Entrepreneurs Posts

Why Games Are Fun: The Psychology Explanation:

“Fun games operate on the principle that our actions will definitely bring us closer to the goal. If you go and slash rabbits (action), you will definitely gain experience points (relation), and you will eventually level up (goal).

This is the reason so many people, including myself, have failed at difficult, uncharted things like entrepreneurship. There’s no guarantee that our next step will bring us closer to the goal. For example, we could easily invest 6 months into building a product that nobody wants to buy. Now, that specific problem can be ameliorated through processes of customer development, but the general problem still exists.

“If we get a job, we’re probably going to get paid for our labors.

“If we build a product and take it to market, we’re probably not going to get paid for our efforts. So where’s the motivation? It requires a lot of risk, and the human brain is not wired to consider long-term rewards! The nucleus accumbens, which may play a large role in the distribution of the phenomenon of pleasure and reward seeking, is part of the ancient limbic system, which motivates lots of behavior. Long-term goals require premeditated planning by the prefrontal cortex.”

[Emphasis added.]

I think there’s an opportunity to apply game mechanics to:

  1. Starting a startup.
  2. Managing employees in a startup.
  3. Managing teams in general.

Please steal this idea and let me know what you come up with. This would be a great project for a business school Ph.D.

Michael Wolff on Guess Who:

“Windows knocked him off the main stage for 10 years; then the Internet seemed to sideline him; not to mention that serious business people (along with many others) thought he was nutty; then he had problems with the SEC (and not insignificant ones); then he nearly died.”

They call this resiliency.

This post is by Mark Suster, a serial entrepreneur turned VC at GRP Partners. If you like it, check out Mark’s startup advice blog and his tweets @msuster. And if you want an intro to Mark, send me an email. I’ll put you in touch if there’s a fit. Thanks. – Nivi

This is the last in a three-part series about the 10 things I look for in an entrepreneur. In Part 1, I addressed tenacity, street smarts, resiliency, ability to pivot, and inspiration. In Part 2, I discussed perspiration and appetite for risk. I elaborated on each of the topics in my blog series on VC startup advice.

Most successful entrepreneurs have an attractive mix of skills, know-how and personal qualities that separate them from the herd. Today I cover three more of these critical elements and throw in a couple of bonus entries that didn’t make my top 10 list but are important nonetheless.

8. Detail Orientation

One of the easiest ways to rule out an entrepreneur is when he doesn’t know the details of his business. There are tell-tale signs, and discussions about competitors often expose them. You can tell whether an entrepreneur has logged into his competitors’ products, talked to their customers, read news coverage of them and gotten the back-channel info.

You can tell if the entrepreneur has a deep-seated competitive spirit. Can’t go a mile deep on competition? Buh-bye.

Let’s talk about your product, and let’s look at your financial projections. Can’t walk me through them on a granular basis? Did someone else pull your financial model together while you did “your job”? Not good enough. The best entrepreneurs focus on details. They can tell you the square-foot costs of their property, how much they spend monthly on Amazon Web Services, and the 12 features being developed for the next release.

Another big tell is a CEO’s grasp of the sales pipeline. I can’t tell you how many CEOs I’ve met who can’t walk me through the details of their sales pipeline. I want the names of key buyers, when you met them last, who the competition is, and what the criteria is for making a decision. You think we’re just going to talk about your largest lead? Sorry. Let’s go through the whole pipeline, please. I care about the details, but I’m more interested in finding out whether you do.

Along with detail orientation, I have a strong bias for “doers”. When I ask for a quick demo and the CEO suggests a follow-up meeting with a sales rep because he’s not “a demo guy,” I usually think to myself, “A follow-up meeting probably isn’t necessary.” Similarly, if you need your CFO to walk me through your financial model, you’re probably not the right investment for me.

Ask any CFO I worked with as a CEO: They did the hard work, but I edited the spreadsheets cell by cell. In fact, I usually built the first three versions of the financial model (but then my ADD took over, and I needed a great closer to make the model complete). Founders need to be hands-on. As I wrote in an earlier blog post: “You can’t run a burger chain if you’ve never flipped burgers.”

A startup seeking investment from me once put their “president” on a call with me. When I told him that “president” was a strange title for a startup, he announced they also a CEO. When asked about their different roles, the president told me the CEO set the strategy while he traveled to conferences evangalizing on behalf of the company. “So who runs the company on a daily basis?” I asked. “Oh,” he responded, “we have a COO.” The company had under $1 million in revenue and was burning $850k a month. It had a strategy-setting CEO, a limelight-seeking President and a COO who ran the company.

I gave that company one of the cheekiest responses I have given in my two and a half years as a VC: “You don’t want to raise money from me,” I said. “The first thing I would do is fire you. Then I’d fire the CEO. Then I’d cut the burn to a realistic level and build a company.” They got their round done anyway from a big late-stage VC. One of the large parts of the burn was PR, marketing, and conference attendance. There are VCs who are fooled by all of this, but it doesn’t equal success. A year later the president and the CEO had moved on.

Bad VCs funded this madness in the first place and weren’t close enough to the company to see what was happening. When the CEO of an early-stage startup tells me he plans to hire a COO, I’m usually not interested in another meeting. (Funny side-note: The company was recently nominated for a Crunchie Award. Unfortunately, money can buy you awards.)

9. Competitiveness

As I wrote in my previous post on perspiration, good ideas attract competition.

Everybody these days is fascinated by the “private sale” concept offered by companies like Gilt, Ruelala and HauteLook. There are some great companies in this category, but the initial category killer was a French company called Vente Privee (which translates to “private sale”). From what I’m told, the founders were in the Schmatta (Jobber) business selling other people’s excess, end-of-line inventory at a bargain. There wasn’t the same end-of life infrastructure that we have in the U.S. (think T.J. Maxx), so they had an early lead. When the internet part of their business took off, a number of competitors surfaced.

By then, Vente Privee was a powerhouse and they used that market power. They made it clear to suppliers that Vente Privee would stop carrying their products if they supplied the newly formed competitors. This was a bare-knuckle industry, and money was at stake. Good competitors fight.

Just ask Overture about Google (“Don’t be evil”) and how they competed in international markets. It wasn’t all smiles, hugs and “let the best man win.” A lot was at stake, and Google competed fiercely.

Have a nice little idea and think you can carve out a large market niche? Not if you’re a nice guy. I’m not saying you need to be an arsehole, but entrepreneurs hate to lose. They’re hyper-competitive in everything they do. I look for that fighting spirit in the individuals at my table. It doesn’t matter if they’re playing golf, poker, Ping-Pong, Scrabble, or Guitar Hero. Entrepreneurs play to win, and they take losing seriously.

Think Mark Zuckerberg doesn’t have some sleepless nights about Twitter despite having more than 300 million users himself? Steve Jobs isn’t a “nice guy.” Nor are Bill Gates, Steve Ballmer, Marc Benioff, Larry Ellison, Tom Siebel, Rupert Murdoch, or any number of people you’ll find who built empires.

10. Decisiveness

Being an entrepreneur is about moving the ball forward a few inches every day. What astounded me when I switched from being a big-company executive to an entrepreneur was the sheer number of decisions I had to make on a daily basis.

They sound so basic when you’re not the one having to make them. Should you go with Amazon Web Services (AWS) or have your own servers hosted at RackSpace? Should you build in Ruby, Java, or .NET? Should you sign a two-year lease or rent month-to-month? Should you hire an extra developer now or a business development resource? Should you take angel money or just go for a seed round from a VC? Is venture debt a good idea? Should we launch at TechCrunch50? Should we charge for a product or offer freemium? Should we ask for a credit card up front, even if we don’t charge for 30 days?

It never ends. There is no such thing as a startup decision with complete information. The best entrepreneurs have a bias for making quick decisions and accept that, at best, 70 percent of them will be right. They acknowledge some decisions will be bad and they’ll have to recover from them. Building a startup might be a game of inches, but you don’t get timeouts to pause and analyze all of your decisions.

I recently have been considering investing in an entrepreneur in Silicon Valley. He was deciding between taking another senior role at a prominent Silicon Valley tech company and starting his own business. I told him I didn’t think he needed any more resume-stuffers and now was the time to go do something big on his own. Within a week he delivered a deck outlining his strategy for a new company. A day after we discussed the possibility of him flying down to meet with my partners, he was on a plane.

He then booked tickets to China to talk with suppliers and promised to revise his strategy by the time he returned to the U.S. He is getting stuff done in entrepreneur years, which is a step change faster than dog years. By the time we speak again, I’ll be able to judge results by the quality of his thinking about the opportunity. But by that time, I imagine, he will have made so much progress that he’ll question whether he should take my money. I’m certain he will have talked with other funding sources. This is how it should be.

If you’ve been “thinking about doing something” and batting the idea around with your favorite VC more than six months, don’t be surprised if they’re not prepared to back you in the end. Entrepreneurs don’t “noodle”. They “do”.

Now that I’ve addressed the top 10 skills I look for in an entrepreneur before investing in them, I’d like to offer two additional qualities that can be critically important but won’t necessarily hold someone back from seeing success.

11. Domain Experience

This isn’t a “must” for me, but it’s certainly a huge plus when entrepreneurs have it. You can spend a year putting your hypotheses on paper while researching a market. But you never really have a handle in the minute details of the industry until you’ve lived in it. If you are launching mobile application and have sector experience working for Apple, Blackberry, AdMob, or JAMDDAT, then I know your product will have your experiences baked into it.

I learned this lesson when I launched my first company in 1999. We offered a SaaS document management in the cloud (we were called ASPs back then). I had no experience in document management systems beyond being a user, and nobody had SaaS experience because the market was too new. We were forced to make assertions about features we thought people would want, how to price them, and how to overcome objections to managing data in the cloud.

When I began hiring product managers, sales reps, and implementation staff, I benefited from what employees learned working at places like Documentum and OpenText. They brought the lessons they had learned in their companies
 over the previous decade. I know this stuff cold now. So when I launched my second company – which was also a SaaS Document Management company – we already had a vision for what would do well in the marketplace.

Domain experience also brings relationships. If you spent three years building relationships with senior executives at media companies, a starting point for your next business ought to be, “How can I exploit these relationships in the next venture I launch?”

One successful entrepreneur I know wanted to launch his next venture in financial services because it was a bigger industry. Fine. But I pointed out that he would be up against competitors who had spent years building relationships with the big financial services companies (as well as channel partners), and he would be starting from scratch. I’m not sure why you’d do that unless you had to.

12. Integrity

The most obvious attribute that didn’t make my top 10 list is integrity. It is very important to me. If I thought I could make a lot of money backing a dishonest person, I personally would pass. I know many private equity firms that would not. I’m proud that most early-stage VCs I know care about making money ethically. So you should include integrity on my personal list of attributes
 required to raise money from a reputable, early-stage VC.

Unfortunately, people with low integrity can be successful and can raise money from investors. So I left it off the master list. I personally know a billionaire CEO who I wouldn’t put high on the list of people with high integrity. But he built his company from scratch to become a very large enterprise.  He is well respected (but not liked) in his industry and in his company.  He spends a lot of money on personal marketing so the story is written the way he wants it.

But I’ve seen his actions up-close and wouldn’t claim that they are high on the integrity scale.  I’ve heard this about similar technology executives of some of the biggest names in history.

I also know him to not be a very happy man.  Money can buy a lot of things but, as the saying goes, it can’t, in and of itself, buy you happiness.  I believe that true happiness comes from a sense of fulfillment, giving, and doing what your moral compass knows is right.  Better that you be this person, whatever level of business success you achieve in life.

If you like this post, check out Mark’s blog and his tweets @msuster. If you want an intro to Mark, send me an email. I’ll put you in touch if there’s a fit. – Nivi

Thanks to Walker Corporate Law Group, a boutique law firm specializing in the representation of entrepreneurs, for supporting Venture Hacks this month. This post is by Scott Edward Walker, the firm’s founder and CEO. If you like it, check out Scott’s blog and tweets @ScottEdWalker. He’s also writing a new series on VentureBeat: Ask the attorney. – Nivi

Last week I offered 5 New Year’s resolutions for closing deals in 2010. This week, I thought I’d have a little fun and address the issue of entrepreneurs’ frustration with lawyers. A recent tweet from Bram Cohen, the inventor of BitTorrent, captures this frustration well: “Lawyers are like phone companies. Their bread and butter is in tricking you into racking up minutes.”

There’s a time in just about every entrepreneur’s career when he or she has wanted, in the words of Shakespeare, to “kill all the lawyers”. In the spirit of David Letterman, here are my Top 10 reasons entrepreneurs hate lawyers (I should point out that “hate” is too strong a word to describe the feelings of most entrepreneurs, but it makes for a catchier title than “dislike” or “complain about”). Click here for a brief video version of this post.

#10 – “Because they don’t communicate clearly or concisely”

Lawyers love speaking legalese and hearing themselves talk. I learned this first-hand as a corporate associate for nearly eight years at two large New York City firms. The tax lawyers, the employee benefits lawyers, the antitrust lawyers and the rest all spoke their own language. As a corporate associate in charge of quarterbacking transactions, I dealt with the various legal specialists and had to learn their mumbo jumbo. At times, I was as frustrated as the clients.

In the book Garner on Language and Writing, Former U.S. Solicitor General Theodore Olsen wrote,Legalese is jargon. All professions have it. All professions use it as a substitute for thinking, and they all use it in a way that makes them appear to be superior. Actually, they appear to be buffoons for using it. The legal profession may be the worst of all professions in using jargon. It’s not necessary to communicate that way. You’re really not communicating, and you’re not really thinking.”

#9 – “Because they don’t keep me informed”

Lawyers often keep their clients in the dark. The real estate lawyer I hired to handle the sale of a property came highly recommended and seemed like a good guy. But I never knew what was happening throughout the process. I showed up to the scheduled closing only to learn it was postponed because of some wrinkles, including the buyer’s financing.

Tom Kane, a legal consultant, notes: “[A] failure to communicate often (as in constantly, frequently, persistently, regularly…) is not only foolish from a professional standpoint (as in discipline by the bar, keeping professional insurance premiums reasonable, and so forth), BUT it is just dumb marketing. One could even say it is marketing malpractice.”

#8 – “Because they are constantly over-lawyering”

Corporate lawyers often have a one-size-fits-all approach to deals. I recently represented a software company in a relatively small business sale (about $10 million). The buyer was represented by a large law firm that sent an acquisition agreement with three pages of environmental representations. When I explained that none of the environmental reps (or indemnities) was applicable to the target because it was a software company with one office lease, the corporate counsel got on a soapbox about his client “not assuming any environmental risks.” He even patched in the firm’s environmental lawyer to support his argument.

As John Derrick, a California appeals specialist, points out in his book Boo to Billable Hours, “Just as the cost-plus contractor has no financial incentive to keep the price down once hired for the job, so the lawyer who charges by the hour has little incentive — at least in the short term — to keep down the hours billed. To the contrary, the lawyer’s incentive is to bill as much as possible. The result can be unnecessary lawyering.”

#7 – “Because they have poor listening skills”

While lawyers love hearing themselves talk, they are often not very good at listening. Entrepreneurs want their lawyers to listen carefully to their concerns and address them appropriately; and they don’t want to be interrupted. I feel the same way, particularly when I am negotiating a transaction and trying to close a deal. I have sat in too many conference rooms negotiating with other lawyers as they played with their Blackberries and answered calls on their cell phones. This is not only rude, but it’s also bad lawyering.

From the Wabet Blog: “While great corporate lawyers have several different attributes, one stands apart from the rest: being an exceptional listener. First of all, it’s essential that the corporate lawyer is always ready and able to listen to the client’s description of [his or her] goals and needs. This sounds trite, but involves a set of skills that is more than simply hearing the words spoken or reading the words on the written page. The exceptional corporate lawyer looks beyond the words to delve into the facts, circumstances and other aspects that define the situation… Some of the skill is derived from training, but to a large extent the exceptional corporate lawyer applies his or her experience and the wisdom derived from that experience.”

#6 – “Because inexperienced lawyers are doing most of the work”

This is the dirty little secret at most law firms, particularly large ones. It even has a name: “leverage”. Law firms try to create the highest possible ratio of associates to partners. The higher the ratio, the more money the partners make. For most entrepreneurs, this generally means paying for the training of young associates.

I discuss this issue in my blog post Behind the Big Law-Firm Curtain: The Good, The Bad, The Ugly, “The reality is that the smaller the client — the smaller the transaction — the further down the ladder the work gets pushed at the big law firms. That’s the way these firms work. The entrepreneur may meet the senior partner at the first meeting for his $15 million acquisition or $3 million financing, but that partner then goes back to his office, calls the assigning partner and gets some young associate to start cranking out the work.”

#5 – “Because they spend too much time on insignificant issues”

Lawyers are notorious for failing to prioritize issues. This is especially true in small transactions. Since I moved to Los Angeles from New York City in 2005, I have handled predominately middle-market M&A transactions, financings and restructurings, a departure from the billion-dollar deals I handled in New York. I expected lawyers on these transactions to produce documents relatively quickly and focus on the key issues of a deal, particularly in venture capital transactions that benefit from standardized documents from the National Venture Capital Association. Instead, I found much of what I found in New York: lawyers spending needless time fighting over insignificant issues.

Foundry Group co-founder and managing director Jason Mendelson recently asked, “Why can’t lawyers know when to leave well enough alone and not feel like every piece of paper needs a mark up? Especially given how expensive lawyers are these days, why on earth would the culture of ‘must mark up documents to show value’ persist? (Answer: lawyers make more money). Especially in the world of venture financing, this is very frustrating.”

#4 – “Because they don’t genuinely care about me or my matter”

Too few lawyers are passionate about the practice of law. Before launching my own firm, I worked alongside many big-firm lawyers who didn’t seem to enjoy what they were doing. This translates to indifference toward clients.

This quote from Zappos CEO Tony Hsieh in a recent New York Times interview struck a chord with me: “I just didn’t look forward to going to the office. The passion and excitement were no longer there. That’s kind of a weird feeling for me because this was a company I co-founded, and if I was feeling that way, how must the other employees feel? That’s actually why we ended up selling the company.”

That’s how I felt at the law firms where I worked. There were a number of passionate superstars at each of my previous firms. But many others were burned out and just going through the motions. “Just another fuck’n deal,” one of my former colleagues once complained to me. That’s why I launched my own firm: to create a team of passionate, hard-working corporate lawyers who love what they do and love helping entrepreneurs.

#3 – “Because their fees are through the roof”

As I discuss in the introductory video on the home page of our website, the traditional law firm business model is broken. Legal fees have sky-rocketed over the past decade, with lawyers at some national firms billing more than $1,000 per hour and lawyers at smaller, so-called “regional” firms, billing more than $600 per hour (see “Law Firm Fees Defy Gravity, Annual Survey Shows”). The number one thing driving these outrageous rates: overhead. Traditional law firms simply pass huge overhead costs onto their clients — expensive office space with lavish artwork and dramatic views; large support staffs complete with librarians, and receptionists; and, of course, high-paid associates.

As a result of the recession and this broken business model, large law firms have recently shed associates in large numbers. LawShucks reports, “2009 will go down as the worst year ever for law-firm layoffs. More people were laid off by more firms than had been reported for all previous years combined.” But as Dan Slater argues in his recent New York Times DealBook post, Another View: In Praise of Law Firm Layoffs, “These layoffs — which in many cases have been paired with salary freezes or cuts and significant reductions in law school recruiting –­ are the best thing to happen to the legal industry in years. Call it a blessing amid recession. Start with the benefit to cost-conscious corporate counsel, who for too long have been bilked by a law firm compensation model that leads lawyers to prioritize their ‘hourly quotas,’ which determine year-end bonuses, over quality service.”

#2 – “Because they are unresponsive”

We’re all busy, but that’s not a viable excuse for failing to promptly return a client’s phone call or email. Clients may have differing definitions of “promptly,” but one business day is a good starting point. I experienced unresponsive lawyers as a client in personal matters, and I experience it as a corporate lawyer trying to close deals on behalf of my clients. Entrepreneurs crave immediacy (and so do I).

A recent deal I was on ran days late, requiring an all-hands conference call to finalize a few key issues in the acquisition agreement. I distributed an updated version the same day with instructions to the lawyer on the other side to call me for an update before he left for the weekend. The weekend passed. I heard back from the lawyer on Monday afternoon, over email — and he had sent a new blacklined version with all new issues raised.

#1 – “Because they are deal-killers”

Lawyers are often viewed as deal-killers because of their failure to set a positive tone and their annoying habit of raising all sorts of reasons why a particular deal won’t close or why a particular idea won’t work. One of the better lawyers I worked with at a firm often said: “Good lawyers are able to identify significant potential legal problems; great lawyers provide solutions to those problems.”

As James Freund, a professor and retired partner at Skadden Arps in New York, points out, “In a transactional practice, nothing comes easy. There are invariably two opposing points of view on significant issues, and the parties will even clash… over a circumstance that may never come to pass. Every disputed issue has to be resolved in order for the deal to take place. And the business lawyers bear the primary responsibility for getting it done. Viewed in its broader context, this activity falls under the rubric of problem solving. Unless you’re a problem solver, you’re unlikely to be an effective business lawyer. And the problems that stand in your way aren’t limited to transactional matters… they can involve dealings with regulatory agencies, tax planning, strategizing about how to protect intellectual property, and on and on.”


While much of this list includes criticisms of my industry, I hope it helps initiate dialogue among entrepreneurs and the lawyers who represent them, to improve the value of the services we offer. And, please remember, I put this list together in the spirit of having a little fun. What experiences have you had with lawyers? Feel free to share in the comments section.

If you like this post, check out Scott’s blog and tweets @ScottEdWalker. He’s also writing a new series on VentureBeat: Ask the attorney. If you want an intro to Scott, send me an email. I’ll put you in touch if there’s a fit. Finally, contact me if you’re interested in supporting Venture Hacks. Thanks. – Nivi

Thanks to Walker Corporate Law Group, a boutique law firm specializing in the representation of entrepreneurs, for supporting Venture Hacks this month. This post is by Scott Edward Walker, the firm’s founder and CEO. If you like it, check out Scott’s blog and tweets @ScottEdWalker. – Nivi

It’s a new year — which means it’s time to make resolutions. Rather than write about my resolutions, I decided to put on my lawyer hat and advise entrepreneurs on what I think their New Year’s resolutions should be. During my 15-year career as a corporate lawyer (including nearly eight years at two major law firms in New York City), I have seen entrepreneurs make certain fundamental mistakes over and over again. So what better way to welcome in the new decade than to recommend the following resolutions to entrepreneurs…

Resolution 1: “I will create a competitive environment when I’m doing deals”

There is nothing that will give an entrepreneur more leverage in a negotiation than a competitive environment (or the perception of one). Every investment banker worth his salt understands this simple proposition. Not only does competition validate a firm’s interest, but also it appeals to the human nature of the individuals involved. Competitors can be played off each other and, as a result, the entrepreneur will be able to strike the best possible deal.

I learned this important lesson as a young corporate associate in New York City. As I discuss in my video post, Lessons Learned in the Trenches of Two Big NYC Law Firms, I recall having two M&A transactions on my plate: one was a divestiture — i.e., the sale of a division of a multinational corporation being auctioned by an investment bank; and the other was the sale of a private company to a competitor (with no i-bankers involved). In both deals, my firm was representing the sellers but, as we worked our way through the negotiation process of each deal, we ended-up with two completely different acquisition agreements with respect to the material terms.

In the auctioned deal, because the i-banker was able to play the prospective buyers off each other and create a competitive environment, the final agreement was extremely seller friendly and included broad materiality qualifications, a huge basket/deductible and a cap on seller’s liability of 10% of the purchase price. In the private-company transaction, however, there was only one prospective buyer — and the buyer’s principals knew that the seller was anxious to sell and thus were playing hardball. The deal terms ended-up being extremely buyer-friendly and included a large portion of the purchase price being escrowed and a cap on the seller’s liability equal to 100% of the purchase price.

The lesson learned is that you must create a competitive environment (or the perception of one) in order to have strong negotiating leverage. There is, however, one important caveat that entrepreneurs should keep in mind: this game must be played carefully and is better handled by someone with experience. The last thing an entrepreneur wants is to end up with is no deal at all.

Resolution 2: “I will leave my heart at home”

You have to think with your head, not with your heart — particularly when you’re doing deals. The best deal guys are masters at taking their emotions out of transactions and being extremely disciplined. They will just walk from a deal if they get out of their comfort zone (e.g., with respect to the price, risk profile, etc.), regardless of how much time and money they have spent.

On the other hand, most entrepreneurs become emotionally wedded to a particular transaction and are unable to maintain their objectivity as they move further along the deal process. They get all excited as soon as someone waves some money at them and allow themselves to get drawn into the money guy’s web. It is critical that entrepreneurs understand this dynamic. Entrepreneurs will generally be negotiating with guys on the other side of the table who are far more deal savvy than they are – venture capitalists, private equity guys, etc. – guys who are masters at playing on their emotions.

This is why it is so important for entrepreneurs to establish a game plan (i.e., dealbreakers) before the negotiating process begins and to have the discipline to stick to the plan and be willing to walk, if necessary. If an entrepreneur is seeking venture capital financing, he should sit down with his transaction team before reaching out to the VC’s to establish his dealbreakers with respect to key terms, such as valuation, the liquidation preference, board composition, etc. The same approach should be followed if he’s interested in selling his company: What’s the lowest purchase price you’ll accept? What’s the highest cap on liability you’ll agree to? Will you agree to escrow part of the purchase price? If so, how much and for how long? Once you establish the dealbreakers early on, you can take your heart out of the equation and think with your head.

Resolution 3: “I will work my balls off”

This is the advice a senior partner gave me when I was a young corporate associate at a major New York City law firm: “If you want to be a great lawyer, you have to work your balls off and make practicing the law the number one priority in your life.” He explained that this means everything else in your life has to be pushed aside, and you need to “work, work, work.” And when you’re not working, he added, you need to be reading treatises and articles discussing the deals you’re working on to get a deeper understanding of the significant issues. When I explained to him that, after three months, I had been working nearly every weekend and that my girlfriend was ready to leave me, he told me that I need to get a new girlfriend.

I received similar advice from Harry Hopman, my old tennis coach (and the winningest coach in Davis Cup history), when I was playing tennis in the minor leagues after college. He preached to me that: “It all comes down to one word — desire. How badly do you want it? How much are you willing to sacrifice?” And he was right. When I was traveling and playing tournaments in Europe and South America, I noticed that the best tennis players were generally the hardest working; the qualifiers were the ones going out drinking every night, not the top seeds. Sure there were exceptions — like John McEnroe — but the exceptions were rare.

I have seen this same pattern during my legal career: the most successful clients tend to be the hardest working. The private equity guys and hedge fund guys I represented in New York City were animals; working around the clock and cranking out deal after deal. I attribute a lot of their success to just plain hard work. In 2005, I moved out here to California to help entrepreneurs, and it’s been a mixed bag in terms of the work habits that I’ve seen. Some of my clients are intense and put in the long hours; others, however, are just dreamers — and they are the ones who struggle. In short, there are no shortcuts to success.

Resolution 4: “I will not let my investors screw me”

Here’s the advice I give all my clients to avoid getting screwed by their investors: do your due diligence prior to accepting any money. The number one mistake I have seen entrepreneurs make in any deal is the failure to investigate the guys on the other side of the table. Remember, you will, in effect, be married to your investors for a number of years. Accordingly, entrepreneurs must do what any bride or groom does prior to tying the knot — date for a while and, of course, meet the family.

What does this mean in practical terms? It means surfing the web and learning everything you can about the particular firm making the investment and, more importantly, the particular individuals with whom you are dealing (and who, presumably, will be sitting on your board for a number of years); it means breaking bread and having a couple of beers with the potential investors; and it means getting references and talking to other entrepreneurs and founders who have done deals with them. Issues to address include: How have they treated their other portfolio companies? Are they good guys or jerks? Can they be counted-on and trusted? Do they share your vision for the venture? Will they add significant value (e.g., through contacts, domain expertise, etc.)?

There is an outstanding video discussion on Mixergy.com between Brandon Watson, a smart entrepreneur (currently at Microsoft), and Andrew Warner, the founder of Mixergy, as to what could happen if you don’t adequately diligence your investors. Brandon is extremely candid and discusses how he got “bullied” by his board. Moreover, he expressly notes in the comments to that post that, “the diligence factor was that I knew them, but had never taken money from them. It’s hard to know how people are going to react when they are at risk of losing money because of something you are directly responsible for until you are actually at that point.”

Resolution 5: “I will retain a strong, experienced lawyer to watch my back”

This is obviously a bit self-serving, but every entrepreneur needs a strong, experienced lawyer to watch his back. There is just too much at stake for entrepreneurs to be (1) using sites like LegalZoom, (2) pulling forms off the web and trying to play lawyer, or (3) retaining the cheapest lawyer to save money. And as the Madoff affair and other recent high-profile cases demonstrate, there are a lot of unscrupulous characters out there trying to take advantage of unsophisticated entrepreneurs.

There are also more subtle potential problems entrepreneurs need to be protected from, including the inherent conflict of interest that certain service providers have. For example, entrepreneurs need to be careful with investment bankers, who generally only get paid if a particular deal closes. Indeed, a middle-market i-banker’s entire year can be made or broken based on whether or not he can close one or two deals.

Unfortunately, I experienced this issue first-hand shortly after moving to California when I got pulled onto an M&A deal in which an i-banker stuck his finger in my chest and warned, “We’re going to get this deal done despite you fucking lawyers.” He then later complained to the managing partner (who had the client relationship) that I was blowing up the deal because I had retained special environmental counsel from my old NYC law firm and we were pushing too hard on the environmental indemnity. Good work by the i-banker (and cheers to my former managing partner) for getting the deal closed by watering down the environmental indemnity: less than six months later our client’s company was indicted for environmental problems that it inherited as part of the acquisition.

The bottom line is that a strong, experienced corporate lawyer will sober the entrepreneur and lay out all of the significant legal risks in a particular transaction; he will then push hard to negotiate reasonable protections. If the deal sours and lawsuits are filed, well-drafted documents with appropriate protections become a kind of insurance policy to the entrepreneur.

If you like this post, check out Scott’s blog and tweets @ScottEdWalker. If you want an intro to Scott, send me an email. I’ll put you in touch if there’s a fit. Finally, contact me if you’re interested in supporting Venture Hacks. Thanks. – Nivi

This post is by Mark Suster, a serial entrepreneur turned VC at GRP Partners. If you like it, check out Mark’s startup advice blog and his tweets @msuster. And if you want an intro to Mark, send me an email. I’ll put you in touch if there’s a fit. Thanks. – Nivi

There are 10 skills I look for in an entrepreneur before writing a check. They are not things that a VC can pick up on in 3 meetings spread out over 6 weeks, which is why I believe that raising VC is something you do over a long period of time, rather than just 2 months of the year. It’s best to meet VCs when you don’t need their money, so they can really get to know you.

In Part 1, I published the first five skills I look for in an entrepreneurs: tenacity, street smarts, resiliency, ability to pivot, and inspiration. I then elaborated on each of the topics in my blog series on VC startup advice.

You need the whole package

Through comment conversations with many of you I tried to emphasize that it isn’t enough to just have one attribute. Being tenacious without the mental flexibility to pivot based on market feedback is a disaster. Having street smarts with no inspirational ability to build teams can yield a great small business but will be difficult to scale into a large VC-backed business.

So we as VCs search for entrepreneurs/founders who have the whole package or as much of it as possible. Few people have it.

These are often amazingly talented people who are really strong in some of the skill areas and there is no shame in this. They often make great team members such as head of products, CTO, head of sales, CFO, etc. Great companies are comprised of great individual point people or functional leaders.

But when I’m looking to write my check I need to look in the eyes of the captain — the maestro who brings the whole orchestra together. And this is where the last post left off — inspiration.

6. Perspiration

Inspiration alone is not enough. We’ve all met inspirational leaders who talk the great talk. They get you all jazzed up after a company meeting but fail to get people to take action or to get things done themselves. Inspiration without perspiration is the equivalent of being a coach — not a CEO. Inspiration is part of what a VC provides, including goal setting, cheerleading, and challenging you. But the CEO needs to move the ball forward a few inches every day. Your VC can’t do that for you.

Celebrity CEOs

As a VC, I also see the apparently great leader who is a great public speaker and networker. He does the conference circuit but is somehow missing from running his company. Someone  else is left back at the ranch minding the shop. Worse yet, internal company decisions often aren’t made without the CEO around and in-fighting amongst the direct reports is not uncommon. Talk to any management team with a “celebrity seeking” CEO and you’ll see what I mean.

If you’re the guy at every conference don’t think that people don’t notice. I notice. I love hanging out with you. I’ll gladly drink a few beers with you. But when it comes time to cut checks I’m backing the guy who’s back at the office getting stuff done. I believe great leaders eschew the limelight in favor of building their companies. (before I get attacked in the comments section I’m not saying ZERO conferences — but you need to be selective.)

I would also say that I found some VCs can’t tell the difference because they haven’t been inside an early-stage company so these CEO’s are usually able to raise money. VC money does not equal success.

99% perspiration

The most poignant quote about perspiration comes from Thomas Edison, “Genius is one percent inspiration and ninety-nine percent perspiration.” For entrepreneurs it’s probably a healthy dose of both. I know you think a VC would take for granted that all entrepreneurs work hard but you can tell the difference between those that see their startup as merely a slightly longer version of their last big job and those that are maniacal and focused about what they’re doing.

My favorite example is Jason Nazar, the CEO of DocStoc. There’s no ‘off button’ on this guy. He’s always open for business. If I’m up super late trying to crank out work, I often get IM messages from Jason at 1am. He attends many social events in the LA scene but he seems to always go back to the office afterward. He’s at TechCrunch50 but he knows why he’s there, who he wants to meet, and what he wants out of those meetings. It’s not a boondoggle. It’s all part of his DocStoc obsession.

Starting a company isn’t a job

There was a recent TechCrunch UK article by an anonymous VC (yes, I think posting anonymously is chicken shit) that talked about the work ethic of European tech companies versus those Silicon Valley. I retweeted this article and got some people in Europe telling me it was unfair to stereotype this way. It’s not. The reality is that many Silicon Valley entrepreneurs/companies are more obsessive and maniacal about their businesses in a way that many others around the world are not. The local culture breeds it. I’m not saying it’s good or bad — it just IS. Europe isn’t the only place to garner criticism for not being driven enough. We get the same criticism in Los Angeles.

But that doesn’t have to be you. If you want a “job”, don’t be an entrepreneur. It’s not a job — it’s your life. I recently posted some VC startup advice about the need for entrepreneurs to have a bias toward action or JFDI (a play on the Nike slogan). Well the second sign I had on the wall of my first startup was SITE. Ask anybody who worked with me how seriously I took it. Sleep is the Enemy.

Success breeds competition — from around the world

For every person who comes into my office with a good idea I respond, “Don’t worry about your failure, worry about your success. If you fail, you move on. But if your good idea pops big time then, trust me, there will be three Ph.D.’s from Stanford sharing a cheap apartment in San Jose working around the clock to beat you. They’ll be eating Ramen or Taco Bell every night and saving their pennies to pour into the company.”

It may be unfair, but it’s the reality of capitalism. It’s the dynamic that drives innovation. In the future, the competition won’t only be in San Jose, but also in Shanghai, Seoul, and Bangalore. I only wish more people in the US Congress understood this as well as Brad Feld does. The Startup Visa is one of our most important innovation movements. You think China can’t build great Internet companies? Have you heard of TenCent? It’s more valuable than Facebook.

In conclusion, if you’re not prepared to be “all in”, then you’re not prepared to build a huge company. You think Marc Benioff built Salesforce.com into a multi-billion company by having a good idea? I can tell you from having been on the inside that even now this guy never shuts off. He’s driven. He creates the success at Salesforce.com. He’s a billionaire and he still works harder than many startups. Are you willing to go that hard for that long?

7. Appetite for risk

Entrepreneurs are risk takers. Not wild speculators, but pragmatic risk takers who have a blind belief that they will find a way to make things work. If you put on paper what it would take to be successful in your company, you’d never take the first step, which is why most people don’t. It is often called a “leap of faith” because you jump from safety into the abyss with only the blind faith that you’ll find a way.

If you won’t take the risk, why should I?

I know it sounds trite to say that entrepreneurs are risk takers so let me describe the normal, rational person who I meet on a regular basis. I was recently on TWiST with Jason Calacanis. A caller dialed in to ask us questions about his startup. He was from South America but living in Switzerland and had launched a startup while holding down a day job at a consulting firm (McKinsey if memory serves). He wanted to raise angel money. I told him to quit his job first. If he wasn’t prepared to do that he wasn’t a real entrepreneur.

I know that 80+% of the people listening to me must have thought that was the wrong advice. But to me if you’re not willing to quit and take a risk on yourself, then you’re not confident enough in your own idea and skills. Why should I be? If you’re idea is so amazing that it warrants my hard-earned angel money then why should I take a risk on you if you won’t take a risk on yourself?

The locked-up entrepreneur who wouldn’t jump

About a year ago I had lunch with a guy who I believe is an amazing entrepreneur. He had built and sold his first company and had good ideas for his second company. He gave me the 50,000 foot idea and he was convinced that this idea would be a monster. The problem was that he was still working out the lock-up period in his big company.

He and his partner told me about this new idea over the course of nearly a year. I finally called bullshit. If this idea was so big then why would they risk not being first to market, not building defensible IP for the sake of a few hundred thousand dollars extra in lock-up money at a big company? I think the mind of an entrepreneur would be far more paranoid about yielding his great next idea than protecting his last 20% payout on the last one. They finally quit. I’m enjoying watching their progress.

The MBA who wouldn’t jump

I run recruiting for my VC firm, GRP Partners. About 18 months ago in early 2008 we hired an analyst (pre-MBA), but wanted to wait until after Summer to hire a post-MBA associate. It was May. I received an unsolicited resume from a second-year MBA student at Stanford. He had exactly the skills I was looking for in an associate. I interviewed him on the phone and in person. I introduced him to my partners who liked him. But we weren’t ready to hire an associate yet so I offered him a summer internship. He told me that, as a second-year student, he could only accept a summer internship if I would guarantee him the job in the fall if he performed well. He wanted an assurance that if he performed well, we wouldn’t go through a recruiting process.

I told him I couldn’t guarantee that. If he was confident in his skills he should take the internship. I told him I couldn’t imagine that a guy performing really well on the inside had anything to worry about from a great resume and interview from somebody we didn’t really know. I told him to join and “become part of the furniture.” Without the guarantee, he turned me down. A few months later he called me back and said he would take the internship. I told him, “Sorry mate, it was a one-time offer. You had the door cracked open and should have taken it.”

Was I too harsh? I don’t think so. I want our associate to have empathy for the customers we serve — our portfolio companies. If the person I hired wasn’t cut from the same cloth as an entrepreneur, then how could I expect him to be able to see inside the mind of entrepreneurs?

My leap into venture capital

I joined GRP Partners in 2007 before they raised their current fund (we closed a $200 million fund in March 2009). They told me not to join until after the fund-raising was done. I told them it was now or never. “Once you’re done raising a fund you’ll hire anybody you want! I want to join now while there’s risk. I’ll help you raise the fund. And I’ll take the risk. Pay me half salary until the fund is closed. I’ll pay my own moving costs and if we don’t raise the fund you owe me nothing.”

I figured that the alternative was that I start my third company with no salary and all risk. I had nothing to lose! And so it was. If I was willing to take risks to get into VC then how could I accept an associate who had no cojones? And how can I fund you if you don’t?

To be continued in Part 3 with competitiveness, decisiveness, and more. If you like this post, check out Mark’s blog and his tweets @msuster. If you want an intro to Mark, send me an email. I’ll put you in touch if there’s a fit. – Nivi

This post is by Mark Suster, a partner at GRP Partners. If you like it, check out Mark’s blog with startup advice and his tweets @msuster. And if you want an intro to Mark, send me an email. I’ll put you in touch if there’s a fit. Thanks. – Nivi

One of the questions I’m most often asked as a VC is what I’m looking for in an investment. For me I’ve stated publicly that 70% of my investment decision is the team and most of this is skewed toward the founders. I’ve watched people who went to the top schools, got the best grades and worked for all the right companies flame out.

So what skills does it take to be a successful entrepreneur? What attributes am I looking for during the process? Having been through the experience as an entrepreneur twice myself, I have developed a list of what I think it takes.

1. Tenacity

Tenacity is probably the most important attribute in an entrepreneur. It’s the person who never gives up — who never accepts “no” for an answer. The world is filled with doubters who say that things can’t be done and then pronounce after the fact that they “knew it all along.” Look at Google. You think that anybody really believed 1999 that two young kids out of Stanford had a shot at unseating Yahoo!, Excite, Ask Jeeves and Lycos? Yeah, right. Trust me, whatever you want to build you’ll be told by most VC’s something like, “Social networking has already been done,” “You’ll never get a telecom carrier deal done,” or “Google already has a product in this area.” You’ll be told by the people you want to recruit that they’re not sure about joining, by a landlord that you’ll need a year’s deposit or by a potential business development partner that they’re too busy to work with you, “come back in 6 months.”

If you’re already running a startup you know all this. But some founders have that extra quality that makes them never give up. At times it goes as far as being chutzpah. And I see this extra dose of tenacity in only about 1 of 10 entrepreneurs that I see. And if you’re not naturally one of these people you probably know it, too. You see that peer who always pushes things further than you normally would. What are you going to get further out of your comfort zone and be more tenacious? It is really what separates the wheat from the chaff.

I once had a debate with a prominent VC on a panel. The moderator asked the question, “if an entrepreneur writes an email to a VC and doesn’t hear back what should they do?” This VC responded, “Move on. Next on the checklist. He’s not interested.” Without much thought I shot back, “That’s the worst advice I’ve ever heard someone give an entrepreneur.” Doh. I almost couldn’t believe I had blurted it out, but what came out of my mouth was so heartfelt that it just rolled out.

If you fold at the first un-returned email what hope do you have as an entrepreneur? As an entrepreneur, people aren’t going to respond to you and it’s your responsibility to politely and assertively stay on people’s radar screen. You no longer work for Google, Oracle, Salesforce.com or McKinsey where everybody calls you back. You had no idea how important that brand name was until you left it behind. Your customers don’t care that you went to Standford, Harvard or MIT. It’s just you now. And frankly if you went to a state college in Florida you’re at no disadvantage in the tenacity column. Persistence will pay off.

2. Street Smarts

OK, so you’re a tenacious person — you never give up. Well obviously that’s meaningless if your startup idea sucks. I don’t think it takes book smart people to build great companies — sometimes it’s a hindrance. But you do have to be a smart person and I personally prefer street smarts. I’m looking for the person that just “gets it.” They know instinctively how customers buy and how to excite them. They have a sixth sense for the competitors’ weaknesses. They spot opportunities that aren’t being met and the design products to meet these needs.

Because they’re street smart, most great entrepreneurs tend to prefer getting out and talking with real customers rather than sitting in a cubicle all day doing beautiful PowerPoint slides. And when they walk in my office and present you can tell that they know what they’re talking about. You can practically hear the “voice of the customer” when they’re presenting their concept.

I often tell people that I’m looking for people who weren’t born with a silver spoon in their mouths. I like people who aren’t worried about the social consequences of doing something they’re not supposed to. That’s why I personally believe many immigrants or children of immigrants fare well in business. It never occurs to them to play by the same rules as everybody else; in fact, I’m not sure if they even know what the “rules” are. It leads many of these people to be more street smart than those defined by convention.

3. Ability to Pivot

I don’t like to invest in people that I’ve never met before who come through my office wanting to have a term sheet within 30 days. I don’t think most VC’s do. Yes, there is the mythical company you all heard about that walked into Sequoia and had a term sheet 24 hours later. I’m sure that happens. But in most situations a VC will want to be able to judge how you perform over time. It’s what prompted my post on how to build relationships with VCs.

VCs often tell entrepreneurs that they want to see “traction” before they’re ready to invest. What I believe they really want is longer to get to know you. And part of what they’re looking for is how you adapt to the business you’re building over time. Every entrepreneur starts with an idea that they believe makes sense. But then your customers start using your products, your competitors come out with new offerings and your business partners decide to launch a similar product rather than working with you. You’re forced to “pivot” on a regular basis. The best entrepreneurs get market feedback regularly and change their approach based on the latest information. The best entrepreneurs seek advice from everybody they need, learn lessons and make minor adjustments on a monthly basis.

This is the reason that I’m personally not that anal about your financial model. I’ve stated publicly that you MUST have a financial model because it serves as your ongoing compass and strategy but it will change on a regular basis during your first 2 years. So much so that your financial model 2 years out won’t resemble your starting model at all!

So, for me, seeing how you respond to market challenges, what you learn and how you adapt is one of the most critical pieces of information I can collect about whether or not I want to invest in your company.

4. Resiliency

I like to say that “being an entrepreneur is really sexy… for those who have never done it.” The reality is that it’s lonely, hard work, high pressure and filled with mundane tasks. It’s a gritty existence. In the grand scheme of things no matter how hard you work and despite your appearance on the TechCrunch50 stage, no one seems to really care. That next round of investment is proving difficult. Customers are harder to sign than you want.  Journalists have just written an article that wasn’t favorable. Your competitors just announced positive news. You’ve got 8 weeks of cash left and one of your employees just asked you to fill out a form so she can buy a house.

Every day you go home and face self-doubt but you’ve got to come back in the morning strong. Your employees are looking in your eyes for signs of weakness and self-doubt. They believe in you and they draw strength from you. You’ve got to be able to come out of unsuccessful VC meetings, pull your socks up, and go into the next pitch. You’ve got to accept customer losses as learning experiences and see how you can improve next time. You’ve got to see your product weaknesses and plug them. You’ve got to hear all of the doubters, and the world is FILLED with doubters, and still not give up. Resilience is one of the tell tale signs of an entrepreneur.

As a VC, if I can tell that you’ve survived tough times and you don’t appear beaten down that’s a huge plus. People always think that the big, successful brands they know were huge success stories from day one. GRP Partners funded Starbucks and Costco. I can tell you both were less than 30 days from bankruptcy early in their lives. They were survivors. One of the most famous case of resiliency in the US history is Abe Lincoln. If you haven’t seen how many setbacks Abe had before becoming president check out the link.

Or, more succinctly, from Sir Winston Churchill, “Success is the ability to go from one failure to another with no loss of enthusiasm.” (quote via David Fishman)

5. Inspiration

As an entrepreneur you’re always under-resourced. You want to hire a crack team of developers but you haven’t raised enough money yet. You want that key marketing resource from Google but he’s on a fat salary that you can’t match. You’re trying to get your contacts to get you that introduction to Ron Conway to sprinkle his legitimacy on your company through an angel investment. All of these things are nearly impossible for most entrepreneurs. And tenacity alone won’t yield positive results.

Often entrepreneurs show me their management team slides with the names of the people who are going to join him once they’re funded. I usually jokingly respond, “maybe you’re not an entrepreneur?” This always gets people to sit up straight 😉 I say, “listen, nearly every successful entrepreneur I’ve ever met has a certain ‘X-Factor’ about them that makes people take notice. I know that these people who you want to join you are in comfortable positions at brand name companies and don’t want to take the risk of joining you. But when the right entrepreneur comes along they think, ‘I’ve got to join this person now. I think this is going to be hugely successful and I don’t want to miss the opportunity.'”

The best entrepreneurs are like that. When you’re around them it’s almost contagious. They are passionate about what they’re doing, they’re confident about their success and they’re driven to make it happen. Sure, they have self doubt when they’re alone looking in the mirror, but you’d never know it from seeing them in the office. And what you need to know is that for every chart you put up with the people who are going to join you when you’re funded, I see companies that have actually gotten the team on board with no more cash in the bank than you have.

Whenever I’m watching someone present to me I’m often thinking to myself, “Can this person inspire others?” And inspiration is so important because not only is it required to hire and lead your team, but it’s required to get customers to work with you when, by all means, they should not. You’ve got less than 6 months cash in the bank and your product isn’t really fully baked. But they have confidence that you’ll get there even if they don’t acknowledge this to themselves. TechCrunch is going to cover you. They probably shouldn’t because you’re a bit more hype than reality right now. But they sense your trajectory. They get a sixth sense that you’re going to pull this thing off. Inspiration goes a long way in business.

To be continued in Part 2 with perspiration, detail orientation, decisiveness, and more. If you like this post, check out Mark’s blog and his tweets @msuster. If you want an intro to Mark, send me an email. I’ll put you in touch if there’s a fit. – Nivi

You’ll probably learn more from this clip than two years at Harvard Business School. From HBO’s The Wire:

(Video: The Wire)

I bet you didn’t know this is Obama’s favorite TV show.

More wisdom from Randy Komisar‘s The Monk and the Riddle (emphasis added):


“So why were they doing this? Why was it worth their time? I am always amazed that venture capitalists don’t ask that question. Perhaps at this point everyone assumes it’s obvious: to get rich.

“Passion and drive are not the same at all. Passion pulls you toward something you cannot resist. Drive pushes you toward something you feel compelled or obligated to do. If you know nothing about yourself, you can’t tell the difference. Once you gain a modicum of self-knowledge, you can express your passion…

[Passion] is the sense of connection you feel when the work you do expresses who you are. Only passion will get you through the tough times… It’s the romance, not the finance that makes business worth pursuing.

“I can’t get excited by a business whose biggest idea is making money.”

Venture Capital

“Most VCs (even if they insist otherwise) simply don’t have the time to give close management attention to the companies they’ve funded. In addition, in contrast to the original VCs, who often gathered years of operating experience prior to becoming venture capitalists, many partners in today’s firms have no executive management experience. They could be working on Wall Street as easily as on Sand Hill Road.”

“I have never seen a company fail for having too much money. Dilution is nominal, but running out of money is terminal.”


[Mediocrity is] the biggest risk of all in Silicon Valley… Instead of managing business risk to minimize or avoid failure, the focus here is on maximizing success. The Valley recognizes that failure is an unavoidable part of the search for success.

“[Excellence] should be your primary measure of success… not simply the spoils that come with good fortune. You don’t want to entrust your satisfaction and sense of fulfillment to circumstances outside your control. Instead, base them on the quality of what you do and who you are, not the success of your business per se.”


“Management is a methodical process; its purpose is to produce the desired results on time and on budget. It complements and supports but cannot do without leadership, in which character and vision combine to empower someone to venture into uncertainty. Leaders must suspend the disbelief of the constituents and move ahead even with very incomplete information.

Many ideas in this Valley happen against all common sense. It’s good when entrepreneurs are a little bit deaf and blind, but if they’re completely deaf and complete blind—and many are—they’re unlikely to learn enough from the market and their advisors to make their vision a reality.”

This is a great slide from John Doerr’s talk at Stanford:


It’s a little hard to read but it’s worth a squint. Or just watch this 4 minute video where he lays it out:

Video: John Doerr on Mercenaries and Missionaries.