I met with an entrepreneur yesterday that I hadn’t seen in a few years. I originally met with her about five years ago when she was starting her company. She’d been a very successful executive at a large company and had decided to jump into the entrepreneurial game and re-invent herself. Her business has grown nicely – and profitably – without having raised very much money.
We mostly just caught up on how things have been going (we email back and forth periodically, but it had been a while since we had met in person.) After about ten minutes, she asked if she could tell me a story about the first time we met. Always game for a good story, I said sure. It goes something like this.
I was introduced to you by someone I had met with who was a close friend of yours. He suggested that I get together with you and made an introduction. After I set up the meeting, I went online to learn more about you. After poking around for a while, I suddenly got scared – I had no idea why I was going to meet with you or why you would bother meeting with me. I didn’t want to blow my one meeting and waste your time. I told this to the person that introduced us and he said “don’t worry about it – Brad will give you 20 minutes of his undivided attention and something good will come out of it.” So I went ahead and met with you.
I was really nervous. I was uncertain what to talk about and just starting telling you about my business idea. You gave me some reactions and a few pieces of advice and as some point said “I bet you wonder why I am meeting with you.” I had no clue, said so, and you responded, “I believe in karma. When I was starting out as a first time entrepreneur a bunch of experienced people helped me, gave me advice, and just spent time with me with no particular expectations on their part, except to be helpful. I’ve never forgotten that and want to pass it on. I have no idea what will come of this conversation, but if I’m helpful to you, you can pay me back by being helpful to another first time entrepreneur after your become successful.” This has stuck with me from the very beginning of my business and I repeat it often.
This story made me smile a huge smile. I remember all of the entrepreneurs that helped me early in my career, including guys like my dad, Gene Scott, Helena and Chris Aves, Stewart Forbes, and many others. Whenever I help someone like the entrepreneur above, I’m paying others back for helping me.
Many of the great entrepreneurs I’ve met believe in this and practice it. It’s not altruistic nor is it selfless as there are huge emotional returns from watching other people – who you’ve helped early in their entrepreneurial career – be successful. If you are a multi-time entrepreneur, I encourage you to consider a daily (or weekly, or monthly – whatever works for you) karma break to help someone that is just getting started.
Wilson Sonsini puts out a quarterly Entrepreneurs Report. The Winter 2008 issues is titled Private Company Financing Trends. They asked me if I’d contribute an article around the topic of hints for pitching VC’s so I wrote an extended version of Perfecting Your Pitch.
The other articles in the Winter 2008 Entrepreneurs Report include:
Recently, I’ve been fielding a lot more requests to write for publications as well as for permission to resyndicate content from Feld Thoughts and Ask the VC (e.g. the republishing of this content on the MIT Technology Review’s Blogs page.) As I come up on the fifth anniversary of writing this blog, I’m finding myself intrigued by the dynamics of how user generated content has evolved.
All the economics and newscasters like to talk about GDP Growth Rate (and its importance to life, the universe, and everything). Whatever. One of my very smart LPs sent me this the other day.
He sent the attached note:
This is not meant to be exhaustive or to suggest any correlation – only a reminder that great companies continue to be created at shitty times. It is, however, interesting to think about what attributes might lead companies founded in shitty times to go on to be successful. How about: single-mindedness of purpose, frugality/capital efficiency, and more sweat than equity.
The list of companies started during periods of negative GDP Growth include Wang, TI, DEC, Fairchild, EDS, Compuserve, Intel, Atari, CA, Apple, Microsoft, Amdahl, Autodesk, Sun, Compaq, Cisco, 3Com, Genzyme, EMC, Amgen, Lotus, EA, Adobe, AOL, Dell, Cisco, and Network Appliance. I know the startup story of many of them and it includes single-mindedness of purpose, frugality/capital efficiency, and more sweat than equity.
“There is a category of people that do stuff and a category of people that stuff gets done to.” The following short video is from the end of the event I did a few weeks in Seattle that was summarized nicely by Xconomy Seattle in Greg Huang’s post VC Model Is Not Broken: Insights from Brad Feld of TechStars and Foundry Group.
Brad Feld – cofounder of Tech Stars – "Do Stuff!" from Seattle20 on Vimeo.
Entrepreneurs are in the category that do stuff. Get up every morning and do stuff.
As I was going through my morning information routine, I noticed a number of articles that I’d put in the “how to not fail” bucket. I read a few of these and noticed a consistent tone of “failure is bad – here’s how to avoid it.”
Throughout my life and career I’ve failed at many things, large and small. I view failure as a fundamental part of every entrepreneurial endeavor, whether it’s a failed project, hire, partnership, relationship, lead, customer, or even the entire business. One of the great things about entrepreneurship in America is that failure is an accepted part of the cycle.
I used to say something like “one of the great things about America is that failure is acceptable.” When great people fail, they acknowledge it, learn from it, get up, dust themselves off, and get back at it. If you accept reality, you can fail gracefully and hopefully learn something from it. It’s never fun – and it can be really stressful / painful / emotionally hard – but it’s a part of learning, evolving, and growing stronger and better.
While I fail at stuff regularly, I’ll never forget the deepest cycle of failure I’ve been in to date. As the Internet bubble popped exploded, company after company that I was an investor in failed. As I grappled with this, I felt like I had been run over by a truck. After I got up, a steamroller came and flattened me. As I was peeling myself off the ground, the steamroller backed up and smushed me again. Then, I realized I was lying on top of a hole and the top fell in and I tumbled down to the bottom. As I was looking up at the sky, some jerk came into view, poured gasoline onto me, and then dropped a flaming stick on top of me. By the summer of 2001, I realized that ever day had been worse than the previous day. I no longer got up in the morning and said “ok – today will be better than yesterday”; instead I resolved myself that every day would be worse, until it eventually got better. Then 9/11 happened.
I hung in there, kept getting up every day and doing my best, working hard to make informed and intelligent decisions, and helping all of the companies I was an investor in however I could. A few more failed, but a nice number survived and ultimately thrived. Things eventually got better. And I learned a lot.
In my world view, the best leaders understand that failure is an integral part of things. The cliche “fail fast” is one of my favorites. When things aren’t working, deal with it. Another is the famous line from Atlas Shrugged “Nobody stays here by faking reality in any manner whatever.” Denying that failure is part of our existence is akin to faking reality.
While I accept “the experience of failure” feels “negative / crappy / depressing / hard / sucky”, I don’t believe that “failure is bad.” Deal with it, learn from it, pick yourself up, and try again.
I had a call this morning with a CEO of a young company I’m on the board of. They are well funded so they have plenty of urgency, but no panic, around what they are doing. During the conversation, he asked what he could do to increase the board member’s visibility of the progress they are making.
I told him to start sending out “daily data”. There is a lot of data flowing through their system and there are several different dimensions of growth that are easy to measure. Rather than hand collecting stuff, I encouraged him to automate all of this right now, while the company is young. It can be web-based data (which I’d just toss in my daily information routine) or better yet emailed to me so it shows up with other reports like this in my daily folder.
Many of the companies I’m involved in do this. A lot of them provide the data weekly, although I always prefer to get it daily as I feel more engaged and can synthesize the trends better. I also notice the step function changes a lot better when I’m seeing the data stream by on a daily basis.
An example of what I’m talking about is the Lijit Stats Robot. Every day I get an email from the Lijit Stats Robot that includes the following daily data:
Another example would be the data I see every day from Gyminee
Obviously both of these data sets are trending data sets so I see the trend rollup monthly, but by getting to see the daily data a quick glance can often generate an interesting insight. It also causes me to spend at least ten seconds thinking about the company each day, which probably serves the CEO well as it increases the likelihood that I’ll notice something else throughout the day that might be helpful to him.
When I was on vacation last week, I read John Bogle’s book Enough: True Measures of Money, Business, and Life. In addition to be a superb book, it had a bunch of tasty little nuggets in it. One of my favorites was “the three i’s – innovator, imitator, and idiot” that was attributed to Warren Buffett.
I thought of this nugget this morning when reading Fred Wilson’s post When Government Funds Business. In it, he concludes “When government funds business, it messes everything up.” One of his examples is the delicious irony that Citi – which just got more government money – is running traditional print ads in the NY Times.
Fred’s wife Joanne’s reaction to this is "We are paying for that ad. In a newspaper that less and less people read every day. No wonder they are in trouble". Yup – I’d put that behavior in the idiot column.
However, I’m aware of some things going on at Citi that I’d put in the innovator column. They aren’t public so I don’t think I can talk about them, but I’m amazed at how forward looking, innovative, potentially transformational, and relatively inexpensive these activities are. They are the kind of fundamental investments that you’d hope major companies are making to stay relevant in the next decade.
While most people aren’t innovators, that’s ok. Many American’s understand the importance of them and – when the innovators take leadership roles – they motivate the non-innovators to follow them. In a twist on Buffett’s line, I’d suggest that if you apply it to leadership, you can segment leaders into three categories: innovators, imitators, and idiots.
When I think about my experiences with large companies, I see Buffett’s quip all over the place. Their leaders include innovators, imitators, and idiots throughout the organization. Same with government. The challenge is the innovators – especially when they are in a culture that is playing defense or simply trying to survive – often get drowned out, discouraged, or marginalized.
I believe that one of the key foundations that America has been built on is the innovator. At all levels of society, throughout history, the innovator has led, created change, and inspired greatness throughout our history. People love to follow the innovator. While the innovator is willing to take risks that might result in failure, not taking the risks often results in even greater failure.
My appeal to all leaders in big companies – and in government – is to innovate. Play offense. If you don’t know how to do this, look around for the innovators in your organization and team up with them. Challenge the imitators to step up their game. And don’t tolerate the idiots in any way, shape, or form.
Sim Simeonov, a partner at Polaris Venture Partners, sent me (along with a bunch of his closest friends) the following email this morning.
“Founders often ask about the dilution they are likely to experience through exit. There are rules of thumb but there is no good data about what happens to common stock (at least, I haven’t been able to find such data outside of S1 filings which are a very biased sample). So, I built a little survey to collect anonymous data from entrepreneurs. I’ll crunch the numbers and share the stats with everyone. I’d appreciate your help in spreading the word around so that we get enough data.”
Sim is doing a short survey to collect this info. Help him become statistically significant by taking the survey – it looks like it’ll take less than two minutes. He promises to post the results on his blog.
Don Dodge totally nails it in his post Create 50,000 companies for $1B. He builds on Fred Wilson’s No Thanks post when discussing what the US government should do with 1/20th of auto industry bailout money.
“Government should create incentives for investment. It is probably best not to make the investments directly. There are already some good programs and incentives in place that have been forgotten or underfunded for too long. Pouring money into these programs is certain to stimulate investment, inspire innovation, and create jobs.”
The four existing programs that Don reminds us of are the Small Business Investment Company, Small Business Innovation Research, 20% R&D tax credit, and a Seed Capital Tax Credit.
I’m personally a huge fan of the Seed Capital Tax Credit, especially administered at the state level.
Note the key phrase “incentives for investment.” And Don correctly makes the assertion that “it is probably best not to make the investments directly.”
Ironically, none of this is very difficult to execute on and it would have an enormous impact on innovation, investment, and entrepreneurial job creation. If anyone in the government wants to talk about it, just email me. I’m happy to head up a committee of three which would include me, Fred Wilson, and Don Dodge.