Article first published as Unlike You, Mark Zuckerberg And Bill Gates Can Go Both Ways on Technorati. Karch Kiraly (pronounced “cartch kur-ai”) is an anomaly. He is the only person to win Olympic gold medals in both indoor and beach volleyball. Just as Karch is a rarity, so are entrepreneurs who are equally facile at startups and Big Dumb Companies (BDCs). Many of these gifted few are household names, partly because they represent such a rare breed: Bill Gates, Michael Dell, Steve Jobs and Mark Zuckerberg. All of these Founders managed their startups from launch to BDC success.
“Learn from the mistakes of others. You can’t live long enough to make them all yourself.” Eleanor Roosevelt - US Diplomat & Wife of President Franklin Roosevelt As an entrepreneur and startup investor, I have helped create companies which achieved two IPOs which collectively raised over $100 million, as well as two acquisitions which totaled $385 million. During those same 25-years, I also made innumerable mistakes. Entrepreneurship is best learned experientially. However, it is my hope that this article will help you avoid learning the following lessons the hard way.
Odysseus could not help himself. He knew the risks, but he had to hear the alluring sound of the Sirens’ song. In Greek mythology, the Sirens were a combination of birds and women who sang to passing sailors, enticing them to approach the shore and crash on its hidden shoals. To avoid wrecking his ship, Odysseus instructed his crew to plug their ears and ignore his orders, no matter how much he implored them to approach the Sirens’ island. Many entrepreneurs encounter a similar dilemma. They often identify expeditious ways to make money in the early days of their adVentures, which allow them to reduce the amount of capital they must raise from outside investors. Unfortunately, such initially alluring business models can ultimately result in their ruin. Thus, entrepreneurs must decide when to stop listening to the Sirens’ song of a quick buck and position their company to take advantage of long-term, sustainable business models.
Question: How do I identify a great adVenture opportunity? Answer: (Passion + Solvable) * Sufficient Reward = Great adVenture Venture Ideas are like hobbies. You do not discover a hobby, hobbies discover you. Hobbies arise from activities that you initially engage in casually and you eventually fall in love with. Thus, adVenture opportunities will generally arise from your proclivities and interests. In the normal course of pursuing areas that naturally interest you, if identify a problem that you are passionate about solving and the resulting reward is sufficient to satisfy your desires, you will eventually realize that you have stumbled upon a great adVenture.
“Good Lord Boyet, my beauty, though but mean, Needs not the painted flourish of your praise: Beauty is bought by judgment of the eye, Not uttered by base sale of chapmen's tongues” William Shakespeare, British Playwright, from Love's Labour’s Lost, 1598 Intellectual Property (IP) is an ugly thing at a startup. It requires you to expend your two most valuable resources, your time and your money. Yet, it does nothing to help you execute your business model. However, to a Big Dumb Company (BDC), a startup’s IP is a thing of beauty. Although BDCs often act irrationally, in this instance, their perception of beauty is highly rational.
In 1987, a representative of Michael Jackson approached the modest Sycamore Valley ranch house and knocked on the door. The owner of the ranch was shocked by the visitor’s message. He told the homeowner that he represented someone who wanted to purchase the ranch at a substantial premium over its current fair market value. He also indicated that the offer was non-negotiable and the home owner had to respond either “Yes” or “No” in a matter of hours. Although this is a somewhat unusual real estate transaction, it reflects a surprisingly common scenario in the world of mergers and acquisitions, with one important distinction.
In 1933, baseball card collectors were frustrated. For some reason, they found it impossible to complete their Goudy Gum 240-card set. No matter how many packages of cards they purchased, they failed to find card number #106, which featured Napoleon Lajoie. Enterprising collectors who wrote Goudy and voiced their frustrations were rewarded by receiving the Lajoie card in the mail. All other collectors were out of luck. What was behind the mystery of the missing Lajoie card?
“I know half the money I spend on advertising is wasted, but I can never find out which half.” John Wanamaker If Mr. Wanamaker had access to the Internet, his oft-repeated quote, would have never been uttered. In the “good old days”, pre- 1999, advertising dollars were largely gambled away. As noted in Pour and Stir Part I, the key to the successful execution of this strategy is managing the following equation: The cost to acquire a customer < lifetime value of a customer This entry focuses on how you can minimize your cost per customer acquired by systematically establishing the infrastructure necessary to track the results obtained from a variety of online and offline marketing vehicles.
Note: This is Part I in a three-part series on The Perfect Business Model. Click here for Part II, and Part III Authentic, hand-crafted Persian rugs always include intentional imperfections. They are said to be, “Perfectly Imperfect, and Precisely Imprecise.” The same is true with many crafts and architecture created in Muslim cultures. I am not a Muslim scholar, but a layman’s interpretation of this tradition of intentional errors is that it arises from the belief that attempting to emulate God’s perfection is sinful. Fortunately, entrepreneurs need not fear running afoul of this sin when crafting their business plans, because all of them are inherently imperfect and imprecise.
This is part III of a three part series. Click here for Part I and Part II John Fitch was first. He spent the majority of his adult life fruitlessly attempting to capitalize on the novelty and uniqueness of his invention. Unable to raise funds from wealthy individuals, he solicited $300 from a hodgepodge of small businessmen, including tavern owners, grocers and physicians. In a matter of months, he developed technology that was superior to that created by the world’s leading scientist over the prior 15-years, despite his lack of a formal education. He debuted his technology in Philadelphia at the 1787 Constitutional Convention. It exceeded his expectations and thrilled those who witnessed it, including a number of prominent Founding Fathers. However, he was still unable to secure adequate funding to commercialize his technology. Fitch spent the next three years traveling the country repairing clocks as a means of surviving, all the while saving money for the eventual launch his venture. In 1790, he began offering a service that eventually transformed world commerce and generated trillions of dollars of wealth. Unfortunately for Fitch, his adVenture folded 18-months after it began. In 1798, at the age of 55, a frustrated, destitute Fitch scrimped together enough money to purchase a handful of opium pills, which he used to end his life. His suicide note was prophetic: “The day will come when some more powerful man will get fame and riches from my invention, but no one will believe that poor John Fitch can do anything worthy of attention.”