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Monday, September 20, 2010

Execution matters

The first event of the SVCE fall speaker series was entitled “Getting off the Ground: Ideas and Execution.” The panel consisted of an entrepreneur, two early-stage C-level execs and an intrapraneur:
  • Steve Erickson, VP and GM, Audio Products, Creative Labs
  • Matt Ready, VP, Sandforce (SJSU ’81)
  • Paul McGrath, CEO, Ridespring
  • Steve Olson (SJSU ’83), CFO, Ridespring
The one common thread was that the idea was (at best) a small contributor to the ultimate success of the startup venture. I don’t know that this is heresy around these part — in the land of big idea tech startups — but certainty it is contrary to the popular mythology. Given the excess entry (often funded by VCs) and inevitable shakeouts in local tech industries, the opportunity for having a unique idea seem pretty rare.

After taking sales positions at 12 different companies since he graduated from SJSU nearly 30 years ago, Ready said that he evaluated a career opportunity the same way that local VCs do, by looking at the market, the technology and the team

In particular, he looked at the new firm’s market, technology, team. He advised entrepreneurs: “if you come up with a new idea, you have to vett it against all three of these vectors.” The biggest problem that he saw was the first one, specifically the Total Available Market. If the company was going after a large enough market, it didn’t matter how good a job it did.

Not surprisingly for a finance exec, Olson was even more blunt in favoring operational excellence: “it’s less about the idea than the execution” because success is “90% execution and 10% a great idea.”

His advice to entrepreneurs was twofold. First, the entrepreneur has to be tenacious, finding creative ways to overcome the inevitable obstacles and surprises. Secondly, (s)he has to have a startup team that share that philosophy — one that is flexible and willing to roll up their sleeves to get things done.

The latter point reminds me of my longstanding observation that beyond entrepreneurs and non-entrepreneurs, many employees seem better suited for startups. Perhaps it’s because they thrive on chaos, perhaps it’s because they prefer being generalists — or maybe they just prefer an environment that provides the freedom to be creative.

As a board member of various startups, Erickson also agreed execution is what separated the winners from the losers. Without directly criticizing his employer, he noted that one of its employees created a hard disk-based MP3 player two years before the iPod . We all know who won, although getting their first brought Creative a $100 million royalty payment from the big A.

Even the one CEO offered only qualified support for the importance of the big idea. In particular, McGrath has given up on the idea of hoarding his ideas and keeping them secret for fear someone will steal them Instead, he encouraged entrepreneurs to “be brutal with your own ideas” and share them widely, encouraging others to identify any flaws.

He was blunt in encouraging entrepreneurs to get honest criticism sooner rather than later:
It’s painful if you find out your idea sucks, but it’s a lot more painful if you sink a lot of money into it.

Wednesday, September 1, 2010

10 easy steps to entrepreneurship failure

On the WSJ website, Rosalind Resnick offers a list of “10 Mistakes that Start-up Entrepreneurs Make:”
  1. Going it alone.
  2. Asking too many people for advice.
  3. Spending too much time on product development, not enough on sales.
  4. Targeting too small a market.
  5. Entering a market with no distribution partner.
  6. Overpaying for customers.
  7. Raising too little capital.
  8. Raising too much capital.
  9. Not having a business plan.
  10. Over-thinking your business plan.
This is a reasonable list, a cautionary tale that can be offered to any entrepreneur. The under-emphasis on sales and distribution is a long-known problem, particular for product-focused tech entrepreneurs.

On the other hand, there is always a problem with one-size-fits-all advice. In particular, her advice on business plans — yes they’re always needed — is a biased and oversimplified summary of a much more complex and nuanced decision that entrepreneurs must make. There is rather extensive research on business plans, which is not referenced: for example, it’s clear that not all entrepreneurs need a detailed business plan.

So I’d certainly give the list of gotchas to entrepreneurs, but note that these are potential problems they should look out for, not necessarily guidelines for what they should or should not do.