Reid Hoffman’s new essay If, Why, and How Founders Should Hire a “Professional” CEO is worth reading for any entrepreneur or any executive thinking about joining a high growth startup. It’s a very personal topic for Reid, and an important one for everyone in the industry to think about. The concluding paragraphs:
20 years ago, venture capitalists were in a hurry to bring in professional CEOs. Today, many of the same VC firms are busy touting their support for long-term Founder-CEOs. Both approaches can work, which means that as an entrepreneur, you should focus less on what’s fashionable, and more on what’s right for you. This is a highly personal decision, and the right answer depends on you and your team—including your co-founders and your VCs. You might be a Steve Jobs, or you might be a Pierre Omidyar. As an investor, I’m willing to back you, even if you’re not sure which one you are yet. In every investment we make, we hope that the Founder-CEO will be able to lead the company to success, but if not, and if you realize as I did that you want to bring in a professional CEO, we’ll work with you to find someone who is a true partner.
So as it turns out, Ben Horowitz was right. You always do want a Founder-CEO. But that person doesn’t always have to be the Founding CEO. Being there at the start isn’t the only path to being a founder. “Founder” is a state of mind, not a job description, and if done right, even CEOs who join after day 1 can become Founders.
Fascinating 20 min video of Steve Jobs leading a brainstorming session (among other things) at NeXT in the late 80's. At his death he was leader of one of the world's largest corporations; but in this video he talks as a founder of a fledgling start-up dealing with office supplies and payrolls. He implores his employees to regain the "start-up hustle." Good stuff.
I believe that marketing is what you do when your product or service sucks or when you make so much profit on every marginal customer that it would be crazy to not spend a bit of that profit acquiring more of them (coke, zynga, bud, viagra).
But, Brad's not anti marketing. He's anti bad marketing. He actually says every one of his start-ups spends money on marketing. It's just that the marketing efforts are "wired into the DNA" of the product and company.
And Fred, after dismissing the importance of "marketing," endorses a bunch of activities from his portfolio company that could easily be called marketing.
The word "marketing" encompasses a bunch of good activities and a bunch of bad activities; a bunch of useful philosophies and un-useful philosophies. The question is which specific marketing activities and philosophies are productive and useful and which are a waste of time and money.
And that depends on the specific company, product, industry. We can all agree throwing $10k to a social media consultant to "promote" a product on The Twitter is a waste. But usually it's more complicated. For example, Fred noted he was referring only to consumer internet companies and not enterprise SaaS companies. That's a crucial distinction. Another example: manning a booth at an expensive trade show like CES may be a good marketing expense for Orbotix, but not a good marketing expense for other companies.
Marketing is neither good nor bad, neither a waste nor a necessity. It's both; it depends. This sounds obvious, and maybe it is, but it seems worth keeping in mind when reading broad-brush posts like the one Fred wrote this morning.
Not all entrepreneurship is the same. Steve Blank clearly describes four different types:
1. Small Business Entrepreneurship Today, the overwhelming number of entrepreneurs and startups in the United States are still small businesses. There are 5.7 million small businesses in the U.S. They make up 99.7% of all companies and employ 50% of all non-governmental workers.
Small businesses are grocery stores, hairdressers, consultants, travel agents, internet commerce storefronts, carpenters, plumbers, electricians, etc. They are anyone who runs his/her own business. They hire local employees or family. Most are barely profitable. Their definition of success is to feed the family and make a profit, not to take over an industry or build a $100 million business. As they can’t provide the scale to attract venture capital, they fund their businesses via friends/family or small business loans.
2. Scalable Startup Entrepreneurship Unlike small businesses, scalable startups are what Silicon Valley entrepreneurs and their venture investors do. These entrepreneurs start a company knowing from day one that their vision could change the world. They attract investment from equally crazy financial investors – venture capitalists. They hire the best and the brightest. Their job is to search for a repeatable and scalable business model. When they find it, their focus on scale requires even more venture capital to fuel rapid expansion.
Scalable startups in innovation clusters (Silicon Valley, Shanghai, New York, Bangalore, Israel, etc.) make up a small percentage of entrepreneurs and startups but because of the outsize returns, attract almost all the risk capital (and press.)
3. Large Company Entrepreneurship Large companies have finite life cycles. Most grow through sustaining innovation, offering new products that are variants around their core products. Changes in customer tastes, new technologies, legislation, new competitors, etc. can create pressure for more disruptive innovation – requiring large companies to create entirely new products sold into new customers in new markets. Existing companies do this by either acquiring innovative companies or attempting to build a disruptive product inside. Ironically, large company size and culture make disruptive innovation extremely difficult to execute.
4. Social Entrepreneurship Social entrepreneurs are innovators who focus on creating products and services that solve social needs and problems. But unlike scalable startups their goal is to make the world a better place, not to take market share or to create to wealth for the founders. They may be nonprofit, for-profit, or hybrid.
The happiest entrepreneurs I've met are the small business ones, not the scale / conquer-the-world ones.
Tyler C., a loyal reader of many years, asks in an email:
What is the best book on start-ups? Not a how-to book, but a fun book for the general reader.
Another way of putting the question: What is a good book that conveys the fun spirit of start-ups that’s not an explicit how-to?
1. Founders at Work by Jessica Livingston is a collection of transcripts with start-up founders from companies like Flickr and PayPal and Google. No editorializing, no analysis, no conclusion. Just long Q&As with founders that give a surprisingly good glimpse of what it’s like to build world-changing technology companies. The lack of narrative spine may make it hard for non-insiders to get into it, though. And there’s no sugarcoating the long, hard slog.
2. Startup by Jerry Kaplan was the classic book of this genre for a long time. It tells his story of developing a pen-based computer. Written in 1994, it’s a bit dated (pre-internet), but still good. I remember reading this several years ago and feeling inspired by the journey.
3. The MouseDriver Chronicles is very fun. Two young Penn grads start a company that develops a computer mouse in the shape of a golf club / driver. Company ends up failing but super entertaining.
4. eBoys by Randall Strouss is a fun book about venture capitalists. It follows Benchmark Capital as they invest in Webvan and eBay during the dot-com boom. Gives a sense of the era.
I think the best how-to book on entrepreneurship, by the way, is Richard White’s The Entrepreneur’s Manual. Amazingly, it’s out of print. Amazon has used copies.
My friend Josh Newman is shifting his film production company to be a venture capital firm that will focus on growth opportunities in unsexy industries:
I think he's right about the gap in attention and money to that quadrant.
There are many opportunities in stodgy industries that go unexploited because it's not mobile / real time / social / insert-buzzword-of-the-day-here. I always enjoy Marty Nemko's blog, and he often champions unsexy business ideas. In his entrepreneurial ideas tag, you can read about his business ideas for organic perfume, food carts, velcro shirts, and more. His entrepreneurship tag has even more.
One more random thought on generating business ideas: look at segments where most of the businesses feel scammy — and then do the exact same business but in a buttoned-up way. Google "mystery shopping" to see what I mean by "feels scammy." Anytime dozens of weird AdWords pop up, you know there's real money being made, but often by scammy entrepreneurs.
Alex Mann awhile back had good tips for how to get into the entrepreneurial swing of things even if you're in college.
O'Reilly says he has tried to use his company to demonstrate that being an entrepreneur can represent a means of exploring the world, one that is just as profound as religious inquiry or Greek philosophy or New Age introspection. "Business doesn't have to be separated from the rest of life," he says.
In a video interview with Fortune magazine (embed below), Marc Andreessen says that in the context of early stage entrepreneurship, smart = curiosity + drive. He says an entrepreneur should be curious their whole life (presumably about the world in general) and then when starting the company be curious about the company, industry, etc.
This is kind of surprising to me. I take ‘curious their whole life’ to mean they’re curious about many different things. I take ‘curious about the company’ to mean curious about the company in a monogamous, all-consuming, obsessive way.
What’s the likelihood that someone who’s generally curious can turn off that radar for 5-10 years and focus the curiosity on one thing? Do “curious” and “obsessive” go together in one human package with any frequency?
Or if not, is Marc saying that an entrepreneur can be intensely curious about the company at the same as being curious (at a noted level) about the world in general? If this is the case, is the entrepreneur requirement of crazy focus a myth?
Here is my old post asking whether you’d rather hang out with business people or academics if you wanted to maximize interestingness. The comments section is outstanding. As of now, my ideal life is working with entrepreneurs (broadly defined) all day, but having breakfast, lunch, and dinner with journalists and academics. With entrepreneurs you get driven people who want to change the world. With public intellectuals you get big thinkers who are relentlessly curious.
Of my icons list of nine people, three are entrepreneurs, two are academics, two are political thinkers, one writer, one comedian. This analysis of Where’s Waldo makes me want to add Werner Herzog to the list.
Her phrase to describe the entrepreneurial reasoning process is "effectual." Effectual is the inverse of "causal."
Causal rationality begins with a pre-determined goal and a given set of means, and seeks to identify the optimal…alternative to achieve the given goal….
Effectual reasoning, however, does not begin with a specific goal. Instead, it begins with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the founders and the people they interact with.
Effectual thinkers are like explorers setting out on voyages into uncharted waters….
All entrepreneurs begin with three categories of means
Who they are – their traits, tastes,and abilities;
What they know – their education, training, expertise, and experience
Whom they know – their social and professional networks.
Sean Murphy, a wise man in Silicon Valley whose post elaborates on the paper, summarizes another part that lays out key differences between effectual reasoning and traditional start-up management models:
Traditional: expected return, work the plan to deliver results to your investors (“Ready Aim Fire” can become “Aim–not big enough–Aim–not big-enough–Aim…”).
Effectual: affordable loss, make many small mistakes as early and cheaply as possible to speed learning (“Ready Fire Steer“)
Effectual: strategic partnership (especially with early customers)
Traditional: rely on pre-existing knowledge to aim for a known market you can dominate and exploit
Effectual: leverage contingencies; create opportunities as you map a new market
Develop the minimum viable product to test your hypothesis about what the market needs. Preferably it’s a product that you’re passionate about since you’ll need to stick with it to an irrational point (the Internet especially is efficiently arbitraged).
Interview with Australian teen who had a party when his parents were out of town and refuses to apologize on TV.
Clint Eastwood lists three reasons why he will never win an Oscar.
Chris Yeh comment on my post on interestingness: "Things are interesting when they are both novel yet strangely familiar. It's like when you meet a new person, yet it seems like you've known them forever."