You don’t have to worry about getting busted by the cops, but otherwise your startup probably faces many of the same problems as Walt Enterprises.
By Chandra Jacobs (Founder, Tripchi)
With the season finale of “Breaking Bad” airing this weekend, I’ve been doing a bit of thinking around the show premise, and how similar the plot line is to the development of a startup.
The same problems that happen to Walt Enterprises in the show happen to all founders when trying to build a company. Product. Team. Partners. Price. Distribution. Investors. You name it, they’ve faced it.
The first few seasons all focus on the perfection of the product and getting the basic product development cycle to a repeatable, predictable state. Walt and Jesse struggle and agilely adjust their inputs based on feedback from the marketplace until they can reach an equilibrium where the demand (and the money they can garner) for their product equals or exceeds the supply and cost (and risk) or raw material. They differentiate themselves right off the bat based on superior quality (not lower price), and the fact that their product is a characteristic blue color doesn’t hurt either. Both of these begin to, at first unintentionally, morph into their brand. However, even with the superior product, they are unable to succeed due to inexperience, lack of partnerships, and inability to scale the walls of the distribution/supply chain barrier.
Jesse knows the industry, since he has prior drug dealing and distribution (and using) experience. He knows the marketplace, and the business. Jesse is therefore the non-technical co-founder. But like most non-technical co-founders in tech startups, he still quickly has to learn the product and learn the technology to assist his co-founder, Walt. Lesson: cofounders must wear many hats.
On the other hand, Walt knows how to develop a pure product, markedly superior in quality to competitors due to his skilled, technical training. Walt can be likened to the rockstar developer. He too must learn other skills outside of his domain expertise, and he quickly dives into the running of the business as well. And even though Jesse seems like a colossal f*** up at times, they need each other. Jesse actually has moments of brilliance since he is often able to stay at the 30,000 foot view, which Walt has trouble doing at first. In other words, they complement each other’s strengths and weaknesses well. Other employees come and go (Badger, Todd, etc.), but the founders are the lasting, common thread. As an aside, drugs are a tough business – so let’s be clear what happens to non-performing or disloyal employees – there’s no second chances and no severance checks. Maybe just severed heads? (Disclaimer: While acceptable and Standard Operating Procedure for a drug business, this is not recommended for a tech startup).
I believe they go for a 50-50 split. Which seems good at first, but then becomes a problem (if you don’t know why, read this article: “The only wrong answer is 50-50”). Mainly it becomes a problem because Walt takes most of the controlling decisions and Jesse starts to feel undermined, ignored, abused, unappreciated, and resentful. If the stakes were set up with a clearer delineation of roles and responsibilities, including controlling interest, expectations could have been managed better. As they amass a larger mind share of brand equity, they are also able to negotiate better equity terms with their distribution partners, such as Lydia.
Walt has an obsession with quality and perfection. This obsession actually leads him to develop a company culture around perfection, attention to detail, stamping out all imperfection (both on the product and the business side) and tying up loose ends. All great if you’re going to be a gangster. But not always great if you want to continue to innovate. In my last Women 2.0 article, I argue that startup culture can either be intentional or accidental. I would say Walt’s culture is more on the intentional side. Intentionally obsessed with perfection.
Interestingly enough, the obsession with perfection leads to the superior quality of their brand. So again, thinking of my “authentic marketing” principle, where you have to have a large overlap between your own values, the product you’re selling, and the company you’re building, you can see why Walt and Jesse (or at least Walt) are so successful selling the product they’ve created–because the company, the product, and themselves have converged into a singular identity.
Walt and Jesse begin by distributing the product themselves, until they realize what a choke-hold the competition has on the marketplace. Even with a superior product, their competitors have erected huge barriers to entry based on the distribution networks in place. They have trouble selling their far superior product because there is literally no room in the marketplace supply chain for another player who wants to build an operation end-to-end. What’s the motto? If you can’t beat ’em….
Building a drug empire is not small feat. Walt and Jesse need some serious cash money to make this happen, and they also need a sound money manager cum CFO, found in the form of the “friends and family” tier (Walt’s wife, Skyler). She is a shrewd business woman, but the complexities of the family-business begin to put a strain on Walt and Skyler’s personal relationship. That said, with her involvement (again, notice the necessity of having good professional services), they are able to balance the check book.
Infographic on Walt’s Drug Empire Expenses Provided by Visual.ly
Walt and Jesse know that to have a successful go-to-market (GTM) strategy, they need some established players that can pedal the product in the marketplace immediately. They use their superior product as the bargaining chip they need to create their first partnership with a small-time local drug-dealer. They also require, that’s right, service providers (gasp!). Especially legal services. They recruit “better call Saul” to take care of some small messes at first (which grow into larger messes). Saul eventually becomes a critical ally, partner, and adviser in their future exploits, and introduces them to Gus Fring, the startup’s ultimate investor/partner/backer.
Like many startup founders, Walt and Jesse begin to dream of expansion outside their home turf, especially since the small-time market of the south-western US became virtually saturated by their product and there was nowhere locally they could continue to grow. That’s when they partnered with an international distributor (Lydia) who could open up doors for them in foreign markets (Prague) where demand was high and supply was not at saturation. This created new streams of revenue for them, just as their business was beginning to stagnate domestically.
It’s also very interesting that the problems they wrestle with are the same ones that startup founders ponder: Should I build it or buy it? How do I recruit the best talent? How do I balance my personal life and my work life? When should I move away from my core competency? When should I seek partnerships/investors? Would I rather be loved or feared?
Ok, maybe not that last one.
What they never, ever, ever, EVER, did was outsource their core competency, which was cooking. They always did this themselves, and as such they were able to maintain a high degree of quality control and have the throttle on production.
In any case, we founders can all learn a lot from Walt and Jesse. The most important thing we can learn is their unyielding work ethic and refusal to fail, epitomized in the show’s catch phrase and another key value to their startup culture: “Let’s cook.”
P.S. If there are any founder traits/issues I have failed to draw parallels to, please send them to me and I’ll add them in!
About the guest blogger: Chandra Jacobs (@tripchi) is the founder of tripchi. She has a background in tech, innovation and product development, especially as applied to web and mobile apps in the entrepreneurship arena. More recently, she has moved more into marketing and strategy post-MBA, as well as entrepreneurship.