20VC Twitch Founder & CEO Emmett Shear on When To Persist vs When To Give Up For Entrepreneurs, The Fundamental Tension When Scaling Orgs and How To Optimise Them & How The Role of CEO Fundamentally Changes with Scale

In this episode of "20 minutes VC and Founders Friday," host Harry Stebbings interviews Emmett Shear, the co-founder and CEO of Twitch, the leading live streaming platform for gamers. Shear recounts his journey from co-founding Kiko, which sold on eBay, to establishing Twitch and its acquisition by Amazon for $970 million. He also delves into his role as a part-time partner at Y Combinator, offering advice to startups on various aspects of business growth. The conversation highlights the challenges of organizational structure at different company scales, the importance of community growth, and the evolution of leadership roles as companies expand. Emmett Shear emphasizes the significance of resource allocation and adapting communication methods within an organization to foster innovation and execution speed.

• Harry Stebbings introduces Emmett Shear, CEO and co-founder of Twitch.
• Emmett Shear's background includes:
  • Raising over $42 million for Twitch from notable investors.
  • Being a part-time partner at Y Combinator.
  • Co-founding and selling Kiko on eBay.
• Acknowledgments to contributors for the episode's questions and suggestions.

You are listening to the 20 minutes VC and founders Friday with me, Harry Stebbings at H Stebbings 1996 with two b's on Instagram and my word. I've been so excited about this episode for quite a long time.

Harry Stebbings expresses his excitement for the episode featuring Emmett Shear.

• Carter: A tool that simplifies how startups manage equity and track cap tables.
• Zoom: A communication platform for video conferencing, phone calls, group chat, webinars, and conference rooms.

But before we dive into the show today, I'm sure you've heard about it, but my word, I just love the Carter product.

The speaker endorses Carter and Zoom as essential tools for startups and business communication.

• Emmett's journey into startups began in college with friends.
• They started a calendar project because of the opportunity and access to smart people.
• The project led to the creation of Kiko, an online calendar.
• Y Combinator's summer founders program played a significant role in their startup journey.

It's a long story. So I was in college with my friends and friends with Justin at the time, and my friend Matt, and Matt pointed out that we were never going to have higher risk tolerance and we were never going to have more access to other smart people than we did right then.

Emmett Shear recounts the beginnings of his entrepreneurial journey, highlighting the influence of his college environment.

• Kiko raised a small amount of angel money.
• The team decided to sell Kiko after Google Calendar was released and demoralized them.
• They listed Kiko on eBay as a stunt to gain attention and potential buyers.
• TechCrunch covered the eBay listing, which helped in the sale.
• Kiko sold for around $258,000 to Tucows.

So we raised a very small amount of angel money, maybe $60,000 in total, I believe. And Google Calendar had been released.

Emmett Shear explains the circumstances that led to the decision to sell Kiko on eBay.

• The sale of Kiko allowed Emmett and his co-founder to pay back investors and take home a decent sum.
• The money from Kiko was used to support Justin TV, which eventually evolved into Twitch.

It was amazing. Like, we could pay back our investors and they could make a small amount of return, and we could both take home like fifty k out of that, or 70k, which I think it wound up being about 35 after taxes.

Emmett Shear describes the financial outcome of the sale and its significance for their future projects.

• Emmett Shear emphasizes the importance of just starting, even without a perfect idea.
• He compares beginning a business to taking on the burden of Sisyphus, highlighting the challenges of entrepreneurship.

I mean, I absolutely love that as a story. And to think about that as kind of the origins of Twitch now and today and where twitch is, it's pretty incredible.

Harry Stebbings reflects on the humble beginnings of Twitch and its growth from the initial experiences of its founders.## Sisyphus Analogy and Startup Journey

• Emmett Shear draws a parallel between the myth of Sisyphus and the startup experience.
• In the early stages of a startup, founders experience a Sisyphean task, pushing a boulder up a hill with great effort.
• Achieving product-market fit is likened to the boulder cresting the hill and rolling down on its own, but it requires a different kind of work to keep up.
• Emmett shares his personal experience with Kiko Calendar and Justin.tv, illustrating the challenge of reaching and maintaining product-market fit.

"When I compare something to the story of Sisyphus, I do believe the quote about Sisyphus in his boulder, that he rolls up the hill. But you have to imagine that Sisyphus is pretty happy."

This quote emphasizes the importance of purpose and persistence in both the myth of Sisyphus and the startup journey.

"But there's this point, if you keep pushing it, where eventually you crest the hill, you get the boulder all the way to the top of the hill and you've been pushing it and you've been pushing it."

Here, Emmett describes the pivotal moment in a startup's journey when product-market fit is achieved, and the effort shifts from pushing to keeping pace with growth.

• The challenge of knowing when to persist with a startup idea or when to move on to something new.
• Emmett discusses the difficulty of making judgment calls in the startup world, where there is no magic recipe for success.
• He emphasizes the importance of having core beliefs in fundamental principles that guide strategic patience and tactical impatience.
• Emmett uses Amazon's early belief in online commerce as an example of maintaining a vision while being flexible in tactics.

"That is the judgment challenge for being a startup founder, I think for actually for any creative act."

Emmett highlights the essence of judgment calls in the startup process, which is a complex and nuanced decision-making challenge.

"You have to know, when is this a sunk cost? And I've discovered this can't work and I should give up and try something new?"

This quote reflects the critical decision point for founders on whether to persist with their current project or pivot to a new direction.

• Emmett Shear explains the transition from a small, lean startup to a larger organization chasing a rapidly growing product.
• He outlines two core beliefs about organizational structure: the tension between centralization and decentralization, and the trade-off between autonomy and mastery.
• Emmett describes the cyclical nature of organizational changes, with companies oscillating between centralized and decentralized structures to balance speed and quality.
• He suggests that reorganizations are not failures but necessary adjustments to maintain a balance within the company.

"But then once you start chasing the boulder, you really need to be able to go fast."

This quote highlights the need for a startup to adapt its organizational structure as it transitions from struggling for product-market fit to scaling rapidly.

"There is a fundamental tension or trade off between centralizing and decentralizing."

Here, Emmett discusses the inherent trade-offs in organizational design, emphasizing that there is no perfect structure, only strategic choices to be made based on the company's stage and needs.

• Emmett acknowledges that regular reorganizations can cause instability within a company.
• He suggests that while reorganizations can be disruptive, they are necessary for the company's evolution and should not be feared.

"And so, 18 to 24 months later, and if you worked at a company, you probably experienced this, there's a new organizational change."

Emmett notes the typical timeframe for organizational changes and implies that they are a common and expected part of company growth.

"I mean, I think anyone who's been through a bunch of reorgs would say, yeah, they can very much cause i"

This incomplete quote suggests that Emmett acknowledges the potential negative impact of frequent reorganizations on team stability.## Change Management and Organizational Reorganization

• Emmett Shear discusses the process and impact of organizational reorganization (reorg).
• He highlights the spectrum of experiences during a reorg, ranging from chaos to logical restructuring.
• Emmett notes that reorgs are sometimes necessary and unavoidable for company growth and evolution.
• He mentions that reorgs can benefit employees by introducing new perspectives and broadening networks.
• Emmett appreciates working in an environment where his role changes regularly.

"When you do a reorg, there's a way to do it such that everyone experiences it as chaos, and there's a way to do it such that it seems like the logical thing to do, and everyone understands what's happening, and it's just almost like, of course, how could we do anything else?"

This quote explains that there are effective and ineffective methods of conducting a reorg, with the goal being to make the process understandable and logical to those involved.

"You have to do it at some point. You need the autonomy of decentralization, or you need the mastery of centralization and you really just have to go for it, and you go for it as best you can."

Emmett is acknowledging that reorgs are sometimes a strategic necessity, whether for decentralizing to grant more autonomy or centralizing to improve mastery over a function.

"I get bored if my job is the name. For more than a couple of years, I've been really grateful to work at a company where my job changes every year, every two years, and I have to do something new and different."

Emmett expresses personal satisfaction with job variability, suggesting that change can prevent stagnation and keep employees engaged.

• Emmett Shear discusses the concept "the medium is the message" and its relevance to corporate communication.
• He believes the medium affects the flow and reception of ideas, not necessarily the ability to express them.
• Emmett compares different mediums like novels and movies to highlight how the medium shapes content.
• He talks about how companies have distinct styles for pitching resources which affect their strengths.

"The medium is the message that the way you connect, the way you communicate, the format you're using, determines at some level the kinds of ideas that flow well, that other people will want to absorb, that will be compelling in that medium."

Emmett conveys that the form of communication influences the effectiveness and appeal of the ideas being communicated.

"Every company has a process for you to go in and say, I think we should build this awesome thing, give me X headcount, give me this budget, give me access to these APIs, and I want us to go build this really awesome thing."

This quote highlights the universal process within companies for pitching ideas and requesting resources to execute them.

"What is Amazon amazing at? Right. Amazon's amazing at logistics, amazing at connecting you with the thing you really want."

Emmett correlates Amazon's pitching process (PRFAQ) with its core competency in logistics and customer fulfillment.

"It's building these hardware devices that you have this just beautiful experience. And I don't think it's an accident that the way you develop that when you're pitching for resources isn't a bunch of written words, but it's a full fidelity demo."

Here, Emmett links Apple's approach to resource pitching, which involves full-fidelity demos, to its strength in creating beautifully designed hardware products.

• Emmett Shear discusses the evolving role of a CEO as a company grows.
• He notes that in small startups, the CEO's role is more hands-on and directly tied to the company's immediate needs.
• As a company expands, the CEO's focus shifts from direct involvement to strategic resource allocation.
• Emmett shares his personal experience of this transition at Twitch, occurring around the 400-employee mark.

"That is increasingly true as the company gets larger. So in the beginning, I think that's absolutely not true."

Emmett challenges the notion that being the best resource allocator makes one the best CEO, especially in the early stages of a company.

"And then there's some jump between the six person startup that has to just get something out there to the 500,000 person megacorp where your job actually does turn into resource allocation."

This quote describes the CEO's role transition from a hands-on leader in a startup to a strategic resource allocator in a large corporation.

"How your resource pitch. Right. How the pitch deck works and your method for allocating resources becomes absolutely critical because that's when your company turns into at some level and being about internal resource allocation."

Emmett emphasizes the importance of the resource pitching process within a company as it scales and the CEO's role becomes more about internal resource allocation.

• Emmett Shear reflects on his personal growth and challenges as a leader.
• He finds being a frontline leader more natural due to his engineering background and enjoyment of direct product involvement.
• Emmett discusses the difficulty of transitioning to inspiring others and relinquishing direct control.
• He mentions the necessity for CEOs to adapt and let go as the company grows larger.

"So I found being a frontline leader a lot easier. I love talking with customers. I love the cut and thrust of detailed product design."

Emmett expresses his initial comfort with being a hands-on leader involved in direct customer interaction and product design.

"I had to let go of caring or controlling. I care about the engineering architecture decisions we make still, but I had to let go of attachment to them."

This quote captures Emmett's challenge of shifting from a controlling role to one that allows others to make decisions, indicating a key aspect of leadership evolution.## Learning to Let Go and Empower Others

• Initially, leaders must be involved in everything, but they learn to delegate and empower others over time.
• Being a good manager involves a collection of interpersonal skills that are crucial for effective leadership.
• Learning to be a better manager is an ongoing process that involves developing a variety of individual skills.

"Beginning, you have to be involved in everything. It's sort of been this process of learning to let go of that and learning to empower other people."

This quote emphasizes the evolution of a leader's role from hands-on involvement to delegating responsibilities and empowering team members.

"Being a manager is a lot of interpersonal skills. It's a whole collection of maybe, I don't know, if you try to count them, I bet you could get into the dozens of independent individual skills that go into being a manager."

This quote highlights the complexity of management, suggesting that it requires a broad set of interpersonal skills.

• Leaders must be able to communicate authentically, ensuring their words are trusted and free from hidden agendas.
• Being believed when speaking is a key skill, as it fosters trust and transparency within the team.

"So I think there's one key skill that leaders need is the ability to be believed when they tell you something, that that's what they actually mean, that they don't have a hidden agenda, that what the thing they're saying is in fact the real reason they're doing it."

This quote underscores the importance of authenticity and trust in leadership communication.

• A challenge for managers is maintaining curiosity and openness when discussing topics they are deeply familiar with.
• Listening fully to others' ideas, even in familiar domains, can lead to learning and more enjoyable interactions.

"One area that I think a lot of managers are, I've seen be really good at that I'm working on myself is the ability to enter a room on a topic you are an expert on, that you've gone deep on, that someone else is presenting in and come in with full curiosity about what they have thought of and what they've believed."

This quote reflects the difficulty leaders face in staying curious and open-minded during discussions within their areas of expertise.

• Communities are grown, not built, much like cultivating a garden.
• The initial members of a community have a lasting impact on its culture due to the founder effect.
• Creating conditions for a community to grow organically is crucial for its success.

"You don't build communities, you grow them. Your communities are more like a garden than they are a building."

This metaphor illustrates the organic nature of community growth, emphasizing the importance of nurturing rather than constructing.

"The very initial starting members of your community, the people who make it up at the very start, determine in this very surprising way everything about it."

This quote highlights the significant influence the first members of a community have on its long-term culture and dynamics.

• Twitch's journey started as Justin TV and has involved several funding rounds and a pivot to its current model.
• The platform faced initial fundraising challenges but found success with Bessemer after pitching to numerous VCs.
• Twitch aims to expand its content base beyond gaming to include a variety of interactive live-streaming activities.

"Twitch is in fact Justin TV, like we renamed the corporation, but technically speaking, I've had the same job since 2006 when we started Justin TV."

This quote provides a brief history of Twitch, tracing its roots back to Justin TV and the continuity of leadership.

"The next five years is all about growing the base of the kinds of content that you can live stream and interact around."

This quote outlines Twitch's future goals to diversify the types of content available on the platform.

• Graduates should focus on discovering what truly motivates them and what they want to achieve.
• The educational system often neglects to help individuals understand their own desires and goals.

"Your most important challenge now isn't doing stuff, it's figuring out what it is that you want to do, what your goals are, what motivates you, what are you connected to, what do you actually want more of?"

This advice encourages graduates to prioritize self-discovery and align their actions with their personal motivations and aspirations.