John Greathouse http://johngreathouse.com Hands-on startup advice for emerging entrepreneurs Fri, 27 May 2016 00:48:55 +0000 en-US hourly 1 http://wordpress.org/?v=4.2.2 Should Millennial Entrepreneurs Skip College? http://johngreathouse.com/should-millennial-entrepreneurs-skip-college/ http://johngreathouse.com/should-millennial-entrepreneurs-skip-college/#comments Fri, 27 May 2016 00:48:55 +0000 http://johngreathouse.com/?p=5917 A version of this article previously appeared on Forbes. Should millennial entrepreneurs go to college? Given the stellar startup careers of non-college graduates like Zuckerberg, […]

The post Should Millennial Entrepreneurs Skip College? appeared first on John Greathouse.

]]>
image001

A version of this article previously appeared on Forbes.

Should millennial entrepreneurs go to college? Given the stellar startup careers of non-college graduates like Zuckerberg, Ellison, Disney, Gates, Jobs, Branson and Dell, the answer to this question might surprise you.

In sports, outliers generate headlines. Basketball stars LeBrone James and Kobe Bryant achieved immediate success in the NBA as 18-yr old high school graduates. However, what about Kwame Brown and Eddy Curry? Ever heard of Jonathan Bender and Darius Miles? Like James and Bryant, these talented players opted to skip college, in favor of a professional career. Unlike James and Bryant, they were journeymen, not superstars.

The same is true in business, where outliers are given an outsized amount of attention. If you believe the mythology surrounding the handful of entrepreneurs who did not obtain a degree, you may think that the path to entrepreneurial success is enhanced by avoiding college. I must admit, I furthered this anti-college narrative with a provocative article about college dropout successes.

In my role as a Professor of Practice within UC Santa Barbara’s entrepreneurial Technology Management Program, I am confronted by several millennials each quarter who ask me if they should quit school to work on their ventures. My response is almost always the same; I think dropping out is a very bad idea.

If you haven't already subscribed yet,
subscribe now for free weekly JohnGreathouse.com articles!

Should I Stay Or Should I Go?

Here is an excerpt from an email I wrote to a student who asked me if she should drop out of school to run her business fulltime because she was anxious "to do great things."

“You are not the first student to pose this question to me. I have had the opportunity to communicate with several students who felt as you do, yet they remained in school and graduated. In each case, the students were glad they remained in school and snagged their diploma before launching their startups. 

As a young person, I shared your desire, ‘to do great things.’ Rest assured, you are not currently wasting your time getting a degree. You will have ample time to make a huge impact on the world, after you graduate.”

Get More Than A Degree

I recently spoke to an international group of entrepreneurship professors at San Diego State University’s Lavin Entrepreneurship Center. I asked them to devise reasons an entrepreneur should remain in college.

Nearly all the Professors agreed that students should stay in school, even if their venture is doing well. Their most persuasive argument was that college teaches young people many things beyond textbook facts and case studies, including:

Discover What You Don't Want To Do - College affords students a chance to satisfy their curiosity by exploring areas of intellectual interest and learn not only what they want to do with their lives, but also what they don't want to do. Once a graduate enters the work world, she loses this luxury of time and flexibility.

Learning To Learn - A sound college education includes gaining the insights into applying logic, researching data and assessing the veracity information. Wise students focus on taking advantage of college to learn how to learn, rather than focusing on simply regurgitating facts.

Peer Management - Group projects, albeit painful, are an extremely effective proving ground for a startup career. In their early stages, startups are generally meritocracies in which strong-willed, highly opinionated people must be encouraged to act in a certain way, rather than ordered to do so. College group projects force students to develop a diplomatic leadership style, in order to encourage their peers (whom they cannot order around) to accept their suggestions.

Mini-ventures - Remaining in college does not mean that students must put their entrepreneurial dreams on hold. Small ventures that can be run part-time allow students to gain hands-on experience. In addition, many a college venture has blossomed into a full-fledged startup after graduation.

Network – Colleges are populated by motivated individuals, many of whom will excel in their chosen fields. Young entrepreneurs can call upon their alumni networks for advice, recruitment of key employees and even funding.

Resources – Many campuses offer entrepreneurial students a variety of free resources, such as: incubators, accelerators, mentor programs, venture competitions (with meaningful prize money) and even seed funding.

Maturity - A significant amount of emotional growth occurs between the ages 18 and 22. For many people who do not enter college after graduation, a stent in the military or Peace Corps allows them to develop emotionally and gain valuable, real-world experiences. The same is true of a college education, which provides young people with a safe environment to learn from their mistakes.

Although a number of notable entrepreneurs either dropped out or never attended college, they are the exception, not the rule. Yes, Kobie Bryant skipped college and had a stellar career. Yet, most successful NBA players earn a college degree, just like the majority of successful entrepreneurs.

Millennials: go to college, grow up a bit, establish a network of like-minded entrepreneurs, learn from some bad choices, do a few keg stands and graduate with the life skills that will equip you to change the world.

Follow my startup-oriented Twitter feed here: @johngreathouse. I'll never tweet about underwater ballet or that killer burrito I am about to devour - just startup stuff. You can also check out my hands-on startup advice blog HERE.

Photo Credit: Harry How/Getty Images

Share and Enjoy

LinkedInFacebookTwitter

The post Should Millennial Entrepreneurs Skip College? appeared first on John Greathouse.

]]>
http://johngreathouse.com/should-millennial-entrepreneurs-skip-college/feed/ 1
Practice Entrepreneurship With A Purpose – Before You Start A Company http://johngreathouse.com/practice-entrepreneurship-with-a-purpose-before-you-start-a-company/ http://johngreathouse.com/practice-entrepreneurship-with-a-purpose-before-you-start-a-company/#comments Thu, 12 May 2016 23:15:03 +0000 http://johngreathouse.com/?p=5907 A version of this article previously appeared on Forbes. Even Stephen Curry Needs To Practice Entrepreneurship is a contact sport. It cannot be learned from […]

The post Practice Entrepreneurship With A Purpose – Before You Start A Company appeared first on John Greathouse.

]]>
image001

A version of this article previously appeared on Forbes.

Even Stephen Curry Needs To Practice

Entrepreneurship is a contact sport. It cannot be learned from a book or in a classroom. The skills which underlie entrepreneurship are largely learned first-hand, through trial and error.

However, you do not need to start a business to begin exercising your entrepreneurial muscles. There are a number of tasks you can perform that will allow you to train in the art of entrepreneurship while you are in school or working at a large organization.

The key to effective rehearsing is to first establish the goals you want to achieve. If you don’t know which specific skills you want to improve, you will only get better them by accident.

If you haven't already subscribed yet,
subscribe now for free weekly JohnGreathouse.com articles!

Practice With A Purpose

“There is no glory in practice, but without practice, there is no glory”

Unknown

The following seven activities allow you to hone your entrepreneurial skillset, without going all in on a particular venture. Focus on the exercises that make you the most uncomfortable, rather than expending energy enhancing your strengths.

  1. Advise A Startup

“By learning you will teach, by teaching, you will learn”

Latin proverb

You may be thinking, “I am not qualified to advise a startup. That’s why I am reading this article. I want to learn, not teach.” Great. There is no better way to learn than when you are forced to teach.

No matter where you are in your entrepreneurial maturation, there are many bright, eager folks who are a bit behind you. If you are in college, advise a High School entrepreneur club. If you are a recent college graduate, mentor college students. If you are a seasoned executive, work with a team of aspiring entrepreneurs.

  1. Refine Your Personal Pitch

“The more you sweat in practice, the less you bleed in battle”

Richard Marcinko, Author

Networking is one of an entrepreneur’s most valuable skills. Practice your interpersonal talents by repeatedly entering a room of strangers with the goal of making at least five meaningful connections with people who can assist the startup you are advising (see point #1 above).

You can easily avoid awkward pauses by weaving your Personal Pitch into your networking conversations. Your pitch should comprise the following three elements.

Who you are – your interests, experiences, education, why you are so bloody interesting.

Where you are going – your bombastic, fascinating entrepreneurial dreams.

How you plan to get there – your short-term tactics and long-term strategies for turning your dreams into reality.

If networking makes you uncomfortable, as it does for many people, that is all the more reason to practice it. As with all skills, the better you get at networking, the less anxiety you will feel when you are on the practice field and ultimately once you get into the game.

If you are networking to assist a startup you are advising, you can substitute the company’s pitch for your personal pitch.

  1. Entrepreneur It

“Don’t practice until you get it right. Practice until you can’t get it wrong”

Unknown

Look for areas in your workplace in which you can create something from nothing. Surprise your boss by launching a project that requires little to no resources, but has an outsized impact on your business.

Ask yourself, “If we hired an entrepreneur, what would they change about the way we do business?” then carryout whatever recommendations you devise. Don’t worry, you can apologize after the fact, when you point to the positive impact your initiative had on your company.

If you are a student, do something bodacious within the confines of a club or student organization. Create a community service project, raise a small venture fund to capitalize student companies – whatever you do, it should be bold and force you to call upon all of your startup talents.

  1. Keep An Idea Journal

“Practice puts brains in your muscles”

Sam Snead, Professional Golfer

As Stephen Johnson demonstrates in Where Good Ideas Come From, epiphanies are rare. Most breakthroughs result from the collision of small ideas which combine to form big ideas. Thus, it pays to document your daily thoughts so you can later recall and combine them with subsequent hunches.

Such journals, formerly called Commonplace Books, were used during the 17th & 18th centuries by curious, deep thinkers, including: Milton, Bacon, Locke, Franklin and Darwin. Modern day entrepreneurs use Evernote, Google Keep, etc. to capture and organize their hunches.

  1. Launch A Side Business

“The difference between ordinary and extraordinary is practice” Vladimir Horowitz, Pianist

As noted in Mini-ventures Build Entrepreneurial Muscle, a number of substantial companies have arisen from ventures started by people in school and who had fulltime jobs.

Even if your mini-venture does not morph into a substantial business, it will act as an effective practice court upon which you can enhance your entrepreneurial chops.

  1. Don’t Throw Up, Speak Up

“You earn your trophies at practice, you just pick them up when you perform.”

Unknown

Entrepreneurs must be able to influence and persuade others, often in a public setting. You can practice this talent by volunteering to give presentations at work, school or in non-profit organizations. You can also join groups such as Toastmasters, whose explicit purpose is to help its members become more confident and able public speakers.

Much like networking, if speaking in public make you queasy, proactively practice your way to proficiency.

  1. Get A Coach

“You play the way you practice.”

Unknown

It is difficult to practice alone. Not only is it a challenge to remain motivated, it is difficult to objectively identify which skills you are improving and where you should focus your practice time.

Like athletes, entrepreneurs benefit greatly from a coach, in the form of a caring mentor. As described in You’re Never Too Old (or Successful) For A Mentor, the time you invest in cultivating a mentor relationship is time well spent.

Follow John’s startup Twitter feed here: @johngreathouse.

Image: AP Photo / Rick Bowmer

Share and Enjoy

LinkedInFacebookTwitter

The post Practice Entrepreneurship With A Purpose – Before You Start A Company appeared first on John Greathouse.

]]>
http://johngreathouse.com/practice-entrepreneurship-with-a-purpose-before-you-start-a-company/feed/ 2
Entrepreneur Hack: This Remote Team Of 12 Generated $100M http://johngreathouse.com/entrepreneur-hack-this-remote-team-of-12-generated-100m/ http://johngreathouse.com/entrepreneur-hack-this-remote-team-of-12-generated-100m/#comments Thu, 05 May 2016 23:05:21 +0000 http://johngreathouse.com/?p=5901 A version of this article previously appeared Forbes. When I published This Remote Working Experiment Failed And Succeeded on the Wall Street Journal last year, […]

The post Entrepreneur Hack: This Remote Team Of 12 Generated $100M appeared first on John Greathouse.

]]>
image001

A version of this article previously appeared Forbes.

When I published This Remote Working Experiment Failed And Succeeded on the Wall Street Journal last year, I had no idea it would generate so much social media attention. Given TimeHop’s failed experiment, I was especially intrigued when I learned that a team of a dozen remote entrepreneurs hack the typical corporate structure and creates a company that generated nearly $100 million in revenue.

Creating an effective remote team is often difficult, especially for a startup, as the core business issues are ill-defined and the pace is chaotic. Thus, even though it is enticing to start a company based with a remote working structure, it is often a challenge to maintain a decentralized approach as a company expands beyond its founding team.

If you haven't already subscribed yet,
subscribe now for free weekly JohnGreathouse.com articles!

Two Virtual Organizations That Worked

To gather hands-on remote team building advice, I sought out two companies that have done it: TaxJar and FastSpring. Both companies’ success proves that it is possible to coordinate and motivate disparate team members, even during a startup’s early, chaotic days.

TaxJar

Some companies allow employees to work remotely one day a week or on an ad hoc basis. In contrast, TaxJar, a SaaS solution which makes automates online sales tax calculations, reporting and filings, is an entirely virtual company. Although the company has a vibrant, collaborative culture, no two employees work under the same roof. (Note: I am an investor in TaxJar via Rincon Venture Partners.)

I asked TaxJar’s Co-Founder and CEO, Mark Faggiano to list five reasons his decentralized venture has flourished.

  1. “Our teams have daily standups so we can easily keep track of what we're working on and work through any blockers. We also have a weekly all company meeting so we can all keep track of the company's progress and collaborate across teams/”
  1. “We have biannual team meetings where we all gather in one place to plan prioritize and socialize.”
  1. “We use Flowdock to chat daily. We have separate channels for work but we also talk about fun things just like any office watercooler. Like any team we also have our inside jokes. Since we chat online, our inside jokes include memes and specially created emojis.”
  1. “Our team produces, so we don't necessarily have to work typical business hours. Our team has flexible schedules that allow them to spend time with the kids in the early evening and hit the slopes on a perfect powder day. The bottom line is that the TaxJar team is happy - and because we're happy, we're incredibly productive.”
  1. “We realize that remote work is not for everyone. Thus, during the recruiting process, we look for evidence of the applicant’s ability to: work autonomously, effectively communicate via chat and email and a willingness and ability to collaborate, despite being unable to walk down the hall and park themselves in a compatriot’s office.”

FastSpring

Dan Engel, Co-Founder and former CEO of FastSpring, is a highly successful serial entrepreneur. Dan is now CEO of Mobile1st, makers of Mobilizer, the mobile customer experience optimization platform.

Early in his career, Dan proved to be a valuable contributor on my GoToMeeting business development team (acquired by Citrix). He then joined Picasa and was instrumental in its acquisition by Google. He then started several successful companies, including FastSpring, a company that provides outsourced e-commerce services to over 3,000 software companies.

Dan shared his entrepreneurial insights with my UC Santa Barbara students, including the manner in which he built a virtual organization. The following four-minute excerpt highlights his comments focused on creating an effective remote work environment. You can watch Dan’s entire talk here.

As Dan notes, “FastSpring these days is over a $100M business and it wasn’t much less than that when we had about twelve people. And we did it all with about $30,000. No venture capital.”

From the start, Dan and his co-founders, (who were also all remote, in four different US states), focused on building the optimal team to tackle the specific type of opportunity they faced, rather than the best team that could be placed under one roof. According to Dan, “In terms of people, we had an approach that had to do with finding the best people, the best fits for the positions and not the best people who happened to be in the same zip code.” Dan later noted that, “This actually turned out to be a huge advantage for us. We gave our people a large amount of flexibility… those that showed they were able to get their job done, we left them alone. They could work on their own terms.”

One way this advantage was evident was with regard to customer service. “Our competitors had customer service where you got an auto response. Whereas (at) FastSpring, we were responding 11:00 on Saturday night. Christmas day, all throughout the day. I didn’t have to ask anybody to work those hours, it’s just that they cared. We hired the type of people who slept with their laptop in bed with them so to them it was like, ‘Well, I’m checking my email anyway.’”

When FastSpring was acquired, the entire team was comprised of twenty two people, of which, “… we had three people in Santa Barbara and everyone else was working, generally, from home and some people were in other countries.” Unlike TaxJar, which meets as a team twice a year, Dan notes that FastSpring’s four co-founders, “… went through a period of three years… where we didn’t even see each other, we didn’t get together once. We would communicate through email… and every once in a while, if there was something important, we’d get on a call.”

Such an organizational structure and communication style would not work for many companies, but in FastSpring’s case, all of the co-founders were former CEOs. Per Dan, “… so we kinda knew what we were doing and we had the division of labor pretty strong. I didn’t need to know what they were doing in their area (because) they knew what they were doing.”

Although the structure worked well for Dan and his team, he did note that it wasn’t without its pitfalls. In particular attempts to raise money and ultimately to sell the business were hampered by the company’s virtual nature. In Dan’s words, “… we did run into potential partners, buyers that would say, ‘Oh, well I really don’t like that the company is spread out all over the place.’ The larger that you get, the harder stronger that argument gets because you have bigger firms (wanting to buy or partner) who want stability and control things from a single place.”

Follow John’s startup-oriented Twitter feed here: @johngreathouse.

Image credit: John Zich/Bloomberg News.

Share and Enjoy

LinkedInFacebookTwitter

The post Entrepreneur Hack: This Remote Team Of 12 Generated $100M appeared first on John Greathouse.

]]>
http://johngreathouse.com/entrepreneur-hack-this-remote-team-of-12-generated-100m/feed/ 0
9 Success Principles From A 40-Year Veteran http://johngreathouse.com/9-success-principles-from-a-40-year-veteran/ http://johngreathouse.com/9-success-principles-from-a-40-year-veteran/#comments Thu, 28 Apr 2016 19:30:09 +0000 http://johngreathouse.com/?p=5895 A version of this article previously appeared on Forbes. After 28 years as a public-school teacher, Bob Wood reluctantly left the classroom and took the […]

The post 9 Success Principles From A 40-Year Veteran appeared first on John Greathouse.

]]>
image001

A version of this article previously appeared on Forbes.

After 28 years as a public-school teacher, Bob Wood reluctantly left the classroom and took the helm of his elementary school. During his 10-year tenure as Principal, his team was awarded the White House’s National Blue Ribbon, a distinction granted to the top 0.3% of all elementary schools nationwide. Under Bob’s leadership, his school was also named a Distinguished School by the California Department of Education, earning an unprecedented score of 10 out of 10.

As noted in You're Never Too Old (Or Too Successful) For A Mentor, Bob is my mentor and friend. Thus, I was honored when he agreed to share his insights regarding the fundamentals of success with my UC Santa Barbara entrepreneurial students.

If you haven't already subscribed yet,
subscribe now for free weekly JohnGreathouse.com articles!

image002

You can watch a 7-minute excerpt from Bob's talk here.

Bob Wood’s Nine Fundamentals of Success

Drawing upon his nearly 40-years as a public servant, Bob distilled his formula for leadership success into the following fundamentals.

  1. Communicate Authentic Core Values

Successful leaders must constantly communicate the core values which underlie their organization’s vision. In turn, the leader’s vision and actions must also be congruent with these values. If done effectively, these organizational values will become the foundation upon which the company’s corporate culture is maintained.

  1. Demand Customer Centricity

The challenges of a public school Principal are akin to that of a CEO, with the added handicap that it is nearly impossible to terminate poor performers. Like a CEO, Principals must collaborate and cajole their various stakeholders, which include teachers, parents, students, staff and administrators.

Bob successfully managed his constituents by never forgetting that his ultimate “customers” were the students he was serving. He resolved numerous conflicts by reminding his stakeholders of their shared commitment to provide the students’ with an optimal education. Startup CEOs can likewise diffuse internal dissention by refocusing their team’s attention on their customers, rather than their colleagues.

  1. Display Total Commitment

Effective leaders demonstrate with their words and their actions that they are “all in.” Without compromise, they apply all of their efforts to the organization’s success and they demand a similar level of dedication from their key team members.

  1. Be Of Service

Successful leaders do not give orders. Instead, they help those around them attain their goals, knowing that this approach will ultimately lead to the team’s overall success. As Bob notes, “I was in service to everyone… if a (light) bulb needed changing in a classroom…I got a ladder and changed it.”

  1. Be Transparent

Acting with transparency goes beyond giving your stakeholders visibility into the decision making process. In Bob’s words, “You have to be who you are on the inside and on the outside. “You have to be on the inside who you are on the outside. Everything has to be congruent. What you say and what you do has to fit who you are it. You can’t fake it.”

  1. Create A Path

Great leaders create a pathway devoid of obstacles that could impede their team’s progress. This path guides the organization and keeps it moving in an optimal direction. Per Bob, “When things are static, that’s when things start to fail. I created a wake (for my team to ride.)” Channeling Daoist philosophers, Bob implored my students, “Whatever you do, don’t wobble.”

  1. Borrow Best Practices

Bob also reminded the students of Picasso’s definition of a great artist, “Good artists borrow, great artists steal.” Stellar leaders create a culture which encourages employees to experiment and seek a “better way,” rather than dogmatically adhering to solutions that worked in the past.

  1. Hire Well

Recruiting the right team members is a leader’s most important responsibility. As Bob notes, “Hire people who reflect the (organization’s) core values and who can grow.” This often requires you to “subsume your ego” and hire individuals who are more talented than yourself.

At a startup, shared values and vision are cornerstones of an effective strategic plan. If your team does not internalize these principles, the lack of accord will guarantee your venture’s failure. Harmony is easier to maintain once you hire people with the right aptitude and the right attitude.

  1. Don’t Hold The Bus

No matter how carefully you recruit your team, some people will be unable to evolve as your company grows and addresses new challenges. As Bob notes, although it is painful, successful leaders must “…leave some people behind.”

It is never easy to sever ties with an employee, even those which are not excelling. However, successful organizations seldom have the luxury to throttle back their growth to accommodate struggling employees.

Follow John’s startup-oriented Twitter feed here: @johngreathouse.

Share and Enjoy

LinkedInFacebookTwitter

The post 9 Success Principles From A 40-Year Veteran appeared first on John Greathouse.

]]>
http://johngreathouse.com/9-success-principles-from-a-40-year-veteran/feed/ 0
Avoid Hiring Victims – Look For These 5 Red Flags http://johngreathouse.com/avoid-hiring-victims-look-for-these-5-red-flags/ http://johngreathouse.com/avoid-hiring-victims-look-for-these-5-red-flags/#comments Thu, 14 Apr 2016 12:00:26 +0000 http://johngreathouse.com/?p=5888 A version of this article previously appeared in Forbes. We’ve all met them. The world’s out to get them. Every boss, coworker and subordinate is […]

The post Avoid Hiring Victims – Look For These 5 Red Flags appeared first on John Greathouse.

]]>
image001

A version of this article previously appeared in Forbes.

We’ve all met them. The world’s out to get them. Every boss, coworker and subordinate is scheming to assure their demise. Setbacks are never their fault. They are a victim.

Victims are bad enough in our personal lives, but they can be especially disastrous at a startup because a small company’s culture can be disproportionately poisoned by a single bad hire.

If you haven't already subscribed yet,
subscribe now for free weekly JohnGreathouse.com articles!

Blame Game

“I am not a victim of emotional conflicts. I am human.”

American Actress, Marilyn Monroe

Some people are quite happy being unhappy. Marriage counselors advise young lovers to never marry someone with the intent of changing them. Follow this advice when recruiting.

Throughout their lives (personal, professional and otherwise), such folks are unable to internalize responsibility for their actions. Every time something goes wrong in their careers, it is always someone else’s ‘fault’, invariably someone who was ‘out to get them’.

Clearly, it is possible for anyone to occasionally become embroiled in a bad employment situation. Nearly everyone at some point in their professional career has been treated poorly in some way. However, if a candidate’s repeatedly negative comments make it clear that such ‘mistreatment’ is a recurring theme throughout their careers; the warning bells should sound and you should quickly cut bait. A normal person is occasionally slighted by their employer. Victims perpetually perceive such slights.

In such cases, the person either repeatedly exercised bad judgment that led them to accept jobs in unhealthy environments or (more likely) they lack the self-awareness to accept and share the responsibility for their career setbacks. Either way, you do not want their bad luck / bad judgment to taint your team.

Self-identified victims are fairly easily to identify during the recruitment process, if you are attuned to the signs.

  • Externalize Failure – Healthy startups have a culture of accountability. Victims cannot be held accountable, because it is never their fault. There is always some other factor responsible for their failures. This mentality limits their ability to learn from their mistakes and fosters a culture of finger pointing and blame.

Effective employees internalize their failures and setbacks. They honesty assess what went wrong in order to avoid similar mistakes in the future. For instance, if a sale is lost to a competitor, self-aware employees examine what they could have done differently during the sales process, rather than deriding the lost customer as “stupid” or alleging that a competitor beat them using nefarious tactics.

Red Flags: “They never gave me the resources I needed to succeed.” Or “My team was weak. I could never hire good people because my boss wasn’t willing to pay market salaries.” “The Founders couldn’t raise the capital I needed to execute my strategic plans.”

  • Single-handed Success – To the victim, success does not have “one hundred fathers.” Rather, it is the result of their intellect and hard work.

Victims overvalue their contributions and exaggerate the degree of their involvement in successful initiatives. Few successes are achieved by just one person. Self-aware candidates freely acknowledge the contributions of their teammates, bosses and other stakeholders.

Red Flags: Frequent use of “I and Me” instead of “Us and We” “I generated 53% of the company’s sales.” “My deals kept the company afloat.”

  • Them & They – Victims describe their past coworkers as if they were never a member of the organization, using pronouns such as, “they” and “them.”

Red Flags: “I tried to tell them that their target market didn’t make sense, but they wouldn’t listen to me.”

  • Everyone Is Clueless – Victims are the sole source of wisdom in their universe. Co-workers are clueless because they fail to appreciate the victim’s brilliance.

Red Flags: “My boss didn’t know what she was doing. She was totally clueless.” “The CEO and the investors didn’t have a clue, despite my repeated warnings that their strategy wouldn’t work.” “Marketing couldn’t generate decent leads and their collateral materials were terrible.”

  • Past Is Prologue – Perpetual victims often seek retribution for their imagined injustices through third parties, such as government agencies and the courts. Fortunately, the typical victim’s lack of self-awareness makes it relatively easy to determine if they previously brought an action against any of their former employers. Just ask them.

The government and courts play an important role in balancing worker and employer rights. Thus, the simple fact that a candidate has previously been embroiled in a labor issue shouldn’t de facto disqualify them from further consideration. In fact, it is illegal to not offer someone employment solely on the basis of a prior employment lawsuit.

Understand if seeking retribution is a pattern of behavior or a one-time, justified action. Many such instances will be subject to confidentiality agreements. Fortunately, you don’t need to know the details of such disputes to appreciate the spirit in which they were initiated.

Red Flags: Understand the general facts behind any prior arbitration, governmental or legal dispute in which the candidate has been embroiled.

Victims Love Company

“If misery loves company, misery has company enough.”

American Author, Henry David Thoreau

Perpetually unhappy people are poisonous to your culture. If left unchecked, their vitriol can lead to an “us versus them” divide that will impact your organization’s productivity and morale.

You may feel empathy when interviewing a victim, but never allow your emotions to result in a bad hire. Once a victim, always a victim. No matter how much support or praise you heap on them, you are not going to change them.

Follow John’s startup Twitter feed here: @johngreathouse.

Image: JohnGreathouse.com

Share and Enjoy

LinkedInFacebookTwitter

The post Avoid Hiring Victims – Look For These 5 Red Flags appeared first on John Greathouse.

]]>
http://johngreathouse.com/avoid-hiring-victims-look-for-these-5-red-flags/feed/ 0
How Can You Tell If Someone Truly Believes In Your Startup? http://johngreathouse.com/how-can-you-tell-if-someone-truly-believes-in-your-startup/ http://johngreathouse.com/how-can-you-tell-if-someone-truly-believes-in-your-startup/#comments Mon, 04 Apr 2016 12:00:41 +0000 http://johngreathouse.com/?p=5880 A version of this article previously appeared Forbes. When entrepreneurs describe their venture, they are often met with encouraging words, such as: “Great idea. I […]

The post How Can You Tell If Someone Truly Believes In Your Startup? appeared first on John Greathouse.

]]>
image001

A version of this article previously appeared Forbes.

When entrepreneurs describe their venture, they are often met with encouraging words, such as: “Great idea. I wish I had thought of that.”

This propensity for people to be polite when you discuss your startup can make it difficult to determine who really believes in your opportunity and who is just being nice. Fortunately, you can separate the polite from the committed by issuing the Blondin test.

Each generation, a few magnetic personalities emerge and generate a mania of public interest. During the mid-19th Century it was Jean Francois Gravelot, who wisely abandoned his given name and dubbed himself The Great Blondin. He was a true rock star of his day.

If you haven't already subscribed yet,
subscribe now for free weekly JohnGreathouse.com articles!

We Believe Blondin, We Believe

On June 30, 1859, at the height of his fame, Blondin stood before a crowd of tens of thousands of people at Niagara Falls. He had begun his Niagara show by crossing the Falls on a tightrope three inches in diameter. Although the cable spanned 1,100-foot and was 160 feet above the raging waters, the trek was fairly pedestrian for a man of his skills. Always the showman, he nonetheless choreographed a few wobbles and slips in his initial crossing in order to heighten the drama.

He then addressed the crowd, asking them if they believed he could cross the Falls blindfolded. The crowd predictably cheered, "Yes, yes. We believe, we believe, we believe!" Much to their delight, Blondin donned a blindfold and made a roundtrip across the tightrope.

He then asked the crowd, "Do you believe I can cross pushing a wheelbarrow?"  Again the crowd riotously chanted, "We believe, we believe, we believe!"

Blondin successfully crossed the Falls pushing a wheelbarrow. Blondin then whipped the crowed into a frenzy before shouting, “Do you believe that I can cross with a man on my back?” Again the crowd hysterically shouted back, “We believe, we believe, we believe!"

Blondin smiled broadly and shouted back to the cheering throng, “It is great that you believe in me. Now who wants to get on my back?"

Silence… No one in the entire crowd of revelers, which had moments before shouted, “We believe, we believe” volunteered to join Blondin on his trip across the rope. They clearly did not really believe.

You will meet Blondin’s crowd over and over as you plan and execute your venture. Friends, family and disinterested parties will emphatically tell you, “We believe!” whenever you tell them about your wacky entrepreneurial plans. With friends and family, this sort of superficial support is expected. However, when you are attempting to build a team of employees, investors, customers and partners, you cannot afford such placation.

When a potential stakeholder, pull the Blondin Test. Make them prove their belief by getting on your back as you step onto the proverbial entrepreneurial tightrope.

One way for a supplier or strategic partner to prove their belief is to accept equity in lieu of cash. With early employees, you might ask them to accept an outsize amount of equity in lieu of cash compensation. If they believe, they will value your stock more than wages.

If the potential stakeholders really believe in you, your team and your startup’s prospects, they will get on your back and trust that you will either succeed or fail together.

Let’s Do This Together

What happened after Blondin silenced the crowd by challenging their belief? Did a drunken fool stumble from the throngs and take Blondin up on his offer of a free ride over the Falls?

No such fool, drunk or otherwise, emerged from the crowd. Instead, Blondin's manager, Harry Colcord, climbed aboard Blondin’s back and the two men successfully made the journey without mishap.

Why did Colcord make the perilous trip? He really believed. However, his was not blind faith. Colcord was confident in Blondin’s capabilities because he was privy to Blodin’s rigorous practice regime. Through his actions, not his words, Blondin had earned Colcord’s trust.

Keep this important distinction in mind when you deploy the Blondin Test. If someone jumps on your back without just cause, they may just as quickly jump off with the first wobble. You owe all your stakeholders proof that their belief is justified. Informed faith, based upon mutual respect, is the solid foundation upon which should establish your stakeholder relationships.

Entrepreneurial leaders must instill an absolute belief in their startups among all their stakeholders. The Blondin Test is a great way to assess whether or not someone truly believes, and thus whether or not you can count on them to lend you meaningful support when the startup tightrope starts to shimmy and shake. In such cases, do not hesitate to ask them to get on your back and prove their belief in you.

Follow John’s startup-oriented Twitter feed here: @johngreathouse.

Image credit: AP Photo/John Froschauer

Share and Enjoy

LinkedInFacebookTwitter

The post How Can You Tell If Someone Truly Believes In Your Startup? appeared first on John Greathouse.

]]>
http://johngreathouse.com/how-can-you-tell-if-someone-truly-believes-in-your-startup/feed/ 0
Student-Founded Fantasy Pollster Is Hoping To Pick The Next President http://johngreathouse.com/student-founded-fantasypollster-hoping-pick-next-president/ http://johngreathouse.com/student-founded-fantasypollster-hoping-pick-next-president/#comments Fri, 25 Mar 2016 00:10:24 +0000 http://johngreathouse.com/?p=5875 A version of this article previously appeared Forbes. Fanstasy sports sites DraftKings’ and FanDuel’s popularity has spurred a new-breed of political betting sites. Unlike sites […]

The post Student-Founded Fantasy Pollster Is Hoping To Pick The Next President appeared first on John Greathouse.

]]>
image002

A version of this article previously appeared Forbes.

Fanstasy sports sites DraftKings’ and FanDuel’s popularity has spurred a new-breed of political betting sites. Unlike sites of the past that were deemed illegal, the current crop of election sites appear to well positioned to exploit the unprecedented focus Americans are applying to the 2016 election cycle.

If you haven't already subscribed yet,
subscribe now for free weekly JohnGreathouse.com articles!

Fantasy Pollster

As discussed in Mini-ventures Build Entrepreneurial Muscle, I am an advocate of students starting side businesses while in college. I believe that the lessons learned, albeit on a small scale, have broad applicability to full-time ventures.

Thus, I was pleased when I learned that one of my students recently launched Fantasy Pollster. Although the startup is still nascent, it has the potential to grow rapidly, as it rides the momentum of one of the most contentious and closely watched elections of the past several decades. The following is an excerpt of our conversation.

John Greathouse: How did you and your Co-Founder Brent Kirkland get started?

Liam Cardenas: After doing a hackathon at Citrix, we realized that we had a similar vision. Shortly thereafter, we began developing apps and websites out of Brent’s garage. Late last year, we had the idea for Fantasy Pollster and have been working on it ever since.

Greathouse: You and Brent are currently third and fourth year Computer Science majors at UC Santa Barbara. How has the entrepreneurial program impacted you? Have you applied specific lessons that you learned in the classroom?

Cardenas: The entrepreneurial program is excellent! We’ve been applying a number of lessons learned so far. For instance, in the High Tech Sales class, we discussed the necessity of tracking ad performance. Since we have released our product, and are now looking to acquire new users, this has proven to be extremely valuable for getting a high return from our advertising expenditures.

Greathouse: You guys could have worked on a variety of ideas. What inspired you to focus your efforts on Fantasy Pollster?

Cardenas: As avid followers of politics, we wanted to create something that would have the predictive powers of old-time prediction markets, such as Intrade. After experiencing the thrill of daily fantasy sports, we realized that creating a fantasy site dedicated to political polling would provide a prediction market that is not only legal, but also much more fun and exciting than those before it.

Greathouse: You mentioned Intrade, which was shut down by the government in 2012. What mistakes did they make that you are avoiding?

Cardenas: Their approach was very different than ours. They created a futures exchange in which the contracts were based upon the outcome of political events. Once regulators started cracking down on the financial industry, they were no longer allowed to accept money from persons residing within the United States.

We, on the other hand, operate as a fantasy sports company, similar to DraftKings and FanDuel. Since we are not a futures exchange, we are not subject to the same financial regulations that forced Intrade to shut down. Although we have our own set of legal rules and regulations, we are allowed to operate nationally with restrictions in only a few states.

Greathouse: So the goal of Fantasy Pollster is to use the wisdom of the crowd to provide accurate predictions for political elections?

Cardenas: Yes, that is certainly one of our goals. However, we also want to make politics more engaging. The incentive for a voter to be well-informed is currently very low. It takes hours to research, yet the chance of an individual vote making a difference is practically zero. This is where our site comes in. If people are heavily invested in the outcome of an election, they will be more inclined to read the news and become politically active. Let’s face it, many people are more likely to research the features of their next smartphone than they are to research the positions of the presidential frontrunner. We want to give political research the same incentives as market research.

Greathouse: That sounds nice, but do you have any evidence to support the idea that people will be become more politically engaged after wagering on the outcome?

Cardenas: Right now we are trying to prove the concept. However, The Daily Show seems to think it will work. Roy Wood Jr., a correspondent on the show, did an excellent piece about election betting, and how it would increase political participation without the negative externalities associated with other types of gambling.

Greathouse: But I thought Fantasy Pollster wasn’t a gambling website?

Cardenas: Well, it isn’t. As I alluded to earlier, we are legally a “fantasy sports company.” While drafting the Unlawful Internet Gambling Enforcement Act of 2006, federal lawmakers intentionally carved out an exception for businesses like ours. Although this exception has been around for a while, we are the first people to apply it towards political elections.

In order to meet this exception, there are certain guidelines that make our games slightly different from those of traditional gambling websites. This is why we do not run into any of the legal issues faced by the gentleman in the Daily Show piece.

Greathouse: How difficult would it be for an existing site to change their designation? Do you think your real competition will come from new sites or existing ones like PredictIt?

Cardenas: PredictIt took the same legal approach as Intrade, except they obtained a letter of “No Action” from the CFTC. This significantly restricts what they can do. If they were to reclassify themselves as a fantasy sports company, they would essentially be starting from scratch. Since we are not bound by the same regulations, we can make games that are more fun, nuanced, and feature rich than they can (create).

We welcome competition from new sites, as it pushes us to create an even better product. Ultimately, we aim to generate accurate prediction data, increase political participation, and provide an entertaining experience for our users.

Greathouse: So, what is the current state of Fantasy Pollster? And where are you planning to go with it?

Cardenas: During the first week of March, we made our first official release. Our games are currently based on the outcomes of the Democratic and Republican primary elections. In the short term, we plan on releasing new types of games with more social features, such as playing with friends. In the long term, we will continue to innovate in the legal prediction market space, shifting our focus from the primaries, to the November elections.

Greathouse: Liam, congratulations to you for launching a real business while in school. I strongly encourage my students to take the plunge and start mini-businesses while they are in college. I am sure you will learn a great deal and you may end up creating a job for yourself upon graduation. Well done.

Cardenas: Thank you for the opportunity to spread the word about our startup.

Follow John’s startup-oriented Twitter feed here: @johngreathouse.

Image credit: Scott Olson/Getty Images

Share and Enjoy

LinkedInFacebookTwitter

The post Student-Founded Fantasy Pollster Is Hoping To Pick The Next President appeared first on John Greathouse.

]]>
http://johngreathouse.com/student-founded-fantasypollster-hoping-pick-next-president/feed/ 0
Car Door Slam Or Spare Tire? Should Startups Build For Buyers Or Users? http://johngreathouse.com/car-door-slam-spare-tire-startups-build-buyers-users/ http://johngreathouse.com/car-door-slam-spare-tire-startups-build-buyers-users/#comments Wed, 16 Mar 2016 12:00:17 +0000 http://johngreathouse.com/?p=5866 A version of this article previously appeared Forbes. Car companies spend a significant amount of money on superficial design features, including the timbre of the […]

The post Car Door Slam Or Spare Tire? Should Startups Build For Buyers Or Users? appeared first on John Greathouse.

]]>
image001

A version of this article previously appeared Forbes.

Car companies spend a significant amount of money on superficial design features, including the timbre of the sound emitted when a car door is shut. Why? Because many consumers value design features over those which impact performance.

Even less time is spent on developing the aspects of a car that become evident long after the purchase is completed. For instance, have you tried to use a car jack lately, let alone the toy-like spare tires included in many cars?

These “hidden” features seldom cross a consumer’s mind at the time of purchase and thus do not impact the buying decision. However, they clearly have a long term impact on the customer’s overall satisfaction and thus their propensity to purchase additional products in the future.

If you haven't already subscribed yet,
subscribe now for free weekly JohnGreathouse.com articles!

Build For Buyers Or Users?

Startups do not always have the luxury to optimize their product for both buyers and users. Choices must often be made between features that entice buyers to make a purchase and design elements that enhance the product’s ease of use.

I learned the hard way that during a startup’s early days, entrepreneurs should give slightly greater emphasis on developing buyer features, in order to reduce the friction of the sales cycle.

When Expercity (creator of GoToMeeting, acquired by Citrix) was competing with Webex in the early days of screen sharing, Webex did something brilliant. In the early 2000’s, SaaS was a nascent concept and most companies were reticent to rent software. In addition to not understanding the pricing model, most of the techies who controlled the purchasing decision believed that software that resided outside of their firewalls was not secure.

Users, on the other hand, immediately saw the benefits of SaaS. They appreciated that the software could be accessed from anywhere and that it was updated weekly. Unfortunately, most companies at that time did not allow software users to initiate enterprise software purchasing decisions. Thus, we were forced to optimize the features important to the buyers along with those valued by our users.

Webex took a creative product development path, while we acted conventionally, attempting to educate the engineer gatekeepers and assure them that GoToMyPC and GoToMeeting were safe.

Rather than balking at customers’ requests to “put a server behind my firewall,” Webex readily complied by shipping a box to their customers that did little more than turn their SaaS off and on. Even though the functionality of the dumb server was negligible, the big red OFF button on WebEx’s servers allowed the engineers to feel that they were in control.

I implored my development team to imitate WebEx’s strategy, but I could not convince my engineers to build a similar on/off box. Instead, we tried to sell our benefits directly to our potential users, rather than satisfying the needs of our buyers. Although we eventually created one of the world’s largest SaaS businesses, we could have accelerated our growth if we had given our engineer buyers the perceived control they desired.

Car Door Slam Features

The next time you review your product roadmap, do not discard features out of hand just because they do not enhance the user’s experience. Such product improvements must also be viewed through the eyes of the buyer. If they will accelerate the velocity of your market penetration, judiciously add them to your roadmap – your salespeople (and investors) will thank you.

Follow John’s startup-oriented Twitter feed here: @johngreathouse. You can also check out his startup advice blog HERE.

Image: MONEY SHARMA/AFP/Getty Images

Share and Enjoy

LinkedInFacebookTwitter

The post Car Door Slam Or Spare Tire? Should Startups Build For Buyers Or Users? appeared first on John Greathouse.

]]>
http://johngreathouse.com/car-door-slam-spare-tire-startups-build-buyers-users/feed/ 0
Mini-ventures Build Entrepreneurial Muscle (And Can Lead To Big Businesses) http://johngreathouse.com/mini-ventures-build-entrepreneurial-muscle-can-lead-big-businesses/ http://johngreathouse.com/mini-ventures-build-entrepreneurial-muscle-can-lead-big-businesses/#comments Wed, 09 Mar 2016 22:48:23 +0000 http://johngreathouse.com/?p=5860   A version of this article previously appeared Forbes. Entrepreneurs see the world like a cash booth from a 1950’s game show. On such shows, winners […]

The post Mini-ventures Build Entrepreneurial Muscle (And Can Lead To Big Businesses) appeared first on John Greathouse.

]]>
 

image001

A version of this article previously appeared Forbes.

Entrepreneurs see the world like a cash booth from a 1950’s game show. On such shows, winners were placed in glass booth filled with money. Once the timer was started, a fan blew the money about and the contestant had a few seconds to grab all the cash they could hold onto.

Once you begin seeing the world with the eyes of an entrepreneur, you realize that money-making opportunities are all around you. I encourage my UC Santa Barbara students to launch mini-ventures while in school so they will begin to see the opportunities that surround them. Along the way, they grab some cash while stressing their entrepreneurial muscles.

If you haven't already subscribed yet,
subscribe now for free weekly JohnGreathouse.com articles!

Once the Ball Starts Bouncing, You Never Know Where It Will Stop

The best advice in Guy Kawasaki’s The Art Of The Start is on page 9, where he states, “Get Going.” As Guy points out, most ventures morph over time to accommodate market realities. As such, the direction you initially point your venture will likely change over time. However, if you don’t start, you can only be assured of one thing – you’ll never control your own destiny.

A list of clever ventures that can be started by college students is included in this Entrepreneur.com article. Three additional examples of mini-ventures carried out by me and my fellow Wharton classmates are described below.

Note: I am not purporting that these are particularly amazing or unique ideas. They merely serve to illustrate how easily entrepreneurial students can turn pedestrian opportunities into profitable, small ventures.

Fashion Show

Two Wharton students needed new suits for the dreaded MBA interview season. Rather than schlep downtown and pay retail, they went to one of the most expensive tailors in Philadelphia and offered to host a fashion show at Wharton, featuring the tailor’s suits, in exchange for two free suits each.

The fashion show was a huge success. The students were given valuable dress for success tips, the tailor sold a significant number of suits and the entrepreneurial students got free duds.

It’s Called Business 

One Wharton student was too lazy to take notes during lectures. With the first test looming, the entrepreneurial student borrowed notes from three rather scholarly students, consolidated them into a single document and sold copies to other students for $5 each.

The student scholars whose notes were used to create the consolidated document were given a complimentary copy (and thus the benefit of the notes from the other two students). The scholars also enjoyed the prestige of having their notes included in the consolidated document, as it was a clear indication of their intellectual prowess – a status highly valued by the legion of Wharton overachievers.

This mini-venture was so successful that the student continued to sell such consolidated notes for the remainder of the student’s Wharton tenure, earning a number of hefty fistfuls of beer money.

At one point during the second year of this enterprise, the entrepreneurial student was approached by an indignant Wharton Professor who tried to shut down the note selling operation, which was taking place outside of the Professor’s classroom. When the Professor asked, “What do you think you are doing?”, the smartass entrepreneur replied, “It’s called business. Last I checked, this was a business school.” Rather than shutting down shop, the student simply moved his operation down the hall and continued to satisfy the brisk student demand for the consolidated notes.

Nostalgic Graduation Poster

Another Wharton student contracted with an undergraduate art student and paid him a nominal sum to draw a caricaturized map of the Wharton campus, showing the proximity of all the bars, hangouts, etc.

The entrepreneurial student then printed a couple hundred of the maps, framing a few dozen, and set up shop in front of the business school.

All the prints were sold in a matter of hours, at a profit of $30 each. This mini-venture did so well that not only did the student earn enough money to travel to Europe after graduation, the entrepreneur franchised the idea to a lower classman, who then sold the same prints the following year and split the profit with the entrepreneur who originated the idea.

From Small to Tall 

I was once on the Board of such a company that evolved from a mini-venture into substantial company. The mini-venture began when the Founder agreed to remotely manage a server for a friend, as a favor. To make his job easier, he created automated security tools to protect the server against hackers. He then showed his security toolkit to a colleague, who laughed at the user interface, built a better one in his spare time, and unwittingly became the Co-founder of the mini-venture.

The two Founders then posted their security code online as a personal-use, freemium product and it quickly became a popular open-source security tool. Within days of releasing the personal version, the Founders began receiving inquiries regarding the price of a commercial version of their product.

One such inquiry came from the Salt Lake Winter Olympic Committee. With no idea what a reasonable price might be, the company agreed to provide enterprise-wide security to the Salt Lake Winter Games for a few thousand dollars. The Founders were thrilled to get paid for what had previously been a hobby and the Salt Lake committee was happy to pay tens of thousands of dollars less than they had budgeted for online security.

When checks started arriving at their condo (they were running the part-time business from a spare bedroom), the Founders realized that it was time to quit their day jobs and focus on turning this mini-venture into a full-fledged startup. The company thrived, generating millions in revenue and was eventually acquired by one of its rivals.

Smooth Operator

Mini-ventures demonstrate to an investor that you know how to make something from nothing. Generating profits, even in a mini-venture, is a precursor to similar success on a larger scale.

Just like larger enterprises, mini-ventures force you to pull together disparate resources and bring multiple parties together. Such ventures also demonstrate that you can effectively negotiate with multiple parties and craft mutually advantageous deals. In short, small ventures prove that you can effectively sell yourself, your idea, your product and your startup’s overall opportunity.

Follow John’s startup-oriented Twitter feed here: @johngreathouse.

Image: Dimas Ardian/Bloomberg

Share and Enjoy

LinkedInFacebookTwitter

The post Mini-ventures Build Entrepreneurial Muscle (And Can Lead To Big Businesses) appeared first on John Greathouse.

]]>
http://johngreathouse.com/mini-ventures-build-entrepreneurial-muscle-can-lead-big-businesses/feed/ 0
Confessions Of A VC: Crap – Why I Passed On Uber’s Seed Round http://johngreathouse.com/confessions-of-a-vc-crap-why-i-passed-on-ubers-seed-round/ http://johngreathouse.com/confessions-of-a-vc-crap-why-i-passed-on-ubers-seed-round/#comments Mon, 29 Feb 2016 13:00:44 +0000 http://johngreathouse.com/?p=5850 A version of this article previously appeared on Entrepreneur.com. Did I passed on Uber’s seed round? No. It’s worse than that. I never even bothered […]

The post Confessions Of A VC: Crap – Why I Passed On Uber’s Seed Round appeared first on John Greathouse.

]]>
image001A version of this article previously appeared on Entrepreneur.com.

Did I passed on Uber’s seed round? No. It’s worse than that. I never even bothered to listen to Travis’ pitch, even though I was repeatedly offered the opportunity. I then passed on Uber’s A Round as well, which I thought was valued too high, in light of the company’s progress.

Too bad, as the initial funding round has increased over 4,000 times in value, making a $250,000 investment worth more than $1,100,000,000. Nope, that’s not a typo. Two hundred and fifty thousand would have netted my firm more than one billion dollars.

As discussed in Why I Passed On Twilio, VC's love to talk about their successes, but seldom publicly acknowledge their mistakes. However, passing on a killer investment is not the worst error an investor can make. It is far more detrimental to one’s returns to make investments in companies which fail to return capital. A VC has done their job when their funds include enough great companies to generate an industry-leading outcome.

Thus, while it is painful for a great investment to pass you by, the pain is wistful, not acute.

If you haven't already subscribed yet,
subscribe now for free weekly JohnGreathouse.com articles!

The Billion Dollar Email

Although Uber never pitched Rincon Venture Partners, we share a very good mutual friend with Travis Kalanick, Uber’s Founder and CEO. Our mutual friend mentioned to me over breakfast during the late summer of 2010 that Uber was raising a seed funding round. At that moment, I could have been one of Travis’ first pitches, if I had been curious to learn more.

In between mouthfuls of home-fried potatoes, I recall telling my friend (paraphrasing from memory – his and mine), "It might work in San Francisco, Boulder and Austin, but I don't see it expanding beyond a few small cities with strong tech communities. If they try to move into Philly, New York or Boston, they're going to get their throats slashed." Note: I am not disclosing my friend's identity. He is now a Senior Executive at Uber, although back in 2010 he had no formal affiliation with the company.

A few months later, on December 30th, 2010, my friend appended the following text to a lengthy, non-Uber oriented email:

“not sure if you guys are aware of uber (ubercab.com). essentially they are a service that turns the downtime of town car/limo services into cab service. i thought it was a great idea given how crappy cabs are and it seems to be getting traction. one of my old *** <company name redacted> colleagues is the ceo. probably not up your alley, but thought i'd mention it.”

 

My email response was characteristically brilliant, stating:

*** <name redacted> - I think you have mentioned this one before, not sure. Sounds familiar.

 

Looks like they are ultimately providing the service (via independent drivers), correct? If so, not a great fit. If they are selling s/w that allows independent drivers to make more money, that is a bus model that fits within our overall investment thesis (i.e., s/w sales vs real-world fulfillment of a service).

 

Keep them coming, esp those for which you know the Founders / key players.

 

My Partner, Jim Andelman, responded a couple of days later with a much more cerebral and thoughtful email, stating:

“Potential issues:

#1 they got a cease and desist order from SF for operating a taxi service w/o a license.  Turned out to be great PR, got them lots of attention, and they're likely able to change their TOS to get in compliance.  But still a risk, and something that may need to be handled a little differently in every single jurisdiction.

#2 (bigger one IMO) is the limited number of metro areas that have the right supply and demand dynamics for this to work as a good service.  I'm just not sure it's gonna fly everywhere, and may end up nichey even where it does work well enough.  Oppty is for them to expand beyond car rides, into other verticals (that are similarly inefficient and have a location component) once they are firmly seated on the handset.  But each vertical requires a lot of focused attention, so could be like building a bunch of businesses at once, which is hard.”

Over the next several years, my Partner and I were reminded of Uber's success every time we connected with our mutual friend, long past when it became a slightly painful joke.

What I Missed About Uber

There were two areas in which I greatly underestimated Uber: (i) its ability to create a robust, two-sided market and, (ii) its wily use of consumers to muscle its way into hostile markets.

Two-sided Market – One reason I was not excited about Uber was because its success was predicated on creating a two-sided marketplace of drivers and riders. Not enough drivers and riders would have shunned the company. Likewise, a dearth of riders and drivers wouldn’t have been incentivized to sit idle, waiting for fares.

Although a number of extremely successful companies have pulled off two-sided markets (notably, Airbnb, eBay and Rincon portfolio company Tradesy), most startups lack the capital to achieve critical mass necessary. Uber's development of its marketplace is a textbook example of how to do it right.

The company began operations in San Francisco, a tech savvy city with a concentrated downtown and notorious for its terrible taxi service. Additionally, Uber initially focused on replacing limo-style town cars and thus appealed to a relatively small number of upscale riders, inclined to have smartphones and be price insensitive.

Although it was a brilliant market entry strategy, it contributed to my misunderstanding of the opportunity. I viewed their value prop as a town car substitute, rather than appreciating the larger opportunity to eventually cannibalize the taxi market.

It's possible I would more fully understood the company’s vision, had I spoke with Travis and not relied on my friend’s secondhand description of the opportunity.

Consumer Leverage – Uber marshaled the collective efforts of its users to overcome decades of entrenched political graft and corruption. They accomplished this in a number of ways, including offering free rides in markets politically closed to them. Uber gave dissatisfied taxi consumers a taste for their superior service and then made it easy for them to express their outrage via social media and email barrages directed at local political hacks. Eventually, even the most corrupt politicians acquiesced when faced with an angry electorate.

Listen To Trusted Sources And Take The Freakin’ Meeting

The ultimate lesson I learned from scoffing at Uber is that I should have honored my friend's thoughtful (and repeated) suggestions and his nose for great businesses. A successful, serial entrepreneur in his own right, he mentioned Uber to me and my Partner several times when it was at a stage that fit within our investment focus. He was clearly excited about the opportunity and was trying to help his buddy Travis by pulling in what he considered to be helpful investors. Yet we never took the time to learn more about Ubercab.com. Dang it.

Note to my loving wife: The next time a friend knocks me over the head with a billion dollar opportunity, I’m going to listen. Promise.

Follow John’s startup-oriented Twitter feed here: @johngreathouse.

Image: Logo courtesy of Uber, all rights reserved

Share and Enjoy

LinkedInFacebookTwitter

The post Confessions Of A VC: Crap – Why I Passed On Uber’s Seed Round appeared first on John Greathouse.

]]>
http://johngreathouse.com/confessions-of-a-vc-crap-why-i-passed-on-ubers-seed-round/feed/ 2