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If Startups are the New Bands, Cracker is 37Signals, and Here Are Their Rules

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I was listening to Cracker as I cranked out some work on a Saturday morning at Starbucks. In wondering what the song “Hey Bret (You Know What Time it Is)” was about, I ran across an interview with David Lowery from 2009 in Magnet Magazine. At that point David had been in the music business for at least 25 years, so the interviewer asked if he had any life lessons for young up-and-comers in the music business. David answered with six rules.

The rules are coming, but first, let me explain the title of this post. I’m a musician-gone-businessperson-gone-early-stage-company-marketer. I’m far from the only one. Just last night I discovered that a friend who’s a CTO of a security startup dropped out of high school to work as a musician. He went from playing music to digital recording, which took him into coding…coding took him into game design…and game design took him into security.

For me, him, and a lot of us, startups are the new bands. We could make more money, be more secure, see our families more, and stay in nicer hotels when we traveled if we worked for big companies. But we trade that off for working on something we believe in, working towards a statistically unlikely outcome. Most startups and bands fail. Somehow, we do it anyway.

Most successful bands aren’t the Beatles, Pearl Jam, Maroon 5, or any other band that most people have heard of. Most successful bands are more like Cracker. Most successful startups don’t grow up to be Microsoft, Apple, or Salesforce.com. Most successful startups grow up to be companies like 37Signals. Modestly¬†successful, profitable, influential, but still unknown by most of the world. And solvent rather than filthy rich.

Since Cracker and 37Signals are kindred spirits, it’s not surprising that David Lowery’s six rules could easily have been published on 37Signals’ Signal vs Noise blog. Here they are, from Magnet Magazine:

  1. Only record what you like. If the record is not successful and the band breaks up in a few years, at least the record you did make is something of which you are proud. (Business corollary: work on a mission you believe in and do work you’re proud of. That way, if your startup fails, you’ve still built your skills and have a good story to tell. Plus, you didn’t waste years of your life on a novelty hit or an app that lets you text “Yo” to people).
  2. Keep your overhead very, very low. Absurdly low. Never tour with more than two crew people. (Business corollary: “The job of the entrepreneur is to make sure the company doesn’t run out of cash.” – Bill Sahlman, Harvard Business School. Don’t measure your self-worth by the number of zeros in your funding round, the size of your tradeshow booth, or the size of your team. Measure it by your contribution. As your contribution grows, the size of the tradeshow booth and team may – or may not – need to grow with it).
  3. Never hire anyone who makes a percentage of gross (as opposed to net). (Business corollary: Vendors are not partners. Sales commissions drive different behaviors and beliefs than equity upside. Your BOD or record company is mostly concerned with their payout, not yours. Your interests are only fully aligned with the very few people who are compensated similarly to you).
  4. If you have to hire someone who makes a percentage of gross, try not to let them make decisions about how your money is spent. Get rid of them as soon as you don’t need them. (Business corollary: “Get rid of them” sounds like it comes from a ruthless businessperson, not a laid-back musician-type. But music is a business. If you have an agency that is driving traffic that doesn’t convert or coverage that doesn’t matter, or a salesperson who is consistently closing unprofitable business, David is exactly right).
  5. Success is partially or largely due to luck. The longer you can remain in the game, the more likely you are to be lucky, the more likely you are to be successful. (Business corollary: we’re back to Bill Sahlman and rules of cash. Luck is a function of time. Sometimes you’re not bidding to win this hand, but bidding in a way that lets you stay in the game as long as possible).
  6. Never sell your long-term upside. Specifically, don’t sell your publishing, and make sure recording contracts have sunset provisions. (Business corollary: Watch the cap table. Take money only on the right terms, and consider debt financing rather than equity for some needs).

Sorta curious to see if 37Signals’ six rules for writing a great song would be anywhere near as good as Cracker’s six rules for business.