What They Don't Teach in Business School about Entrepreneurship

making an investment based on the following characterization, a, b and c, therefore, d. And as soon as you start running a company, you realize that none of those assumptions work, and as an entrepreneur, you get paid to have an opinion. When

they

say, Will,

what

's your opinion on this deal? Do you have an opinion. And I suddenly realized, like, shit, I don't even know

what

to do now. And realizing that was a very unnatural feeling because I would find myself always knowing about you and realizing now that I don't know. And basically, in the context of this, we had no idea how to make money, none.

And how to deal with that and accept it and then realize, well, how are we going to get out of this problem? And in deciding that, okay, this, I remember when Nick Saven won the national presidency and he said that, hey, we believe in the process, not the results in Alabama and what that means. What he meant was that if you know how to block, how to play defense, you know how to do these things, you just play and then trust the process to help you get to the outcome you want. But, instead of some random act of heroism where you'll have this flash of genius that will make you rich, just decide to slowly and steadily move towards where you're going in a predictable way and then trust that that will get you there. get to the correct answer instead of previously saying I have the answer, now we will make that happen.

That was a really difficult transition from being an investment hypothesis-driven thinker to being a process-driven thinker. Mm-hm. Mike, after engineering

school

, I went and worked at Place Hughes, Hughes Aircraft Company. And one of the projects I worked on was a solar-powered race car. And it was a totally great job. We traveled across Australia at full speed from Darwin to Adelaide. And this car, before we built it, was the fastest, again, this was a long time ago, the fastest solar-powered cars were going maybe 20 miles an hour, maybe 22 miles an hour. and we built a car that could go 55 miles per hour forever, just on sunlight.

Which is, from an instinctive perspective, like it's an amazing achievement. And we won the race and we came back and I remember clearly as always my boss saying that was amazing. You know, I just want you to know that the average career at Hughes Aircraft Company is 6%, you'll get 6.5% this year. And just the feeling in that moment of knowing that your destiny was in your own hands was like okay, this is not going to work. I also got fired between my first and second year of

business

school

. I went to work with a consulting company. At the end of the summer everyone got an offer to come back except me.

And I was fired because I frowned at people above me in the company. And

they

told me that I admired them for at least telling me that, but you know, talking about wanting to be in control, these are all, in a way, strong influences. and another thing, more or less, how you get to

entrepreneurship

. I was actually interviewed on Japanese television and I said, well, I think one of the key tests is how you feel at 9 o'clock on a Sunday night. . If you feel like, you know, yeah, it was a great weekend. I'm looking forward to this week because there are interesting projects, that's one thing, but if you feel like, oh man, I can't believe the weekend is over.

I'm not really looking for a job, it's time for a change. Well, they showed it on Japanese television and they actually showed it at 9 o'clock on Sunday night and apparently they were inundated with 12,000 phone calls to the switchboards or whatever saying, yeah, we, I need to get a new one job. So, like that, like that, like that, those were my influences in doing a new company and the biggest surprise to me at the risk of Chuck's wrath because this is one of the things that Ben said, yeah, in terms of, I think the most important things.

We are a small team and with high morale, it is really difficult to defeat. And it is possible, we had to change, three of my four companies had to change. The original idea completely failed and I had to change to a new idea and that was a surprise to me. It wasn't so much the quality of the original idea, but the quality of the team and the morale of the team that I believe we are, that was the key. Yes, interesting, so yes. Interesting, similar to the point, is that you need a team, you need a high-performance team, because let me generalize what you just said Mike.

There are very few companies that maybe start here and continue like this. The majority go like this, even if they get there, and many more go like this, and end up here. Mmm. And the question is, how, how do you do this, sometimes what is called the art of small boat sailing? Any of you who are a sailor, you know, you tack from one side to the other. And a good team is the way to do it. Yes. So, now we're going to pivot a little bit to thank you very much. Let's address a little the lessons learned.

And to start, just ask each of the panelists what the two key lessons are, one of the two lessons that have been important to their success, lack of success, you know, if there had been failures, you know. , you, you, you learn more from failures many times than from successes. And how and where you learned it, and then after we leave that, we'll come and talk about reflecting on your

business

school experience and find out what you think was, was the most important thing about your business school experience. So let's start with one or two key lessons that have been important to your success or lack of success in your business career.

How and where did you learn them? And let's start with Will. Mmm. I would say, I don't want to repeat myself a little bit, but I think what Mike said is also very important, like, you know, Andy wrote the book Plan B, and basically, it's, it's the same point that Chuck made about veering one way. to another. It's, it's, it's having a smart, energetic team that learns very quickly what the signals the market is giving them, and you know, we have a thesis about our business and now we're on thesis four. I think probably. And recognizing that, as I used to remember, Chuck was on the board of ConEd and the founder of ConEd told me that once, when he was thinking about starting a company.

He said, hey, listen, the first step is the hardest, but once you start, you're just on a journey and a process, and I think that's right. As you begin this work, be very, very aggressive about it. But at the same time, be very flexible as a team on how to attack based on what you're hearing, so thesis on revenue or monoization or customer acquisition, market segment positioning, everything you need to address, with a degree of flexibility so you can re, reconstitute yourself. And then being able to work with investors is really critical in that sense. Because again investors, going back to my original premise about the difference between startups and investments.

Investors are thesis driven. So if you say we're going to do this. I am raising money for this purpose and we will attack this market in this way. Let's characterize the revenue model this way. And at the first board meeting you think, well, that's not why it doesn't work, you know? Having the ability to have that conversation with them. So they will be with you during the trip instead of being surprised by the attack. So I would say being able to work with your team and try to attack the market and learn, and then another challenge is how to work back with your group of investors to basically say, okay, well, this is what we're looking at. in the market.

Here are the data points. That's how I would characterize them. Here's why I think we need to change direction a little and then turn it into an open conversation, so that they become part of the solution instead of looking critically at their problem. So, I don't know if that makes any sense. So the lesson is that I will be ready for changes in direction and accept them. Yes. And also, have the courage to go back to your group of investors and explain to them, this is not the case, this company is not doing what they invested in.

Yes. And your point, your point of view that as an investor, you have a thesis and you are investing in a market. And if at the first board meeting they come back and say, wow, sorry guys, I just accepted your $10 million, but... Right. You won't go there. Correct. Another thing I've really learned, I think, and I say this with all due respect, is that investors are extremely stubborn, like, you know, an alpha male. Write to people normally. And they have many opinions. The other thing I learned was to recognize them, be respectful, and listen to them all without being too reactive in responding to any of them in particular.

What I mean by that is I'm going to say, you know, you should do this, this, this and this and I'll come back and say okay, that doesn't make sense. Why would I do that? And yet, it was already over, so I guess there's a fine line between having an open conversation with investors and being extremely respectful of their opinions because, in my experience, CEOs who don't listen to their investors get fired with relative speed. So you listen, but you're still in charge. So you need to decide how to incorporate their feedback, make them feel like they've been heard without making decisions that go against your own instincts or what you think the company should really do.

I think that's something that's also difficult to learn. That's right, you were an investor in a company called Hummer Winblad. One of those two was Ann Winblad. So if we change the alpha male a little to very determined and stubborn. Yes. How so? That's very, very fair. Okay. Miguel. So for me, one of the golden rules is that speed is the ultimate weapon. And I have learned it in good and bad ways. I have all these little sayings. I think the probability of any business development deal happening decreases by 10% every time it doesn't close. And I really believe it.

So, you know, we closed the deal with Microsoft with a shortcut where our results were displayed on Microsoft's search results page. And that deal was closed in less than ten days. And I think if it had been extended to six weeks or something like that, it never would have been done. The same goes for the deal with AOL. I just saw in my you know, history which ones close and which ones don't. The same goes for raising money. I think I raised seven rounds of funding and six of the seven had a signed term sheet on the day I launched.

And I think if we make it longer, all these questions and doubts, more market research and everything that comes up and even the closure of employees. Me, someone coming in for an interview, we'll do diligence checks while they're still interviewing other people at the company, and before they leave the building, we'll make them an offer and say, are you ready to accept? ? And they are like stunned. And at this moment? We say you know yes. And we don't want to rush you to sleep and let us know tomorrow at 9 o'clock. But we get a lot of those people, and if we don't, I've seen people spread out and then, you know, you lose them.

Also, product launches, my entire company that we've launched, launched a product within three months, three and a half months of starting the company. And then, it's not a feature-rich product, but you get market feedback and all that. So for me, speed is by far the most important lesson I've learned. So one of the points you raised there had to do with raising money and signing the agreement the same day you presented it. Yes. Were you able to do that the first time? Let's assume that, that, that, that all these people will be the first time. Yes.

So people always ask that. So let me say that part of the reason I think all of us here are doing this is because of aspirations. To motivate and excite you guys, some of this stuff may seem like, oh, I can't believe that. But it's kind of a goal to pursue. But actually J for Jertson was my second company, so I had one under my belt, $13 million. We introduced them at 8:15 on a Tuesday morning in April 1998, and received a term sheet signed by them at 4:30. And the way you do it, anyone in this room can do it.

I think some of the techniques are: go into that meeting with what I call and then hire. And if I then hire, I will get a customer for the product and make incredible claims. For example, if we can provide search results in 50 milliseconds and 80% of your users think our results are better than theirs, would you buy them for a dollar per thousand? And almost anyone will say yes, that's fine. So, they sign a letter or whatever and then they enter the Trevor Fischer troops with this letter. Now there are all kinds of caveats and clauses and no legal contract, but at least Trevor Fischer says it's okay, you know, the market risk has been eliminated.

He has a client. And you also go into that meeting thinking about how you're going to build that product. Here's the Gantt chart, here's the people. Here are the three people I'm going to hire. I already talked to them, I already knowoperations. You know, the rise of Amazon EC2S3. The ability to not own a single machine and run a fairly large web application. So I think increasing capital efficiency and a new class of investors whose expectations are slightly different than someone who has an $800 million committed capital fund. It's quite interesting. And it makes it possible, especially if you're a software expert, to be very capital efficient and find access to capital where people have expectations and a $50 million exit is actually part of their model.

I analyze something more with i, I think that now each interaction depends a lot on email. That there will be a shift towards real customer care and service. So, to the extent that you can be more hands-on, you can have a more complicated web-based product. Don't just rely on user experience for that and how you train these people to help you and what technologies they use. I think it will become a very rich environment. You know, I think we're going to see a renaissance in the whole idea of ​​customer service and customer education. Labeling all the things they said.

Mike, any last comments? I think, I think you should, I think you should ignore any macroeconomic trends that exist. I think there are disadvantages in some situations because it is difficult to raise money, but there is a positive counterbalance: it is now easier to recruit and retain people, and it is now easier to get cheaper office space, and the competition is less because they can do it. Not getting financing. So. I really think you should ignore the macro stuff and just build your company and not worry about it. I think we'll close with that. Thank you very much and we appreciate your comments. .

It's a pleasure to meet you. Yes, it was a pleasure meeting you.