…Once you’ve built something: found product market fit, or are ramen profitable, then things change. You’re no longer trying to prove viability, but instead to scale and maximize the business, and while the problems are more complex, the business has a team and some momentum. At that point the expected duration changes (the Lindy Effect), and the founders really have to focus on the longer term, which includes a healthy and balanced life.
Startups have such a glamorous reputation. Companies like Facebook, Instagram, YouTube, Uber, and Airbnb once started as scrappy startups with huge dreams and huge obstacles. Yet we of course know that most startups don’t end up as success stories. What does a founder or a founding team need to know to create a highly successful startup?
In this series, called “Five Things You Need To Create A Highly Successful Startup” we are talking to experienced and successful founders and business leaders who can share stories from their experience about what it takes to create a highly successful startup.
I had the pleasure of interviewing Philip James.
Philip James is CEO and founder of Firstleaf. A serial entrepreneur, Philip has spent the past two decades in the wine industry, building companies that combine technology with personal touch and world-class winemakers to deliver finely crafted wines at an affordable price point. Philip oversees US-based wine company Penrose Hill, which sells direct-to-consumer through the Firstleaf wine club, a brand that has more than 150,000 active customers and growing. With a Masters Degree in Computational Chemistry from Oxford University, an MBA from Columbia University in New York and professional qualifications from both the Society of Wine Educators and the Wine and Spirits Education Trust, Philip has dedicated his entrepreneurial career to innovation at the intersection of wine and technology.
Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
Thank you for having me here!
I’m a proud American, but I wasn’t born here. I grew up in the UK and moved here as an adult for my MBA at Columbia University. Most entrepreneurs have their “lemonade stand” story…here’s mine: I grew up in a rural area, and we farmed our own vegetables and some livestock for the family table. My dad also kept bees. I helped him harvest the honey, and I sold it from a stand at the end of the driveway. We lived on a cul-de-sac, so it didn’t exactly thrive.
I had a string of tough jobs as a teenager (farm labor, cleaning commercial kitchens and toilets, stacking grocery store shelves) which helped shape me. Ultimately, I was good at math and logic puzzles and was lucky enough to get accepted to Oxford to study Chemistry, where I received my master’s in computational chemistry. I was the first person in my family to go to university, so it was a great honor to be accepted to Oxford.
My master’s thesis was in using mass spectroscopy and 3-dimensional computer modeling to help understand the composition of complex molecules. I had no idea that 20 years later, I’d be running a business using the exact same technology I was researching during my thesis.
What was the “Aha Moment” that led to the idea for your current company? Can you share that story with us?
Call it a lucky accident! I grew up reading books about exploration, everything from Ernest Shackleton to Bill Bryson. I climbed Everest (I didn’t summit, but helped rescue a friend), sailed the Atlantic (came in fifth place) and later, rode my motorcycle across Asia (crashed and had surgery in Kazakhstan).
No surprise, then, that I considered myself an adventurer and wanted to start a travel company when I graduated business school. I’d been rejected from the school entrepreneurship course (my ideas weren’t good enough), and then my lawyer told me I couldn’t self-sponsor for a work visa.
At that same time, a friend’s father ran a small wine importer and catalog retailer, and the father fell sick, and my friend asked for help with the business. I like wine, particularly discovering interesting new wines, and as a scientist, I understood the chemistry of wine, but not the details. I’m not good at memorization, and my brain just couldn’t remember all the regions and grape types, let alone which year was the “good one”. I was a professional in the industry, and I couldn’t remember the rules — how could a normal customer be expected to? I still find it hard to pick wine from a wine list, or in a liquor store — it’s a real Paradox of Choice problem to pick one from hundreds or thousands of choices.
And, ever since then, its been my mission to help people like me. To give people the confidence to find wines they love.
Was there somebody in your life who inspired or helped you to start your journey with your business? Can you share a story with us?
It might be cheesy to admit this, but my mother. I had been skipped a year in high school, and while my grades were fine, my emotional maturity was…let’s say, lacking. There was one teacher who was hell bent on getting me held back. I remember one year, I was 14 or 15, and I did a two-week unpaid summer internship at the local water treatment facility (ie. sewage plant! I was into chemistry, then as now.) The teacher found out about it, and before it had even begun, she wrote to the company to say that the work should have gone to an older student who was “more deserving.” Like anyone’s mum would have done, mine stormed in and kicked the teacher’s butt. I often think how differently my life would have gone if I’d had been held back instead. I don’t think I’d have been here in this position today. My mother passed away during my time here at Firstleaf, and while she’s no longer with us, she got to see me start the company and for it to grow.
What do you think makes your company stand out? Can you share a story?
It’s easy to make a bold claim (“we have the best wine”, etc.); it’s harder to back it up and to live it every day. One of our claims is that we’re the #1 Awarded Wine Club. We first made that claim when we had passed our 1,000th award for our wines; we’ve since passed 2,000 awards. People didn’t believe us, and I’ve heard everything from: “are you a real winery?” to “are those awards from reputable sources?” The first is pretty insulting to our winemakers, who work every day in our lab at our winery. But for the second, it seemed simplest to show people, so we publish a list of every award our wines have won here [https://www.firstleaf.club/awards] and let people judge for themselves.
That transparency is important to me and the company. It’s one of our core values, and it extends to everything we do. We recently began publishing the nutrition information and ingredients for our wines. The wine industry lobbies against needing to provide this information, but to us it’s about fairness. We’re the largest winery in America that publishes this information, and you can see it on each wine page on the website.
How have you used your success to bring goodness to the world?
You mean beyond making wine? Because there’s a lot of goodness in that!
I support a charity called Wine to Water and have done so both personally and professionally for about 10 years. Wine to Water provides clean water to people in need, setting up wells and water filtration for communities both in the US and around the world.
To date, I’ve raised and donated about half a million dollars to Wine to Water. Every dollar provides clean drinking water for one person for one year, and so it’s wonderful to think of the total impact. It hasn’t just been money; I’ve gotten to know the founder of the charity well and have worked with them on their media, where a campaign of ours received close to 1 billion media impressions [https://www.prnewsonline.com/awards/2014-community-relations], and helped gain a lot of awareness for the issues and the work they do. I’ve also traveled with him around the world to work on some of the projects firsthand.
You are a successful business leader. Which three-character traits do you think were most instrumental to your success? Can you please share a story or example for each?
I’m answering this using three of the company’s six core values, as they represent my best thinking around how to start and scale a business:
- Kill the Squid: There’s a long story about why it’s a squid, but ultimately this speaks to the need to look at a problem and solve it from First Principles. There are so many hacks and heuristics, but real life is complex, and you can’t just use a simple formula. An example: we scaled a lot early in the pandemic, but several of our investors told us not to, and that our retention for these new members would be bad as the economy suffered. That is what might have happened in a typical recession, but 2020 was not typical, and while unemployment was high, there were also a lot of other people who kept their jobs, worked from home, and were saving money thanks to not spending on gas, work clothes, etc. Retention ended up increasing since pre-pandemic days.
- Imagine Being, Before Doing: This is a more stringent version of the Golden Rule, which puts empathy first. I have a lot of constituents: not just the hundreds of thousands of wine club members we have, but also the hundreds of team members, investors and vendors. Beyond that, we also operate inside an industry with competitors and complementors and so on. Before any major decision (and this is why I try to make so few of them), I spend a lot of time mentally putting myself in the shoes of others, to understand how this will affect them. We recently went remote first indefinitely — that was a big decision, which again, affects a lot of constituents, potentially for a very long time. We now have employees in 20 states and eight countries, that’s not a decision I could, or would, undo.
- Be Passionately Curious: This is part of an Einstein quote, in which he says, basically, his curiosity is more important than his intelligence. I’ve been running Firstleaf for over five years, but I’ve been working on this problem, of online wine, for 15 years. I still read industry news, and scour for relevant data, several hours per day. In a world where many people are looking for a shortcut to get rich quick, I’m content to do it slowly, and it’s my curiosity that keeps me interested in this same problem, even after putting tens of thousands of hours into it already.
Often leaders are asked to share the best advice they received. But let’s reverse the question. Can you share a story about advice you’ve received that you now wish you never followed?
One of the traps that a first-time entrepreneur can fall into is that the others around the table (bankers, lawyers, investors etc.) are usually far more experienced. Where this can become a problem is when they speak with authority about the overall business when their expertise is rooted in a very specific function. Over time, I’ve realized each instance is nuanced and needs its own interpretation. As I gained experience, I learned to listen to many people but never to simply follow someone’s advice, and instead, I synthesize my own opinions. This “thinking from first principles” is the first of the company’s core values.
Can you tell us a story about the hard times that you faced when you first started your journey?
A startup doesn’t “deserve” to win, they have to earn that right.
A while ago, while running another company I had founded, I was approached by Amazon who was interested in buying the business. I flew to Seattle and met with a team of executives…for eight hours. The part of their pitch that resonated the most was that “at Amazon, you can be more efficient — when you email or call someone, they will call you back immediately”. The deal didn’t happen, but that comment stuck with me, as over time its become truer and truer.
These days, my life is relatively efficient: the people I need to speak to, do call me back. But, when I started this business, it was not that way.
There’s often a fundamental “chicken and egg” problem a startup has to solve, and there’s no obvious way to catalyze the reaction. For me, I needed some vendor and partnership contracts in place to raise money, and the vendors wanted to see the money before committing. Eventually, I got a key contract in place, but it had a 90-day requirement for me to raise our seed round. I missed both the 90-day date, and the funding requirement, and so it’s ultimately due to the grace and kindness of the random person on the other end of the contract that this company even exists today.
Where did you get the drive to continue even though things were so hard? What strategies or techniques did you use to help overcome those challenges?
I’m a regular human. Sometimes I’d get knocked over, and barely had the energy or willpower to get back up. Sometimes the person or company out to get you is powerful, and sometimes they believe things are a zero-sum game (i.e., that you need to lose, for them to win).
Ultimately, I’m a believer in the fact that success feeds success, and so I practice the theory that Admiral William McRaven has written about, how something as simple as making your bed in the morning can get you in the habit of achievement, and from that small block you can keep building. If you ever see me tidying my desk, or organizing a filing cabinet, you’ll know I just got kicked in the teeth, and I’m slowly bouncing back.
One of my favorite quotes is the Haitian proverb: “Beyond mountains there are more mountains.” There are many similar quotes, that all speak to stoicism. I’ve slowly learned to embrace that the difficult path is often the right one.
The journey of an entrepreneur is never easy, and is filled with challenges, failures, setbacks, as well as joys, thrills and celebrations. Can you share a few ideas or stories from your experience about how to successfully ride the emotional highs & lows of being a founder”?
It’s nice to have a co-founder (Erik Steigler): he does the tech; I do the business side. It’s unlikely we’re both having a bad day, so the success and setbacks in one side of the business are often balanced out by the other.
I remember once, when we were struggling to close a fund raising round years ago, we had about two months of cash left before we’d run out. I’m usually pretty calm, but the randomness of fundraising coupled with our impending bankruptcy was really stressing me out. Meanwhile, my cofounder was as cool as a cucumber…funding was was my responsibility (thanks for the trust!) and for him, used to being woken up in the night to need to fix something on the site, two months felt like an eternity. I am a believer in Andy Grove’s Only the Paranoid Survive, and anytime I stress over something months or years away, Erik reminds me that this one offers the luxury of time to think rationally and solve the problem.
Let’s imagine that a young founder comes to you and asks your advice about whether venture capital or bootstrapping is best for them? What would you advise them? Can you kindly share a few things a founder should look at to determine if fundraising or bootstrapping is the right choice?
The glorification of big funding rounds is a disservice to entrepreneurship overall. Some companies need a lot of capital. That’s fine. But it’s the hype around the funding itself that’s not productive. On the day you raise the money, you haven’t really achieved anything with it. In fact, it’s better to think of a giant round as a liability, as you now must use it to achieve the promises you made to those new investors.
If you reframe the financing that way, it answers your question. Should you bootstrap or raise? Well, how big will your company be? If the promises you need to make to raise the money are not achievable, then you’re not following the right path. It’s easier to scale up later than to go backwards.
Fundraising is a tool, it’s not inherently good or bad.
Many startups are not successful, and some are very successful. From your experience or perspective, what are the main factors that distinguish successful startups from unsuccessful ones? What are your “Five Things You Need to Create a Highly Successful Startup”? If you can, please share a story or an example for each.
Five?! Okay, let’s try…
- Can the founders hold their relationship together (while everything else changes)?
- Can the CEO scale up faster than it takes the money to run out?
- Can you make “good enough” decisions very quickly at first, but ultimately transition, letting all those go, leaving the CEO with the job of only needing to make a small number of important decisions as best as possible?
That’s three. I don’t think the original idea is important (reality evolves and ideas do too), and capital/team, etc. all come from the above three.
What are the most common mistakes you have seen CEOs & founders make when they start a business? What can be done to avoid those errors?
There are a lot of things that look like work, but they don’t move the business forward. Be careful not to conflate “busy” with “productive”. I used to go to lots of conferences, speak on panels, and do a lot of industry things. None of that has materially impacted my business.
There are many ways of doing something, and often eight out of ten are good enough. Take the company name, for example, there are definitely “bad” names, and some basic guidelines to follow. But, once you’ve done that, you can still end up with a dozen “good enough” names — at that point, just pick one quickly and move on. Think of Google or Apple for example — these were not their intended or original names. Google was named literally as the result of an accidental misspelling (it was supposed to be Googol, which is a specific giant number). Apple was named after the founders were unable to think of anything better than the fruit Steve Jobs was eating. Firstleaf wasn’t my first-choice name, but it was in that first group of “good enough” names.
Startup founders often work extremely long hours and it’s easy to burn the candle at both ends. What would you recommend to founders about how to best take care of their physical and mental wellness when starting a company?
I’m in two minds over this question. On one hand, when you first start a company, probability is not in your favor, you have no team, no customers and so on. The world does not inherently need more startups. So, sweat of the brow, is what gets you over that first hump.
But, once you’ve built something: found product market fit, or are ramen profitable, then things change. You’re no longer trying to prove viability, but instead to scale and maximize the business, and while the problems are more complex, the business has a team and some momentum. At that point the expected duration changes (the Lindy Effect), and the founders really have to focus on the longer term, which includes a healthy and balanced life.
I think about the business and our industry most of my waking hours, but I don’t “work” most of that time. I’m just as likely to be hiking in a forest, or kayaking on a lake, while thinking as I am to be sat in front of my computer. It’s no longer my job to make the fastest decisions, instead I’m trying to build an organization where I make the fewest (ideally important) decisions. It’s strange when the company you started, can function great without you, but as a founder, that’s the ultimate point.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
I can’t top the mission of Wine to Water: bringing clean water to the billions who still lack it. I’m happy to be close to that organization and its mission. In the meantime, I’ll settle for the much more mundane mission of helping give people the confidence to select and enjoy wine.
We are blessed that some very prominent names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US with whom you would love to have a private breakfast or lunch, and why? He or she might just see this if we tag them.
I study a lot of experts by reading about them, following their decision making process, etc. In some cases, I’d rather read about someone and study them than meet them. With that said, entrepreneur turned VC Chris Dixon is someone with whom I’d like to share a meal. He has a blog that I’ve read for years, and I still use several of his posts from a decade ago (such as this one), to help teach a point to my team every few weeks. I’d meet him just to say thank you.
How can our readers further follow your work online?
Feel free to follow me on LinkedIn: https://www.linkedin.com/in/philipjames/
This was very inspiring. Thank you so much for the time you spent with this. We wish you continued success and good health!