Why you should run your startup like a poker player (Replay)

**Chris Saad** (0:00)
This is a remastered replay of one of our most popular episodes. Enjoy.

**Yaniv Bernstein** (0:04)
The whole point of venture-backed startups is you're not building a good business early on, you're building a good experimental learning machine that allows you to build a massive business at scale eventually. So don't confuse the two. Remember the game you're playing.

**Chris Saad** (0:19)
You're listening to The Startup Podcast. This is an educational episode.
Hey, I'm Chris.

**Yaniv Bernstein** (0:27)
And I'm Yaniv. And in today's episode, I thought we'd talk about a fun analogy for what it's like to run a starter, which is a game of poker. Now, hopefully most of you have at least played poker. Some of you might in fact be some really great poker players. And in this episode, we're going to break down all the different ways in which the game of poker is a nearly perfect, not quite perfect, but a nearly perfect metaphor for what you're doing in a starter. So I'm really looking forward to this one, Chris.

**Chris Saad** (0:51)
Yeah, absolutely. And so am I. I'm actually a terrible poker player and I don't know all the rules. I don't know how to do it on instinct. I have to have a little cheat sheet in front of me. So for all of you out there who are not great at poker, don't worry, we'll hold your hand along the way. Yaniv, this idea of startups as a poker game is one that you brought up and suggested we do. So how about you frame it up for us, explain the metaphor and how it connects to startups.

**Yaniv Bernstein** (1:14)
So there are a few things about a poker game. And I guess I'm thinking of a game of Texas Hold'em in particular for those who play it. It's the most common tournament format. Like you, Chris, I'm not actually a big poker player, but I've played enough poker and I've read enough books about poker and watched movies about poker, Casino Royale is obviously the best, that I really see a lot of commonalities between how great poker players play the game and how great startup founders play their game. And it is a game. When I say it's a game, I don't mean that it's not serious, but what I mean is it has rules and techniques that you really need to think about. And so I just wanted to talk about a few of the high level commonalities and then we'll dive into each of them and talk about how they apply to startups. The first way in which startups are like poker is that it is iterative. You're not just playing one hand, you're playing multiple hands, hand after hand, and each time you learn something and each time things fall a different way.
The second is that poker has a concept called blinds, which is even if you're not participating in a hand, you have to bet a little bit. And that to me is very much like the concept of burn rates in a venture backed startup, where you are slowly losing money. The countdown to zero dollars is on. The third thing is you have to make decisions based on uncertain information. You will never know everything that's going on, so you need to internalize that and still be good at decision making. The fourth is progressive learning. You need to learn things a little bit at a time and build on that and make use of the fact that you're not going to learn everything at once. The fifth is what's called resulting or avoiding resulting, which is being really clear about the difference between the quality of the decision and the quality of the outcome. Because again, this is a game of chance that is true for startups, it is true for poker. So you really need to separate those things. And the final thing, which is maybe not the best thing that you want to hear as a startup founder, but it's certainly true, is there is a relatively low probability of a successful outcome in any given match. And so you need to be aware of that and consider what that means for you as an entrepreneur, as a founder, and as part of a broader career.
So that's a high level thinking. Chris, should we jump into the first one and talk about iteration?

**Chris Saad** (3:21)
Yeah, absolutely. Let's do it.

**Yaniv Bernstein** (3:23)
So one of the key things that we've talked about in previous episodes, Chris, is that you're not doing everything at once. What you're really trying to do is progressively de-risk the risks that stop you from becoming a successful multi-billion dollar business, right? That's why we have different funding rounds. And we've talked about in each of those different funding rounds, you're trying to prove something different to your investor. Early on, you really just want to prove perhaps some early product market fit, some early demand. Then you need to build out the product and get to a certain amount of scale. Then you need to prove profitability. A couple of episodes ago, we talked about prioritization, we talked about sequencing, and the fact that that is, in a sense, the core competency that startups have is to get really good at prioritization and sequencing. And I know, Chris, this is something you talk about a lot with your clients.