Nesheim Online

TIP OF THE WEEK: When should I do my startup?

I want to talk to you about timing your career as an entrepreneur.

I spoke this week to a lot of Cornell University students who are entrepreneurs-to-be. The school is a hotbed for entrepreneurs. It is a research and learning institution second to none in the world that attracts the finest talent. It's entrepreneurs are world-class and the startup teaching is awesome. So are the students and faculty.

Quick Facts about Entrepreneurship@Cornell

• 144 courses on entrepreneurship offered across the 2007/2008 curriculum map
• 9,000 total enrollments in the 144 courses
• 55 faculty from across the campus associated with Entrepreneurship@Cornell
• 9 Deans

Entrepreneurship@Cornell.edu

One central discussion I had was with students wondering if they could get venture capital for an idea after they graduate (undergrad or MBA or Master of Engineering or PhDs all had the same issue) or if they should join a startup.

I suggested they think about the following as they reach a conclusion about what they should decide:

• Most startups fail, even if started with the finest venture firm money and serial entrepreneurs.
• The golden years of a career are ages 28 to 38. Then it is over. You coast with your reputation and skills (you are "branded") after that.
• You can do a startup after age 40. Many do. Successfully.
• Your current idea will not be your last. Real entrepreneurs have lists of possible ideas for startups and add some daily.
• Think about what you have on your resume in three years when you need a job. Your startup is statistically going bankrupt. You do not walk on water. Think about your the next step after your company shuts the doors or after you are booted out.
• Think about where you want to be in ten years. Family with two children? House in nice neighborhood? Saved for kid's private university education? Out of debt? Can you get there if your idea is a flop?
• Who will go with you to do the startup? Your wife (one couple at Cornell is planning on that)? Where is the business experience (managing an income statement and lots of people) you may lack going to come from? It is next to impossible in the quality startup world to get money without a complete core team.
• Why are you wanting to do a startup? Because you feel like it? Or you cannot bear thinking about a boring job in a boring giant corporation? Or you cannot find an employer?
• What are the skills and network you want to accomplish attaining over the next three years? Where could you find a great boss? What company culture works for your type of stress abilities? What do you want to learn most to take to the next job (or into your first startup)? Why are those skills missing in you today?
• Have you considered joining a small to medium enterprise (SME) that is public and growing 30 to 80 percent a year? Could you enjoy and learn what you are missing in such an inferno? (try looking at companies highlighted by IBD Business Investor's Daily).
• And then there are all those questions about your startup idea that venture capitalists ask.

BOTTOM LINE: Eager young people (under 40) graduating from school often look to startups as the next step on their career path. Some succeed taking that step. Most don't. Think about your alternatives before you automatically try to raise money for your idea. The thinking suggestions above will help you craft a great plan for yourself to grow in self-fulfillment, purpose in life and personal satisfaction. You should end up with confidence that your personal plan will lead you to building a personal unfair advantage. I wish you The Best on your adventure!

SOFT AT THE BEGINNING: Startups are sculpted form a lump of clay

It was a long and productive day yesterday, working with a first-timer and a serial entrepreneur, crafting bplan changes. We have been digging deeply into a new space and finding encouraging signs of real gold. As I put the Porsche into cruise control on the ride down the coast to Carmel, I reflected on our progress.

One thing stood out: I must always think of a startup as a lump of clay in the hands of a sculptress.

The sculptress has an idea in mind at first, yet knows the final outcome is most likely to be very different. Respect for that enables the lump of clay to be shaped over time, learning and reflecting as lessons are learned along the way.

Yes, a good bplan is highly recommended. Yet it is organic and will change by the day. I just finished editing a PPT pitch and was surprised at how much we had modified our bplan in less than five days of work.

The shining insight of the day came during an interview with an experienced CEO candidate. He reflected on our plan with comments about how he would take only the minimum seed round, focus on building only what needs to be built, get an early (alpha) customer to work with, and go on from there, hiring as we proceed and learn, month by month.

BOTTOM LINE: As the sun came out this morning, I was reminded of how soft the first years of a startup are. A parent dreams about how the child will grow up, but the outcome is typically very different than planned. The same goes for startups. This is a very important concept to learn. It is also very tricky to manage for first-time entrepreneurs. When you get it right, you have learned a lot about building and unfair competitive advantage. I wish you the best!

TWAS THE NIGHT BEFORE STARTUP CHRISTMAS and all the business plans were nearly graded,

The sun was down, the windows shaded.

 
It was a dark and stormy night, and all through my house,

Not a creature was stirring, just my computer mouse.

 
I was grading class business plans, and all snuggled in

To my home office in quiet Carmel, away from Silicon Valley’s holiday shopping din.

 
Grading of the plans was nearly finished, so I looked forward to bed,

When up in my head I heard such a clatter, that I had to stop grading to see what was the matter!

 
I looked at the pile of colorful pages,

And realized I was in trouble, oh my students, those sages!

 
How could it be? There were four in every five, each marked Confidential,

Meaning, Professor John, don’t use it in the next class as an example!

 
Oh such a clatter, that rang in my head!

What was going on, what had I said?

 
But then the light dawned on me, I sensed what was the matter:

The students had created not fiction, but real stuff, well written, very good banter.

 
Yes, I could now understand what they intended to do, it was what exactly what they had said,

“We’ll start with an original idea, put together a great team and get it lead,

 
Fueled by an unfair advantage, built by great people on a quest,

To use their bplan, put in hard work and do their best,

 
To convert the idea into a world-class business, with lots of sales and products that do good,

And race on to victory, as a brilliant group of people should.

 
Then reality will become beneficial, with good things for the many needy,

And sales will climb and climb, it will become very big, really!

Yes, it’ll become known to the world! An enterprise of great fame,

A gorilla of a new mountain, of a fresh domain.”

 
So I put on my glasses to finish the last two plans,

And smiled at the chances, but I had already become one of their big fans.

 
And now let me wish you aspiring entrepreneurs a Merry Christmas,

And Happy New Year,

 
with much dreaming and joy,

and many a great cheer!

 
Remember to make it an adventure, keep it fun as you go,

And please: remember to invite me to party, on the day of your IPO!

 

 

WANNABE MISSES THE POINT: What not to aim for as an entrepreneur.

“John, I just want to do a startup. Not become a wage slave. When I graduate I need to find some people with a good idea or invent one of my own and then do a startup. How can I do that?” said Tom on the phone.

We talked about an hour, going over his alternatives as a bright student about to graduate from one of the finest universities in the world. Consulting for McKinsey. Wall Street work as an investment banker grunt to greatness. Fortune 500 climbing the ladder. Hot emerging growth company. Young gorillas like Google. And other alternatives.

But each time Tom rejected the idea and said “But I just want to do startup.” Finally he blurted, “John, give me a couple of names, people in good startups. I’ll call them and see if they will hire me.” That was my opportunity for one more attempt to clarify the real world to Tom.

“So Tom, why would you hire yourself if you were the founder of a good startup? What could you do to earn your keep in a new enterprise? What could you claim to be an expert at, doing it better than anyone else competing for the job?” There was a pregnant pause. About a minute later, Tom said “Do you mean I have to be good at marketing, or operations or something like that?” I replied “Well, why else would you hire yourself? There are millions of smart people out there who can learn to do something on the job as fast as you can, or faster. And why would you hire people to learn their jobs at the expense of your new enterprise?” Another pause ensued.

 

"What about the Internet guys like Goolge and Yahoo people?" asked Tom. "They were in the Mania phase of a bubble, Tom. Lucky, just plain lucky. Do you want to bet your next half a decade on luck?" I returned.

So I continued on. “Tom, it is easy to start a startup. Getting moving is not hard. What is hard is finishing alive and in great condition. That is hard. Finishing a startup is what a startup is all about. Building a world-class enterprise starting with an original idea is the name of the game. It is not about ‘doing a startup’.”

“You mean to tell me that I can’t just be a startup person?” Tom quietly said. I thought he was beginning to see the point I was trying to make. “Tom, competition is ruthless on new enterprises. The battles are for life or death. It is not about just having fun and walking away happy if it goes bankrupt. It is very serious. So whom do you want to go into battle with? A young, untrained rookie? Or a battle-proven veteran who can do a job with world-class excellence?”

“I think I get it” replied Tom. “Guess I’ll rethink my plans. Thanks.”

“Call me later if you want to talk further, Tom”

LESSON OF THE DAY: If you want to do a startup, start by becoming an expert at leading and managing one of the classical functions: marketing, engineering, finance, and so on. The mark of arrival is becoming a vice president of such a function in a brand name, world-class corporation. The crop of such graduates have made the most outstanding CEOs and core teams that went all the way to IPO. And they have gone on to become successful venture capitalists.