I'm startled to see how long it's been since I last wrote in this blog - almost 2 months! There's no shortage of interesting things to talk about, just a severe shortage of time to do so. I suppose it's a good thing because, frankly, I've been busier than the proverbial one-armed paperhanger. Lots of people needing help and I'm just happy to be asked to give it!
I did take time out a couple weeks ago to go see one of my favorite Valley entrepreneurs, Marc Andreesen, the Netscape, Opsware and Ning co-founder who now runs his own venture capital fund called Andreesen Horowitz. Marc was speaking at a Stanford University Entrepreneurial Thought Leaders seminar and it's always worth listening to what he has to say. In no particular order here are some of his topics and thoughts (excuse the paraphrasing).
On the venture capital industry:
Interestingly enough, you need a license to have a gun or to drive a car. You don't need any kind of license - or indeed any specific background or expertise - to become a VC!
As an investor, most VC firms will break your heart. It's well documented that majority of VC returns are made by the top 20, 30, 40 firms and the other 700 or so will significantly under-perform the market at vastly higher risk. (He implies this is a badly broken model).
Because it's so much cheaper these days to get many companies started and ramped up than it used to be, there is a whole new layer of seed and Angel investors coming into the market and in essence displacing some of the traditional VC roles. And at the other end of the spectrum there are new firms coming into the market and investing hundreds of millions of dollars in much later stage companies like Facebook, Zynga and Groupon with the specific objective of providing liquidity to founders and employees and allowing these companies to stay private much longer than they would have historically done. (Being public is absolutely not all it's cracked up to be!)
Three necessities for a successful startup:
- Is there a big market? An existing one, or a brand-new one.
- Is what you bring to the market enough to provide a 10x change as a result of your product, technology or innovation. It has to be significant enough to create a brand-new market, or be able to punch through and displace existing, entrenched competitors.
- Team. Preferably more than one technologist, and somebody who knows how to sell!
How to attract the best and brightest to your startup:
Stock options, yes, sure. But you really need a great vision. "The difference between a vision and an hallucination is that other people can see the vision!" It's a sales job. The entrepreneur must be able to create and sell that vision in a compelling enough manner to get everyone else - investors, employees, customers - to go along with it and help make it happen.
The Valley as the world's center for consumer electronics:
Marc believes that the combination of incredibly powerful chips and components, almost as commodities, and the design skills and software innovation here in the Valley is shifting the center of gravity for consumer electronics back here from Asia. Firms like Apple, yes, but also Mino (Flip cameras), Aliph, Palm, Tivo, Sling and many more. While they look and feel like hardware companies in reality their strengths are in the innovative product designs, software capabilities and related services (app stores, iTunes etc) these companies bring to the table.
For example, Aliph's Jawbone Bluetooth headset now comes with an app store where you'll be able to download apps that can do things like read you directions as you're driving, read you your email, etc.
Entrepreneurship "in the cloud":
Many of these consumer products companies - and others - are doing their software development in the cloud, particularly using Amazon Web Services. This has eliminated much of the traditional high costs - servers, software, bandwidth etc - associated with starting up technology businesses, allowing these companies to be much leaner, take less capital and scale up more rapidly.
There's lots more but you get the flavor! To see Marc's talk in its entirety look here at Stanford's Entrepreneurship Corner. If you missed his interview on Charlie Rose on PBS last year, go check it out here.
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