Qualities of a successful entrepreneur - Ability to change course (3/11)
Translation of the third post of Mark Saster from the series about the quality of a successful entrepreneur (previous posts: 1 , 2 ).
_________
This is part of my new series of posts on what makes an entrepreneur successful . Originally, I published them on the VentureHacks site, one of my favorite sites for entrepreneurs. If you have not been there, then you should go.
The series began with a conversation about what I consider the most important quality: persistence . The next post was about practical grip .
')
3. Ability to change course . I do not like to invest in people who are not familiar to me who come to my office and want to have a preliminary agreement in 30 days. I do not think that many venture capitalists love to do it. Yes, of course, there is a mythical company - everyone has heard about it - which came to Sequoia Capital , and the agreement was ready in 24 hours. I'm sure that happens. But in most situations, a venture capitalist will want to evaluate your performance over time. This prompted me to write a post on how to build relationships with venture capitalists . It is surprising and the entrepreneur who is going to sign an agreement proposed by someone he does not know at all. You can also go to Las Vegas and marry or marry the first person you like, without understanding how this person lives. Good on the papers (good brand) does not necessarily mean that a person will be a good spouse.
Venture capitalists often tell entrepreneurs that they want to see the “support” of the undertaking before they are ready to invest. I think they really want to get to know you better for some time. In part, they are interested in how you adapt to the business that you are developing. Every entrepreneur starts with some idea that he thinks makes sense. But then your customers start using your products, competitors make new offers, and your business partners decide to launch a similar product instead of working with you. You just have to “change course” on a regular basis. Top entrepreneurs regularly receive feedback from the market and change their approach based on up-to-date information. Top entrepreneurs seek advice from everyone they need, learn lessons and make small changes every month.
For clarity: most of the serial entrepreneurs at the early stage of the project’s development know that whatever they do in the first year, in the fifth year they will have to do something completely different. . It may even be a completely different business, and perhaps the business model will change a lot. Google did not even suspect that it would make that kind of money on paid search results. They simply copied and exceeded the website Overture (formerly goto.com). We all know Pure Digital's Flip Video cameras. Do you know that their original product was not a video camera? What about PayPal - think you know their story? The original idea was to exchange money through Palm Pilot handhelds! Twitter was a side branch of Odeo, a website dedicated to sound and podcasts. At first it was called Twttr and did not receive any rave reviews on TechCrunch and GigaOm at all . Seesmic (now a Twitter client) was originally a video blogging platform. Geni.com spawned Yammer. The list is endless.
Outstanding entrepreneurs change course. Evan Williams, Luke LeMer and David Sacks are outstanding entrepreneurs.
For this reason, personally, I am not too picky about your financial model. I publicly said that you MUST have a financial model , because it works like a compass and gives a strategy, but it will change regularly during the first two years. And it will change so much that in two years it will not be at all like the original model. And in five years? Further changes will not be as significant.
So for me, how you respond to the challenges of the market, what you learn and how you adapt is the most important information, on the basis of which I understand whether I will invest in your company. Perseverance is a great thing, but if you do not listen to the market and do not change your behavior based on the feedback received, then you are hopeless. Unfortunately, if you do not possess practical acumen, you will notice changes in the market far from immediately and the change of course will be overdue.
I once wrote a text called JFDI , beating Nike’s motto (“Just Fucking Do It” or “Just do it, damn you!”), Where I concluded that entrepreneurs need to make quick decisions and act quickly. At best, it will be possible to make about 70% of the right decisions. To see 30%, i.e. what is done wrong needs a wise leader. To recognize the wrong and reorient people, you need a leader capable of humility. To carry everyone along, changing direction, you need a real leader. See what Mark Zuckerberg achieved by reorienting Facebook to update statuses to challenge Twitter. It was a great change of course - that is why Mark and achieved such success in Facebook. Let the market not exactly accepted its changes, but the direction, as it seems to me in retrospect, was chosen correctly.
Example:
The best recent example is Ofir Tanz and Ari Mir . This is one of the most talented young technology entrepreneurs in Los Angeles. They came to me 2 years ago with their company GumGum and wanted to get the first round of investment. They wanted to build a DRM system for copyright holders of digital images so that they could protect and better monetize their images. The guys surrounded themselves with good advisers, such as David Sacks and Mike Jones . Mike introduced me to them, so they came up with knowledge.
I liked the guys right away, but the DRM-system for image holders was unconvincing to me. They went back to develop the business further. In the next parish, their business plan was reoriented to create a flexible pricing mechanism for holders to sell images to websites; They developed a banner platform for “out of stock” images. A contract was signed with Gawker Media and the New York Post. It was already more interesting, but also not mine.
After another 2 months, they returned again, receiving investment from Crosscut Ventures , a Los Angeles-based venture capital firm specializing in early stage projects managed by Rick Smith and Brian Garrett. I really respect guys. They also made an investment with Howard Morgan of First Round Capital, and he, if you become familiar with his biography, is a legendary person. Hmmm Looks like the guys did not stand still. They have signed contracts with Glam Media and TMZ.
By the next meeting, they launched several conceptually new products, including the ability to buy the clothes shown in the picture by clicking on them through the affiliate links. I didn’t really believe in this product, but the guys continued to demonstrate their ability to quickly launch and test new products, and every time I met them, I noted their progress.
And then there was a second change of course (the first was a departure from DRM). They suddenly had Javascript on pages that were visited by 40 million unique users, and they made innovative ad products that overcome blindness to banners. They began to launch products that allowed website owners to better download applications from third-party vendors, and experiment with brand-new ad models that raised daily revenue 7 times in less than 30 days.
That was enough for me. I realized that the guys have a real "DNA entrepreneur." They focused on product and cost. They are rapidly introducing innovations and engaging customers. They changed course, had they run something that did not give profit. And now they have also demonstrated the "ringing of the cash register."
And then a serious change in course took place. In the process of launching new products, Ari Mira came up with an idea. He wrote a 7-page positioning text, which, in fact, said the following: “Publishers know best how to monetize their audience. We have proven that through innovation and experimentation, you can earn on advertising much more than using Google AdSense. But what if you create a place in the market where publishers can create their own advertising elements and sell keywords to customers directly in real time? We have already proven that we can beat AdSense, which is not so difficult. In fact, publishers use banner ads that do not give high CPM values, and indeed people don’t look at it - except for very cool sites. Or publishers use Google Adwords, where they are constrained by the Google ad format and contextual links. Both models work for someone, not for someone. And what if to give the publisher the ultimate freedom? What if keyword buyers have a different choice besides buying expensive and competitive words from Google? ”
Hell. Great idea! Therefore, the team arranged a 60-day product development sprint. During this time, we decided to invest both in GumGum and in this new product line, which later became known as Bedrock . Then we conducted a 30-day pilot trial with clients that gave very impressive results. We called a number of publishers who told us what they wanted to achieve. We talked with customers and understood their situation. After some 90 days, the product was given the green light, and a few months later we announced it .
I am proud to work with these guys. Writing a check, I told them that I was investing not only in their current business, but also in their potential. Truly so.
_________
Previous translations of this series:
1. Perseverance .
2. Practical grip .
_________
This is part of my new series of posts on what makes an entrepreneur successful . Originally, I published them on the VentureHacks site, one of my favorite sites for entrepreneurs. If you have not been there, then you should go.
The series began with a conversation about what I consider the most important quality: persistence . The next post was about practical grip .
')
3. Ability to change course . I do not like to invest in people who are not familiar to me who come to my office and want to have a preliminary agreement in 30 days. I do not think that many venture capitalists love to do it. Yes, of course, there is a mythical company - everyone has heard about it - which came to Sequoia Capital , and the agreement was ready in 24 hours. I'm sure that happens. But in most situations, a venture capitalist will want to evaluate your performance over time. This prompted me to write a post on how to build relationships with venture capitalists . It is surprising and the entrepreneur who is going to sign an agreement proposed by someone he does not know at all. You can also go to Las Vegas and marry or marry the first person you like, without understanding how this person lives. Good on the papers (good brand) does not necessarily mean that a person will be a good spouse.
Venture capitalists often tell entrepreneurs that they want to see the “support” of the undertaking before they are ready to invest. I think they really want to get to know you better for some time. In part, they are interested in how you adapt to the business that you are developing. Every entrepreneur starts with some idea that he thinks makes sense. But then your customers start using your products, competitors make new offers, and your business partners decide to launch a similar product instead of working with you. You just have to “change course” on a regular basis. Top entrepreneurs regularly receive feedback from the market and change their approach based on up-to-date information. Top entrepreneurs seek advice from everyone they need, learn lessons and make small changes every month.
For clarity: most of the serial entrepreneurs at the early stage of the project’s development know that whatever they do in the first year, in the fifth year they will have to do something completely different. . It may even be a completely different business, and perhaps the business model will change a lot. Google did not even suspect that it would make that kind of money on paid search results. They simply copied and exceeded the website Overture (formerly goto.com). We all know Pure Digital's Flip Video cameras. Do you know that their original product was not a video camera? What about PayPal - think you know their story? The original idea was to exchange money through Palm Pilot handhelds! Twitter was a side branch of Odeo, a website dedicated to sound and podcasts. At first it was called Twttr and did not receive any rave reviews on TechCrunch and GigaOm at all . Seesmic (now a Twitter client) was originally a video blogging platform. Geni.com spawned Yammer. The list is endless.
Outstanding entrepreneurs change course. Evan Williams, Luke LeMer and David Sacks are outstanding entrepreneurs.
For this reason, personally, I am not too picky about your financial model. I publicly said that you MUST have a financial model , because it works like a compass and gives a strategy, but it will change regularly during the first two years. And it will change so much that in two years it will not be at all like the original model. And in five years? Further changes will not be as significant.
So for me, how you respond to the challenges of the market, what you learn and how you adapt is the most important information, on the basis of which I understand whether I will invest in your company. Perseverance is a great thing, but if you do not listen to the market and do not change your behavior based on the feedback received, then you are hopeless. Unfortunately, if you do not possess practical acumen, you will notice changes in the market far from immediately and the change of course will be overdue.
I once wrote a text called JFDI , beating Nike’s motto (“Just Fucking Do It” or “Just do it, damn you!”), Where I concluded that entrepreneurs need to make quick decisions and act quickly. At best, it will be possible to make about 70% of the right decisions. To see 30%, i.e. what is done wrong needs a wise leader. To recognize the wrong and reorient people, you need a leader capable of humility. To carry everyone along, changing direction, you need a real leader. See what Mark Zuckerberg achieved by reorienting Facebook to update statuses to challenge Twitter. It was a great change of course - that is why Mark and achieved such success in Facebook. Let the market not exactly accepted its changes, but the direction, as it seems to me in retrospect, was chosen correctly.
Example:
The best recent example is Ofir Tanz and Ari Mir . This is one of the most talented young technology entrepreneurs in Los Angeles. They came to me 2 years ago with their company GumGum and wanted to get the first round of investment. They wanted to build a DRM system for copyright holders of digital images so that they could protect and better monetize their images. The guys surrounded themselves with good advisers, such as David Sacks and Mike Jones . Mike introduced me to them, so they came up with knowledge.
I liked the guys right away, but the DRM-system for image holders was unconvincing to me. They went back to develop the business further. In the next parish, their business plan was reoriented to create a flexible pricing mechanism for holders to sell images to websites; They developed a banner platform for “out of stock” images. A contract was signed with Gawker Media and the New York Post. It was already more interesting, but also not mine.
After another 2 months, they returned again, receiving investment from Crosscut Ventures , a Los Angeles-based venture capital firm specializing in early stage projects managed by Rick Smith and Brian Garrett. I really respect guys. They also made an investment with Howard Morgan of First Round Capital, and he, if you become familiar with his biography, is a legendary person. Hmmm Looks like the guys did not stand still. They have signed contracts with Glam Media and TMZ.
By the next meeting, they launched several conceptually new products, including the ability to buy the clothes shown in the picture by clicking on them through the affiliate links. I didn’t really believe in this product, but the guys continued to demonstrate their ability to quickly launch and test new products, and every time I met them, I noted their progress.
And then there was a second change of course (the first was a departure from DRM). They suddenly had Javascript on pages that were visited by 40 million unique users, and they made innovative ad products that overcome blindness to banners. They began to launch products that allowed website owners to better download applications from third-party vendors, and experiment with brand-new ad models that raised daily revenue 7 times in less than 30 days.
That was enough for me. I realized that the guys have a real "DNA entrepreneur." They focused on product and cost. They are rapidly introducing innovations and engaging customers. They changed course, had they run something that did not give profit. And now they have also demonstrated the "ringing of the cash register."
And then a serious change in course took place. In the process of launching new products, Ari Mira came up with an idea. He wrote a 7-page positioning text, which, in fact, said the following: “Publishers know best how to monetize their audience. We have proven that through innovation and experimentation, you can earn on advertising much more than using Google AdSense. But what if you create a place in the market where publishers can create their own advertising elements and sell keywords to customers directly in real time? We have already proven that we can beat AdSense, which is not so difficult. In fact, publishers use banner ads that do not give high CPM values, and indeed people don’t look at it - except for very cool sites. Or publishers use Google Adwords, where they are constrained by the Google ad format and contextual links. Both models work for someone, not for someone. And what if to give the publisher the ultimate freedom? What if keyword buyers have a different choice besides buying expensive and competitive words from Google? ”
Hell. Great idea! Therefore, the team arranged a 60-day product development sprint. During this time, we decided to invest both in GumGum and in this new product line, which later became known as Bedrock . Then we conducted a 30-day pilot trial with clients that gave very impressive results. We called a number of publishers who told us what they wanted to achieve. We talked with customers and understood their situation. After some 90 days, the product was given the green light, and a few months later we announced it .
I am proud to work with these guys. Writing a check, I told them that I was investing not only in their current business, but also in their potential. Truly so.
_________
Previous translations of this series:
1. Perseverance .
2. Practical grip .
Source: https://habr.com/ru/post/83287/
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