I listened to a video segment for the Churchill Club’s “Startup 2006” event moderated by Guy Kawasaki and featuring a panel of entrepreneurs including Reid Hoffman, the CEO of LinkedIn and Joe Kraus, the CEO of JotSpot.
The video is here for those that want to spend the 90 minutes watching it:
For those that don’t have the time, I thought I’d share a few excerpts that stuck with me (I watched the whole thing). Some of the thoughts included are my own, but the original concepts were sparked by one of the panelists.
- Distribution, Distribution, Distribution
In retail, the formula for success has been “location, location, location”. For startups, it is “distribution, distribution, distribution”. One of the key determinants of success for a startup is how it will distribute the product and get customers. The risk of not being able to distribute in most cases is higher than the risk of not being able to execute and build a product.
- Release Early
One of the panelists (I forget who) had a pithy statement about this. “If you are not embarrassed about your product at the time you launch it, you’ve launched too late”. I could not agree more. Too many startup entrepreneurs strive valiantly (and in vain) to create the “perfect” product. It is usually much more effective to have the courage to put an imperfect product out there and then the conviction to listen to the market and fix it afterwards.
- Be a trendspotter, not a trendsetter
This one was very interesting. The premise here is that trendsetters take on a lot of risk because they have to try and predict how customers will respond to a particular offering. When attempting to set a trend, you are creating something “new” with the expectation that there will be a very positive response. On the other hand, trendspotting is the process of seeking existing patterns in existing market behavior – and responding to it. It’s usually much easier to find patterns in existing behavior (and exploit them) than try to create new trends and predict new behavior.
- VCs Can Diversify Their Risk Across A Portfolio
This is a relatively obvious one, but still important to be reminded of. VCs are in the business of seeking high returns on a limited number of their investments. As such, they are not looking for “modest” outcomes in any individual case. For their portfolio math to work, they need each of their investments to be striving for a spectacular outcome (with the expectation that most won’t). On the other hand, entrepreneurs do not have the luxury of a portfolio of investments that they can spread their risk across. As such, it’s often an all or nothing deal for them. This can create an understandable tension between VC and entrepreneur.
- Face Reality, But Remain Optimistic
Joe Kraus cited the Stockdale Paradox. The idea is that to succeed, entrepreneurs need to be able to face the harsh reality of their day-to-day existence. However, simultaneously, they have to remain optimistic that their eventual outcome will be positive.
- When Hiring, Allow No False Positives
Once again from Joe Kraus: When hiring, it is much better to turn down lots of people, even at the risk of losing an opportunity to hire someone that would likely have worked out. If you’re not 100% sure, no hire. Take the risk of losing some that may have been great people, if it means you reduce the risk of letting in less than the best.
- 60 Hour Weeks Isn’t Enough
This came in response to an audience question about the panelist’s take on work-life-balance and the 40 hour work-week. The questioner was positing that when he interviewed with startups, he asked the question as to whether or not he was likely to succeed at the company if he worked only 40 hour work weeks. The response from Reid was interesting (and something I passionately agree with). You need to understand that in the early days of a startup, you’re the walking dead. It is up to you and the team to get the company off the ground. The experience is more of a marathon than a spring. This means you likely shouldn’t be working 100 hour weeks as you’ll burn yourself out too early. But, if you’re working only 60 hour weeks, you’re likely not working enough. This brings to mind one of my 17 pithy insights for startup founders – “Startup founders work long hours for a reason. There’s more work than there are people. If you’re seeking balance, seek it elsewhere.”
For others that watched the video (or were actually at the event), feel free to leave your comments of other aspects of the session that you found useful or interesting. There was a lot of good material covered and I have not come close to capturing it all.