Josh Elman

The 'too big, too small, just right' rocket-ship rule for joining startups

Josh Elman describes joining companies late enough to have momentum but early enough to matter. Microsoft in 1995 was too big (he worked on custom Excel charts among tens of thousands), a 10-person pre-product-market-fit company was too small, and the sweet spot is a company working 'enough' that you can have huge impact and outsized equity.

“I worked on custom charts within Excel. I looked around and there were tens of thousands of other people working on other minuscule things that added up to this giant Microsoft. The next summer, I interned for a 10-person company then called Kartoffelsoft. It didn't quite have product-market fit and it was trying to find its way through. I was like, "Oh, that's almost too small. I want something with a little bit of momentum or where I can tell the story to myself of why it can be giant for the world."”

Steal thisTarget companies with proven momentum but unproven scale: working enough to derisk, early enough that your equity 10x's.

Elman's 10x test: only join if it can get 10x bigger with a shot at 100x

Josh Elman's filter for which company to join: it must be able to get 10x bigger in users, revenue, or market cap over the next 3-4 years, with a shot at 100x. He runs this math in his head before committing.

“So in my mind, it has to be able to get 10x bigger— 10x bigger in users, revenue, or market cap— with a shot at 100x. And so I do that math in my head, which is like, I'm joining this company over the next 3 to 4 years.”

Steal thisBefore joining any company, ask: can this realistically 10x in users, revenue, or market cap in 3-4 years?

Joining Facebook at $15B because '$150B is still a 10x'

Many had written Facebook off as already-giant when Elman joined in 2008 at a $15B Microsoft valuation. He still saw a 10x: a path to $150B market cap and 500-700M users, with the Facebook platform becoming as unavoidable as Google and SEO.

“Facebook had, let's call it, 70 million monthly active users. It had been valued at $15 billion by Microsoft a few months before I started. It wasn't like I was a genius for joining Facebook when it was a couple of college kids and just networks in college. I still went back and I said, "Look, at $15 billion." I think this can be a 10x. I think it's a $150 billion market cap company, and so my stock will grow 10x at least, and the user base can easily get to 500 to 700 million people”

Sold his company for $997M and walked away with $3M

Sam mentions a friend who sold his company for $997 million; Josh Elman immediately guesses the founder walked away with just $3 million, illustrating how dilution can leave founders with a tiny fraction of a huge exit.

“He walked away with $3 million.”

Robinhood, Coinbase and Chime will be massive fintech outcomes

Asked which companies still fit his 10x/100x sweet spot in 2020, Elman predicts Robinhood, Coinbase, and Chime as the three US fintech companies that come out of the wave as massive outcomes, plus Revolut and TransferWise internationally.

“In fintech, Robinhood, Coinbase, and Chime are the 3 companies that I think are going to come out of this wave and just be massive outcomes. And then internationally, I'm quite bullish on Revolut and TransferWise as two companies I think that will still be very significant.”

Deliberate action: the trait Elman saw in every billionaire founder

Elman's observation of founders like the Robinhood and Discord teams: they aren't fast, snap-decision makers; they take 'deliberate action.' They're voracious and do a huge amount, but can always give a clear reason for every hire, meeting, or choice, including why something that failed still made sense at the time.

“And the reality is I like to call it deliberate action, which is they're really deliberate about just about everything they do, whether it's a hire, whether it's a meeting they're going to take, whether it's a person they're going to spend time with. But they do a lot of things. They're kind of voracious. They just are like nonstop accumulating information, doing things. But if you ask them why, why did you do that? Why did you go here? Why did you think about that thing? Why did you say that? They actually always have a good reason.”

Great founders sell the 10-year vision AND ground it in the next 5 moves

Elman's rare-double trait of elite founders: they can paint a compelling 5-10 year picture of success and simultaneously ground it in the concrete next steps. He cites the Musical.ly (later TikTok) founder painting a vision of creativity for the world while explaining exactly which product flaws he'd fix next.

“they can paint that picture of the success in 5 or 10 years that sounds really, really compelling. So, they can hold that version of the future and sell it really well, but they can also ground it in, "And here's the next 5 things we're going to do and here's why." And I have met a lot of people that can do one of those things really, really well, but very few that can do both.”

Reid Hoffman's GUR: Growth, then Usage, then Revenue

In his 2003 LinkedIn interview, Reid Hoffman explained how the company would win in three sequenced phases: first grow into the largest network using viral mechanics, then drive usage by making members better professionals daily, then layer in revenue by selling engagement and search to HR, sales, and recruiters.

“He called it growth, then usage, then revenue, which I then called GIR. He said, "First, we're going to grow and become the largest network. It's going to have utility for a few people. Then for most people, they'll just be latently there, but we're going to use all the viral mechanics to actually capture the network. Then we're going to focus on usage." which is we're going to figure out how to get you using your network to make you a better professional more every day. Then we're going to focus on revenue”

Steal thisSequence a network product: win growth first, then engineer usage, then monetize, in that order.

The next big secret: getting people to pay for what they value, gaming-style

Elman's pick for the under-appreciated secret of 2020 that will be obvious in 15 years: most industries default to ads, but gaming long ago proved people will pay directly for things they enjoy or that motivate them, coaching, training, content, creators. Nobody has pulled those monetization lessons fully out of gaming yet.

“Gaming companies have known this for a very long time, and yet every other industry has said, "We'll just build an ads business. We'll run remnant ads and we'll do some direct sales and that's how we'll grow." You're just starting to see people realize that, actually, people are willing to pay for things that they enjoy or that activate them or that motivate them, whether that's coaching, training, good content, subscribing to a specific writer who brings me value every day, but nobody has figured out how to bring those lessons fully out of the gaming ecosystem.”

Steal thisPort gaming's direct-pay monetization playbook into a non-gaming industry that still runs on ads.

Longer onboarding always makes your product better

Elman's latest talk argues a counterintuitive growth principle: longer onboarding always makes your product better. Shaan confirms it from experience, noting that vendors who insist on an hour-long onboarding call do so because their data shows retention is meaningfully higher.

“My latest one that I've been shopping this year is on onboarding. It's longer onboarding always makes your product better.”

Steal thisResist shortening onboarding to reduce friction; a longer, guided onboarding usually lifts activation and retention.

Build a rocket ship on the back of a rocket ship

Shaan cites VC Josh Elman's talk: platforms give you easy early growth, but you must build escape velocity to get off them before they change the rules. While exploiting a platform's advantages, you should equally be planning your escape, the way Zynga did off Facebook.

“hey, it's great when these platforms are around, you can go get some easy growth on top of them, but you gotta make sure you're building escape velocity to get off them quickly because you will not survive living off them.”

Steal thisExploit hot platforms for early growth but engineer escape velocity before they change the rules.