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The challenge of growth (3/3): views from a WEF report

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Following my two previous posts on the challenge of growth through Greiner and Google, here is my final contribution thanks a recent WEF report: Global Entrepreneurship and Successful Growth Strategies of Early-Stage Companies

It is a 380-page rich analysis of what it takes to grow and the ecosystem of high-growth companies. I will soon give a few data points on venture capital compiled by the authors, btu I want to focus here on the challenge of growth. Section 2 of the report (The Early-Stage Entrepreneurial Company Journey) focuses on growth accelerators and different growth challenges as well as dark moments and the main lessons from entrepreneurship.

On the growth accelerators (pages 37-38), market opportunity comes first but HR and organization is not too far behind. For the growth challenges (pages 37 and 42), HR is far ahead with market opportunity really behind. Dark moments (pages 37 and 42): it is much more balanced with financing 1st, markets and environement both second, top management 4th.

What is really inresting in the report are less the statistics than the summaries of the inetrviews and let me extract quotes on the dark moments and main lessons on entrepreneurship. they do remind me reading the books Founders at Work, Betting It All and In the Company of Giants. I hope you will appreciate tham as much as I liked putting them here!

Dark moments

There were times I went to bed thinking ‘game’s up’ and when you wake up you find it is not. The many systems challenges in our early years created some very stressful Saturday afternoons that were at times particularly dark moments.” (Betfair)

We thought we were invincible […]. But we didn’t know what was coming and that we were going to face serious trouble[…] All our glory and credibility disappeared. On top of that, my partner left the business. Many of our people in the US left. The company was declared ‘almost irrelevant’ [..]. But we decided we didn’t want to let the company go. I wanted to turn the company around, and the board supported me in that. So we made a number of key moves. (Business Objects)

We needed to convince people that the Internet was a real market. Many potential distributors thought that the Internet was a research network and had no commercial potential. Thus, convincing people to be our first distributors in 1993 to 1994 was by far the biggest challenge. (CheckPoint)

The core issue was a failure to properly plan for the hyper-growth of the site. […] As long as the site was functioning, it was easy to ignore the engineering team’s pleas that the site was running on Band-Aids™ and fumes. […] Unfortunately, those pleas were discounted by members of the senior team until it was too late.” (eBay)

The general worst moments are as you’re running out of cash […] and there’s no term sheet yet […] that was a periodic dark day as I call it. That would come somewhat predictably, but it always and nevertheless hung heavily in the back of my mind. It was one of the few things that could interrupt my sleep. (eSilicon)

There was one particular time in our history, and that was back in the very earliest days of the company when we were still based in New Mexico. One of our first customers was MITS, which was acquired by another company, they stopped paying us and we basically had no income for a year. We were just barely able to hang on, and after that I had a rule that we always had to have enough cash on hand to be able to operate for a full year, even if nobody paid us.
“The first decade it was IBM that almost killed us. I mean they were a great ‘angel’ in a way, but they also almost killed us a few times. We were in a situation long before Windows where we were totally at the behest of IBM. And IBM could have crushed us on many occasions. They had huge demands on us and sucked our resources. We were basically a low cost, outsourced programming sweatshop for IBM. They paid us very little and the only thing we really got from them that turned out to be very lucrative was the right to sell the DOS operating system to other companies. IBM was a large company and we were a small company and every new code release would have to circulate around to all these different divisions, and it was very difficult to keep our technical people motivated to serve the beast, as it were. When we launched Windows, IBM had a competing project, which they were working on with us called OS/2. Previously, IBM had always set the standards. We would provide the technology and their brand recognition and clout in the industry were what really set the standards. When we launched Windows 3.0, that was the first time that we really went out and did it without IBM. We had made an internal decision before that, that whether IBM was with us or not, we were going to launch Windows 3.0. The day before the launch, IBM reluctantly decided to endorse Windows.” (Microsoft)

There were maybe two dark moments. Because it was difficult to get financing, we decided to bootstrap the company as much as we could with our own money and develop the service. That was a challenging period. That was in the spring and summer of 2003. As we started to incur costs in the software developers, we started to run out of money. Some people internal to this project maybe did not believe it would happen. That was one big challenge. (Skype)

“The first dark moment occurred in the summer of 2002. We were running out of money, struggling with a new product and having difficulty penetrating any major customer. We were about to be saved from our misery through an acquisition by our largest competitor, but then they walked away from a definitive acquisition agreement after two months of diligence, during which they had learned all of our secrets and dirty laundry. We could easily have let this situation destroy us, but instead, we took it as a slap-in-the-face and redoubled our efforts and commitment to success. Our founders took this slap personally, and within a year, they had delivered a breakthrough product that was much better than our competitors’ products and allowed us to penetrate Cisco and other key customers. (Netlogic)

“Every company has dark days. In a young company there’s a huge amount of uncertainty. One dark day occurred in the first quarter after we went public. I’m off on a Friday with my wife and my aunt and uncle, and we’re up in Point Reyes –there was no email. So I called into my voicemail, and we had just got notified by one of our customers that they were cancelling a US$ 375,000 development project. We were going to miss our first quarter public. The rest of the day, I’m living in a silent movie. They’re all talking to each other, but I have no idea what’s going on. I’m sitting there spinning in my own mind. I have a knot in my stomach. I am calling into the office every 15 minutes, but there is no news. I came into the office on a Monday morning, after having some time to reflect on it. I said, ‘Well, first we ought to try to go back up to this company that cancelled us and see if we can get them to give us US$ 100,000’. We did a lot of things that quarter, and we figured it out. It was a very dark period. Bad news travels fast and everybody knew we were just hosed. There was no way to fully make it up, and it was awful.” (Veritas Software)

Lessons from entrepreneurship

1. The three Ps are important: Persevere, as you will have many setbacks; be professional in everything you do; and be passionate.
2. Being able to overcome problems is a pivotal skill: After you overcome each problem, you will feel good because you know you are on the right end of that problem and that some other company
will have to handle it.
3. The most undervalued commodity in an entrepreneurial venture is time: You must get things done in a time-efficient way and with minimal distraction.
4. When you get lucky, two things are essential: (a) quickly take advantage of it; and (b) don’t kid yourself it was not luck. Be brutally honest with yourself.”
(Betfair)

1. “The famous lesson from Jim Robbins’ book, Good to Great: ‘Confront the brutal facts but never lose faith in the positive outcome’. This is essential to come through victorious from difficult periods.
2. “Have a clear concept of value and innovation: We started with a great innovative concept that was easy to explain to our customers and we created a brand new market.
3 “Follow a proven entrepreneurial model: a) attract venture capital and have options available for employees to participate in its financial success, b) go global as early as possible, c) find the better market for going public.
4. “Encourage a culture of passion: Adapt quickly to changing circumstances and always be clear about the growth drivers. Cascade goals all the way down in the organization and measure or monitor. Communicate [goals] heavily to your team, so they can lead their own teams.
5. “Take advantage of a global talent pool: it completely changes the fabric of an organization and creates new opportunities.”
(Business Objects)

1.Key leaders in an organization need to be extremely flexible with the ability to get into a completely new field and build a team and strategy to handle it.
2. You never stop being an entrepreneur. At every step you need to build a working and stable infrastructure, and yet still challenge yourself with shaking things up and finding the next new opportunities.
3. In order to succeed, you need an innovative product, a growing marketplace and a great team of people. It is impossible to succeed without the right people, but the other factors are critical to successful growth.
“Whenever you do something, try to do it in the best possible way. If it works, you will establish a precedent that will last for many years. So try to do the right things in the right way the first time.”
(CheckPoint)

One of the things I found really rewarding while working in Silicon Valley is that risk is not only accepted – it’s encouraged. There are tons of experiments going on there all the time. Risk is, in part, how work gets done there. For me, failure only happens when you don’t learn from your experiences. […] Being an entrepreneur is a tough occupation – you have to believe in what you’re doing, even when others are pointing out all the reasons why your idea won’t work. You have to develop a higher risk tolerance and be ready to find the lesson in each idea that doesn’t work.
(eBay)

Point number one is about the motivation for entrepreneurs. On a risk-adjusted present-value basis, no rational person would ever be an entrepreneur if they did it just for the money. Most young entrepreneurs go into this thinking it’s a quick route to the gravy train. And in fact it’s not. It’s more about creativity and self-actualization than it is about compensation.
“Point number two is about having the right venture capital behind you. I encourage people to seek senior partners who hold central power in the VC firm and will be your long-term funding champion.
“Point number three is about the people. A great product or technology misapplied in the market cannot be recovered by a bad management team. But a great management team can take a B product and win by making the right chess moves at the right time.
“Point number four is our three S’s: speed, simplicity and self-confidence. Winning requires speed. Speediness is achieved through simplicity (non-bureaucracy and non-territorialism). Self-confident people feel good about their position in the company and deliver speedy solutions without behaving bureaucratically. A CEO has to ensure that the three S’s are engrained into the company culture.”
(eSilicon)

“One of the key things is that you have to be in the right place at the right time. This isn’t a question of luck. It means that you have to recognize the opportunity early, and go after it with incredible focus and commitment before anyone else does. […]. You also have to be willing to take risks and make mistakes. Nobody should have to worry about being penalized for trying something new and not having it work out. The key is to learn the right lessons from mistakes so you can continue to move forward.”
“Hire the best people you can. One of Microsoft’s strengths was it innovated that way. It spent a lot of time at universities, before that was fashionable, to seek out talent. They hired for high IQs first, and then figured out a way to organize them and make them productive.”
(Microsoft)

1. “Think big and think global. Think differently. And even if people around you don’t believe it, if you really think you have something, you need to believe in your gut feeling and go for it.
2. If you want to go anywhere in life, if you want to pursue your dreams, you have to take risks. Risks involve failures. You cannot be afraid of failure if you want to pursue your dreams.
3. Entrepreneurship is a lifestyle. It is about what defines you. It is about a passion to change and build things. When you look at it this way, it is also about having fun.
4. Once you get going, stay very focused on getting the right people.”
(Skype)

1. “Think beyond the possible and then back off to reality. Just sit down with a piece of paper and look at what you’ve got. I really believe in a very simple SWOT analysis. Then plan, plan, plan. And then adjust.
2. Hire the best people when you can afford it. A great idea can come from anyone in the company.
3. Be prepared to make mistakes and keep innovating.
4. Customer pull is a hundred times more important than a technology push, but nothing is more important than a great engineer.”
(Arm Holdings)

“The first lesson is, don’t start a company just because you want to make money. You start a company because you believe in your idea and are passionate about it. Also, the idea has to be practical, be implementable and solve some real user problem. Then wealth creation will be a by-product.
Second, you should get off the ego trip. Associate yourself with the right people to complement you. Don’t think, just because you are an entrepreneur and the founder, you should be the CEO. You may or may not be CEO material. To succeed, use your strengths rather than assuming you’re strong in every area.
Another important lesson is that you’ve got to attract good people. You can do it if you have a convincing idea that is really attractive. If you don’t have the right idea, or if you’re not passionate enough about it, you can’t attract the right people. You can’t do it alone. Not any one person will have all the expertise.”
(Brocade)

“Personally, I would recommend that any founder and entrepreneur not initiate a venture on one’s own. In my view, the fact that we had a founding team of three – and later four – meant that we could share the psychological load and stress that a fast-growing company brings. While good friends, we largely had independent social lives so we could ‘switch off’ the company from time to time.
(Iona)

The most important lesson is cliché. In technology, the intelligence, creativity, motivation and teamwork of the people ultimately determines the level of success. Providing an environment that attracts, keeps and motivates top employees is an absolute requirement.
(Netlogic)

1. “The most important thing I learned from Silicon Spice is that no matter how sexy or exciting your idea may look, if you want increase your chances for success, then you must actively engage with potential customers early on. They may not become your ultimate customer, but they certainly will teach you about the product and its features and functionality very early on. I would say that’s one of the most critical things to do, even if you have to make a sweetheart deal with them to get their engagement.
2. As an entrepreneur, you have to have the DNA in you to not give up. I could have easily given up on Silicon Spice and moved on to do something else. This drive to succeed at any cost is part of every successful entrepreneur I have worked with. You have to figure out whatever it takes to make a success of the company.
3. The biggest thing I learned from Intel and that I have carried with me since is there is a discipline about focus and execution. You have to focus on very crisply defined deliverables. You can’t just clutter people with 100 things. You have to distil them down to one or two. However, you have to be very careful. You can’t dump all of Intel’s culture into a start-up, either. But there are elements of the Intel culture that, when brought in a suitable manner, can help a start-up become far more efficient and successful.”
(SiliconSpice)

“Number one: The most important thing is the right product, in the right market, at the right time.
“Number two: The greatest flaw that the entrepreneurial character has is that they get excited about their own ideas and they start filtering with a confirmation bias. What you want to do is open all portals to new information.
“Number three: One of the hardest things for me is this very profound ambiguity you experience. You have a vision of what you want to do, who you are and what defines you, but along the way, you have to do all these opportunistic and pragmatic things, which draw you in different directions and you just never see that original vision. You have to be able to do things that betray that original vision for the good reasons along the way. Sometimes you have to just abandon it and move onto the next thing because it’s the better thing to do. For me, that turned out to be a very hard thing to do.
“Number four: If you don’t listen to your board, you may or may not get fired. But if you listen to your board and investors, you’re guaranteed to get fired. I believe you have to take leadership. And if I sit and think about the business 24 by seven, and when you run a company – it’s the only thing in your life, it’s 24 by 7 – guys that show up once a month or quarter, and kind of flirt with this thing, are simply not qualified to have a better opinion. And investors who buy your stock and sell it ten minutes later, are even less qualified to have a better opinion – although that doesn’t prevent them from having opinions. You have to do what you believe is the right thing for the company and you have to put your job on the line to do it sometimes, and that’s just part of what it is. Sometimes you win, sometimes you lose.”
(Veritas Sofwtare)

Start-Up in French on iPad and Kindle.

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Following the digital edition of the English version of Start-Up (Kindle, iPad) last summer, I just did the same for the French version. More details on the page which lists all published versions in paper (English, French, Russian and maybe Italian soon) as well as digital ones.

I was wrong about the difficulty in producing an iBook for Apple. Thanks to an EPFL colleague, I learnt I did not have to use complex editors such as Calibre (and then do a lot of manual corrections). I just imported my Word file into Pages eand then converted it in the ePub format. It then took Apple 8 days to validate the content.

60 Great Books to Spur Your Entrepreneurial Spirit

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Julia Watson works with Oedb.org, where was just published the article “60 Great Books to Spur Your Entrepreneurial Spirit”

I love to read books as you all know and I read some of the 60s (like Founders at Work or Startup Nation). they probably forgot a few (mine!, just kidding) but this looks very good. Thanks Julia 🙂

Start-Up Nation: Israel

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Thanks to an opportunity I got to meet with the Israel Chief Scientist, and the fact I was offered Start-Up Nation at the end of the meeting, let me give you my views on this very interesting book. But first a few things about Israel and innovation.

As the map (adapted from John Kao, Harvard and showed at the OCS meeting) indicates, Israel is an innovation superpower. Cisco, Intel, Microsoft, Novartis, Nestle and many others are located there. Check Point is just one of the many start-up success stories. Israel has more start-ups quoted on Nasdaq than Europe and venture capital is very active there. Finally the office of the chief scientist manages and funds the public side of innovation in Israel. All this is perfectly analyzed in the book Start-Up Nation that I have just read.

I thought I knew a lot about Israel, but the book is rich in anecdotes. The history of Israel is well described and innovation was probably a necessity to survive. If there is a point I appreciated less is the importance the authors give to the military. They may be right, that’s not the point, but I thought the topic came too often in the chapters. This remains a great book and a must read for anyone interested in high-tech innovation and entrepreneurship.

I’d like now to quote a few things I liked. It’s not structured at all, but I invite you to read the book!

From the Introduction

Google’s CEO and chairman, Eric Schmidt said  that the United States is the number one place in the world for entrepreneurs, but “after the U.S., Israel is the best.” Microsoft’s Steve Ballmer has called Microsoft “an Israeli company as much as an American company” because of the size and centrality of its Israeli teams.”

The authors begin by explaining that adversity and multidimensionality as much as the talent of individuals, are critical:  “it is a story not just of talent but of tenacity, of insatiable questioning of authority, of determined informality, combined with a unique attitude toward failure, teamwork, mission, risk, and cross-disciplinary creativity.”

Chapter 1- Persistence

The usual joke Americans need to put, but it is a good one!
Four guys are standing on a street corner . . .
an American, a Russian, a Chinese man, and an Israeli. . . .
A reporter comes up to the group and says to them:
“Excuse me. . . . What’s your opinion on the meat shortage?”
The American says: What’s a shortage?
The Russian says: What’s meat?
The Chinese man says: What’s an opinion?
The Israeli says: What’s “Excuse me”?
—MIKE LEIGH, Two Thousand Years

– No inhibition about challenging the logic behind the way things have been done for years.
– A rude, aggressive culture which tolerates failure.
– Israeli attitude and informality flow also from a cultural tolerance for what some Israelis call “constructive failures” or “intelligent failures.”
– It is critical to distinguish between “a well-planned experiment and a roulette wheel
(During the meeting with the chief scientist, there was a similar argument: “if we have a 5% success rate, we’d better give the responsability to donkeys to choose and if it is 70% success rate, we do not take enough risks”)
– Amos Oz talks about “a culture of doubt and argument, an open-ended game of interpretations, counter-interpretations, reinterpretations, opposing interpretations. From the very beginning of the existence of the Jewish civilization, it was recognized by its argumentativeness.”

Chapter 2- Lesson from the military

– Narrow hierarchy and autonomy gives a lot of responsibility to individuals, authority is discussed
– People are mature earlier.
– No need to wait for order to act.
– “The key for leadership is the soldiers’ confidence in their commander. If you don’t trust him, if you’re not confident in him, you can’t follow him.”
– “If you aren’t even aware that the people in the organization disagree with you, then you are in trouble”

– “Real experience also typically comes with age or maturity. But in Israel, you get experience, perspective, and maturity at a younger age, because the society jams so many transformative experiences into Israelis when they’re barely out of high school. By the time they get to college, their heads are in a different place than those of their American counterparts.”… “The notion that one should accumulate credentials before launching a venture simply does not exist.”

A dense network – the whole country is one degree of separation (Yossi Vardi)

Chapter 5- Order and chaos

– Singapore’s leaders have failed to keep up in a world that puts a high premium on a trio of attributes historically alien to Singapore’s culture: initiative, risk-taking, and agility; in addition to being real experts who can improvise in situations of crisis.
– Innovation is fundamentally an experimental endeavor (improvisation over discipline)
– Learn from mistake with no fear of losing face.
– Nobody learns from someone who is being self defensive
– Fluidity, according to a new school of economists studying key ingredients for entrepreneurialism, is produced when people can cross boundaries, turn societal norms upside down, and agitate in a free-market economy, all to catalyze radical ideas.

Chapter 7 – Immigration

Immigrants are not averse to starting over. They are, by definition, risk takers. A nation of immigrants is a nation of entrepreneurs.—GIDI GRINSTEIN

Sergey Brin spoke in an Israeli high school: “Ladies and gentlemen, girls and boys,” he said in Russian, his choice of language prompting spontaneous applause. “I emigrated from Russia when I was six,” Brin continued. “I went to the United States. Similar to you, I have standard Russian-Jewish parents. My dad is a math professor. They have a certain attitude about studies. And I think I can relate that here, because I was told that your school recently got seven out of the top ten places in a math competition throughout all Israel.” This time the students clapped for their own achievement. “But what I have to say,” Brin continued, cutting through the applause, “is what my father would say—‘What about the other three?

The authors mention the seminal work of AnnaLee Saxenian (Regional advantage, the New Argonauts). As a few examples of Israel tech. diaspora mentioned in the book:
– Dov Frohman – Intel – 1974 –  Wikipedia link. Apparently Israel has been the core of Intel innovation in the past decade and Intel is the largest private employer in Israel.
– Michael Laor – Cisco – 1997 –  Linkedin profile. Cisco has acquired 9 israeli start-ups since Laor came back (more acquisitions than in any other country except the USA)
– Yoelle Maarek – Google –  http://yoelle.com now at Yahoo!

But one should not forget Mirabilis/ICQ (see below)  or Check Point. Check Point was established in 1993, by the company’s current Chairman & CEO Gil Shwed, http://en.wikipedia.org/wiki/Gil_Shwed at the age of 25, together with two of his friends, Marius Nacht (currently serving as Vice Chairman) and Shlomo Kramer (who left Check Point in 2003 to set up a new company).

Chapter 9 – Yozma

Another member of the tech. diaspora: Orna Berry – PhD USC – Unisys-IBM then Ornet and Gemini then OCS chief… The VC industry was really launched through the Yozma effort as well as Israeli incubators. Gemini was the first Israel fund. See the wikipedia article about venture capital in Israel.

Another quote on start-ups vs. more mature industries: “In aerospace, you can’t be an entrepreneur,” he explained. “The government owns the industry, and the projects are huge. But I learned a lot of technical things there that helped me immensely later on.”

Chapter 12 – Transdisciplinarity

“There’s a multitask mentality here.” The multitasking mentality produces an environment in which job titles—and the compartmentalization that goes along with them—don’t mean much.
– “Combining mathematics, biology, computer science, and organic chemistry at Compugen”
– “Putting this together required an unorthodox combination of engineering skills.”

The term in the United States for this kind of crossover is a mashup. And the term itself has been rapidly morphing and acquiring new meanings. … An even more powerful mashup, in our view, is when innovation is born from the combination of radically different technologies and disciplines. The companies where mashups are most common in Israel are in the medical-device and biotech sectors, where you find wind tunnel engineers and doctors collaborating on a credit card–sized device.

But the authors do not forget to mention that Israel is A country with a motive

Role models

Though Israel was already well into its high-tech swing by then, the ICQ sale was a national phenomenon. It inspired many more Israelis to become entrepreneurs. The founders, after all, were a group of young hippies. Exhibiting the common Israeli response to all forms of success, many figured, If these guys did it, I can do it better. Further, the sale was a source of national pride, like winning a gold medal in the world’s technology Olympics.

“There’s a legitimate way to make a profit because you’re inventing something,” says Erel Margalit “You talk about a way of life—not necessarily about how much money you’re going to make, though it’s obviously also about that.”

“Indeed, what makes the current Israeli blend so powerful is that it is a mashup of the founders’ patriotism, drive, and constant consciousness of scarcity and adversity and the curiosity and restlessness that have deep roots in Israeli and Jewish history. “The greatest contribution of the Jewish people in history is dissatisfaction,” Peres explained.

Again “Not just talent, but tenacity, insatiable questioning of authority, determined informality, unique attitude toward failure, teamwork, mission, risk and cross-disciplinary creativity.”

As a conclusion

“So what is the answer to the central question of this book: What makes Israel so innovative and entrepreneurial? The most obvious explanation lies in a classic cluster of the type Harvard professor Michael Porter has championed, Silicon Valley embodies. It consists of the tight proximity of great universities, large companies, start-ups, and the ecosystem that connects them—including everything from suppliers, an engineering talent pool, and venture capital. Part of this more visible part of the cluster is the role of the military in pumping R&D funds into cutting-edge systems and elite technological units, and the spillover from this substantial investment, both in technologies and human resources, into the civilian economy. … But this outside layer does not fully explain Israel’s success. Singapore has a strong educational system. Korea has conscription and has been facing a massive security threat for its entire existence. Finland, Sweden, Denmark, and Ireland are relatively small countries with advanced technology and excellent infrastructure; they have produced lots of patents and reaped robust economic growth. Some of these countries have grown faster for longer than Israel has and enjoy higher standards of living, but none of them have produced anywhere near the number of start-ups or have attracted similarly high levels of venture capital investments. What’s missing in these other countries is a cultural core built on a rich stew of aggressiveness and team orientation, on isolation and connectedness, and on being small and aiming big. Quantifying that hidden, cultural part of an economy is no easy feat. An unusual combination of cultural attributes. In fact, Israel scores high on egalitarianism, nurturing, and individualism. In Israel, the seemingly contradictory attributes of being both driven and “flat,” both ambitious and collectivist make sense when you throw in the experience that so many Israelis go through in the military. There is no leadership without personal example and without inspiring your team. The secret, then, of Israel’s success is the combination of classic elements of technology clusters with some unique Israeli elements that enhance the skills and experience of individuals, make them work together more effectively as teams, and provide tight and readily available connections within an established and growing community.

If you have arrived here, you were interested enough in this long article. Logically, your next move would be to buy Start-Up Nation!

Advice to entrepreneurs

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I found instructive to compare two short videos from the STVP. The first one is dated 2002 and shows Larry Page, the co-founder of Google. The seconde one, with Aaron Levie, has just been published on january 19, 2011.

And here is a comparaison

Larry Page vs. Aaron Levie
  • Work with the right people, great people you are compatible with
    		•
  • Do not compromise. Be passionate
    		•
  • Have a healthy disregard for the impossible
    		•
  • Do something which was impossible 3 years ago
    		•
  • Do not follow the hype. Good ideas always get funding.
  • If you feel comfortable, you are probably not doing the right thing.

    • Clearly passion, ambition but also self-confidence are ingredients of entrepreneurship.

    Another very good post on the topic is Should You Really Be A Startup Entrepreneur? by Mark Suster, where the reality of entrepreneurship is superbly described.

    The Social Network

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    The new movie about Facebook’s founder, Mark Zuckerberg, is a great movie. It does not matter so much if it is a description of reality. You may watch it as a piece of fiction, and it would remain a great movie thanks to the actors and screenplay.

    It is also great because it describes the start-up world in a very accurate manner. It is not a movie about start-ups really, but there are details which reminds me a lot of real-life stories.

    The first lesson is that money and friendship seldom work together. The stories of Eduardo Saverin, the founder soon to be diluted, Sean Parker, the exhuberant founder of Napster and Plaxo and mentor of Zuckenberg and the short appearance of Peter Thiel are such examples.

    It also shows the old world of Boston where people think ideas are crucial and the new world of Silicon Valley where what matters is implementation. It’s why Silicon Valley is the Triumph of the Nerds. It shows how right Paul Graham is when he says Silicon Valley is about nerds and money. You see the crazy, sad, exciting, depressing life of these hard-working people. You may like it or not, but it is mostly what start-ups are about.

    I just looked for what some key people thought of the movie. So, for example, Eduardo Saverin said here: “The Social Network” was bigger and more important than whether the scenes and details included in the script were accurate. After all, the movie was clearly intended to be entertainment and not a fact-based documentary. What struck me most was not what happened – and what did not – and who said what to whom and why. The true takeaway for me was that entrepreneurship and creativity, however complicated, difficult or tortured to execute, are perhaps the most important drivers of business today and the growth of our economy.”

    And Dustin Moskovitz said there: It is interesting to see my past rewritten in a way that emphasizes things that didn’t matter (like the Winklevosses, who I’ve still never even met and had no part in the work we did to create the site over the past 6 years) and leaves out things that really did (like the many other people in our lives at the time, who supported us in innumerable ways). Other than that, it’s just cool to see a dramatization of history. A lot of exciting things happened in 2004, but mostly we just worked a lot and stressed out about things; the version in the trailer seems a lot more exciting, so I’m just going to choose to remember that we drank ourselves silly and had a lot of sex with coeds. […] I’m very curious to see how Mark turns out in the end – the plot of the book/script unabashedly attack him, but I actually felt like a lot of his positive qualities come out truthfully in the trailer (soundtrack aside). At the end of the day, they cannot help but portray him as the driven, forward-thinking genius that he is. And the Ad Board *does* owe him some recognition, dammit.

    And Zuckerberg himself!

    Watch live video from c3oorg on Justin.tv
    This is from Garham’s start-up school and here is part 2

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    Of course, this looks like corporate language, we should remember these guys have FaceBook shares! Talking about shares, there was another thing I did not like recently, the fact that according to Forbes, Zuckerberg would be richer than Steve Jobs. I had a discussion with a friend over the week end and he agreed with the statement whereas I disagreed. It may be a detail: but as long as Facebook is not quoted, Zuckerberg’s wealth is mostly paper value he can not really trade. I am sure he is already rich, he probably has already monetized some of his shares but not all of them whereas Jobs owns shares which are liquid. It may not be a big difference given the success of Facebook, but I have seen to many stories of start-ups where people thought the paper value of the stock was real wealth and the next day worth nothing…

    When my daughter told me yesterday, she might at least explain her friends what her dad was doing. i.e. working in the world of start-ups, I thought the movie had at least reached that goal of reaching a large audience towards this important topic!

    Final point, a recurrent topic in my blog: Facebook cap. table and shareholder structure. As Facebook is private, it is a challenge to know what’s true and what’s myth. I have still tried the exercice from what the Internet gives. One interesting feature is Saverin’s dilution from 30% to 5% whereas Zuckerberg went from 65% to 24%, not really pro-rata! We shall see when Facebook goes public, who wrong I was!

    Boulevard of Broken Dreams

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    A colleague of mine (thanks Jean-Jacques) recently mentioned to me this book by Josh Lerner, which full title is Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed–and What to Do About It. I was all the more interested that Lerner is the author of many academic papers on high-tech entrepreneurship, and particularly of one about serial entrepreneurs: “Performance Persistence in Entrepreneurship” [pdf format here] with Paul Gompers, Anna Kovner, and David Scharfstein, Journal of Financial Economics, 62 (2007), 731-764. I will come back in the future on this topic which I am currently studying.

    So what should we do about the public efforts is what Lerner is trying to help us with and his answer shows how challenging the topic is. What is beautiful about the author (my personal point of view) is that he likes history (just like me). Just like Steve Jobs! Just read again what I posted about Jobs on mentors; “You can’t really understand what is going on now unless you understand what came before”.

    Lerner’s initial chapter is “A Look Backwards” He shows how entrepreneurs and investors benefited and suffered from each other in the 70s and 80s, including the excess of speculative bubbles, the PC burst of the 80s for example. He also shows how important public support was in the very early days through the funding of research (mostly the cold war militaries) and the legal actions to ease venture capital (SBIRs, Erisa Acts) so that he does not really agree with Rodgers (founder of Cypress) who wanted government out of Silicon Valley (page 32) so that he claims that “The Public sector did play a key role in shaping the evolution of Silicon Valley” (page 35).

    Then, in the following chapters he shows how complex it is to find facts: “consistent information on venture-backed firms that were acquired or went out of business doesn’t exist” (page 59) which means that quantitative analysis is rare. And remember he is a respected academic, so he knows! What he tried to do then, is to show some of the obvious mistakes: incompetence in allocating public resources (page 73), capture, that is use of subsidies by the wrong groups (page 80), by “organizations that are mandated to help entrepreneurs” (page 83). “Seven of the incubators gave less than 50% of funding in cash to incubated firms” (just one example from Australia, page 84) or the SBIR program which has exhausted its usefulness (page 85).

    So his advice is:
    – enhancing the entrepreneurial culture (page 90) [through the right laws, the access to technologies, tax incentives and training],
    – increasing the venture market’s attractiveness (page 100) [through allowing partnerships, creating local markets, accessing human capital abroad],
    – avoiding common mistakes: timing [be patient], sizing [not too small, not too large], flexibility [learn by doing], create the right incentives [and here it is a complex situation as perverse effects from good ideas often occur] and evaluate [which does not happen often enough].

    Indeed, his introduction (pages 12 and following ones) summarized it all: you need rules, experience, time, incentives and assessment. But with all his experience and knowledge about high-tech entrepreneurship, Lerner is very humble with the lessons: the topic is really complicated, all these advice have to be implemented together and it is really their careful interconnections which will make an ecosystem lively or not. Then it is my personal conclusion that such favorable conditions will be useful if entrepreneurs use them intelligently. So the reason why all this fails has many roots…

    I cannot finish this post without comparing it to my book. It is indeed very similar in its conclusions with slightly different facts and figures. So you would learn complementary and consistent things by reading both! My thesis is we need an entrepreneurial culture and access to people from Silicon Valley who have the experience. Everything else is necessary but not sufficient.

    There will never be another Silicon Valley

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    Well who am I to predict the future? In fact I do not know but I really doubt it. Famous bloggers have mentioned the topic again recently. In Techcrunch it was Can Russia Build A Silicon Valley? by Vivek Wadhwa. And in the Equity Kicker, it was Building an ecosystem to rival Silicon Valley by Nic Brisbourne. I reacted to both in the following way:

    What a topic! Clearly something which has been around for… at least 35 years (I mean how to replicate SV). The fact that we still discuss it shows how complex it is. It has been my main concern in the last years and for the beauty of the debate (that’s what blogs are about, right?) let me play the devil’s advocate fully. At an extreme, I do not think there will ever be another Silicon Valley. For example, Kenney claims in his book on SV it requires 5 basic ingredients: universities of high caliber (Stanford and Berkeley in SV), a strong investor base, service providers, high-tech professionals (who accept to leave their big companies for start-ups so from Intel, Cisco, Apple, MSFT, even Google now to the next wave) and last but not least an entrepreneurial culture. All this is not easy to gather. But even worse, SV was probably an accident, a monster which was never successfully replicated. Saxenian showed in Regional Advantage how even the Boston area failed and the fact that Paul Graham moved ycombinator fully out of Boston to SV is just another sign. In Europe, Sophia Antipolis was a first experience … in 1972 so? So you need a rare combination of ingredients in the recipe and hope the oven is at the right temperature for a long, long time. Now I am playing devil’s advocate so things are not so bad. As a positive reaction, let me add my own analysis: I am not sure governments are good at innovation, they are good at stimulating research. The US federal govt has put billions through DARPA, NIH, DOE, etc, and this obviously helped Stanford, Berkeley to be the best universities worldwide (see the rankings) and the Internet to be created. Long term investment in infrastructure is what gvts are good at (education, research, transport…) Then, yes, bridges with SV are critical. It is exactly how Israel, Taiwan, then India and China have been successful with their diasporas. Countries should invite back the experienced migrants. When he has time, Brin should help Russia or Levchin Ukraine, or even Grove Hungary etc… I am less sure tax credits, admin, legal tools have been so useful in the 50’s, 60’s and 70’s when SV was its in early days. As a conclusion, it is and will remain for a while a great topic.

    Of course, my reaction was not as important as the source of the posts: Russia wants to be more innovative and commissioned a report to assess experiments of innovation ecosystems. The result is the following report: Yaroslavl Roadmap 10-15-20 (pdf format.)

    There isn’t anything really new in this report, at least for innovation experts. But it is a very good synthesis of what the USA, Israel, Finland, India, and Taiwan have tried, be successful in, but also in what they failed.  The historical summaries are great and full of good lessons. I had the feeling the authors put too much emphasis on infrastructure vs. culture. It is my own bias again! They mention culture a lot, but they may be aware also that it’s the most difficult thing to create… If you like the topic, you should certainly download and read the pdf, and build your own opinion.

    iPad vs. Kindle

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    As I just mentioned in my previous post, I converted the English version of the book Start-Up to the Amazon Kindle and Apple iPad/iPhone formats. I will describe here what I faced as challenges and output.

    The Amazon Kindle first.

    It was relatively easy to do the job. I just add to save my Word version of the book into an HTML file. Well, almost. First, the table of content did not have direct hyperlinks, which I had to build. And at the end, it was not really a meta-table of contents so that you can click on the links (on the iPad version of the Kindle) but there is no real table of content. Second, the tables of data were just awful, so I had to convert them to JPG pictures. Then I just had to become a member of the Amazon DTP platform, fill in my details and upload the file. Their validation was fast and the Kindle version is available since late July. As I wrote in my previous post, the main weakness I saw is that on the iPad version of the Kindle, I could not enlarge the pictures (whereas I can do it with an iBook). Other weaknesses: the table of content is not good; and the chapter titles are small. Finally, I still do not know why they sell it for $11.99 when I asked for $9.99.

    Now the Apple ibookstore. This was much more challenging!

    Preparing an ebook is not as simple as I thought. In my simplistic views of electronic books, I thought that PDF would be an ideal format. I was naïve! If you want to read ebooks on a laptop, Adobe Digital Editions (http://www.adobe.com/products/digitaleditions) as well as Calibre (see below) provide a good reader for your laptop.

    Now Apple was tougher. First I had no clue if I should become a developer or a content provider (http://www.apple.com/itunes/content-providers). Fortunately enough, being a content provider is good enough and free! Once you are registered as content provider you just have to let Apple validate your file. Well one minute! To become a content provider, I had to download iTunes Producer which works on Apple computers only!

    Then you have to do much more work than with Amazon! First they want a EPUB format. You need to create such a file from the same HTML file required from Amazon (you can use Calibre, www.calibre-ebook.com) and you need to validate it with epubcheck (code.google.com/p/epubcheck). I had many bugs and had to use an epub editor. Sigil was good (code.google.com/p/sigil). But I still had to do some hand work and I would quantify it as a few days of work of editing whereas Amazon only asked me about a day.

    Finally, Apple annouces it takes them up to 10 business days to do the quality control and it is about what it took. I do not have a Kindle so I cannot judge the result. There were a few buyers but I did not get any feedback yet. I have an iPad with the Kindle reader so I could check the results as I said previously. The experience was better with iBooks but better than I feared on the Kindle platform provided for the iPad.

    Finally, the iBook seems to be available through the USA, Canada, UK, Germany and France only and apparently the countries which have agreements with those. Switzerland is not part of the group so I would not be able to buy it from home… too bad for Swiss residents!