A startup (as Steve Blank says) is a search for a repeatable and scalable business model.
Starting a business is not doing a startup if it is a service business, or a business with a local focus (i.e. a shop), etc.
That is not to say that starting a business is less “worthy” than doing a startup. It also takes incredible passion, determination and effort. However, the distinction is still true. If you already have a proven business model you are not a startup. Your challenges are operational, not existential.
If everyone involved in supporting “new businesses”, i.e. government, economic development agencies et al, could understand this pretty fucking simple distinction, then life would be sweeter.
Honestly, it would.
These days we spend a lot of time talking about being agile, willing to pivot, etc., and without doubt, these are super valuable skills for an early stage business to have. Indeed, what separates you from the large established businesses you hope one day to crush is the fact that they are welded to the status quo and you are not.
Established businesses have managers who are primarily worried about maximising their bonus, rather than changing the world. And they have an IT director who presides over a bunch of ‘enterprise systems’ that are expensive to maintain and were designed to represent the aforementioned status quo via a two-year development cycle that ran 3x over budget and thus aren’t getting thrown out for at least a decade…
They move slowly and predictably - often gobbling up massive fat profits, but always doing it like a herd of wilderbeest grazing on the savanna. On the other hand, your startup’s only chance is to be the lightening fast cheetah able to pick off a straggler or two from the herd - hence being agile is pretty much essential if you don’t want to starve.
However, all this nimbleness, being opportunity-hungry and the like, are definitions of an effective early stage business. They do not define what it is to be an entrepreneur.
No what ultimately makes an entrepreneur is summed up in this quote from Peter Thiel:
"the best entrepreneurs… have a definitive view about the future and plan for it; they don’t willy-nilly chase luck—using statistics, probability, and iterative processes—to stumble upon something, anything that flies."
In short they are opinionated to the extreme. And it is not just hopes or hunches, no they possess big, whopping, block-out-the-sun opinons on the most important aspects of their business.
Their willingness to hold and act on their opinions shapes their entire way of thinking, and it is what, more than anything else, gets them further down the path to success than everyone else.
If you are not suitably opinionated, then you risk being buffeted by all the stuff that you bump into on a daily basis - successes, setbacks, advice from mentors, your parents asking you when you are getting a real job, your bank manager asking you to kindly put some money into your personal account, etc, etc…
What makes this definition of an entrepreneur incredibly powerful is the context in which it was offered.
in 2006, Mark Zuckerberg, at the age of 22, convened a “quick 10 minute board” meeting with Peter Thiel and a representative of his other major investor to tell them that he had no interest in being acquired by Yahoo! for $1billion.
They were very much of the opinion to sell, but he made it clear that (in his opinion) Yahoo “had no definitive idea about the future. They did not properly value things that did not yet exist so they were therefore undervaluing the business.”
Leaving aside what Facebook has gone on to become, history has proven him 100% right about Yahoo!
For pretty much the reason that Zuckerberg stated, Yahoo! have been terrible at growing the value of their acquisitions. They are a business that is run by managers, and they lack (or at least until recently, lacked) someone leading them with a suitably strong opinion about the future.
Facebook, on the other hand, are led by a guy who has his opinions and is willing to line up behind them.
Do you agree with me? What is your opinion? Let me know on twitter at @lefthandme
Full story and source material: http://www.inc.com/allison-fass/peter-thiel-mark-zuckerberg-luck-day-facebook-turned-down-billion-dollars.html#hn
So I have this Facebook account I don’t use - I set it up for testing an app quite a while back before I realised you could set up ‘Test’ users. Anyway, last month Facebook started emailing me asking me if I knew another Facebook user based on the fact that we went to the same school. I had put in my school as ‘The School of Hard Knocks’ as it was a dummy account, and obviously this person had entered the same school name (its a fairly common gag, a bit like the ‘University of Life’).
Anyway, what is interesting about this is how hard Facebook are trying to get me to reengage with the site (since they obviously view my dummy account as a lapsed user). As you can see from the image above, they’ve emailed me this same question 24 times in just over a month.
I’ve not yet logged back in as I am interested to see what the tally tops out at.
I should note that I don’t have a problem that they are emailing virtually every day (I could just kill the account or simply log back in), I am just impressed that this is how hard they work to reactivate lapsed accounts.
Last week the Scottish Government announced a £1m Edge Fund which aims to invest “up to £50,000” in businesses who pitch successfully in what the press have labelled a “Dragons’ Den-style” fund.
As it happens the comparison to Dragons Den’ could hardly be more apt - given that it is a a bit of light entertainment rather than a serious early stage funding source for companies. For sure some businesses do get funded, but the vast majority of those taking part (most likely including the “Dragons” themselves) are merely there for the exposure that TV grants them.
A £1m fund that aims to fund businesses to the tune of £50,000 results in 20 businesses getting funded. Compare that to yCombinator which has funded 400 businesses in 15 semi-annual rounds and you immediately reach the conclusion that this is but the most babyish of baby steps towards creating a genuine startup ecosystem in Scotland.
Although yCombinator itself has “only” directly invested around £5.33m during this period, they are unique in their ability to attract extraordinary amounts of external capital to the businesses they support. Indeed, Yuri Milner offers $150,000 per business simply on the grounds that they got accepted to yCombinator on terms that are extremely entrepreneur-friendly.
Moreover, yCombinator have accelerated the size of the intakes dramatically in the last few years so that 2012 will see 107 businesses complete their programme.
Both Milner and yCombinator have identified that investing in startups is very much a numbers game - you identify a lot of extremely talented teams and then invest in all of them, in the knowledge that no-one (no matter how experienced in business) has any real clue which new ideas are going to take off.
One only has to look at the yCombinator smash-hit businesses to see just how hard it is to predict - a booking site for spare rooms, a web hosting company and a cloud-storage offering that should have been crushed at birth by any one of Google, Microsoft, Amazon or Apple.
Did Paul Graham, the co-founder of yCombinator, or any of his colleagues know that Airbnb, Heroku or Dropbox would be such runaway successes - of course not. They recognised the talent of the teams and knew that there was nothing in theory stopping these groups of founders from being super successful - just as there was nothing in theory stopping any of the other businesses who went through yCombinator at the same time.
It is remarkable that even as someone with a passion for the web and for startups, I barely recognise the names of more than a few dozen yCombinator companies, and indeed I’d wager that in terms of public awareness, the number is probably less than 5. This is borne out by the valuations of the yCombinator businesses - I read recently that Dropbox is more valuable than all other yCombinator companies put together and that Airbnb is more valuable than all yCombinator companies (minus Dropbox) put together.
Thus 7 years of effort from the ultimate early stage talent spotter, and over $1 billion of investment from the top angels and VC firms on the planet has produced literally a handful of significant companies. Yet this is exactly what sophisticated early stage investors expect - yCombinator has been a massive success despite what the numbers may appear to suggest at first glance.
It is in this light that a £1m “Dragons’ Den-style fund” needs to be critically assessed. Scotland has no Paul Graham, it has no conveyor-belt of Ivy League calibre young founders (founders have to be young to create companies that go on to change the world - the older exceptions only prove the rule), and it has no Yuri Milners, no SV Angels and limited access to the sort of investors who pack the famous yCombinator demo days.
Thus this £1m fund is already at a massive disadvantage, and I would argue that its existence does little more than prove just how little people in government, banking and business “get it”. Like Dragons’ Den itself, putting up £1m is all about the show - about personal and corporate reputations - and not about really creating a startup culture.
What is most frustrating about this is that it doesn’t take considerably more investment to really start moving the needle. A fund in the region of £15m-£20m per year would see up to 300 businesses funded (perhaps fewer if cap was raised to, say, £150,000 which might be necessary in some cases).
For sure, it would be crucified in the press and would attract every crank in the country, but provided the focus was deliberately elitist (in an intellectual sense) and targeted primarily at low-capital tech startups (no chasing R&D dreams - IP is a side-effect not the goal of starting a business!) then very soon the global Venture Capital industry would be beating a path to Scotland to see what was being created. Despite the existence of hotspots like Silicon Valley, VCs’ don’t care where the opportunity is based, just that it can reach a big enough audience.
They won’t come to see 20 businesses, but 300 teams made up of a combination of our Nation’s smartest young people as well as the cream of the global crop who would also be attracted to launch their startups in Scotland (like capital, top entrepreneurs are often geographically agnostic) - well that would be a different story.
Now as someone who is firmly on the social democratic side of the political spectrum I am going to make a point that should not be taken the wrong way: We live in a country with tremendous social exclusion and depravation - and this must be tackled. However, on a weekend where the £1m Edge fund launch was very much overshadowed by a £33m fund to help the most needy I couldn’t help but wonder, what is honestly stopping similar amounts of money being committed to helping the most ambitious? This is not an either/or question - we should be doing both!
Pathetically, the Edge Fund is even out-done by the package of support put together for multinational (and very profitable) mobile operator Three to create 300 call centre jobs in a city, and indeed a country, that many seem to think is only capable these days of answering the phone rather than changing the world. Press 2 if you want to see this change….
Something that I’ve been pondering recently is the (not particularly insightful) observation that individuals in a specific group use a common language to signify that they are part of said group (and thus imbued with, what they consider to be, some positive characteristic or ability).
This is often seen when dealing with the likes of recruitment consultants or estate agents, where the use of utterly cringe-worthy phraseology seems to be an essential ingredient of the job.
Back in my law school days, I spoke to an advocate who made a similar point about police officers in the witness box (and in general). He opined that their use of a sort of pseudo-legal terminology was designed to impart a sense of power and ‘officialdom’, but it frequently caused hilarity in court when a grumpy judge would take issue with it and demand a re-statement in plain English.
This sort of language use is very much a learned-behaviour and, as such as someone who (for better or worse) operates on a more instinctive basis, I find it quite amusing when I come across it.
Actions not words should determine ability and authority; not to mention the willingness of one individual acknowledge such traits in another.
"A players hire A players," he said. "B players hire C players. Do you get it?"
"If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But if each of us hires people who are bigger than we are, we shall become a company of giants.”
No explanation needed with the latter…