T.A. McCann, serial entrepreneur and Managing Director of Pioneer Square Labs, has sailed in two America’s Cups. How are sailing and startups alike? T.A. explains.

David Cohen was super excited when he realized that T.A. McCann—founder and CEO of Senosis (acquired by Google), Gist (acquired by Blackberry) and Rival IQ, a leader in marketing analytics, as well as Managing Director of Pioneer Square Labs—was the same guy he was reading about in The Proving Ground: The Inside Story of the 1998 Sydney to Hobart Race.

T.A. tells tales of his sailing adventures—including one harrowing anecdote involving Rupert Murdoch’s finger—and applies the knowledge he gained competing in two America’s Cups to running and growing startups.

Companies and resources mentioned in this podcast:

ITINDY

Pioneer Square Labs (PSL)

The Proving Ground, by G. Bruce Knecht

Rival IQ

Splash

Edited highlights from the conversation:

Sailing as a metaphor for startups:

David: If you haven’t read the book, go get Proven Ground. It’s really great. And it’s so cool that you’re in it and it’s all real. That’s really an amazing, true story, which I love better than fiction.

Any tiny little advantage is really important in sailing. Deciding what’s the risk of doing something or what’s the risk of not doing something is so important. We had Wendy Lea on recently and she was talking a lot about the risk of not doing something. When you’re coaching startups, how do you assess risk-reward in your coaching them, knowing that small things can make big differences over time?

T.A.: I’ll play with a sailing analogy a little bit. Because it does answer your question. So in the America’s Cup and the highest end of sailing, you have a very significant amount of money. Think of it like a Seed Round or a Series A. You have a hypothesis about different areas on which you can experiment that might create an advantage. And in the sailing category, that could be boat design, sail design, team design, tactics, electronics, weather, etc. Even in boat construction, you hire the best people you can. For each one of those subdisciplines you build a big gigantic Gantt chart of which experiments will take how much time. What do we expect to see? How might we test A versus B? And you start running those processes, those tests.

The difficulty at a management level is knowing how many different tests or how many swim lanes you can run, how many different experiments you need to do in order to make a decision. Is this category going to be an area of innovation? Or is it just going to be an also ran? Should I double the amount of investment in category X versus category Y?

I’ll give you an example. In 1992, we had a hypothesis that we could invent an entirely new type of sail cloth made of carbon fiber, which is a very brittle material, very light, very strong. And we went through many, many iterations where the first sail we would put up—$10,000-$15,000 worth of sail—would literally blow up in like five seconds. That didn’t work.

Keep trying, keep trying, keep trying. Ultimately create this product called Cuben Fiber that was about 20% stronger and significantly lighter than everybody else’s. One small innovation that led to a significant advantage. That was some part of us winning that 1992 America’s Cup, and in the startup mode.

I think the advice I pull out of that story is really thinking about the areas where your individual team has a hypothesis for an area of innovation. What are you going to do the same way that everybody else does? A different way? How might you design that experiment? How can you delegate the ownership of experiments to different people on the team? In a CEO or founder kind of role, your job is to think about whether you have enough capital applied to the two, three, four, eight areas of innovation that you might create an advantage around, and then managing that through some realistic timeline and decision making on which ones are going to work, which ones are not going to work, and which we’re going to invest more in—which actually has some validity around what we do at PSL as well.

David: For sure. Hey, last sailing analogy, I promise. You know, when you’re a little bit behind, your approach to risk is different. So let’s say you have a competitor that’s outflanking you. Maybe in sailing you’re going left or going right and you’re trying to figure out how to look for advantage. Have you found yourself encouraging people that you work with—CEOs, mentees—to react differently because the competition’s ahead or just stay the course and know that you can bear up?

T.A.: I built and you invested in a whole company called Rival IQ that is partially about this. If you can understand your competitors well—in the case of Rival IQ, it’s specifically around digital marketing—if you can understand your competitors well, you first choice is, can I compete or not? Right? Do I have the appropriate intellect or resources to compete? If the answer is no, you have to find a way to create a different area that they’re not spending time on.

So I think the answer for startups is to first understand your competition. If you use a sailing analogy like the 1995 America’s Cup, we were outspent three to one or so. The team that we were sailing against had boat speed on us, and so what we had to try and do, which ultimately we still failed and lost, but we had to be much, much more aggressive on tactics. We were almost always trying to create an area where they would create a foul on us, at which point we may have a chance of winning because we were just slow enough that if we could get one foul on than we might be able to make it even.

David: Fascinating. I love the way you’re thinking about that—understanding the competition versus overreacting to them, right? And being intellectually honest with whether or not you think you can bear up.

T.A.: The other part, as regards to both sailing and startups, is really thinking about fundraising. So fundraising is a strategic advantage. If I can raise more capital than you, even if I spend it slightly less well, I may still be able to create an advantage. If I get the best capital, the best investors for space A or space B, it’s much less likely for you to be able to get those kinds of people. I think about fundraising as a strategic weapon that you can utilize in your startups. And therefore, I highly encourage people to think when you’re going into fundraising mode about who is the best possible investor that you need. Do you understand the competitive landscape of the best investors? What have they already invested in, and how can you fit into that jigsaw puzzle?

That’s the same as we would have done from a sailing perspective: understand the competition. Understand how you fit into that competition.

Aligning creativity with process:

T.A.: I’m a mechanical engineer, so I like thinking about the way things work as much as what they do. And this is true about startups, too. Part of the reason I’m such a fan of Techstars and Startup Weekend and even all of us who are working on studios is there’s a whole bunch of process oriented stuff, whether it be fundraising or product development or recruiting, etc. that can be generalized or certainly got to a place that is sort of best practice level, and that can be applied to many different kinds of companies. Part of the reason I was excited about joining PSL was that they had had success, but in many ways weren’t quite sure why.

It’s like companies that have early product market fit, and you’re like, oh my gosh, it’s going great. But I don’t know exactly why. And if you don’t know exactly why, you can’t predict if it’s going to continue in the future. So part of the reason I joined PSL and was excited about it is they had great success, a limited amount of process, and I’d say a limited amount of understanding or repeatability or certainly predictability in that. So I kinda came in and I started trying to figure out for myself how this place works. What has worked well, what has not worked well? Why is this company being successful, and this other company less successful? I tried, both for myself and for PSL, to start to document that, write it down, draw a schematic, draw a flow chart, that type of thing.

In addition, we were not very consistent at talking to new founders or new entrepreneurs or new potential CEOs about how the process works. So sometimes process drives consistency, and as we add more MDs, more people, more companies, we also had to figure out how to communicate this consistently. And if we can communicate it consistently, can we start to predict how likely a company is to be successful? Meaning, can we get it out and can we get it funded and can it get good early market traction?

Greg [Gottesman, Co-founder of PSL] is so creative. He’s an idea-a-minute kind of a person. And yet that idea-a-minute can be very distracting for a company. You might have the shiny penny kind of CEO: sometimes they’re like, oh we could do this, we could do this, we could do this, we can do this, we could do this. But as you start to get scale in a company, even small scale, five, 10, 15, 20 people, that’s very jarring for a company, because they can’t keep up with all of that. You don’t know when or how each idea should be factored in with all the other things you want to do.

So it’s amazing to have creative people like Greg, and it’s amazing, especially in our world here at PSL, to have lots and lots of ideas. The trick is balancing that with: How do we take an idea and move it into validation? How do we know how to move it out of validation into creation? How do we know when to get a CEO for that? How do we know when to spin it out and how to fund it, which are kind of the main parts of our process? And so we have tension between creativity, lots and lots of new ideas, and productivity or structure by which to evaluate those ideas, know which ones to try, which ones to explore and and which ones to just put on the back burner. Or what I would call The Important Things I’m Not Doing Yet list—or ITINDY.

Rapid Fire Round

David: Favorite city that you think everybody in the world should visit.

T.A.: Outside Seattle, it would be Auckland.

David: Any favorite charity that you urge people to check out or get involved with in some way?

T.A.: I’m on the board of splash.org. We provide clean water to the poorest communities in the world, and it’s a really cool company that is a nonprofit that functions very much like a for profit. Incredibly cool.

David: Awesome. We’ll check it out. Hopefully we’ll get some Give First action going there. If you could have dinner with anyone, dead or living, who would it be?

T.A.: Elvis Costello.

David: Oh, fun. Why’s that? Got to ask.

T.A.: I’m just a huge fan. He’s so creative. Smart in many, many different ways. He’s been a musician in lots of different ways and also an advocate. So a life hero and interesting person and obviously very creative.

David: We’ll end with this. How can somebody listening today give back to you and maybe to PSL for the great advice they’ve heard here today?

T.A.: I write a blog at tamccann.com and there’s a lot of startup stuff on there. So give me feedback on this stuff that I’ve written, and share the things that matter to you. And tell me things that you hope that I would write about in the future.


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