For some reason I’ve been doing a lot of interviews lately. In many of them I get asked similar questions, including the inevitable “what makes a great entrepreneur?” When I’m on a VC panel, I’m always amused by the answers from my co-panelists as they are usually the same set of “VC cliches” which makes it even more fun when I blurt out my answer.
“A complete and total obsession with the product”
The great companies that I’ve been an investor in share a common trait – the founder/CEO is obsessed with the product. Not interested, not aware of, not familiar with, but obsessed. Every discussion trends back toward the product. All of the conversations about customer are really about how the customer uses the product and the value the product brings the customer. The majority of the early teams are focused entirely on the product, including the non-engineering people. Product, product, product.
And these CEO’s love to show their product to anyone that will listen. They don’t explain the company to people with powerpoint slides. They don’t send out long executive summaries with mocked up screen shots. They don’t try to engage you in a phone conversation about the great market they are going after. They start with the product. And stay with the product.
When I step back and think about what motivates me early in a relationship with an entrepreneur, it’s the product. I only invest in domains that I know well, so I don’t need fancy market studies (which are always wrong), financial models (which are always wrong), or customer needs analyses (which are always wrong). I want to play with the product, touch the product, understand the product – and understand where the founder thinks the product is going.
I don’t create products anymore (I invest in companies that create them), but I’m a great alpha tester. I’ve always been good at this for some reason – bugs just find me. While my UX design skills are merely adequate, I’ve got a great feel for how to simplify things and make them cleaner. Plus I’m happy to just grind and grind and grind on the product, offering both detailed and high level feedback indefinitely.
How a founder/CEO reacts to this speaks volumes to me. I probably first noticed this when interacting with Dick Costolo at FeedBurner when I first met him. I am FeedBurner publisher #699 and used it for my blog back when it was “pre-Alpha”. I had an issue – sent firstname.lastname@example.org a note – and instantly got a reply from Dick. I had no idea who Dick was, but he helped me and I quickly realized he was the CEO. Over the next six months we interacted regularly about the product and when he was ready to start fundraising, I quickly made him an offer and we became the lead investor in the round. My obsession with the product didn’t stop there (as Eric Lunt and many of the other FeedBurner gang can tell you – I still occasionally email SteveO bugs that I find.)
I can give a bunch of other examples like FeedBurner, but I wrap up by saying that I’m just as obsessed with product as the founders. And – as I realize what results in success in my world, I get even more obsessed. Plus, I really like to play with software.
The Apple patent suit against HTC really riled up my friend Sawyer. I wasn’t planning on posting another missive from him until next week, but I thought this was particularly timely given the public statement from Apple, including a specific quote from Steve Jobs about its competitors stealing their patented inventions. Sawyer explains why this is simply inflammatory rhetoric and actually has no basis in fact or the way patent law works. He also makes the case – using this as an example – that patents stifle, rather than promote innovation. Enjoy. And, after you read this, if you want a little “doesn’t this sound familiar” action, take a look at the Wikipedia page on Apple Computer v. Microsoft Computer with regard to the GUI – with a little Xerox tossed in as a side dish. And now, my friend Sawyer.
The other day Apple announced that it is suing HTC for infringing several patents related to the iPhone, including patents on the UI, i.e., software patents. As part of the press release, Steve Jobs said the following (emphasis mine):
“We can sit by and watch competitors steal our patented inventions, or we can do something about it. We’ve decided to do something about it. We think competition is healthy, but competitors should create their own original technology, not steal ours.”
The rhetoric of "stealing" and "theft" surrounding accusations of patent infringement is bothersome, both because substantive patent law doesn’t embrace the concept of theft, and because most patent cases don’t involve credible allegations of actual theft or even copying.
Plaintiffs try to use "theft" to inject a moral element into patent suits, but there is no substantive moral element in patent law. The point of a patent is to grant a monopoly in exchange for public disclosure, and patentees want people to use the ideas (in exchange for license fees), otherwise the public disclosure aspect is pointless. The Constitution doesn’t authorize patent or copyright law for moral reasons either: “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries…”
The only doctrine in patent law that shades into morality is willful infringement. The shifting law on willful infringement will be the subject of another post, but in any case, willfulness isn’t a morality doctrine; willful infringers aren’t bad people, they are just people who decided to continue possibly infringing because they didn’t think they infringed, thought the suit was frivolous, or thought they would lose more money by stopping, at least in the short term. The doctrine is set up to penalize people who recklessly infringe by potentially trebling damages, and so acts as an incentive to settle suits and pay licensing fees. This isn’t a moral calculus, it’s a utilitarian one.
Willfulness, however, acts as the main vehicle for plaintiffs to inject moral rhetoric and copying allegations into a patent suit. “Copying” in a patent law sense means that an infringer either literally read the patent and copied what the claims said wholesale, or saw a product embodying the patent and copied the patented aspect of it. Copying in patent law does not mean “theft.” Theft of secret ideas is actionable under trade secret law, and I know of very few cases pairing the two. Literal copying is often actionable under copyright law as well. Isn’t it the case though that patentees want people to copy? Doesn’t copying mean that their ideas are spreading and being used for follow-on innovation, which are good things? The issue if anything is proper compensation, not the act of copying itself.
Unsurprisingly, we don’t usually even get into copying as a consideration. A paper by Mark Lemley and a good blog post titled Patent defendants aren’t copycats shows that the vast majority of patent cases don’t involve an assertion of copying (and we’ll have to see if the Apple case does). Putting in place an independent invention defense to infringement, as suggested recently by Brad Burnham at Union Square Ventures, would potentially wipe out 90% of patent cases.
Setting all of that aside, in my experience, when plaintiffs do allege copying, particularly in software cases, the allegations are uniformly flimsy and bogus litigation tactics aimed at getting “black hat” stories about defendants told to juries. And it’s a great tactic because juries are people, and regardless of the merits, they like to stick it to the bad guys, especially so where the merits are boring patent law issues that no one understands anyway.
Now we have one of the biggest and most innovative companies out there, Apple, trying to sue one of its competitors out of the market with patents, and using the false rhetoric of theft to justify the suit. This underscores that the patent problem isn’t just "trolls" versus "big companies," it’s big companies using patents to sue others in the same market into oblivion, cutting off competition and destroying innovation. Imagine, if HTC weren’t making great Android phones to compete with the iPhone, would Apple be incentivized to significantly improve its products? Would we have no iPhone if patents didn’t exist? I think it’s fairly obvious that in the absence of patents, we would have more competition and more innovation here, not less.
In any case, the takeaway for reform advocates is that we need to shift the rhetorical frame in discussions around patents from the moralizing of "stealing" and "theft" to what the issue actually is, a dry utilitarian calculus about what outcomes are better for innovation and competition. When we think about the issues in that frame, it sort of takes the wind of out of Steve Jobs’ sails, doesn’t it?