I found this excellent post, entitled Top Ten Geek Business Myths, on Ron Garret (formerly, Erann Gat’s) blog today. Garret worked early on at Google, wrote for Xooglers (which appears defunct), and has become a venture capitalist.
Here are his ten myths:
- A brilliant idea will make you rich
- If you build it they will come
- Someone will steal your idea if you don’t protect it
- What you think matters
- Financial models are bogus
- What you know matters more than who you know
- A Ph.D. means something
- I need $5M to start my business
- The idea is the most important part of my business plan
- Having no competition is a good thing
- (Bonus myth) After the IPO you’ll be happy.
Here are some of my thoughts on his myths, organized by number.
1. It’s rarely just the idea; it’s the execution and don’t forget the timing. You need all three for big success. For example, Business Objects had a good product, with one awesome idea (the semantic layer), but we had great execution and near-perfect timing. Ingres had a great idea (relational database), great timing, but sorry execution.
2. As Theodore Levitt says: “purchasing agents buy 1/4 inch holes not 1/4 inch bits.” It’s not about the product, it’s about the problem it solves.
3. I generally agree with his point: no one cares about the idea until it’s too late. In software, the game is primarily about market-share and switching costs. However, my experience at Business Objects runs somewhat counter to this: the founders did successfully patent the original idea and years later we made significant money suing competitors. That said, I view this as the exception, not the norm. While the patent provided some nice royalty income, it was not a key enabler of company success. Most important, I agree with his basic assertion that technical entrepreneurs tend towards excess focus on patents, which typically have no impact on short- to mid-term business success.
4. I’ll stay out of the political swamp and simply agree with the assertion that it’s not what you think, but what your customers think, that matters.
5. I love the Eisenhower quote: “[I find that in preparing for battle,] plans are useless, but planning is indispensable.” I am a huge believer in all forms of planning and, in my experience, a well crafted plan often does becomes reality. So I’d rephrase Eisenhower as: “the plan may or may not be useless, but planning remains nevertheless indispensable.”
6. I think both matter: what and who. Who drives not only early customer success, but also the composition of your team, which is absolutely critical.
7. Pragmatically speaking, PhD’s definintely help get speaking slots at conferences which can be critical to early-stage visibility. I’m not saying you should get a PhD to help your PR program, but — to give a concrete example — much of Documentum’s early success in pharma was related to marketing VP Chip Hay’s PhD. Because of Chip’sPhD, he was invited to participate on a panel at the Drug Industry Association’s Electronic Document Management conference. During that panel, Chip saw the massive opportunity to help pharma companies accelerate the new drug approval process.
8. Because capital was so expensive for its two young, French founders, Business Objects learned frugality early on; it was started with a total of about $4M in venture capital. You don’t need tens of millions to start a company. Some companies (e.g., MicroStrategy) bootstrap off consulting businesses and raise no VC. In reality, the demand for capital is a function of product development costs, growth, and the need to build a market. So while I believe you don’t need vast sums to create a company, I do believe that raising VC is an advantage: if you pick good VCs, you get excellent advisors on your board “for free.”
9. I think he overstates this one. I’d rephrase along the lines of 10% inspiration (the idea) and 90% perspiration (the execution). Simply put, VCs are famous for investing in categories (i.e., ideas) simultaneously. So in any category, there are typically 5-20 companies all starting at roughly the same time with roughly the same idea. Execution then becomes the dominant factor in determining outcome. For example, after Oracle’s success in the 1980s, VCs invested over $100M in object DBMSs hoping for a repeat. Today, social networking sites (e.g., LinkedIn, MySpace, Plaxo, FaceBook, Friendster, Tickle) would provide a similar example.
10. I concur. When a company tells me that they have “no competition” I assume they are either lying or in a dead space. There are simply too many smart people, too many VCs, too much money, and too much entrepreneurship to believe that only one company will come up with a solution to an interesting and potentially lucrative problem.