Sulaiman Ali

Most people wildly overestimate the risk of quitting

Sulaiman Ali argues that leaving a stable job to start a company is far less risky than it feels: unemployment for skilled people is under 4%, and even a failed founder can return at a higher level because companies value the entrepreneurial experience.

“And I really think a lot— most people overestimate the risk that they're taking when they leave their job. The unemployment rate in the United States is sub-4% for people who are competent and skilled. Build in their line of work, it's easy for them to go back to their job. I think if I quit Microsoft, started a company and failed for a year or 2 or 3, I could go back to Microsoft and actually get a higher position than what I would have if I had stayed, just because even Microsoft values that entrepreneurial experience that people will have.”

A silly Facebook 'Superlatives' app hit 1M users in a month

To relearn coding after leaving Microsoft, Ali and a friend built a joke Facebook app called Superlatives in about two weeks, hoping for 100 users. Within a month a million people used it and their servers were melting.

“So we made a bunch of really funny superlatives, like most likely to wear a bunny costume for no apparent reason, most likely to get conned by old ladies in Las Vegas, things that we just thought were kind of offbeat and funny that you would want to give to a friend. And, uh, that friend would go to the app and give one back to you.— So we launched on the Facebook platform and within a month, 1 million people had used it and our servers were melting.”

Naval cold-called and offered $200K over lunch

On his first-ever meeting with a Silicon Valley insider, Naval Ravikant flew Ali out, took him to lunch to gauge if he was technical, ambitious, and a real entrepreneur, then offered to wire $200K on the spot.

“And he cuts through all the bullshit in my head and says, what's it going to take to get you on a plane tomorrow to come meet me here in San Francisco? And I say, oh, okay, I can do that. Right. And so I buy a one-way ticket to San Francisco and come to come out here and meet with him.”

Keith Rabois: my engineers can copy you in 30 minutes

At Slide, Keith Rabois opened the door to his engineering floor and told Ali it would take them 30 minutes to copy everything he'd built and integrate it into Top Friends, then he'd be toast. Ali declined to join, saying they could have the app but not his time.

“And it's going to take them about 30 minutes to copy everything that you've done and integrate it with Top Friends, their biggest Facebook app. And I think the biggest Facebook app in the world at the time. And then you're going to be toast.”

Track repeat usage, not lifetime users

Ali's early apps optimized for total people who ever used the app rather than daily/monthly active users, so they built things people touched once and never returned to. The lesson: optimize for frequent, long-term, repeated usage instead of one-time virality.

“We didn't track those things. We just tracked how many people had ever used our app. So we were optimizing for fundamentally the wrong thing. What you want to optimize for is building something that people are going to use constantly for a long period of time, frequently ideally. We were optimizing for something that people would touch, get 10 of their friends to use, but never come back to.”

Steal thisPick daily/monthly active users as your North Star metric, not cumulative installs.

$2M for 9 months of work, written on a napkin

Shervin Pishevar slid a $2M offer across a napkin to buy Ali's company after roughly 9 months of work. Ali, who'd been making $76K/year at Microsoft, says he'd have said yes even to $200K.

“Yeah, we would have probably said yes to any number, frankly. So at the time when I was at Microsoft, I was making $76,000 a year. —so he offered us $2 million for 9 months' worth of work.”

The roll-up: combine the top players to manufacture value

Shervin Pishevar raised $15M from a VC to buy the top 5 companies in the Facebook-app space and merge them, spending ~$10M to create $50-100M of combined value. This is the classic roll-up playbook.

“So you get somebody to back you and give you a big check. In this case, he'd gotten a venture capitalist to give him $15 million. He was going to use that $15 million to buy up the top 5 players in the space, combine them all together with a goal of, you know, that costs $10 million but creates $50 million or $100 million of value.”

Steal thisRaise one big check, acquire the top players in a fragmented space, and merge them into a single more-valuable entity.

Use an ad network's incentivized installs to game the App Store charts

TinyCo's first game Tap Resort was pushed into the top 5 free apps via a marketing partnership with Tapjoy, generating hundreds of thousands of downloads and $500-600K of revenue in the first month.

“He'd started a company called Tapjoy that's a mobile ad network wherein Tapjoy promotes our game Tap Resort. And by promoting it, they push it in the top 5 free apps on the iPhone App Store. So we get hundreds of thousands of downloads immediately, and those downloads are turning into revenue. So in the first month of launch, we generate $500,000-$600,000 of revenue.”

Never lie to yourself about reality

Ali says the core failure mode for founders is self-deception: with investors, employees, and press to please, it's easy to tell yourself things are working. The strength of his team was admitting their reality had changed and acting on it immediately.

“I think that one of the things you need to do as an entrepreneur is never lie to yourself about reality. It's very easy for an entrepreneur to lie to themselves about reality, especially when they've got investors that they always want to say the nice thing to or the right thing to, especially when you've got employees and you always want to be— your employees to be excited about your business and where you're going.”

Never lie to yourself about reality

Ali says the core failure mode for founders is self-deception: with investors, employees, and press to please, it's easy to tell yourself things are working. The strength of his team was admitting their reality had changed and acting on it immediately.

“I think that one of the things you need to do as an entrepreneur is never lie to yourself about reality. It's very easy for an entrepreneur to lie to themselves about reality, especially when they've got investors that they always want to say the nice thing to or the right thing to, especially when you've got employees and you always want to be— your employees to be excited about your business and where you're going.”

List every reason you'll fail before writing a line of code

A Keith Rabois rule Ali adopted: before building anything, write a prioritized list of all the reasons the company could fail, then try to disprove each one up front rather than discovering them after launch.

“One thing I heard Keith Rabois say once is when you start a company, you should think about all of the reasons that it's not going to work and all of the reasons that it's going to fail. And you should start with that list, make a prioritized list, and try to prove that these aren't things that are going to make your company fail. And you want to do that as the first thing.”

Steal thisBefore coding, write a prioritized pre-mortem of failure reasons and try to disprove each one.

Fox gave TinyCo the Family Guy deal out of fear of what they'd do next

Competing against EA and Zynga for the Family Guy license, Ali relentlessly asked his BD lead 'what more can we do today?' and pulled every string, including Marc Andreessen and Tom Rothman. Fox said they gave TinyCo the deal because they were afraid of what the team would do if they didn't.

“And in fact, when we got the deal done with Fox, they said, we had to give the deal to you because we were afraid of who else was going to call us if we didn't do the deal with you guys. We were afraid of what else you might do next if we didn't give you the deal.”

Signed a $10M Fox license with only $2M in the bank

TinyCo committed to pay Fox $10M within 30 days for the Family Guy license while holding just $2M. They cajoled Silicon Valley Bank, with Marc Andreessen's help, into a ~$10M loan, paid Fox, then laid off ~70-80 of 160 people to cut burn.

“When we signed the deal with Fox, we signed a deal that says that we're gonna pay them $10 million for the license and that we're gonna pay them $10 million within 30 days. We have $2 million in our bank account. So the first thing we need to do is go convince somebody to give us the money to pay Fox.”

The founder's conviction is the artificial heart keeping the company alive

After layoffs cratered morale and people quit weekly, Ali compared himself to Iron Man's artificial heart: the only thing keeping the company alive was employees seeing his conviction in the office, and if his heart stopped beating for one beat, everyone would quit.

“And I felt like during this whole time period, the only thing that was keeping the company alive was people seeing me in the office, people seeing the level of conviction that I had, and that if my heart stopped beating for one beat, the company would die and everyone would quit and give up.”

Put his last $1M into the company behind $10M of debt

Out of money, Ali poured the $1M he'd made when his $100K MoPub investment was acquired by Twitter into TinyCo, sitting behind SVB's $10M of debt. He believed he'd never see it again but needed to turn the card over to find out if there was an ace in the hole.

“Um, and financially I felt like it was the wrong decision to make, but emotionally I just felt like I need to see this through. I have come this far, just need to see if this game is successful when we launch it, and I can't give up. And if what it takes is me putting this money in and losing it to turn that card over and find out whether there's an ace in the hole or not. I got to do it.”

He gave up at noon, then woke to $400K in day-one revenue

When the Family Guy game's App Store featuring came in weak, Ali declared the company dead, left at noon, watched Netflix and slept. He woke to find the game had generated $400K in revenue on day one and ran to the office to rally the team.

“So I fall asleep, I wake up the next day, I immediately go to look at our stats and I'm like, oh. We just generated $400,000 in revenue yesterday. So this is working. Holy fuck, this is actually working. We're winning. I run to the office and like rally the team and say, wow, this is working. We did it, guys.”

TinyCo sold at $85M revenue and $15M EBITDA

The Family Guy game went on to do $150-200M in lifetime revenue. TinyCo, with a Marvel game and a Harry Potter deal in the works, sold while doing about $85M in revenue, $15M in EBITDA, with ~150 people.

“We sell the business. The year that we sell, we do— we're doing about $85 million in revenue, $15 million in EBITDA, about 150 people at the time.”

Native Deodorant's 'sniff test' product research

To build Native, Ali and his brother bought deodorants off Etsy, applied one under each armpit, ran a mile, and sniffed each other to find the effective formula. The brand later sold to Procter & Gamble in a nine-figure deal.

“So we put some of the deodorant that we bought from Etsy under each of our armpits. We go run a mile and then we sniff each other's armpit. To see, is this deodorant actually good? Highly scientific. It's totally unscientific, but also very effective.”

Engineering is becoming a commodity; well-rounded founders win next

Ali's contrarian Thiel-question answer: software engineering is commoditizing in Silicon Valley, so the next generation of successful entrepreneurs will be well-rounded generalists rather than necessarily technical founders.

“One of the things I believe is that engineering is becoming a commodity in Silicon Valley and that the next generation of entrepreneurs are going to be not necessarily technical, but people who are more well-rounded in their skill set.”

Most people wildly overestimate the risk of quitting their job

Sulaiman Ali argues that with sub-4% unemployment for skilled workers, quitting to start a company is low-risk because you can return to a job — often at a higher level, since companies value entrepreneurial experience.

“And I really think a lot— most people overestimate the risk that they're taking when they leave their job. The unemployment rate in the United States is sub-4% for people who are competent and skilled. Build in their line of work, it's easy for them to go back to their job. I think if I quit Microsoft, started a company and failed for a year or 2 or 3, I could go back to Microsoft and actually get a higher position than what I would have if I had stayed”

Steal thisReframe quitting as low-risk: worst case you return to your field, often at a higher level for having tried.

A silly Facebook 'Superlatives' app hit 1 million users in a month

Ali and a Georgia Tech friend built a Facebook app where you assign joke superlatives to friends. They hoped for 100 users; within a month a million people used it and their servers melted.

“So we made a bunch of really funny superlatives, like most likely to wear a bunny costume for no apparent reason, most likely to get conned by old ladies in Las Vegas, things that we just thought were kind of offbeat and funny that you would want to give to a friend. And, uh, that friend would go to the app and give one back to you.— So we launched on the Facebook platform and within a month, 1 million people had used it and our servers were melting.”

Naval cold-calls a stranger and offers to wire $200K over lunch

Naval Ravikant called Ali out of the blue, cut through his hesitation by asking what it would take to get him on a plane tomorrow, and at lunch offered to wire $200K on the spot.

“And he cuts through all the bullshit in my head and says, what's it going to take to get you on a plane tomorrow to come meet me here in San Francisco? And I say, oh, okay, I can do that. Right. And so I buy a one-way ticket to San Francisco and come to come out here and meet with him.”

Shervin Pishevar buys the company with a $2M number on a napkin

At a Facebook-apps conference, Shervin Pishevar wrote an acquisition number on a napkin and slid it over. Ali saw $2 million for a 9-month-old company and said yes instantly.

“So he writes a number on a napkin, turns it over, slides it to us. We look at it and we immediately say, okay, let's do this deal. Uh, so it was a $2 million number on the napkin and we'd started the company sort of 9 months ago.”

$76K Microsoft salary to a $2M napkin offer in 9 months

Ali was making $76,000/year at Microsoft. Nine months after quitting, he was offered $2 million for his Facebook app company.

“So at the time when I was at Microsoft, I was making $76,000 a year. —so he offered us $2 million for 9 months' worth of work.”

The roll-up: raise a big check, buy the top players, combine for more value

Shervin Pishevar's strategy was a roll-up: he raised $15M from VCs, then bought the top 5 players in the Facebook-apps space, combining companies that cost ~$10M to create $50–100M of value.

“So what Shervin was doing was a strategy that's called roll-up. So you get somebody to back you and give you a big check. In this case, he'd gotten venture capitalists to give him $15 million. He was going to use that $15 million to buy up the top 5 players in the space, combine them all together with a goal of, you know, that costs $10 million but creates $50 million or $100 million of value.”

Steal thisRoll up the top players in a fragmented space: combined, they're worth far more than the sum bought separately.

TinyCo got its name from a $700 domain

Ali and Ian Spivey wanted a cheap, fun domain. Every good name was expensive, but TinyCo was available for $700 — suggested by engineer Bo Shi — so that became the company name.

“We were looking for domain names that were really cheap and fun. And TinyCo we bought for $700. All the other domain names and ideas that we had were very expensive. So that's how we arrived at the name TinyCo.”

TinyCo's first mobile game made $500K-$600K in its first month

TinyCo's debut game Tap Resort, pushed into the iPhone App Store top-5 free apps via a Tapjoy partnership, generated $500,000–$600,000 of revenue in its first month.

“So we get hundreds of thousands of downloads immediately, and those downloads are turning into revenue. So in the first month of launch, we generate $500,000-$600,000 of revenue. Not bad.”

Japanese gaming giants drove TinyCo's ad costs from $1 to $9 and flipped the unit economics

TinyCo spent ~$1 to acquire a customer and earned ~$2.50 in net revenue. Cash-rich Japanese mobile gaming companies entering the US drove acquisition costs to $4, then $6, then $9 in six months, turning the business upside down.

“We would spend about $1 acquiring a customer, and we generate about $2.50 in net revenue from that customer.— a bunch of Japanese mobile gaming companies were making so much money in Japan but saturating that market, and there was no more growth left there for them. So they were moving to the United States, opening up offices in San Francisco, and saying, "OK, we're going to become dominant mobile game companies in the United States." They drove the cost of customer acquisition up from $1 to $4 and then to $6 and eventually to $9”

Keith Rabois: list every way your startup could fail before writing code

Ali relays Keith Rabois's heuristic: before building, write a prioritized list of all the reasons your company could fail, then try to disprove each one — up front, not after you've launched.

“One thing I heard Keith Rabois say once is when you start a company, you should think about all of the reasons that it's not going to work and all of the reasons that it's going to fail. And you should start with that list, make a prioritized list, and try to prove that these aren't things that are going to make your company fail.”

Steal thisBefore writing a line of code, write a prioritized list of why the company could fail and try to disprove each.

License powerful brands to win downloads without paid acquisition

Facing brutal ad costs, TinyCo's play was to license huge media brands (Family Guy, like the existing Simpsons game) so the brand itself drove tens of millions of downloads in the App Store — a console-game playbook nobody had brought to mobile.

“So we make a list of brands where we think this brand is so powerful, we're going to be able to get 40 million people to download the game just based on the fact that I have this brand in the App Store. One of the brands that we come up with is Family Guy. So there'd been a Simpsons game launched, and the Simpsons game was beginning to do well. And we said, okay, what's like The Simpsons? Family Guy. Let's go try to get the Family Guy license.”

Steal thisWhen paid acquisition breaks, license a brand whose built-in fanbase does the customer acquisition for you.

Founder puts his own $1M angel windfall into the dying company, behind $10M of debt

TinyCo's $100K MoPub investment turned into $1M when Twitter acquired it. With investors refusing more money, Ali put that $1M into his own failing company — junior to $10M of SVB debt — and a16z matched it dollar-for-dollar.

“I had invested in this company called MoPub, started by this guy Jim Payne, and I'd invested $100,000 into it. It got acquired by Twitter and that $100,000 turned into $1 million. So I said, okay, I just made this $1 million. I'm going to go put that money into the company. And that million dollars is going to be behind the $10 million of debt that we've got from Silicon Valley Bank.”

He left the office assuming the company was dead, then woke up to $400K in a day

When the Family Guy game got a weak App Store feature, Ali concluded the company was over, went home and slept. The next morning the stats showed $400,000 in revenue the prior day — it was working.

“I immediately go to look at our stats and I'm like, oh. We just generated $400,000 in revenue yesterday. So this is working. Holy fuck, this is actually working. We're winning. I run to the office and like rally the team and say, wow, this is working. We did it, guys.”

TinyCo sold at ~$85M revenue and $15M EBITDA; Family Guy alone did $150-200M

At sale, TinyCo was doing about $85M in revenue, $15M EBITDA, with ~150 people. The Family Guy game alone went on to generate more than $150M, maybe $200M, in revenue.

“The Family Guy game goes on to do more than $150, maybe $200 million in revenue at this point. We get an offer to buy the business. We hire an investment banker, this guy named Dick Filippini, who helps us get a couple more offers. We sell the business. The year that we sell, we do— we're doing about $85 million in revenue, $15 million in EBITDA, about 150 people at the time.”

The Native deodorant 'sniff test': run a mile, smell each other's armpits

Ali and his brother built Native (later sold to P&G) by buying deodorants off Etsy, applying them under each armpit, running a mile, then smelling each other to find the one that actually worked.

“So we put some of the deodorant that we bought from Etsy under each of our armpits. We go run a mile and then we sniff each other's armpit. To see, is this deodorant actually good? Highly scientific. It's totally unscientific, but also very effective. Effective. And we eliminate all these terrible deodorants from Etsy that are not effective, and we find one that works.”