2007/04/09

Startups: selecting and nuturing.

A comment on Paul Grahams post Why to Not Not Start a Startup.

Paul along with Robert T Morris (author of the 1988 Morris Worm, now MIT assoc. professor) run a Venture Capital firm.
They run Startup School as well. An exceptional idea.

At the end of this is a list of Paul's 16 points.

My comments:
1. *the* best piece I've ever read on startups.

2. These ideas don't just apply to technology startups.
They apply to new businesses generally.

3. Walt Disney couldn't make it on his own, knew this and got his brother Roy out of hospital (!) to work with him. Roy outlived Walt. Walt painted castles in the air, Roy built the (economic) foundations.
=> Co-founder good, Creative+Executor great :-)
=> There has to be real trust/loyalty between the founders. With enormous wealth on offer, enough people go crazy & try to take it all. A partner you don't know well can take you down easily.

4. 'Founders', a.k.a. entrepeneurs, are more willing to take *risk* than most people - which means they get pretty comfortable with failure. They are also a special breed.
=> Comfort is the enemy of Change.
=> Change is Risk, but the only way forward.
=> Comfortable people won't pursue a startup vigorously...

5. How do you get your Founders to "put skin in the game"? To have a personal stake in the outcome? (Besides losing their dream - or is that generally enough?)

6. One of the most important personal traits of a great entrepeneur - keeping a journal... Gotta write everything down. Crops up repeatedly in biographies. Richard Branson is quite clear about it - but doesn't relate it to his success. There is supposedly some research that says 1.5-3% of all people write down their goals. Once there was a long-term Ivy League school study (is this apocryphal?) showing that people who wrote down their goals out-performed others by 5:1 or 10:1

7. People are different. Some are shy/introvert, many extrovert. Shy people don't sift through the large numbers needed to establish 'good networks' and check-out who'd make a good partner.
Many of the best geeks are quiet & retiring folk. They will, by definition, find it hard or impossible to bring along a partner. But forcing someone on them won't work either.
This is a hard problem to solve.
=> A solution is something like your "Startup School", but a little more frequent, to provide a mileu in which these people can mix and hook up. [As conferences and User Groups can do.]

[For a great example of this, see how Paul Allen was treated by Bill Gates and Steve Balmer on his last project at Microsoft.]

8. The Internet changes everything. But the VC process is still face-to-face personal contact... Silicon Valley was caused by VC firms like "Kleiner, Perkins, Caufield & Byers" bringing money from The East into technology. Even with the hordes of imititors and rip-off merchants, greedy investors flocked and made out well...
Because the place had critical mass - in people and places to meet, and the culture to support it.
These comments are peppered with genuine frustration (& longing) from would-be entrepeneurs.
=> How can the Internet overcome this tyranny?
=> Business is about personal relationships. Can the Net ever replace or augment that critical factor?

9. Technology support. Finding someone who is fluent with a key technology, like hardware hacking, can be critical to the success of a project/startup. When it's not your field, how do you find a way in? Then how do you get taken seriously by an expert??

10. Scaling: small trials and growing entrepeneurs.
My belief is that good entrepeneurs are grown, not born. And that there are predictable growth stages for all companies.
A wealthy friends' advice is: Never attempt anything more than 30% larger than you've done before.
=> Have you thought of building a process to train up entrepeneurs before they enter your funding process?
=> I'm thinking graduated funding levels, starting low ($10k) and in a couple of stages getting to $500k or so.

11. For solid research on what makes *great* employees, see Robert E Kelley's book "How to be a Star Performer"
[http://www.kelleyideas.com/pages/howtobeastar.htm]
Number One Quality: Initiative.
Sounds the same...

12. One of the prime causes of some recent major corporate collapses here in Australia was: "Ignorance, Arrogance and Self-Delusion". They are a powerful triplet that can't be broken through. Witness the non-musical entrants in "American Idol" who honestly believe they are brilliant.
=> How do you sort these out? They'll always have a high opinion of themselves, their abilities and a string of huge accomplishments.



Summary points of Paul Graham's piece:
He is going against the usual practice and debunking some myths and adding own observations.

1. Too young
2. Too inexperienced
3. Not determined enough
4. Not smart enough [have to be smart enough, not ultra smart]
5. Know nothing about business
6. No cofounder
7. No idea [good people generate them quickly]
8. No room for more startups
9. Family to support
10. Independently wealthy
11. Not ready for commitment
12. Need for structure
13. Fear of uncertainty
14. Don't realize what you're avoiding
15. Parents want you to be a doctor
16. A job is the default

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