This quote explains how applying to Y Combinator and scheduling an interview inadvertently led to a situation where investors felt compelled to act quickly, creating FOMO.

"And so free food is a great way to meet founders. Founders are how I met many of the vcs that in my early days that I had been introduced to or other people in my network."

Anna Shedletsky shares a practical approach to networking with founders and VCs, using informal gatherings to build relationships that later proved valuable for fundraising.

• Hosting dinners for founders allowed for the expansion of an entrepreneurial network.
• Seeking advice from VCs provided valuable insights and helped establish relationships without direct pitching.
• Founder referrals are highly regarded by VCs and can significantly aid in fundraising efforts.

"So I hosted dinners at my house, several of them with several different groups of founders I knew, like two founders, and so I asked them to bring two other founders that they knew, and I met those people and then had additional dinners where I invited those people and they invited other people."

Anna Shedletsky shares her method for growing her entrepreneurial network by hosting dinners and leveraging the connections of other founders.

"And I think what I have kind of stumbled into is you just go and ask advice. This is a great way to get like half an hour of free consulting about what you should be worried about in your business and what you should be doing about XYz or the other."

This quote emphasizes the strategy of asking VCs for advice, which serves as a means of building relationships and gaining valuable business insights.

• Anna Shedletsky shares a critical piece of advice for the founder community based on her experience.
• It's important not to get complacent once a term sheet is received, even if it's from a favored investor.
• A term sheet can be pulled unexpectedly, as happened to Anna's company, creating difficulties in the fundraising process.
• Keeping multiple conversations open with potential investors is a strategic move to safeguard against such incidents.
• The best defense is to have at least two high-watermark term sheets to work with in parallel.
• It's advised not to shut down other investor conversations prematurely, even if the fundraising process feels complete.

"We had our high watermark term sheet pulled on us for what we believe was no fault of our own. A week after we thought we'd finished the presigning due diligence and had started trading red lines back and forth."

This quote illustrates the unpredictability of fundraising and the importance of maintaining multiple options until the process is fully complete.

• Anna Shedletsky describes the most challenging aspect of being a CEO.
• CEOs often feel like they are juggling multiple full-time jobs simultaneously.
• Key responsibilities include hiring, fundraising, selling, running the company, and planning ahead.
• There's a personal desire to build a company that is a great place to work for both the CEO and the employees.

"I think the most challenging aspect of being a CEO is feeling like I have three or four full time jobs at any given time and trying to do all of them well."

This quote emphasizes the diverse and demanding roles a CEO must play within a company.

• Anna Shedletsky's favorite book is "Lord of the Rings" by J.R.R. Tolkien.
• The book inspired her appreciation for well-crafted sentences and well-chosen words.
• The influence of Tolkien's writing led her to minor in creative writing, which benefits her role as CEO.
• She attributes her interest in writing and its impact on her professional life to "Lord of the Rings."

"I learned to appreciate the power of the well crafted sentence and the power of the well chosen word."

This quote reflects on the profound influence literature can have on one's communication skills and professional development.

• Anna Shedletsky discusses the exciting potential applications of machine learning in manufacturing.
• The focus is on creating closed-loop feedback control around the entire manufacturing line and supply chain.
• Machine learning in manufacturing is seen as a wide-open space with significant potential for innovation.

"And I think that's a super exciting wide open space for machine learning."

The quote highlights the potential for machine learning to revolutionize manufacturing processes.

• The manufacturing industry is described as antiquated in both processes and mindsets.
• People working in manufacturing are often too focused on execution to consider potential improvements or new technologies.
• There's a disconnect between the advancements in consumer software and their application in the manufacturing industry.
• Anna's company aims to bridge this gap by introducing new technologies to the manufacturing sector.

"And I think that we live in this, in society of consumer software, and we kind of expect that same consumer software to carry over to this industry, and it just hasn't, it hasn't converted well."

This quote explains the lag in technology adoption within the manufacturing industry compared to consumer software.

• Anna Shedletsky recommends the First Round Review as a valuable resource for entrepreneurs.
• She finds the content well-written and relevant to her needs.

"It's really well written, and they're always talking about a topic that is useful to me as an entrepreneur."

The quote indicates the utility of the First Round Review for entrepreneurs seeking insightful content.

• Anna Shedletsky is optimistic yet realistic about the future, acknowledging that it will be a challenging journey.
• She prefers to leave the specifics of Instrumental's future to unfold with time.

"Oh, man, it's going to be a bumpy ride, I'm sure, but I think I'm going to leave this one up for time to tell."

This quote conveys a sense of hopeful anticipation for the future, tempered with the understanding that there will be challenges ahead.

• Harry Stebbings expresses gratitude to Anna Shedletsky for sharing her insights.
• Harry promotes Foundersuite and Greenhouse software as valuable tools for startups and hiring, respectively.
• The promo code for Foundersuite and the recognition of Greenhouse as a top workplace are mentioned.

"Foundersuite makes software for raising capital in the last twelve months, startups using Foundersuite have raised over $130,000,000 in angel and VC funding."

"Greenhouse software designs tools that helps companies hire great people and ultimately build better businesses."

These quotes provide information on resources that can assist startups in fundraising and hiring, contributing to their growth and success.