Lessons I’ve learned about entrepreneurship

Great management team vs bad business, bad business wins. Great management team and a great business and something special happens. (this quote can be attributed to many people include Buffet/Munger and Andy Rachleff of Benchmark). Choose the market you are focused on VERY carefully. In a world of too many VC companies saying “we will figure out monetization later”, it’s critical to ask yourself if there is a history of customers paying for the product/service you are offering?
Great businesses attract great management teams; a very talented acquaintance applied for a job at Google in 1999/2000 and asked to be paid only in options. Smart people want to go where the fun and money is. Success is the most valuable recruiting lever you have.
VCs rarely want to give you money when you need it and want to give you lots when you don’t. Don’t expect VCs to be the risk takers to make your business happen. Every once in a while, you find a visionary VC (Oyster is lucky to have Ajay Agarwal from Bain) who wants to take a risk ahead of the curve. Raise money when you don’t need it.
“Hot” markets never are – by the time a market is “hot” it’s late and hot markets attract too much VC attention and therefore overinvestment which leads to too much competition. The VC markets have fads – and the fads inevitably pass.
Average thinking yields average results – don’t waste your time with conventional wisdom.
Read magazines two or three years late – try it, you’ll see. (Ariel does this religiously)
Make money as early as possible – revenue/profits solve most all problems. Businesses that don’t make money are not real businesses.
Don’t let your eyes be bigger than your stomach - You may not become famous hitting a “single” and while you don’t want to think small, don’t be blinded by an imagined need to make 100s of millions of dollars for yourself – having 10M changes your life entirely. 100M is far more about ego and keeping score than it is about need. If you have already hit a single, trying to hit a homerun becomes a high class problem to have
Don’t worry about what other people – VCs in particular – think about you. Keep your own counsel. But it is also true that given enough time, good businesses run by good entrepreneurs are able to raise money.
Don’t read your own press – if the press was good at predicting the future, they’d be making money doing it. The press necessarily focuses on today – not on tomorrow.
Be careful how much day to day news you read – you can lose yourself in the day to day. You need to get above the day to day and focus on what the market will look like in a year or two.
Startups are emotional roller coasters – invest in finding a co-founder that you can share the emotional load with and who complements your talents. Ariel, Eytan and I are each better because of our collaboration.
Make sequencing your religion – Unless you are Google, you will have more good ideas than you have resources – sequencing is a critical skill. Learn to identify today’s problem and solve that. Take tomorrow’s problem, write it down, and save it for tomorrow.
Take vacations - it’s macho in startup circles to talk about how much you work and most entrepreneurs are, in some way, always working even when they leave the office for the day. But if you take the time to leave it behind for a week at a time, you’ll come back refreshed with a broader perspective. Academics understand the need for a change of pace and scenery in order to get their creative juices flowing.
Non industry conferences tend to be a waste of time and profitable only for their organizers. Find smaller, focused, vertical specific conferences and use them to schedule lots of meetings you’d otherwise have to fly to. It’s the hub of a hub and spoke meeting system.
- Things like Web2.0, TC50, and TED are very expensive and more about social climbing and ego boosting than about making progress with your business.
Learn your strengths and weaknesses as early as possible and outsource to employees or co-founders anything you are not great at.
It does not matter if the pundits think you will be successful - it matters whether you are building something that real customers can’t live without. What is Techcrunch’s track record of picking winners?
Focus on users – not uniques – in Comscore, all uniques look equally valuable regardless of how much money they make you. Find the most valuable users and focus on them. Your hard core fans – you have hard core fans, right? – will likely generate the vast majority of your product insights.
Raising VC money = selling off a piece of your company that you can never buy back, nothing more. VC money may be a means to an end but, in an of itself, only means that you’ve sold off a piece of your company that you can never get back. Raising a lot of money means you have to create that much bigger of an exit before you make a dime. Don’t be impressed by companies that have raised a lot of money – be impressed by those that make a lot of money.
BigCo managers rarely do well in a small company – no matter how smart they are, the skills required are totally different. Startups operate on a different frequency. Sales guys are a notable exception since what they do is easily measured. Just be realistic that if they were selling a product that sold itself, they were an order taker, not a salesperson – it was not their skill that was closing deals but rather the product they were selling.
Understand the incentives people have and you will understand how they will act.
Contracts are for when things go bad – you typically don’t need a contract when things are going well. If someone says “don’t worry, we trust each other so we will figure out a way to deal with that scenario when it happens” as a way to avoid putting something in a contract, ask yourself why they would not put it in the contract now? People rarely pull out the contracts when things are going well.
Companies should be run by their managers and founders – not their shareholders and whenever possible the majority shareholders should be the founders and managers. It’s not an accident that many of the most successful companies in history are closely held by their founders. Mark Pincus (Zynga) has spoken publicly about his need to maintain control to insure the company is successful. He’s been doing this entrepreneurial thing for a while – he’s not confused.
Sell stock, not control - your shareholders don’t need control despite what they may think. If they request control, ask yourself the following question “will my own shares become more valuable if he/she is making the decisions here instead of me”. If the answer is yes, why are you running the company? ““Who gives a shit what your valuation is? At the end of the day your valuation will be more impacted by a board made up by a bunch of old white men who show up once a month for half a day. It’s a lot easier if you just tell them what you’re going to do” – Mark Pincus
Beware those who profess their honesty – people who proactively and repetitively tell you that their word means everything are almost always liars.

Lessons I’ve learned about entrepreneurship

Categories

Blogroll