Category: Entrepreneurship

Marc Andressen writes:

Startups that have a credible potential to be sold or go public for a 10x gain on invested capital within 4 to 6 years of the date of funding should consider raising venture capital.

Most other startups should not raise venture capital. This includes: startups where the founders want to stay private and independent for a long time; startups where there’s no inherent leverage in the business model that could result in a 10x gain in 4 to 6 years; and startups working on projects with a longer fuse than 4 to 6 years.

Notably, there are many fine businesses in the world — many of them highly profitable, and very satisfying to run — that do not have leverage in their model that makes them suitable for venture capital investment.

Paul Graham writes:

The world of investors is a foreign one to most hackerspartly because investors are so unlike hackers, and partly because they tend to operate in secret. I’ve been dealing with this world for many years, both as a founder and an investor, and I still don’t fully understand it.

In this essay I’m going to list some of the more surprising things I’ve learned about investors. Some I only learned in the past year.

Alex Krupp writes:

Much better to wait until you’ve discovered something new about human nature. Something that makes your assumptions more accurate for more people, more of the time, in more places. Something more useful. Something more actionable.

Call it assumption-driven entrepreneurship.

The best part is that theories are invisible so they can’t easily be found and copied. Your theory of human nature is your hidden sustainable competitive advantage. Make sure you have one. And use it wisely.

Knowledge@Wharton has an excellent interview with Subroto Bagchi:

There is a mistaken notion that every start-up [begins its existence in] a garage, and a [garage-sized firm] doesn’t have to have a process. More start-ups remain at that size and then they go off the scene, because they fail to embrace process. Even if you start small — and you have to start small — you can pretend that, “You know what? I’m a Fortune 500 company, and I need to front-load my organization with the right process.” This is because process is not about a framework that will bind you up; process is like plumbing. It’s like infrastructure.

Let us imagine that you want to someday build a skyscraper. You have to pre-think what plumbing must go into the skyscraper. It cannot be an afterthought. The plumbing you require for building a skyscraper is very different from the plumbing that you require for a two-bedroom house. You don’t build the plumbing for a two-bedroom house today and say, “As I build another floor, and then another floor, I will add to the plumbing.” No. That doesn’t work. So you have to pretend that, “I am a skyscraper.” The inlet and outlet for the skyscraper is going to be very different. So pretending [or imagining] is a very, very important thing.

Fred Wilson writes:

I have two meetings this week with guys in their early to mid 40s that are two of the best entrepreneurs I’ve ever worked with. Both are asking me the same thing – “what should I do next?”

There are questions of motivations, work/life balance, not needing the money, looking for a big idea, etc.

One of them asked me – do you know any 45 year old entrepreneurs?

Yes I do. But only one of the entrepreneurs in our current portfolio is older than 45. And he’ll probably be starting companies until he dies. It’s what he does.

But the facts are pretty eye opening. Nine of our eleven entrepreneurs are in their 30s. One is in his 20s, and one is in his 50s.

That says to me that prime time entrepreneurship is 30s. And its possibly getting younger as web technology meets youth culture.

Well, I will be 40 in August – and have been an entrepreneur for 15 years. Am I past my prime or does the best lie ahead? Only time will tell.

GigaOM writes about HitForge:

HitForge is an entrepreneur cooperative composed of independent small teams, where people can apply with their ideas, join the team, and see their idea go from idea to product in a few weeks, largely with help of an offshore engineering team.

If it works, then the product is turned into a company. If it doesnt work, the product is killed, and the team moves onto something new. HitForge is out of a few thousand dollars. The team whose product got killed still gets to share in the hits that come out of the cooperative, Ravikant says.

Ed Sim writes: “Big companies move slowly and often change their minds. A relationship with a big company will surely take time and cost you money whether in upfront dollars or expenditures on resources. And while we would all love to build our business off the back’s of other brands and distribution, at the end of the day, in order to create a big winner, it is imperative for startups to control their own destiny. This means that your business has to be able to grow organically and not have its fate fully dependent on its partners. What this means is that first and foremost you have to have a killer product, one that people love, can’t live without, and share with others. In this new world of mashups, open APIs, and widgets, startups can easily get distribution. Getting customers and revenue is a different story altogether. Remember, distribution doesn’t matter if people don’t use your product or service so start with the basics and figure out how to make your product a must have that someone will pay for.”

David Beisel writes:

Information about new startups and trends affecting them is near ubiquitous given the rise of influential and well-read blogs, as well as the mainstream press and conferences. And based on these visible and salient market trends, smart people tend to be led to the same conclusions about wherein lies the opportunity. If a large objective market opportunity exists, it would be unusual for it to go entirely missed by those with experience in the space. However, not everyone sees it that way entrepreneurs, bloggers, and others sometimes privately/publicly accuse and dismiss other groups of copycat tactics.

This copycat threat leaves entrepreneurs hesitating about spreading knowledge about their startup endeavors, especially early on. Yes, there is certainly risk in this perspective and there is a logical set of reasoning for operating in stealth mode, as I wrote about a couple of years ago (my opinion is that the best course of action isnt a binary approach, but rather a nuanced one.) But I believe the risk of another someone literally copying an entrepreneurs startup idea is largely overperceived and overweighted. Generally-speaking, isnt it better to bang your drum about your idea with better hopes to attract co-founders, employees, advisors, capital, and other important continents to make your company successful?

Dave Winer writes:

Even after you get an offer from a VC, very carefully find out if their vision of the company agrees with yours. If it doesn’t there’s a pretty good chance you’re either going to end up working for the wrong company (the one that agrees with the VC’s vision) or out on the street looking for a job, with your idea tied up in a company whose vision you don’t agree with.

I’ve seen this happen too many times — the entrepreneur feels his or her vision has been ratified because the money has come in, but the VC was thinking something else. The VC often wins this struggle. Better to figure this out before you become partners.

Inc has an inspiring story of how Vikas Goel built eSys.

Goel is the 36-year-old CEO of a Singapore-based company called eSys Technologies, which he founded in 2000. Born in India, he had arrived in Singapore in 1996 with no capital and no contacts. Four years later, he launched eSys with one employee and a part-time staff member working in a one-room office. On the surface, his timing could hardly have been worse, since right about then the bottom dropped out of his chosen line of business, the distribution of computer components.

But where others saw potential disaster, Goel saw opportunity. And by 2005, the company had sales approaching $2 billion, 112 offices in 33 countries, and four manufacturing plants where its employees assembled the products it had begun to sell under its own brand name, including a PC that went for about $250 at retail. Goel had accomplished this, moreover, without taking on any long-term debt or bringing in any outside investors–and while operating with a gross margin of as little as 3 percent.