Halvar’s Guide to Entrepreneurship – Thomas Dullien / Halvar Flake

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Introduction

I founded two companies — zynamics, which I ran from 2004 to March 2011 and which I sold to Google (GOOG), and optimyze, which I ran from 2019 to November 2021 and sold to Elastic (ESTC). The first company was bootstrapped, initially with no cofounder (an early employee received a big equity stake later), the second company had a cofounder and was venture-backed.

Neither of these exits were “successes” by Silicon Valley standards, but they were definitely impactful and possibly life-changing for founders and most employees.

I learnt a few things, and after talking to founders or would-be founders, I decided to share my lessons more broadly.

This document contains information, anecdotes, and insights. I hope that they will be useful for other founders. It will also contain a number of falsehoods that I believe to be true. Please make me aware of where that is the case.

Warning: I only have experience in software/SaaS B2B and know nothing outside of that. With only two companies as experience, nothing in this document should be taken uncritically as truth. I also have no experience with a company between size 15 and 3000 employees.

Reasons to become an entrepreneur

If you think about becoming an entrepreneur, think about the “why”. Do not expect to find a simple answer, but doing introspection is a good idea. I never really aspired to become one; I stumbled into my first company by accident: I wrote a piece of software that people liked, and then needed a legal entity so I could sell it. I realized afterward (during my time at Google) that beyond 4-5 years, I have real trouble fitting into very large organizations run by someone else.

Your reasons will be idiosyncratic to you. I certainly did not understand my reasons very well until after my second company; I only embarked on more introspection at that point.

My reasons were:

Some say work happiness is achieved by the triad of Autonomy/Mastery/Purpose. This is true for me for technical work, but when working in an organization, I also need a lot of agency to be happy. This means having the ability to fix things that I perceive as broken without running a long political campaign. In many large organizations, fixing even relatively trivial brokenness gets hard unless you’re extremely high up. Having my own company gives me a ton of agency. The hiring process seems broken? Great, let’s do a new one. There’s poor code hygiene? Great, let’s build a company that writes great code.

I love working with great people on problems just on the verge of the possible. This can be hard in large organizations, as large orgs tend to (unintentionally) avoid having too many good people on one team (the value for the large org is maximized by spreading out great people to guide many teams - so most teams will only have 1-2 great members). It is often easier to assemble a great team in a small company.

Great people are sometimes oddly-shaped — perhaps they don’t have the right academic credentials, only work three days a week, live in strange places, work strange hours, interview poorly, etc. - but they are great. Not being able to hire great people due to some bureaucratic obstacle grates on me, and I love the flexibility of just being able to hire them. Large organizations need standardized components, and small orgs can work with “nonstandard parts” that are often unusually great at multiple things.

In order to function well in a hierarchy, I need to respect my immediate manager, and the majority of people above me in the hierarchy need to appear to me to be both competent and of high personal integrity. This isn’t always easy to achieve in large organizations. Concretely at Google, I found Sundar an extremely uninspiring CEO, and the trend in upper management was a steady decline in both competence and integrity.

I have a(n un)reasonably high opinion of my own value, and that perception does not always agree with job ladders, salaries, promotion processes, and company politics.

Alignment of technical, economic, and ideological interest: I really love to work on things that manage to align my technical interests, my economic interests, and my ideological interests. Ideally, I want to work on something that I perceive as being super interesting, something that is economically valuable, and something that has an impact in the broader world that I perceive as positive. This can be very difficult to achieve in a large company.

Alignment of customer, company, team, and personal interests: As a middle manager in a big company, I often found it difficult to align “what’s best for the customer”, “what’s best for the company”, “what’s best for the people reporting to me”, and “what are my own interests”. In a startup, if done right, these things are auto-aligned.

There’s a part of me that loves building a product that delights users, that makes eyes light up...