Archive for the ‘entrepreneurs’ tag
Entrepreneurial narratives are everywhere. From executive education classes to TED to General Assembly’s own enterprise programs, it’s not difficult to find the story of a successful entrepreneur in almost any industry. These stories inspire not just aspiring founders, but also innovators within Fortune 500 companies and creative agencies.
But what are we to take from those stories? How does anyone – even someone within a larger organization – draw meaningful, applicable lessons from an entrepreneur’s first-person account of success? After all, there’s a huge element of randomness in any new venture. For example, Chad Hurley and the founders of YouTube made a lot of great decisions, but they weren’t the first team of smart people to build an online video site. In the words of investor and entrepreneur Chris Dixon:
“I’d been around the web long enough to remember the dozens of companies before YouTube that tried to create crowdsourced video sites and failed. […] YouTube built a great product, but, more importantly, got the market timing just right.”
But every stock trader knows that timing markets can be impossibly hard, so taking lessons from YouTube’s success is not only difficult, it’s dangerous. Drawing the obvious but – in many cases wrong – conclusions from a entrepreneurial success story can lead to cargo cult thinking, wasted money and lost time.
Applying lessons from entrepreneurship within larger companies can be even more challenging. Innovators within large institutions and brands know that bringing new ideas to the table isn’t enough. In addition, they must overcome organizational inertia and traditional mindsets to effect change.
So how do we learn from these stories? Here are five tips from my experience:
1. Failure is a data point too. Many people focus only on entrepreneurial successes, when in fact just as much can be learned from the much-more-numerous failures. Learning from others’ failures is an efficient way to ensure you don’t repeat them. And keep in mind that even within successful companies there are always numerous products, initiatives, and hires that failed. Studying how great teams fail and react to failure is one of my favorite topics of conversation with entrepreneurs.
2. Appreciate the details. Entrepreneurship is a game of finer points, not broad strokes. Success is often the product of many small decisions on topics that can range from landing page design to company culture to early brand decisions. A deep discussion of these topics – and how entrepreneurs came to key decisions – can be far more informative and interesting than broad questions like “How did you come up with the idea?”
3. Meet the lieutenants. It’s practically a cliche to say that an entrepreneur should surround him- or herself with great people. But it’s also fundamentally true. Great entrepreneurs recruit great managers, and many of the critical decisions in a successful company’s history are made by non-founder operators, not the founders themselves. Often these operators know how to wield “soft power” in a way that is much more applicable to innovators within large organizations who don’t have a founder’s moral authority.
4. Understand persuasion. At the earliest stages, entrepreneurs need to convince others to see things their way, to ignore the obvious pitfalls and believe in a vision. Without that power of persuasion, it is impossibly difficult to find investors, recruit early hires, and close clients. Whether starting a new company or innovating within an existing organization, those abilities are universally applicable and one of the best practices to learn from successful entrepreneurs. When watching an entrepreneur speak, it can be more informative to pay attention to how they are saying something than what they are saying.
5. Metrics, metrics, metrics. Great entrepreneurs set key metrics closely tied to their success and drive their teams toward those metrics. Understanding how entrepreneurs chose the right – or wrong – metrics and incentivized their teams to pursue those metrics can paint a detailed picture of how a company’s operations, finances, and culture are all integrated. And like the other tips here, how a startup sets metrics should be very similar to how a department within a large company sets them, making the lessons very applicable across organizations. While the methodologies used to succeed may shift as a company grows, the key metrics should not.
I believe that anyone can learn from an entrepreneur’s story regardless of their role. With these pointers in mind, entrepreneurial stories can be vastly more educational and applicable.
I was having drinks with a few entrepreneurs last week, and the topic of business plan competitions came up. I ran Yale’s competition for a year while I was a student there — a sobering experience. Ostensibly, the winners of the contest were the best potential entrepreneurs. In reality, the top awards were often swept by Yale MBA candidates who spent the entire year perfecting a 30-40 page business plan with little intention of starting a real business. They’d take the award money alongside their McKinsey or Goldman signing bonus.
Most experienced entrepreneurs — or at least most of us around the table that night — agree that business plan competitions suck. But is there a way to improve them? One CEO in attendance suggested that business plan competitions be revised to focus on the real tools of a VC pitch — that is, a slide deck and in-person presentation. It’s certainly a better basis than a business plan, but I don’t think it solves the problem. Rather, it still perpetuates a false and harmful archetype of how venture money is raised.
In reality, raising capital is a long game — a process to be measured across years and companies, not weeks and pitches. The people who “win” the real venture capital game are those entrepreneurs who spend years — if not decades — building their reputation and their relationships with investors. This doesn’t mean that first-time entrepreneurs can’t raise money, but that they’re far better off spending their time setting metrics-driven goals and hitting those goals in order to build trust in the investor community than writing a business plan or shopping a deck.
Business plan competitions can’t build a comparable experience, so they’ve created a generation of first-time entrepreneurs who falsely believe that money is raised in front of a Powerpoint rather than series of coffees and beers.
If you made me redesign the business plan competition, I’d do something pretty nontraditional: a unit economics competition. The contest would be in-person and just takes five minutes per contestant: explain your business concept in 1-2 minutes and walk through one Excel worksheet presenting the unit economics in the next 2-3 minutes. No long-form writing or slides, just the basic math that explains the core cost and revenue drivers and assumptions of your company. And no 3-5 year projections, either. While it might be beneficial for entrepreneurs to fully think through their company by spending 150 hours writing a business plan, modeling out your unit economics will provide 90% of the value at a fraction of the time.
Furthermore, the winners of a unit economics contest would be more likely to build successful companies. Unlike a business plan, with a 3-5 year projection at its core, a unit economic model tends to focus the entrepreneur on the near-term opportunities with the highest likelihood of success: the kind of things that will create grounded and focused businesses rather than speculative, multi-threaded companies. And if you’re a broke student hoping to start a business straight out of a university-sponsored competition, which would you rather have?
General Assembly is an urban campus for technology, design and entrepreneurship. I founded it last year along with Adam Pritzker, Jake Schwartz and Matthew Brimer.
As you go deeper into the technology community, it gets harder to remind yourself that the global economy is struggling. Every startup in New York and the Valley has open positions that go unfilled for months. Salaries for developers and designers continue to rise, and entrepreneurs are creating real businesses with real revenue.
It’s all too easy to forget that our nation still has the highest unemployment rate many of us have ever seen, especially among young adults. Over 15% of people aged 20-24 are without a job, the highest in more than a generation. Students graduate from college and often times spend their days fruitlessly emailing their resumés to deaf corporations. Clearly, there is a mismatch between what we are teaching our newest citizens and what they need to succeed.
Critical courses are absent from the state curriculum and given only token acknowledgment in higher education. Design and software development, two of the most relevant 21st century skills, are glossed over throughout our educational system. It’s in this context that we’re launching General Assembly, a new kind of campus to educate designers, engineers and entrepreneurs.
That said, an education is only meaningful in the context of an environment that reinforces its message and provides a community to stimulate ideas and growth. This is why we built General Assembly on the model of a campus. We’re crafting a curriculum and have created a physical space in the heart of Manhattan for hackers and designers to work, collaborate and learn. We’re trying to tackle a big problem, and we certainly can’t solve it alone. But we have to try, and I hope you can join us.
There’s a common misconception about why people become entrepreneurs. In my chats with founders, I’ve seen that the most common driver — ahead of earning fantastic returns, working flexible hours or learning new things — is simply getting away from a bad boss, or bosses at all.
To those on the outside looking in, the world of startups looks like a boss-free paradise. After all, you can name yourself the CEO, or at the very least have control of a menagerie of roles in your business. Unfortunately, it’s usually not. That’s because someone — perhaps an investor, a customer or a partner — is almost always playing the boss role.
Truly bossless businesses are tough to find; they have to follow a few major constraints. First, they need to hit cash flow positive almost immediately. Without that, you’ll either need to keep your day job (and your boss) or take investment (and investors, which are a different kind of boss). With cash flow, you’re only responsible to yourself and your business. Second, they need to have tons of customers, even at an early stage. That way, each customer isn’t important enough to justify appeasing them. Ideally, each customer is spending such a small amount that their process of dealing with you is automated (in B2B) or your business supports high churn (in B2C). Finally, executing the concept shouldn’t require more than perhaps one or two trusted partners.
There are a few broad categories of businesses that meet these constraints, and I’m fascinated by each of them:
Affiliate Marketing / Lead Gen: This is probably the easiest vertical to get into, as it doesn’t necessarily require any technical skills. Anyone with some marketing smarts and a WordPress install can start generating affiliate revenue, and it doesn’t really come with any obligation to anyone — affiliate program managers are often at least one level removed from the publisher (you), and it’s trivially easy to switch from one affiliate program to another.
One of the beautiful things about many affiliate businesses is that the entrepreneur is also building long-term value — typically, in a targeted email list or site that ranks high in search engines on certain keywords. In that way, affiliate and lead gen businesses are also fundamentally different from (say) consulting, in which it’s tough to argue that the consultant is building long-term value in their business.
Arbitrage: An extremely broad category, “Arb” is big umbrella that could include online advertising arbitrage, proprietary equity trading or perhaps even certain types of e-commerce. But it’s probably the most common of all bossless trades, with a huge number of independent prop traders making essentially bossless livelihoods. The downside of any arbitrage-based business, of course, is that the opportunity can (and will) disappear — of all the businesses discussed here, arbs are building the least long-term value in their enterprise.
Software Sales: To fit the criteria listed above, software business require some engineering skills. But if you’re a hacker, there are few better bossless businesses. This is especially true on the B2C side, with gaming as a prime example.
Note that in some of these businesses — especially B2B software sales — there’s a fine line that prevents customers from becoming bosses, and many entrepreneurs accidentally cross over that line by doing custom work, failing to automate sales processes or relying too much on a few large buyers.
This stuff isn’t for everyone, but I think there is some inherent (particularly American) desire for freedom from people looking over you shoulder, setting deadlines and making demands. And to many of us, that freedom is being a founder. Just be careful what you choose to found.
Most of the truly miserable people you meet in life aren’t stupid or unambitious, traits we’ve been taught to associate with an unhappy life. Rather, the unhappiest people I know are also some of the smartest and hardest-working. But they’re also martyrs, a dangerous and under-appreciated workplace pathology.
Approximately every tenth highly intelligent person I meet is a martyr. Martyrs have an addiction to making themselves miserable for the sake of others. It’s not necessary for this misery to be for anyone’s benefit — it simply needs to be understood by the martyr that they are performing a sacrifice at the feet of another person or group.
Paul Graham’s How to Lose Time and Money makes a great corollary point — specifically, that driven people rarely waste time by sitting on the couch watching TV, but by doing useless work. I’d like to take that a step further. A number of smart people are Martyrs, who draw their willpower from Sisyphean quests, enjoying difficult and painful situations for the sake of the pain endured. Their equivalent of praise is the feeling of deep guilt they can inspire in others.
Martyrdom is chronic and can impact someone’s strategic decisions. I’ve seen martyrs join organizations doomed to fail simply to have a steady stream of martyr-ready situations. Playing the martyr role is addictive, and situations in which a martryr can work extreme hours, take the blame for far-reaching problems, and prostrate themselves at the feet of bosses are their crack cocaine.
Martyrs paralyze organizations. I’ve written about the huge influence guilt has on communication, but it deserves restating. The guilt that martyrs inspire among their peers and superiors destroy organizational structure and productivity. When a colleague is going to fall on any sword within eyesight, there’s a natural disincentive within a team to hide the swords — that is, to cover up the issues and problems that arise in any organization. Martyrs inspire guilt, and guilt is a terrible emotion to inspire in a group. Guilt saps enthusiasm, sweeps problems under the rug and eliminates any willingness to take risks.
Everyone avoids the dull, the lazy and the untrustworthy. By their very definition, martyrs are none of these things — yet they should be avoided to the same degree. Martyrdom is at best saddening and at worst contagious and destructive.
Both Matt Mireles and Mark Davis write about startups. Both write well, and both are must-reads for entrepreneurs. But their blogs are really, really different. Matt is controversial — he’s gone after a number of high-profile targets over the past couple months, including David Rose, just about every venture capitalist and New York itself. Matt’s writings are about working outside of the system, struggling against larger institutional forces in an attempt to hack together a company. Mark’s (or Larry Lenihan, or Phin Barnes or any number of VCs)’s writings are insightful, but they focus on learning the ropes and working within the existing system to achieve success.
For the visual learners among us, I’ve thrown a few startup and VC bloggers I like to read on a chart. I guess this is my form of a blogroll. Apologies in advance to anyone not included, I love you too but I budgeted 10 minutes to make this damn thing:
The placement of the dots is a gross estimate, but you get the point. While those at the VC-oriented side of the spectrum tend toward more educational, less controversial fare, entrepreneurs tend to be a bit more inflammatory.
Does this mean that VC bloggers are more restricted by the environment of the VC firm and the potential downside of annoying entrepreneurs or (worse) LPs or other partners? Maybe. But just as controversial writings could be enabled by freedom, controversy is also a tool for gaining pageviews and notoriety. Just look at compete.com’s chart of The Metamorphosis, Matt Mireles’ blog.
Plus, you have to consider supply and demand. There are fewer VCs than entrepreneurs, and content written by VCs simply tends to be in greater demand since they are the ones dishing out the money to young entrepreneurs. So you could say that VC bloggers are don’t need to write controversial content in order to get noticed. It’s certainly true with guys on here like Fred Wilson and Mark Suster — they write controversial stuff when they want to, but they certainly don’t need to start crafting linkbait.
I’d argue that it’s not only smart, it’s necessary for anyone in the startup world to pay close attention to the entire spectrum. Focus too much on the VC writings and you’ll lose sight of the bigger picture and the way founders really think about things. Focus too much on the entrepreneur crowd and you’re just delusional — and missing out on a lot of good posts.