The Psychology of Serial Entrepreneurship
Highlights from Founder's Mindset podcast interview with Keith Schacht
Last week’s episode of The Founder’s Mindset was a special treat for me:
Our featured guest was Keith Schacht, who’s not only a personal friend, but also one of the people who’ve most compellingly and inspiringly embodied “the builder’s mindset” in my mind since long before I even had a term for it.
Keith’s biography as a Silicon Valley serial entrepreneur could intimidate even the most intrepid early-stage founders, though you’d never guess it by talking to him. Named one of the top 20 entrepreneurs under 25 by BusinessWeek back in 2005, Keith has successfully built and sold 4 venture-backed startups to date. The latest of these was Mystery Science, an edtech company whose open-and-go science lessons were being used in over half of all American elementary schools at the point when Keith and his cofounder Doug sold the company to Discovery Education in 2020. The acquisition set him and Doug free to start building again from scratch, this time with an even more ambitious vision for transforming how children around the world learn about, well, anything.
What are the psychological building blocks that make up a serially successful, wildly ambitious, and unabashedly happy builder? That was what I set out to learn through this conversation with Keith.
Below are some representative excerpts from the full episode, which you can also listen to on Apple Podcasts or Amazon Music or wherever you like to listen to podcasts:
The quest for product-market fit: Getting to know and love the problem
Me: …I know some early stage founders get this impression when hearing from really impressive, successful serial founders… that you're a really happy, well-adjusted guy… and it's been pretty smooth sailing…. What hasn't been smooth? Where have the curve balls hit you from and how have you experienced some of that struggle?
Keith: Yeah. I mean I think it's not smooth, but I just never expect it to be smooth. So I don't get upset when it's not smooth. It's like when you're off roading, you expect lots of bumps… I mean an example was my previous company, Mystery, was the biggest sort of company success to date. …And it was a classic example of having strong conviction about a broad area of opportunity and specific ideas, but flexible on whether that particular idea was the right one. And so it was five, six, seven, eight iterations later before we finally got something.
Me: So in retrospect, it's really clear that you struck gold and have been incredibly successful with that eventual iteration of the product, but how did you know at the time that you were really onto something with that sixth or however many "th" iteration?
Keith: Yeah. And I mean, maybe even to come back to your earlier question too of, it sounds like smooth sailing, I remember my co-founder, Doug, this was his first company. And so it was kind of fun to watch the search for product market fit through his eyes because each prototype we'd build, he'd be like, "Oh, this one's going to be the one." And then I'm like, "Whoa, we don't know. We don't know." And so much of this is managing your own psychology, which it sounds so abstract to put it that way. I think one of the most important things that every step of this discovery process is to be really clear on what you know and what you don't know and not to ever confuse the two.
And a very common pattern, to make this really concrete, is I mentioned we prototyped a line of science kits and put this in the hands of a bunch of parents. And it's very easy after that moment that it didn't work to conclude, "Oh, no one wants a line of science kits." Or some broad generalization like that, which is too general. The right way to hold it is the particular prototype I built that I put in the hands of these six parents wasn't used by any of the parents. And when you hold the conclusion that way, it leaves the door open to, maybe it was the wrong set of parents. Maybe there's a different group of customers, but the exact same product, or maybe the idea of a line of physical science kits was a good idea, but those three that we made were bad for a particular set of reasons because they involve supplies that most parents didn't have at home.
And so, that's such an important part of the journey is to always be really clear on what you know and what you don't know and to hold those conclusions in the right way. And I think that's what makes the journey feel bumpy and circuitous, but not frustrating. It's just a process of coming to understand the nature of the world and your customers and your idea and whatnot. So to come back to your question of, how did we finally know? It was say, let's call it prototype number six. We had built something that we tried on parents and a number of parents gave it to their kids' teacher and said, or I think a couple parents said, "I gave it to my teacher and asked them to try it because we didn't get around to it." And we thought that was an interesting clue. We didn't immediately jump on elementary teachers at that point.
When we did finally decide to build a prototype for teachers, we initially built one for middle school science teachers because we wanted to help them teach science. That one didn't work either. They didn't use it. We happened to be, I had a friend of a friend who was an elementary teacher and happened to show her one of these prototypes and she was excited about it. She said, "Wow, that's cool." And told us about something she was doing.
And one of the breakthrough moments was she told us about a set of lessons that she needed to teach soon and we just offered to help her. So we said, "Oh, so what's this particular lesson you want to do? Okay. Well, what if we prepared the following things for you and sent that over within a couple days?" And sort of followed her lead in a really concrete way, a specific day, a specific lesson, a specific problem, and we helped her and that was big clue number one. She got really excited about what we gave to her, used it quickly, and asked for more and then we made a few more of these.
Me: …I just want to notice what a great example that is of, Paul Graham writes about doing things that don't scale and how important that is early on in the founding journey, and I think that's just such a great example. Of course, you weren't ultimately going to build a global product where every single teacher you go and you talk to them and you learn about the next lesson they're going to teach, but you need to know what the need is and the best way to find out locally while you're testing it out is, go talk to a teacher, find out what they need, and then see if you can deliver it to them.
Keith: Yeah. Yeah, absolutely. Well, and I mean I think that it's true, it's an example of doing something that doesn't scale, but even more important, I think it's an example of the other sort of YC line, make something people want. It's so easy to make something you want people to want, but they just don't want it. And so we definitely spent a lot of time, we'd have an idea, we wouldn't build very much, sometimes it was just a mock-up and then we'd talk to an actual customer who we thought would want to use it, see their reaction.
I mean just the other day, I got an email from a friend who has built a prototype and wants to show it to me to see what I think. And just based on the email, my first reaction after reading this email was like, "Doesn't really matter what I think, because I'm not a potential customer. I wonder if this person has shown it to five customers by now before building the whole thing and now wants my feedback on this," because so often people miss that step. And so, I really don't care what anyone thinks except the potential customers that we think we are going to be serving with this particular idea.
Me: …So I'm really curious if you think back on the earlier experiences, what do you think you needed to learn through experience so that then you just didn't get frustrated because you expected-
Keith: I mean yeah, it's very abstract to tell someone, "Make something that people want and you'll know when they want it." And that's the experience that I had is I have built things before that people didn't want and I have built things before that people really wanted and you can really see the difference. People use lots of different analogies of customers actually wanting something from you and pulling it out of your hands, instead of you calling like, "Hey, would you like to try this?" "Oh, sure. I'll try it." I sent it over, you don't hear anything for 48 hours. "Did you get a chance to try it?" "Oh, I haven't gotten to it yet." You can tell what it feels like when you are the one providing the energy to push this product forward versus your customers are the ones bringing the energy and pulling it out of you.
…In those early days, many times Doug and I would have the conversation like, "Is this the one? Is this what product market fit feels like?" And I would say to him, "Oh, no, you'll know when we have product market fit? You can tell the difference." And when we finally got this first elementary teacher who was excited and asking for more, and then we got a few more elementary teachers, I remember Doug remarking, like, "Wow, this feels so different than those other prototypes we built where no one really seemed to care and we got a few hundred signups, but then no one would use it.”
Everyone has experienced it as a consumer of products. And so, one of the ways you can try and teach someone the feeling of it is to interview them enough that you can find a product that they were really excited to use and get lots of examples of who did they tell and did anyone have to remind them to use it? As compared with some product that someone wanted them to use that they didn't really. But that's hard to do that in a general way, you kind of have to pull it out of someone to get a concrete example for them.
The choice to sell: Knowing what’s important and what’s not
Me: So, Keith, tell me about, as you grew and you hit that exponential growth, you hit that product market fit, and years went by, and at some point you reached the decision to sell Mystery…. Tell us a little bit about some of the behind the scenes thinking and decision making that accompanied that momentous choice.
Keith: There's an interesting parallel with the early process in the business, where I wanted to start a business and there was a certain set of customers I wanted to serve. So I had some things that were really important to me personally, and I stuck to those, but I was flexible on a whole set of details that didn't matter to me, like the particular product and whether it was in home or in schools. I was willing to serve kids in either way. And so the sale of Mystery was motivated by a similar process where the company at that stage… was very much in a growth stage…
We were doing a good job with that and there were many ways in which I enjoyed that, but I missed the new product development process and I could also see... I could extrapolate out the next few years and I could see that our current product growth was going to slow soon. So I was personally motivated to want to work on a new product, because that's what I am most excited about and really plays to my strengths, and economically, from the perspective of the business, unless I was happy with this business reaching a plateau and being the size it was, the business needed its next product in order for the business to keep growing.
I first focused on hiring an executive team that took over a lot of running of the business day-to-day… and Doug and I got to the point that we had 50% of our time free. So we were splitting our day, first half of our day was existing school business and second half of our day was a new attempt to build a direct-to-consumer version of our product that kids could use at home.
And there's a lot of nuance to the story, but it was hard to do both for a whole host of reasons. …and my eventual conclusion was, "Oh, these are actually two different companies. They're not two different products within the same company.”
And so at some point, I started a process along with my key investors to figure out what to do about that conclusion that I had two different businesses, and over a few months we explored everything… What I wanted was to work on building a new product with a set of people who were really suited to that early stage, and there's a lot I liked about the current business, but I was flexible as to what my involvement was. Would I be involved at a board level? Would I would be involved at an advisory level? Would I manage another CEO? And played out a whole bunch of options.
That's so often the way that ultimately these hard decisions get navigated is by being really clear on what matters, what doesn't, and so it's like being firm on the things that matter and flexible on the things that don't, because you have to explore the space of potential solutions.
Me: Yeah. Yeah, and I wonder, since it was a joint decision with your co-founder, was there any conflict or friction or were there hard conversations to be had between the two of you around, "Well, what is important and what's not, and what can we be flexible on? What does each of us want out of the next chapter?"
Keith: Yeah, it's remarkable to say no, but really, Doug and I, we've been really fortunate to be incredibly aligned on a set of fundamental things that matter to us and flexible on a set of things that don't matter to us, and there's a set of things that matter to me and don't matter to Doug, and vice versa, but there's a shared set of fundamentals and a shared set of optional, and those overlap really well….
The two of us working together on this was not the hard part of the problem, but it could be. I have had a past co-founder that we got a divorce, feels like a marriage, so we got a divorce and went our separate ways, because we had different goals for the business and he wanted to do one thing and I wanted to do another. So I ended up eventually exiting the company and selling my half of the company to him in order to pursue the thing that I wanted to do. So it's by no means guaranteed, even with an initially good partnership, that all the motivations and interests stay aligned as the years go by.
Me: Yeah. Yeah, it's interesting. Now, in a way, we're talking about co-founder-co-founder fit, which in certain ways you also learn to read over time and learn to optimize just as you do with product market fit.
Keith: Yeah, and after a bad co-founder breakup, for a while, I said, "I don't think I want a co-founder. I'm just going to go solo," and then after going solo for many years with a company and a half, I said, "I'm really ready to try this co-founder thing again.”
Starting anew: Remembering that “reality always wins”
Me: Now you're in this new stage of redevelopment, you're working on the new company that you and Doug formed, and you've got some nice seed funding and it's a really exciting, cool idea just from having heard about it on the sidelines. So what are the challenges now?
Keith: We haven't made something people want yet.
Me: Ah, so you're back. You're back there again.
Keith: We've made a lot and we're probably on prototype number 10 or so, and each one feels like, "Oh, okay, we learned something last week and we're going to incorporate it and then we're going to build it and we're going to throw that over the wall," and it's really hard to know when you're close. There are certain problems in business where you've made no progress and then all of a sudden you're done. Hiring is one of those, when you're trying to fill a role. You can say you've interviewed 100 people or you've interviewed 20 people, you're not necessarily closer to filling the role after... you've kind of made no progress until you find the candidate who's the right fit and they accept your offer, and then all of a sudden you're done.
So we're in the hard phase of product market fit where none of the things have fit in the market yet and we've got our next idea we're working on and maybe it'll be this one, and this has been a long process. We're 15 months or so into it and have built a lot of cool stuff that no one wants in the exact form that we wanted it yet.
Me: Though, they really should want it, you would think. It's so cool.
Keith: I know... and it's funny, you just have to be... My focus, what I want, is to discover the truth about our customers... so I just, I'm incredibly excited to build each prototype and have no hesitation to just throw it all away and delete that code when it doesn't work, because it was in the service of learning, not in the service of building this thing. I don't care about the thing, what I care about is building something people want, and so when they don't want it, then I cease to care about the thing that I've built, because I want to build something they want. The motivation has to be focused there because, otherwise, it can just feel so frustrating to build something and throw it away and build something and throw it away, and people start getting attached to things and now you're fighting reality and in any battle between you and reality, reality always wins.
…There's a certain serendipity and chemistry with the market and timing with that, and so there's no guarantee we'll find it, but I know it's here and... I'm enjoying the process enough of looking, I think half the battle is, do you get tired before you climb the mountaintop or not? And we have enough rations in the form of money and there are six of us on the team. So there are enough resources that I don't feel like I have to do everything myself - I build one piece of each new idea. It'd take me six times as long if I was solo, but instead, I'm one of six people, so we can get a lot more done and can try more ideas than we would've otherwise been able to try.
Tending to the foundation: Managing your mind
Keith: …I think a lot about managing my attention…. I mean, we started Mystery right when, I think, I'd just had my first child, or no, I just had my second child even. So managing just family life on top of being an entrepreneur is a challenge… And I've talked to many friends who are new parents about it because it is really hard. And you have to figure out how to structure your... I mean, my wife and I have gone to great lengths to structure our household and our life, and have the right support so that we can both be entrepreneurs, and love being parents, and get to spend good time with our children, and have enough just household and support for our family life that we can do it all. Because otherwise, we couldn't and I would just be sufficiently distracted.
But I'm to the point that with everything I have going on, both a side business, family, office, investing and kids, and working on this company, I get to wake up, and this product I'm trying to build is the first thing I think about. And when I'm going to bed, it's the last thing of, "Oh, I have another idea. I'm going to try that idea tomorrow." So I feel like only one thing really gets to occupy your shower time. And by that it, just the mental background thread where your mind is chewing on a thing and integrating some new information. And it's really important that I can structure my life so that most days my background thread is this unsolved product/market fit problem.
Me: That's incredible. I mean, what a great heuristic, let only one thing occupy your shower time at any given time. That's hard.
Keith: I mean, I think the reality is only one thing gets to occupy it… At least in my experience, it doesn't really work to have multiple. You can stop thinking about one and try and shift it to another, but there's a pretty significant switching cost to the mental background thread. So I feel like, during the day, I can pause what I'm working on and shift something for an hour and then come back… But… you can't just quickly interrupt that and put that on something else because it runs, it operates at a different subliminal subconscious level than your conscious focused awareness.
Me: …it's so interesting to hear you say this because I think the real lesson here is to know yourself and to manage and set up your environment and your time accordingly, because I bet we have listeners right now, who hear you say you, "Look, you can only have one thread that's running on autopilot." And they're probably, "Really? I wish I could get it down to one. Are you kidding? There's always a loop of maybe 10 to 20, and I can't even keep track of them all." And for them, the liabilities are a little bit different, but I think some of the fundamentals are the same, which is that they need to be that much more intentional about which loops they encourage and feed and allow, and what loops get to be activated when, and where to put the ones that don't fit in the shower, or that just don't belong during work hours, or during family time, or whatever the case may be.
Keith: Yeah. I mean, I don't know how many listeners are technical, but I feel like there's a lot of great parallels from the technical world, where you can automate a lot of technical tasks. You shouldn't have to think about deploying each new poll request that you have ready. You want to automate that away, so you just click merge and everything happens…. So much of, I feel like, being a founder is taking that mindset with your life. "I'm being distracted by X, Y, Z a lot, how can I automate that away?" Or you don't automate it in the same way, but delegate it, get someone else to own it, or solve the problem at its root so it stops resurfacing in my life, or et cetera.
Me: Yeah. Or schedule it for a worry time each day, which I've written about and which a shocking number of founders have really taken to… I think it's because it's that crucial need to be able to outsource and automate, as you're saying….
Keith: …Yeah, that's true. I mean, I think the ideal is, if you can check it off the list so that you don't have to dedicate time to it, but there's some things that don't work that way, and they do need some time. And scheduling, I do that a lot. I schedule time to think about specific problems, and then don't think about them. Or I'll work on something just enough so that I know, "Oh, as long as I get this far, I'm going to be able to set that aside for 48 hours and not worry about it, as long as I get it to that point." And so I'll do that just so I can free up the space for 48 hours to do a sprint on something.
Me: Exactly, yeah. And I think just giving ourselves permission to do that, and realizing we need to be as strategic about our minds and our mental resources, as about all our other resources. And maybe even more so because it's sort of the foundation for everything.
Keith: Yeah, absolutely. Absolutely.
Me: So Keith… I'd love to just hear, is there anything that you see as a current area of growth, whether it's a weakness that you need to address, or a lifelong liability, like some of us have, or whether it's just the next frontier for you in terms of, "I really want to keep getting better at this”?
Keith: I think there's two that I'm thinking about a lot. One of them connects with the theme I've been talking about, where this new business is taking longer to get the product/market fit than I expected. And that's a significant difference that I have spent a lot of time thinking about. And I'm trying to sort of figure out, how should I hold this? And one small example is I went back to the Mystery days and I was like, "Well, when did I actually start that? And when did we actually?" Because in my head, I was like, "Ah, it only took 6 to 9 months," but when I actually added up the months, I corrected myself. I don't know, a little revisionist history happened in there somewhere. So that is one that I'm navigating, and I am intentionally working on a bigger problem at a bigger scale, with a bigger founding team, in different ambitions than I have had before.
And so I can't desire all those differences, yet also expect a whole bunch of things to be the same that they were before. And so I'm really trying to acknowledge and unpack like, "Ah, what things do I need to expect to be different this time around? And which things is my past expectation well-calibrated for?" So that's one.
Me: That's a good one, because it's something that you're already way above average at, expectation setting and calibrating, and it's sort of where we started. And it's still something you can always stand to improve on because it has to grow with the size of your ambition, right?
Keith: Yeah. And I mean, there's a general premise in there, which is the things that you're already good at are probably the things you should lean into more, as it compared to the standard schooling mindset of, "Oh, well you have four A's, but you get a B in the subject so spend your time on the B." I definitely have internalized the avoid the things I'm bad at and figure out how to lean into more of the things I'm good at. And so this is sort of in that category.
I think the other one that I think a lot about is, and I have a coach I work with regularly… and so this is very much inspired by my work with her, to be aware of the difference in the quality of work that I'm producing when I'm really excited about the thing. And I mean, excited as in excited in the moment. So some days I'm just like, "Oh yeah, today's going to be a great day. And oh my gosh, we have so much progress yesterday." And the energy you feel is almost electric.
And it's no surprise that how much you get done and the quality of the work, and those are the days where you have a small breakthrough in your idea, and you see your problem from a different angle, and then there's other days where you just don't feel that way, and you just feel a little off and you're dragging, and it's physical, and it's emotional, and it's creatively psychological. So it's the level of excitement occurs on all those dimensions, and dragging occurs at all those dimensions. And how do I make sure that I have more hours of more days where I'm really feeling great, as in fewer hours and fewer days in which I'm not, and all the little things that go into that. And step one is just awareness about, "Oh, what mode am I in right now?" And oh, why do I think I'm in that mode? And how do I shift it? And what are the techniques for shifting at that work for me?" And so that's probably the thing I'm spending a lot of time on.
Me: Yeah, cool. Have you found any techniques that work for you?
Keith: I mean, I think part of the lesson from my coach is there's lots of techniques, and different ones work for different people, and so I think it's highly personal. Music works well for me, just I can use music to shift my mood, I can use music to even, "Gosh, I'm not in the mood for that music right now. Hmm, oh, interesting. That's an actually indication of the mood I'm in." So it's music can be both a diagnostic tool for me and also a tool to shift.
Me: An intervention tool as well as an assessment tool.
Keith: Yeah, yeah….A lot of it is taking breaks, managing physical energy, treating yourself. Maybe I should go get my favorite coffee right now for my favorite coffee shop or stop and have a snack, and just managing the physical needs of one's self can go a long way. Those are probably the ones that are most useful for me right now.
Me: Thank you. I'm really glad that we got to some of those idiosyncratic ways that you've learned to manage your own mood and energy because, in a way, the whole work of building one's self into a builder boils down to really taking ownership of building one's self. And being just as entrepreneurial about what makes me tick, and when am I excited, and when am I alive, and when am I dragging, and you're your first customer, your first investor, stakeholder, everything.
Me: And so it's just such a nice example to end on, that if you're being agential about that… then everything else can follow.
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