Category Archives: Entrepreneurship

Why I Started My Own Business

Entrepreneurship
Keiss Castles
Keiss Castles (Photo credit: Wikipedia)

I was keynote speaker at “Invention to Venture,” a technology entrepreneurship event sponsored by the University of Portland. I enjoyed the group thoroughly, and it forced me to articulate some of what I gather are less obvious viewpoints on starting a business.

Somebody asked me to comment on what makes an entrepreneur, and with the question, presented the common picture of the entrepreneur driven by the vision. This reminded me that my case was different. I left a good job at Creative Strategies and started on my own not because of something I wanted to build, not because of creative vision, but rather because I thought I could make enough money to keep my family whole and do what I wanted.  I wanted interesting work, and I wanted to choose my work.  I wanted to actually do the writing and research, not supervise others. It was important to me that what I spend hours doing was something fun — I always found writing and planning and working numbers fun — even though I didn’t have the idea that would create the empire.  I was avoiding boredom, not building castles.

(Question: this was my first post on this blog, posted originally in 2006. I changed a couple of words and posted it again today because somebody asked me about it. I’m thinking about doing that with some others of my oldest posts. In the beginning nobody read this blog, and I like some of what I posted back then. Like this one. Is that a good idea? What do you think about it?) 

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Tipping Point Trumps First Mover Advantage

Economics, Entrepreneurship, Starting a Business, , , , , , , ,

Two interesting milestones: a note last week that Ebook Sales Surpass Hardcover in the U.S. coupled with the fact that digital music overtook physical media for the first time in 2011, something I expected since 1998. In both cases what surprises me is not that it happened, but how long it took. And what interests me is who makes the money on timing these trends. Because it sure wasn’t the first mover. 

I posted about this in Who Makes the Money on An Inevitable Shoe Dropping earlier this week on the gust.com blog. I was an early adopter in both these markets. I bought the Rocket eBook Reader in 1999. I bought the Diamond Rio mp3 player in 1998. Both products were first movers, innovative leaders, but they were brought out well before the right time. Both were discontinued years ago. And, I think but can’t prove, both were business failures. 

What does this tell about first-mover advantage? The ebook reader finally took off roughly 10 years later when Amazon.com and Apple converged on it with hardware and content. The mp3 player took off just a couple of years after the Diamond Rio. 

What happened? The tipping point happened. And the first-mover advantage didn’t. Why not? What do you think? 

Crabgrass Theory of Tech Startups

Economics, Entrepreneurship, , ,

I’m fascinated by Fred Wilson’s recent post he called The Darwinian Evolution of Startup Hubs, on his AVC blog from late last month. This is so much like my own sense of how it was, beginning with the first semiconductor companies appearing in what was then called the Santa Clara Valley in the 1950s. I was in elementary school then, in Los Altos, CA, where all this was happening. His summary:

In my mental model of Silicon Valley, the first ‘tree’ was Fairchild Semiconductor (founded in 1957) which begat Intel (founded 1968) which begat Apple (1976) and Oracle (1977), which begat Sun (1982), Silicon Graphics (1981), and Cisco (1984) which begat Siebel (1993) and Netscape (1994), which begat Yahoo! (1995) and eBay (1995), which begat Google (1998) and PayPal (1998), which begat YouTube (2005), Facebook (2004), and LinkedIn (2003) which begat Twitter (2006) and Zynga (2007), which begat Square (2010), Dropbox (2008), and many more.

I’ve compared this phenomenon to crabgrass. One plant generates others nearby. I think it must have been like this with auto makers in Detroit and steel in Pittsburgh, but that was well before my time. This is certainly what we saw in the Silicon Valley:

If you drill down a bit deeper, you see that the founders, investors and early employees generate a tremendous amount of wealth from these big successes. The later employees don’t make as much wealth but they do learn a ton and make enough money that they don’t need to work for someone else and so they strike out on their own and are often funded by the folks who made the big money in the prior startup. That’s how the seed drops from the tree and starts a new tree growing. This continues on and on and on.

Tree, crabgrass, seeds, and seedlings; sort of the same thing. And I’m seeing what he describes in the growth of other hubs too:

This darwinian evolutionary model of startup hub development is not limited to silicon valley. We have seen it play out in other places, most notably Boston, and increasingly in NYC. It is also playing out in markets like Boulder Colorado and Austin Texas and many other parts of the US and many parts of the world.

Fred Wilson’s VC firm is called Union Square Ventures, and Union Square, in Manhattan, is right in the middle of the growing New York high tech startup hub around Soho and the Garment District. Some call it Silicon Alley. And I’ve also seen this happening in Austin, and, although I don’t know Boulder, I do see Brad Feld’s Boulder influence spreading.

The big follow-up question is what can anybody do to break the cycle and speed it up and get some other location onto the same path. What starts it? What are the factors? 

And how do we get that here (wherever here is)?

(Image: bigstockphoto.com)

Growing Your Business: What Got You Here Won’t Get You There

Business Mistakes,

This was more than 10 years ago but I still remember it well. I was walking to lunch with a friend and long-time business planning client talking about our growth at Palo Alto Software. We had doubled revenue in the previous two years. These were good times. But my friend had a warning: 

Be especially careful at this point. It’s two times harder to go from 25 employees to 50 than from 10 to 25.

That didn’t make sense to me then, but it does now. It’s related to culture and accountability and leadership. What reminded me was Josh Linkner’s 5 Traps to Avoid When Growing Your Business on Inc.com. Especially his #3, which he calls “Putting Religion Ahead of Science.”

When you were a start-up, all you had was your vision and belief (aka “religion”). Your burning desire fueled you and the company to break through start-up gravity and get your business off the ground. As you grow, however, religion alone won’t be enough to sustain your trajectory. My business partner, Dan Gilbert, often says, “What got you here won’t get you there.” In most companies’ evolution, there comes a point where systems have to be documented, training materials established, and processes architected (aka “science”). Without this foundation, a company fueled only by passion derails, since your 126th employee won’t possess the same fire as team member No. 6.

The emphasis there is mine, by the way. 

Josh has several other good points on this list. Gorging opportunities, for example, meaning trying to do too much. This is also really good:

Remember this: More companies die of indigestion than starvation. When you look back five years from now, your success will based much more on the times you said “no” rather than the times you said “yes.” As the old Chinese proverb states wisely, “Chase two rabbits and both will escape.”

Good stuff. Nice post. And we don’t talk enough about this second inflection point, getting a company through its adolescence. It’s hard to do. 

How Stop Signs Illustrate Decision Making

Entrepreneurship,

Remember when you were a kid, learning to drive, and they taught you that a stop sign requires a full stop? And a full stop means that you can actually feel the car settle back when it does? I’ve come to realize that, for me at least, decision making reminds me of the need for the full stop. stop sign

I think about a problem, review the options, and then I need to pause. I let it percolate. I digest it. I give it a pause that releases the pressure. I don’t stay focused on it straight through from problem to decision.

How long the digesting or percolating takes depends on the problem. That pause can take an hour, a day, or several days. It doesn’t always work but it often does. I relax, like the car coming to a full stop, and let it go. Most of the time the decision will come to me much better after the pause.

Don’t Expect Truth When You Ask an Entrepreneur

Business Research, Entrepreneurship,

I enjoyed this thoroughly and I’ve been meaning to post about since Scott Shane first posted Entrepreneurs’ Job Creation: Expectations Versus Reality on Small Business Trends last March. His chart, shown here below, compares what entrepreneurs said were their hiring expectations to the actual hiring: 

Job-expectations.png

You can read the details on Scott’s post. I don’t really care about the research specifics. I think it’s wonderfully eloquent as is, a picture worth at least 1,000 words. 

Conclusions:

  1. Once again, research based on asking people what they are going to do is inherently flawed because most people don’t know and most people say what they feel good hearing themselves say, not what they really think. 
  2. Entrepreneurs are optimistic about hiring. 
  3. Entrepreneurs are most optimistic about hiring when asked by a pollster how many people they are going to hire. 
  4. If you could invest in the difference between what entrepreneurs say will happen and what actually happens, you’d be very rich.  

Give People Value and You Should Succeed

Entrepreneurship, Starting a Business, ,

Russ Capper of the BusinessMakers show interviewed me three weeks ago for a 20-minute segment on that show. In this snippet be focus in on one two-minute piece of that that he calls “the BusinessMakers Classic Minute.

It comes down to two points:

  • First, the myth of persistence. Persistence doesn’t make a business succeed. It’s what’s left over after all the other causes of failure have been scraped off. 
  • Second, the most important single factor is value. Give customers value. 

If you don’t see the video here, you can click this link to see it on YouTube. 

Quick Funny Disruptive Game Changing Paradigm Shift Video

Bootstrapping, Starting a Business,

In my post here yesterday I questioned the value of the phrases “game changing” and “disruptive” for what every startup promises investors and few really offer. Right after posting I caught Sramana Mitra’s fun video cartoon here, a quick riff on the similar phrase “paradigm shift.”

Aside from the fun video, I’ve mentioned Sramana before on this blog and I’m happy to mention her again in this post because the world of startups and entrepreneurship needs to be more aware of her 1M/1M program to help people succeed with startups. Sramana’s program, unlike so much of the teaching available for startups, acknowledges the fact that the vast majority of startups make it on their own, bootstrapping, without outside investment. And she tries to deal in that real world, not in the theoretical or academic or high end world in which every startup requires funding by outside investors. The program is named for its goal of helping a million startups get to a million dollars in revenue each.

If you’re curious about that, here’s a link to the program website, and here’s a link to a 30-minute summary on YouTube.

True Story: A Great Presentation Wins Big

Business Plan Contest, MBA, Venture Contests, ,

Do great presentations launch businesses? Not always, perhaps, but sometimes, yes. And in this case, yes. Or maybe it’s just a great business. 

I was in Austin TX at the event last Saturday when NuMat Technologies, a startup launched at Northwestern, won the University of Texas’ Venture Labs Investment Competition.   I was also at Rice in Houston two weeks earlier when NuMat won the Rice Business Plan Competition. 

Both of these victories matter. The Venture Labs competition pits winners of other competitions against each other. It was the first of the big MBA-level business plan competitions when it began in 1984, and bills itself as the SuperBowl of these contest. The Rice version has the highest payoff, more than $1.5 million total prizes, and close to $1 million for the winners. Both of them require at least one MBA student, from any accredited institution, for eligibility. Both of them include startups from Asia, Latin America, and Europe. 

I haven’t read the NuMat business plan, but I did see the NuMat pitch, which was sensational. The key was explaining the science just enough to be credible, focusing on the business, and keeping it clear and flowing from point to point. I hope NuMaT  will do an online video of that so you can see it.

In the meantime, I’ve embedded a very short YouTube video that explains the science surprisingly well in just about one minute. Clearly, somebody on this team is a good communicator: 

If you don’t see that here, you can click this link to see it on YouTube. The quick summary is that it seems  poised to change the way gases are stored. Think about those very heavy metal compressed gas tanks like the LNG fuel tanks in LNG-powered vehicle. Think what would happen if the same or more gas could be stored in a new substance that wouldn’t let it leak but wouldn’t require compression. This looks like a real game changer. 

Conclusion? Yes: hey NuMat, post your pitch online!

Disrupt Education … Please!

Angel investment, Business Plan Contest, Venture Capital, Venture Contests, , , , ,

I wonder if we as a society are ever going to figure out how technology can disrupt our antiquated systems for educating our children.

Think about what’s happened to information, social interaction, research, and business over the web — not to mention mobile technology — and then think about education. Preschool, K-12, and higher education.

Would anybody disagree that the institutions we depended on as kids are now embattled and crumbling as a result of political and economic factors? Higher ed has had the worst inflation of any industry I can think of over the last two generations. And the K-12 still depends on the old model of the teacher and two or three dozen students in a single classroom.

Innovation, yes, all over the place … but has it really changed anything yet?

And why not? Last week Shelley Palmer‘s email update tipped me off to Harvard and M.I.T. Offer Free Online Courses on YTimes.com, and a new Stanford-related venture called Coursera, a Web portal to distribute a broad array of interactive courses in the humanities, social sciences, physical sciences and engineering.

Also last week I received this in email…

(The innovative minds at TED have brought a new educational video website to the head of the class. Today, TED-Ed launched http://ed.ted.com a site that features TED-Ed’s original K-12 animated videos with accompanying lessons and quizzes. On top of that, the site allows educators to create original lessons for any YouTube video, rendering the video on a new link where teachers can monitor student progress.

And I’ve subscribed to several and offer several courses at udemy.com myself. And by this time we’ve all heard of Kahn Academy, another compilation of online courses.

How many universities are offering online courses? How many of those are simply free to users? How many at very attractive prices?

But what about attendance, homework, kids doing things they don’t want to do, people growing up, validation, certification, leverage, consistency?

My angel investment group is looking in detail at EdCaliber, which offers online tools for K-12 teachers. And I saw two additional education business plans over the last three weeks at business plan competitions at Rice and the University of Texas.

I’m hoping something really changes public education for the better. I haven’t seen it yet.

(Image: bigstockphoto.com)