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Top 10 Mistakes Made by Entrepreneurs (Full Transcript)

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Full Text of Top 10 Mistakes Made by Entrepreneurs – Part of 2010 Conference on Entrepreneurship at Stanford GSB.

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TRANSCRIPT: 

Question-and-answer session

Interviewer: So, the first question why did you become an entrepreneur? And anybody can go first, Jay?

Jay: Well, I started my entrepreneur journey unconventionally, I actually dropped out of high school when I was 16, so. Actually what caused me to become an entrepreneur was a little bit different. My family was going through little hardships, I was trying to go ahead and help out. And basically, try it out my first job, and only job was trying out for McDonald’s and, they rejected me. So, I realized, hey, there’s something called the internet and looked at what was going on. I mean just the euphoria of it and fell in love with the whole online advertising space. And the beauty of the internet is you don’t need the stigma that’s attached to kind of business as it was probably 50 years ago. I mean, you can be a 16 year old in a bedroom, and start a business that two years later, you can sell for $40 million. And that’s probably, was impossible 50 years ago, so, partly survival helped me become an entrepreneur, but on top of that, I love building stuff out of nothing. So, I’m passionate about it, as long as you have it in your DNA, you can be successful.

Carol: So I became an entrepreneur pretty much out of necessity. I had been working at a public accounting firm. Been passed over for partnership two times and I could see that the third was coming up. And the only reason was because I was a woman. And at this point, there were zero women in the partnership across the world. And that just wasn’t okay with me. But I had butted my head up against the glass ceiling enough times. And at this point, had enough visibility across the whole firm to know that I wasn’t personally going to be able to change this organization from the inside. So I left and turned around, and offered them my services for basically the exact same thing that they would have had if I had made partner within their structure. And asked them to pay me three times as much. They agreed which was the amazing part. Provided me an office and let me keep my administrative assistant for the first six months and I was totally billable from the very, very first day. And that grew into an organization that had employees across the world. And then, kind of once you get the bug, it just kind of starts taking over. And so it’s sort of like, well, there’s a problem here. I can solve it by doing this. And there’s a problem there, and I can go solve that by doing this. And I love it.

Entrepreneur3: Yeah. So I guess the best answer that I can give is that I didn’t decide to become an entrepreneur. And I mean that in two ways. One, I’m actually not quite an entrepreneur. I don’t really deserve to be called an entrepreneur, unlike all the other people up here. I’ve always sort of helped entrepreneurs. I joined the LinkedIn and Facebook before we raised venture funding. Before the companies were built and so on. So, very, very, very early in those companies.

Entrepreneur3: But, surely but always sort of liked helping entrepreneurs. They used to call that being a venture capitalist, but that means something else today, I guess. So the second way in which I mean that, and just really amplifying what Carol just spoke to is, I think a lot of the time people who end up being entrepreneurs, don’t really exactly decide to become entrepreneurs. It’s not like being an accountant, where you say, you know, I’m going to go out and take a test, and get a license, and go become an accountant. I’m going to go to entrepreneur school, and become an entrepreneur. It’s a little bit more organic than that, a lot of the time in my experience. And it’s something that almost happens to you, or that you get the bug for, like you said, usually because something’s broken that you want to fix. Or because something doesn’t exist that you think should exist. And you just decide, I’m going to do it. And that can take lots of different forms. But I think it’s a more organic process than a lot of other so-called career paths.

Entrepreneur4: I actually never aspired to become an entrepreneur. I was working as a research scientist, and I thoroughly enjoyed that, so I never aspired to become an entrepreneur, working as a manager, or working in business in the first place. But the thing that made an impact on me was that, I was actually reading the specification for Netscape 2.0 some years ago, somebody may remember the browser Netscape. But I was reading the whole night, and I was really taken by this, and it had an enormous impact on me. So the next day, I actually quit my job, and started my first company. And I had no idea what kind of business idea I was going to pursue, I really didn’t have so much of a plan, but it was more this incredible passion I felt for internet. I could just sense that internet was going to be really, really big. And I felt this was too big thing — too big of a thing to walk away from, so that’s actually why I started.

Interviewer: So in the life of an entrepreneur, now you’ve been all living the life of an entrepreneur, what is it you like about the life of an entrepreneur, and what is it you don’t like about the path that you have chosen? Anybody, or you can just go to in any order you like.

Entrepreneur1: I guess what I love about it is – yeah it probably goes both ways. I love creating something out of nothing, and seeing that impact, it’s almost like you can see it nurture. And you can see the positive result as quick as you can, kind of make it, make it happen. The downside of being an entrepreneur is that it’s not as posh and stable as a typical company where you have enough things in place, where you don’t have to worry about the revenue. You don’t have to worry about profitability. You don’t have to worry about the individual things, so you end up losing a few hairs almost every day. So, part of being in a startup is, you have your good days and you have your bad days, but, you know, you fall down and you get up, and you keep going.

Carol: So in the corporate world, I used to be called a workaholic. And I’m a pretty passionate person and when I’m on a project, or working on trying to get something done, I pretty much stay focused on that. And that used to be considered a bad thing. And when I became an entrepreneur, everybody just started saying, oh, but she’s an entrepreneur, it’s okay. And so, I suddenly became socially acceptable, about the fact that my work life and my personal life had a very, very blurry line.

Entrepreneur3: Yeah you know, the best thing about it is that it’s amazing and all-consuming, and exhausting, and crazy, and the worst thing about it is that it’s amazing and all-consuming, and exhausting, and crazy. It will become your life, if you’re lucky, and you’re doing it well. And there’s trade-offs in that, but I feel like the last ten or so years of my life are more or less this vortex of non-stop startupness which is great. I wouldn’t trade it for anything. But I think it almost becomes an either/or decision, at some point, if you’re lucky enough to be facing that problem.

Entrepreneur4: I think for me the biggest is the dream, that you can allow yourself to dream. You can allow yourself to, you’re going to create a company, you’re going to have an impact on the world. And at the end of the day, it’s really all up to you. I think of that as a fantastic luxury, that there’s really no limitation. It’s all about your capability, your creativity, and your hard work. That at the end of the day, hopefully, you will be able to accomplish what you set out to do.

Carol: But one of the things that all of us are talking about is that we’re doing it because we have some passion about what we’re doing, and with whom we’re doing it. And one of the things that you’ll hear people give you advice about over and over again is stay focused on your passion. And the reason is, if you hate what you’re doing, you won’t be successful as an entrepreneur, because it requires too much extra effort. And you have to really love it to make the sacrifices that are necessary to be successful.

Entrepreneur2: You also have be a little bit crazy to enjoy the ups and downs of it. Because there’s a lot of ups, there’s a lot of downs along the way. But I think the other key thing is like, if you look at just how the business world works, big companies get to run it. But, in the startup, you get to change it. And if you look at companies like Facebook, Twitter, and just social media in general, that’s really transpired the way we communicate. Big companies are now following onto that, so I think that’s the highlight of being an entrepreneur, is when you can make that big of an impact, and if you’re part of that genre, you can really go ahead and see why, you know. You’re passionate about it, you’re making a change and it’s a lot of fun.

Entrepreneur3: I think that you have a phenomenal luxury when you’re an entrepreneur. And that is to pick the people you actually are going to work with. And I think that really makes a big difference. You know, one thing is to have this objective, or dream or desire. But you can actually work with people that are phenomenally inspiring. People that are fun to hang out with. People that you really care about. And regardless of where you want to go with the company, regardless what you want to accomplish, just a luxury that everyday you will go to work, you work with people that fundamentally are people that you like, and you want to hang out with. I think that is a phenomenal perk, if you can put it that way.

Interviewer: So it’s a great segue to the next question and so we have some both pure entrepreneurs, and we have some venture capital experience here. So, you can answer it from either perspective. Do you think it’s better in the construction of an entrepreneurial company, to partner, to have a partner with someone that maybe has complementary skills, or vision, or whatever, or is it better to go it alone?

Entrepreneur2: Well, I think it’s a frustrating answer, but it depends on the person. And there are people who are absolutely solo creators who have a very individual drive, and that’s the way they function. There are people who thrive and need a partner. I think the funny thing about, about startups is, this whole thing is driven by exceptions. You know, you can create any rule you like, you know, oh, you know, startups where the husband and wife are the founders together.  That always fails, well except for Cisco, you know, startups — I mean, no matter what you pick, there are always exceptions. So, it’s very hard to generalize out of those things. I’ve been involved in companies where there were kind of co-founders, and a founder and co-founders, and just a founder, and I think all of them can work. The most important thing, if you’re starting something yourself, I think it’s to ask yourself what’s the right thing for you? And just like with a lot of the other things that we’ve been talking about, it should really be a sort of organic process, I think. If you sit down and say, all right, today I need to go out and find myself a co-founder, that’s probably not going to succeed.

Entrepreneur3: I think it’s all about — it’s a couple of ways to look at it. Part of it is finding your dream team, and they’re all your co-founding employees, and that’s really essential for any startup. Your first five people, make it or break it to actually seeing if it’s going to survive. Your first 20 people, make it to see if it’s going to be a large company or not. And when you get to that standpoint, you got to go ahead and realize who your right partner’s going to be, and partner can be beyond co-founder, it’s really VC. And you know, just a short plug for Stanford. Stanford’s actually an investor in gWallet. So, I think we got — we picked the right investors for the right reasons. And partly, it’s because they can actually add a tremendous value. I mean, if you look at my first company, I actually took no funding whatsoever. I bootstrapped it. Mainly because nobody wanted to fund me. I was 16, 17, 18. So, no offense on that. But what I learned on the second time around is when I actually raised venture capital is it matured me as an entrepreneur. It actually brought a different perspective on how to grow a large company, how to actually sustain certain things that you do, international expansion and so forth and picking that right partner is key, because if you pick the wrong one, VCs can either add a lot of value, or they can take a lot of value out. So, that’s the caveat, no offense, but that’s the big formula into finding the right magic in that partnership.

Carol: Yep. So, the other part is whether or not to do it alone or in a team is also based on – if you need outside money, how are you going to get it? And in the venture world, one of the conventions is basically, never invest in a single entrepreneur. And the bottom line is, if the entrepreneur gets hit by a bus, what do we have? So, if you have at least two people on a team then, and one person gets hit by a bus, then at least, theoretically, there’s somebody to kind of go forward. And so typically, by the time you see them any entrepreneur company coming forth to a venture capital firm, you’ll see that they have gotten to a point where they have at least the outward appearance of being a team. Angels kind of go back and forth. And since I happen to straddle both communities, there are lots of angels that will fund a single entrepreneur. And then tell them, you have to go find other co-founders. But it depends on how much money you need.

Entrepreneur4: I think the question whether you need a co-founder or not, perhaps the most important thing is, who you choose as co-founder and in the heat of the moment or in the excitement of actually hatching an idea, I think that it’s easy to find somebody that is your soul mate right there and then, right? They’re all excited, oh let’s do this, and they all worked up about it. But if you and a co-founder are looking for somebody that can help you build a company long term, I think it’s very important to dive below the initial excitement, right? What is that person’s long term contribution? And what is that person’s long-term commitment and aspirations for the project? And when I’ve seen some start ups failing and succeeding, I see a lot of startups fail because the founding team was the wrong founding team. And the founding team did not have long term aligned objectives. And perhaps one was wanted to work really hard for a long time and the other one decided to — it was fun for a year or two but then later the person was not willing to work as hard anymore. They didn’t then have a shareholder agreement that regulated for whatever reason was going to happen down the road, creates a lot of tension, right? Then one person, that was a part of the founding team has a large stake with the company, but he’s really moving on to do something completely different. So, that can create a lot of, issues and problems for a company I think.

Entrepreneur1: And just to add on that, I think it’s pretty crucial when you actually find that person or find that your dream team is to find the right DNA that has the hunger because partly even when hiring, my third company. It’s, you would assume I would have the pick of the draw in hiring the best talent and fortunately there is that pool there, but it’s really, really hard when you can look someone in the eye and say is this person hungry or is this person just expecting a great outcome. Because any startup regardless, if it doesn’t guarantee an outcome and it’s really, really hard to go and find out that the consensus DNA isn’t going to go ahead and do what it takes to make the exit happen, or make the positive outcome happen. And probably 1% of the people I interview, I can see that hunger, 99% just don’t have it. So it’s really finding that 1% especially in that first five employees, especially when the first 20 employees because if you don’t you’re going to set yourself up for disappointments and failures.

Interviewer: So this is one of the questions that I personally can relate to, have you ever experienced a black day? Now I describe a black day as all despair and no hope. And so if you have, could you tell us about it, share — kind of anecdotally share it with us. And then tell us how you’ve dealt with it internally because it’s certainly difficult and how did you deal with it, deal with your company. So, I think everybody probably has a story. It may not, but —

Entrepreneur2: I think for any successful entrepreneur, you have to have a few black days because they ground you and they also teach you a lot. That something, that something schooler actually.

Interviewer: You had more than one?

Entrepreneur2: I’ve had my fair share. And, probably more than I wanted. But I think the primary one that sticks to mind was, I was 16, six months into my business. Dropped out of high school, was doing $200,000 to $300,000 a month in revenue. Highly profitable. And started hiring the right people. And I didn’t have any formal contracts in place with the primary engineer person that I had that was managing the technology. And I just got a threat from them that if I didn’t give them a third of the company, they would shut me down. And again, 16 and a half years old, I did not have any idea. So, I was trying to play poker. And, obviously it didn’t work in my favor. And they actually did shut me down. And, obviously when you’re underfunded, you don’t have a board, you’re 16, nobody’s really going to take you seriously. So, imagine all the odds against you and imagine completely being out of business for a full week. So imagine no Facebook for a week. Imagine your email not working for a week. Imagine whatever service you’re running is gone from the Internet, and the Internet’s a 24/7 business, right? So that happened, and it took me a week to go ahead and recover from that until I recovered from the servers until I got the right people to turn them back on and it was a mess. It was a mess and what I realized is that there’s a couple of things you got to do.

Number one, never keep yourself vulnerable. If you’re an entrepreneur always have a backup plan. Always have someone else that’s going to have your back. Or you better make sure you have that skill set on yourself, because if you don’t you’re going to have situations like this.

Number two, always surround yourself around people that want to make you win, and see you win, and make sure you have the right rock stars with you because if you don’t have those right people, you’re going to have so many of these horror stories over and over. And I learned a lot from that. And I wasn’t cheap on employees. I wasn’t cheap on any of the structures I needed to do from thereon. And a year and two months after that point is actually when I sold the company for $40 million. So yeah, that was probably the most black day of any teenager’s life that you could imagine. But it ended up becoming a positive outcome, because I learned a lot from it. And a lot of it, at least for my entrepreneur journey came from making these mistakes, and actually seeing these disappointments come to life. Because they ground you, and they teach you a lot and they prepare you for the future.

Entrepreneur3: So I, I think there’s probably two kinds of black days. There’s the black days which Mark defined as days where there’s truly all despair and no hope. And we’ve all had those days in our lives in different ways. You know, this is just part of life. So, these things happen. I think for startups in my experience it usually takes one or two forms, either you’ve had some great momentum and it suddenly stopped or it’s just slowed dramatically and you don’t see how you’re going to find your way back out of that. Or a people issue. And, those take all kinds of forms. But, there’s also a lot of black days where there actually is some hope in there, if you look at it closely. And so in terms of how you deal with it, I think trying to find that that hope and trying to find a kernel of what’s going to enable you to turn this around whether it’s something specific and tactical or something emotional is really important. You know, personal example of that which has been talked about a lot is when we launched the News Feed at Facebook in the fall of 2006 and we had a product that we had a lot of conviction around, and felt was a great product. Which was a great product, we just did a really, really, incredibly terrible job of actually launching it, and preparing people for it or not preparing people for it. And the reaction was unbelievable. We had 10% of the user base actively protesting against us. 10% of the user base, a million people actively protesting. We got a phone call from the Palo Alto Police Department saying turn it off right now because there’s going to be a protest rally in Downtown Palo Alto on Monday and we can’t put up the infrastructure to support a protest rally in this city, so you have to stop it.

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Camera crews coming up the windows of the office, peering into the office to try to get pictures of people. Just really, unbelievable amount of bad feeling and pressure coming from the entire outside world, but what was so meaningful about that moment for me was that was the moment when I fully understood for the first time just how important this was to people. That people cared about this so much that they would get this upset about it in large numbers. Say, my god, this is, there’s something going on here. Which is really, really rare and really special and, we have problem that we need to deal with. But underneath that all, there’s something very powerful here that we can harness, if we do it in the way. So there are situations in life whether in your start up or the rest of your life where things are just bad in there, and there’re just no — there’s nothing you can do about it but get through it. But a lot of times there is actually something more in those situations, so I’d encourage everybody to at least ask the question is there something else to this story.

Carol: I’d actually like to answer the question in a slightly different way. I’m a little bit older than most of the other panelists so I think I’ve had more black days but what’s gotten me through them is that I picked up the phone, and talked to an advisor. And the advisor helped me put the situation in perspective, and one of the attributes about a really bad black day, is the reason why we call it black, is that things went from grey to black. I mean, all you can see is bad and negative, and your normal personality of positive and seeing the silver lining and all, suddenly just left your body. And it was that ability to reach out and have perspective brought back in and its’ amazing. When I look back through my life and I looked at those black days, it was literally less than 24 hours before I was able to reframe that as this is when the universe changed, rather than this is a black day. I’ve now gotten to the point where, when I hit black days, I’m like, oh, the universe is about to change. Okay. And I actually now try to very actively be that special advisor for our portfolio companies. And I hope I’m the one that when they get in trouble, that I’m the one that they call.

Entrepreneur4: Yeah, I think, yeah, one example of black day for me would be a complete R&D dead end. So this was this fingerprint research company that I started. So this was a very ambitious project, and initially we thought it was going to be fairly easy. We were going to revolutionize how fingerprint matching algorithms were done. But it turned out to be much, much harder than we thought. And on the way we actually found a text book saying that this was actually not possible. This was theoretically an exciting idea but in practice it wouldn’t work. But here of course that made us more excited, and we wanted to go on. But as time goes moving on, we were really not getting any progress. And we had spent I think three and a half years, and I spent several million in funding this. And it was to the point when the engineers on the team, they didn’t believe it anymore. And everyone else was questioning whether it was possible to move forward. And, I had a wakeup call one day when one of my friends that who I trust really well, said you’re so stubborn, why is it that everyone else in the world believes that this is impossible, even your engineers working in the R&D team, and still you believe that this is doable.

And then I started to ask myself, am I delusional? Am I completely irrational? Am I just trying to pursue a dream that is really not ever going to happen? And that was a really tough moment for me. And I was really mulling this over and I was thinking, the only rational thing, actually is to throw in the towel, right? Everyone around me told me that that was going to be the case. But the thing that made me not throw in the towel, was that when I was really feeling really thinking through it, deeply, I realized that, if I threw in the towel now, I will never be able to forgive myself. I will always continue in my life asking what if I didn’t throw in the towel. And when I came to that realization I decided that whatever it takes okay, I set aside this amount of money, and whatever it takes, this amount of money, I’m able to set aside. And I’m going to go all the way, all the way to the absolute point where there’s no hope whatsoever that this is going to be successful. Then I’m willing to throw in the towel. But I know for sure that I have done everything I can.

And after that, it wasn’t so black anymore. Because then I kind of felt good. Then I had a kind of a plan. And what happened was that we actually had to get a completely new R&D team. So I moved the whole R&D to the US. And slowly and clearly we were able to turn around. And we were able to get the breakthroughs that we were hoping for. Three years later.

Interviewer: Did you ever reach a point where you like, all right I’ve done everything I can, that’s it, I’m throwing in the towel?

Entrepreneur4: I was very close at this point, right? But I decided that okay, whatever it takes this is the money that I’m willing to spend. This is how far I am willing to push it. And I was thinking about selling lots of things I had and whatever. You know, I wanted to bring it to this point. And once I had that, made that mental decision, I was kind of ready to go. And then it wasn’t that black anymore.

Entrepreneur1: I think the flipside of that is, I think a lot of people when they walk into what they want to do, they walk in with fear. And they walk in with failure. So they’re basically saying, okay, I got this great idea. I want to go and work on it and then they’re spending 80% to 90% of their energy on the fact that it’s going to fail already versus that 10% oh, okay maybe it won’t fail. So, I think it’s great when you can go and set aside okay this is my plan and this is my point of how far I’m going to take it and I’m going to give it my all. I’m going to spend that 100% of my time in making it happen. The flip side of that is when you haven’t even started it, when you have nothing to even go ahead and do it and you’re consuming yourself with all this negative energy where you’re like oh my god am I going to fail, and if I fail my family’s going to think this, my friends are going to think this. I think that’s really where, when you’re starting off as an entrepreneur, you got to clear your head on that and just walk in, failure’s not an option and you’re going to give it all your all from day one.

Carol: Actually I think that’s one of the big characteristics of a really successful entrepreneur is that they actually never recognize that they could fail.

Entrepreneur1: It’s part stubborn, part ambition.

Interviewer: Yeah, I have a feeling. I have a feeling that Joren was never actually going to reach that point where he said, you know what, I’ve done everything I can.

Entrepreneur4: No. It was, there was no money left. You know, there was nothing left.

Carol: Every great entrepreneur that I’ve ever worked with, when they hit that point, somehow managed to go find some more money.

Interviewer: You know, just to, because I’ve maybe, I don’t know if I’ve seen more black days than anybody else, but boy I’ve seen my share. And over time I’ve actually come to look at them as opportunities, leadership opportunities. You know, you can, everybody looks at you the leader of the company, and everybody’s down and they’re looking at you and you’re down but it’s an opportunity to say, let’s do something, let’s take action, let’s create a plan. And if you prevail, you actually build tremendous bonds in that leadership team and the team inside the company. So and if you can kind of step out of the blackness just for a moment and say is there an opportunity here there really actually is. I mean that’s kind of one of the things I’ve seen.

But keying off of Carol’s comment the next question I had was, what are the characteristics of an entrepreneur? What are the —  I mean, there’s many, I mean, I certainly have — as I teach this subject matter and I’ve come up with list of 20, 30, different words, what do you think of the characteristics that are central to the character of an entrepreneur?

Entrepreneur1: All right, I’ll start. So I think the details actually vary a little bit by market. But to abstract out from that to what some of – we’ve all been talking about. I think that the most important thing is that it’s something that comes from passion for whatever it is that you’re doing. Whatever it is you’re building, whatever it is you’re making, whatever problem it is you’re solving, whatever new thing it is you’re bringing into the world. That can manifest itself in lots of different ways. There are a few people out there for whom that passion is actually the act of entrepreneurship. And those are people who I think generally are called serial entrepreneurs. But for those people, it really is like entrepreneurship itself is the thing that they’re passionate about. Some people are like that, a lot of people who are good entrepreneurs aren’t really like that, and don’t even necessarily sort of self identify as entrepreneurs. And just self identify that yeah I’m doing this thing. It’s just this thing, that I, not even that I want to do, it’s just like yeah, this is just like what I do. I do this. I have to do this.

And so I do think the details vary a little bit by market but the best abstraction that I can, or the best example, template that I can think of for that particularly for the areas that I focus on is Martin Luther. That’s sort of the template that I always hold up for somebody who’s a great entrepreneur. And the reason that I say Martin Luther in particular is, you need to sort of be just a little bit crazy, completely convicted that, your idea and your way is the way the world needs to go. But not sort of to the point of irrationality and self destruction. There’s a difference between somebody who is an evangelist and a creator, and somebody who is a martyr. And I hear people talk about Joan of Arc as an entrepreneurial architect sometimes. I would argue that’s a little too much martyrdom, and a little — too little impact. So getting the balance on that right is very tricky. But, it’s that, just, conviction that’s completely transcendent to everything and is just something that the person does, must do. It’s just, you know? It is what it is. That’s sort of the architect in – the archetype in my mind.

Entrepreneur3: I think one characteristic you got to swallow really, really hard is you got to embrace rejection, and sometimes the hardest thing to do as a human being but if you can swallow it and understand how to you know, deal with it, you’re going to probably solve 80% of your problems. And if you just look at my career path nobody wanted to fund me at ClickAgents. I was doing millions of dollars in revenue and millions of dollars in profit. But nobody wanted to fund me, because I wasn’t part of the .com, you know euphoria. And the way things looked, at least back in the heyday. And then at BlueLithium I had three different venture capitalists pull away from doing a deal with me at the last minute. So imagine like doing high fives with your employees and realizing oh, we’re going to get millions of dollars in for the company and then getting it pulled. I even had one very famous venture firm in the valley told me that I was going to miserably fail at BlueLithium, and that I should listen to them and divert my attention to something that’s actually going to work. So, and I wonder where he is now. But I’d love to have a drink with him. But if you look at that and then just kind of look at even the other industries, look at Garmin. That the founder of that company tried 88 times till he got an investor to actually say yes. And then if you look at J.K. Rowling as an author, she’s the most respected, I mean she’s a billion dollar, billionaire author and she got rejected 7 times from her first book. So, all of that comes down to the human nature of realizing what your pain tolerance is for embracing rejection and so long as you can grow a thick skin, drown out the noise, and focus on that objective, I mean, you will prevail.

Entrepreneur4: And I think the way I look at an entrepreneur is really that entrepreneurship is really a way to express yourself. In the same way an artist is creating or painting a painting, or composer writes music, I think fundamentally, an entrepreneur creates a company, that’s a great organization in a way to express himself or herself. So there’s an underlying passion, and there’s underlying desire to contribute in some way to get their voice heard, to add to the world, or make the world in a tiny way a little better. I think perhaps there are three qualities that I would, on the top of my head, think of that is important qualities, and I think one is that you’re very optimistic. If you see the world through a positive lens, every person you meet is a potential partner, or an employee, or a client, right? If you have a negative perspective, every person you meet is a competitor or there’s an obstacle towards your success. So have that positive mind-mindset I think is hugely important because then you see the opportunities that you will — that comes your way that you perhaps didn’t even think about initially.

The second one is the same thing as Jay was talking about, that ability to absorb rejections. The ability to absorb disappointments, setbacks because it is going to be a long way. It is going to be a way with a lot of setbacks. And to withstand that, I think it’s essential to be successful as an entrepreneur. And perhaps, this last thing is a way to impact people around you, because as an entrepreneur, typically you have to create a phenomenal team around you for the company to be successful. And you don’t need to be the light of the party, you don’t need to have phenomenal people skills, but at least there’s something with you that, that you’re able to inspire other people. Perhaps you’re the best developer that when you’re extremely passionate about what you do, you have this strong conviction that other people see, they like, and they want to follow you. So I think there is an element of having ability to influence and attract and inspire other people as a key ingredient in that. So being positive, absorbing rejections and affecting people in one way or another.

Interviewer: Carol, you have anything to add?

Carol: The only thing I want to just add to this conversation is in my mind, there is a gigantic difference between an inventor and an entrepreneur. And in Silicon Valley, we tend to blend the two. And I think that’s a big mistake. There are lots of people who can create interesting technologies, but they can’t deliver. And so for me, the entrepreneurship part shows up in their ability to deliver. And that’s a very vague term, but anybody that’s been an entrepreneur will understand that, that is where the rubber meets the road.

Entrepreneur3: It’s a great point. I think a lot of where that delivery happens, just as Joren said is around people, people, people, people. The people you can rally to work with you and help you. The people who you can inspire who are going to be your customers, or your users, or your other constituents that are going to inspire to invest in you, exactly. That ability to not just create something, but to inspire others with your creation, I think is the thing that propels you forward from that initial ideation to actually succeeding.

Entrepreneur1: I think entrepreneurship is kind of like, it’s like an art. And there’s probably three stages of it. And I mean this in wholeheartedly. There’s probably the first stage where you’re the creator and you’re the inventor and you’re trying to prove of concept. The second stage is you’re the manager. You’re actually trying to go ahead and scale the company. You’re actually trying to build. You’re actually trying to go ahead and prosper in that regard. And the last part is you’re the executor. You’re actually executing against a potential outcome. And that itself is a different strategy. So all three require a completely different approach and it’s up to you as an entrepreneur to see if you can mold yourself as the company grows. So you know exactly how to go ahead and act because you can’t act like the creator when you’re already at a company that’s already doing $100 million in revenue and you’re trying to go ahead and have a potential exit. You got to be a completely different CEO. So, partly — the problem that I see in most entrepreneurs is that they get way too emotional with certain things. Whether that is owning certain amounts, or controlling certain amounts. But I think the best thing about being an entrepreneur is being able to adapt to the different changes that you’re able to do in the various stages of entrepreneurism.

Carol: On the other hand, though, I want to make sure that people are clear about the fact that entrepreneur does not necessarily mean founder. I mean there are lots of people that were extraordinarily entrepreneurial at Google. Or at Intuit, or at Cisco, and at Yahoo. I mean, pick the company. I mean, being entrepreneurial is a state of mind. It isn’t, you know, the fact that you’re the founder.

Interviewer: How do you — in this character issue, how do you feel about risk seeking, risk avoidance kind of thing that a lot of people describe entrepreneurs as risk seeking. Do you — how would you comment on that?

Carol: So I think your ability to live in a risky environment is pretty important as an entrepreneur. You know the whole concept of, can you sleep at night becomes a big one. And if you’re going to put your health at risk, being an entrepreneur probably isn’t the right thing for you. And there are times in your life where you can’t afford to take a risk. You have too many other individuals in your life that are depending on you. And so I think there’s some kind of reality checks that you need to have about your risk levels. Having said that, most of the entrepreneurs that have been incredibly successful are the ones who took risks at extremely inappropriate times in their lives. And so Ted, to Matt’s point. You set a rule down and somebody’s going to think of an exception to it. So, but risk being willing to live with risk is a big one.

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Entrepreneur3: That’s a big distinction. The distinction between being okay, living with risk, being risk tolerant, and being risk seeking. I think it’s kind of crazy to be risk seeking per se, I think great entrepreneurs tend to be change seeking, and when you’re trying to change things, risk is inherently a part of the process. You have to be okay with that. But people sort of seek out risk for the sake of seeking out risk maybe you’ll get lucky, but that doesn’t seem like the way to make things happen to me.

Carol: Actually, in many cases I think especially when they’re starting up the company, you don’t see the risk. I mean, you’re so clear about your vision of the future. That to Jay’s point, failure isn’t an option.

Entrepreneur4: But I agree with that. Because a lot of times when you talk about entrepreneurship, a lot of people talk about the risk, or taking risk. And there’s something with that, that rubs me the wrong way, because I don’t think necessarily entrepreneurs are taking risk. At least I don’t look at myself as taking risk. On the contrary, I feel that I continuously try to minimize risk. But what I do try to do is pursue opportunities I see. But I don’t look at myself as a risk taker. I’m willing to live a risk, I’m willing to tolerate to live with risk. But I’m not the risk taker, I minimize risk for whatever ability I’m capable of doing. So it’s more, I think that’s a big distinction.

Carol: But in reality the fact that you’re willing to operate without a net. By definition it moves you into the risk.

Entrepreneur4: I’m perhaps a bit more risk tolerant. Once you say that you’re a risk taker, I feel that you’re stepping over a line that I’m not comfortable associating myself.

Entrepreneur1: Well, I also think there’s two types of risks that entrepreneurs take. I mean, there is also two types of entrepreneurs. There is a type of entrepreneur that says, okay, I’m going to change the world. So I’m going to go with the crazy idea, and nobody has done it before, and I’m going to try to go ahead and prove myself right.

Carol: I love those.

Entrepreneur1: I’m not one of those. I’m on the second category, which is basically saying okay, I recognize that there’s enough people doing this, and I understand this may be a crowded space but I’m going to copy exactly what they’re doing, but I’m going to go ahead and catch up to them by executing them better. And then, I’m going to innovate. And if you kind of think about that, that’s how majority of all the successful companies in Silicon Valley have actually started. I mean, if you look at kind of Friendster and MySpace, MySpace was just copying Friendster, but it could scale, right? And then, if you kind of look at MySpace and Facebook. I mean, Facebook yeah, is very different now, but it had the same functionalities at a certain point too, and that’s really where I think the — my recommendation to entrepreneurs is that, don’t put yourself — I mean, again, I know you love the first category but I kind of fear that if people try to go ahead and prove something that haven’t been proven before, you are walking into a room that isn’t already disqualified yet.

Carol: So, some of that happens with depending on industry. So, I mean, for instance, the area we’ve made the most amount of money is in medical devices. And the reason why our companies have been successful and have made us a lot of money, is because they did something totally new and different and — So, I mean there’s room for both.

Entrepreneur1: Sure but I think there’s — all I’m saying is there’s a lot of risk in putting something in a category that hasn’t been proven. I mean just based on enough data that supports new investments that haven’t been proven versus going after a category that is already out there and you’re competing against it. There’s always going to be a leader, there’s always going to be an incumbent, I mean that’s just the nature of business. All I’m saying is that at least for me as an entrepreneur, I reside in the latter where I’m not going to take that risk of coming up with something completely different. And you know, be left to kind of cold shoulderish in the marketplace, versus kind of going in with it and replicating something, and then innovating it by out-executing them and, after I’ve reached a certain point.

Entrepreneur4: But I think when it comes to risk sometimes I’m not sure if I understand all the discussion either because, what are you risking, right? There’s an underline assumption that there’s something specific that you’re risking. And I think that people have different aspects of what is worthwhile risking, or what is worthwhile not risking, right? So, if you don’t have a good understanding of what you’re risking, then the discussion becomes very abstract too. And the way I look at it is that you have a certain amount of time on this planet. Tomorrow you can be hit by a truck. And do I want to live my life doing something that I don’t feel fulfilled with? That’s a big risk that you live the whole life and being miserable, right? So it depends a little bit on what it is that you really want to do and what you are willing to risk. And in that perspective I think — I understand that risk is associated with entrepreneurship, but I don’t like the notion, risk is put on a entrepreneur saying that this person is a risk taker.

Interviewer: Let me move to one more issue of this entrepreneurial character that I think is interesting to discuss. You know, in my thinking over the years about what motivates entrepreneurs, I’ve kind of come with three categories. Change the world, build a great company, get rich. So, what is the — I think all three’s fine. But some people are driven more by one than by other. So how would you describe those three words for yourselves in terms of how would you kind of slot yourself or profile yourself relative to those things? And do you think those are relevant to entrepreneurial motivation?

Entrepreneur1: I mean, I would say, I never did anything for the money. And I think that anybody that walks into an entrepreneurship endeavour to get rich has already failed. And I mean, monetary exits, cash that you make is really, comes after all the hard work, and you can’t even think about that from day one. And if the minute you do, you’re going to start making short-term decisions that are going to go ahead and affect your business decisions that you should be making. So, for me it’s always been about being successful and proving myself that I can do it again and, that I know the formula. And so long as I know the formula, I want to challenge myself for the next opportunity. And sure, the money that comes along is like keeping score. But that’s about it.

Entrepreneur3: I think, the change the world idea or variants on that, like for me, the way I would articulate it personally is sort of be involved with the most interesting things I can be involved with. That’s it. And all the best entrepreneurs I know tend to look at the building of a great company, and the making of a lot of money, as means to the end of accomplishing the goal that they are trying to accomplish. The idea that, I want this to be structured as a company, because a company is the best vehicle to accomplish what it is that I’m trying to accomplish. If there were a better vehicle, I would use that other vehicle instead, but this is the best vehicle, so that’s what I’m going to do. That’s the mentality that resonates most with me and, I think, can get you to the biggest and most exciting places.

Entrepreneur4: I think changing the world is such a big term. But I think definitely there’s a part of me that, perhaps, try to contribute, somehow, in my little way. So I think the reason why I think that is important because, I think everyone you’re looking for some kind of meaning or purpose with what you do. That you actually see that what you do has a positive effect. And that I think is important part of my drive. In addition to that, I think it is going back to what I talked about earlier. Working with people that you really care about, working with people that you’re really passionate about, and indirectly that is really building an organization that you take pride in.

Carol: So I think the kind of the core motivation and where the company is in its growth process, is going to motivate where the money sources are coming from. And so, if you’re trying to change the world, but there’s no clear path to making money. The type of investor that you’re going to attract, is going to be very different, than one that you come in and say, you know, here’s the plan, I’m going to do this. This is going to happen, and you’re going to get your money back in three years at X percentage. Well, having heard that speech a lot of time, I’d never believe it. But the point is that it attracts a different type of investor, and so part of the game and one of the things that craters any startup is not being properly capitalized. And so, part of the game is figuring out where are the right pockets of money for your startup. And, I think you need to understand when do you need to attract money because of passion, when do you need to attract money out of greed. And where do you need to attract money out of the philosophy of building a bigger, stronger company.

Interviewer: So one of the questions I think is generally interesting, certainly do the students that I teach is, where do great ideas, great insights, come from? And if you’re willing to share, what’s hot now?

Entrepreneur1: I would say social gaming, and social media, is probably from a sector, probably one of the interesting sectors that I see right now. I mean, hence I’m in it. But in terms of ideas and execution, I mean, part of my philosophy is that idea, when you get it, is 1% of the journey. 99% of it is all execution. So, I know a lot of people that get wound up because they see a hot idea, or a hot sector, and they basically, I mean, I even get crazy emails saying, hey, I have the next trillion dollar idea. I don’t even know if that idea exists, but still, in terms of people’s mindset, they think this idea is going to make them rich, or this idea is it. That’s it. That’s 1% right there, and 99% of how you actually execute from starting a company, making it into something, and going through the ups and downs that you’re going to have to go through is really the outcome that you should focus on.

Entrepreneur3: Yeah, I refuse to even answer the question because it’s not what anybody should be thinking about if they’re thinking about starting something. You need to be thinking about, you know, what you wish were hot tomorrow, not what’s hot now. My job is to spot what’s hot now before anybody else spots what is hot now. But that’s a different topic, that’s being a venture capitalist. The entrepreneur’s job is to do the thing that they want to do and so I wouldn’t worry about what’s hot now. Actually the only extent to which I would worry about what’s hot now is if you really want to do something, and you look, and say, you know, this is really hot right now, that’s probably a bad sign. But beyond that, just forget it. Don’t look at it as a positive or a negative. Just ignore it, just ignore everything and just do what you want to do.

Entrepreneur4: I strongly support what you are saying, Matt. I totally agree. And I think that sometimes there’s a little bit of a fever that you’re chasing what is hot and that, I think that is a big mistake you do, that you try to come up with something that is hot. It must be something that you’re passionate about. It must be something that you can really see, that this will have an impact. That this will really create value. And where to look, I have no idea really, but I love internet. I think internet is fantastic, and particularly when you think about combine that with mobile phones. And I think that, well, some people say that all innovation on the internet is done. Some people say that social media and social network is the last big innovation on internet. I don’t think that’s true, whatsoever. I mean, we are the first generation that grew up with computers. Internet has just come up late in the last few years. Social media didn’t come until one year ago. So, within that space, there’s just phenomenal and phenomenal opportunities to commit innovative products and services, and I’m sure that we just scratched the surface of what they’re going to see going forward.

Carol: You know, there are so many problems in the world. And kind of the core areas that tend to trigger people’s passion is that they’re trying to solve a problem, or they’re fantasizing a different world. So the current state of the transportation industry drives me nuts, and anybody can do beam me up Scotty, I’m, like, so there. I’m concerned about health and I know that there are, like, several core things that I need to do. Exercise and sleep, and what I eat are the three big things that’ll impact my health. So anybody that can make that easier, and simpler and I can eat anything I want, and never put on a pound, would be fabulous. I mean you start working through what’s wrong in the world, where are the big problems, what are the big trends. I mean, we have a huge bunch of people that are crossing the 50 year old line, and the world is different when you’re 50. And so, how do we meet those needs? We have a younger generation that is moving into a global world, not a village world. How does that impact? I mean, pick an area, and you can discover that there are problems and the minute you discover the problems, you start fantasizing about how to solve it and, bingo.

Entrepreneur1: People talk about this idea of changing the world a lot. I think, a lot of the times what they really mean is, is changing your world. Really great things that people create and build, and turn into big companies. I think they usually come from very personal places. And so you have to sort of find what’s personal for you, and what is it about your life that you want to change? And I think it could be subtle, but in lots of ways that extension is a driver for people. When you start thinking about problems at sort of grand levels of abstraction, I think you risk getting into sort of dangerously unemotional territory. This is hard, right? It’s really hard to do this. You have to really, really, really want to do this all day and all night 7 days a week for the next, assume it’s going to take 20 years, and completely disrupt and interfere with and screw up the rest of your life. So, it got to better be really, really, really personal. So it’s great to want to change the world but I think a lot of times when people talk about changing the world they’re really talking about changing themselves and changing their world, and changing their world around them and that may sound selfish, but emotions are important.

Interviewer: Yeah. When I talk about it in class, I always talk, I use the word authentic that there’s an authenticity. The great ideas come from personal experience, the ability to be unhappy with something, see an opportunity to change it and apply that and then, that’s, you know, that yields ideas. And on the what’s hot now question, which I always ask, it’s a kind of like the Groucho Marx quote, which is, who’d want to be a member of a club that would have me? And what’s hot now? If I knew that, I would be sitting — I’d be out doing it instead of sitting here talking about it, right?

Carol: But the thing that I want to make sure that at least I’m communicating is that entrepreneurship is not limited to technology. Entrepreneurship happens in all walks of life, and in all business segments. And there are investors that will support that. We happen to have a particularly high concentration of technology based investors here in Silicon Valley but that doesn’t mean that, that is the world and —

Interviewer: Yeah, they built Starbucks on a great cup of coffee, there’s nothing — you got to love that. We have five minutes left, let’s open it up and see if there’s any questions from the audience for all or any particular panelist.

Audience: You spoke about surrounding yourself by great people. When you go back sort of startup mode you don’t have much credibility behind you, not many people know you to have this, what you think is great idea. How do you actually hire these A players, like what are some practical sort of steps from the knowledge you know now of how you would go out and try and influence these people to come onboard?

Entrepreneur1: Well, there’s probably — there’s two categories of rockstars. There’s the first category of the founding employee sweat equity rockstar. And then secondly the rockstars you hire at a second stage of the company. I think you’re asking about the primary stage and just a quick story on my side is when I started BlueLithium I actually found a company in Belarus of all places, through the internet, and they had a great technology. I actually went down there, visited them, and they were just scrappy entrepreneurs building code in an apartment building, next to about 18 different computers. And I love that. I love the scrappiness, the bootstrapness, and when I look them in the eye and said, what do you want for your company? And they basically said a half a million dollars. And I said okay, how about if I can give you more than that? And when I can go ahead and — what, well, in a different way. And the way was, for them to bind to my vision of what I wanted to create and you got to understand when you’re trying to look for that rockstar, you got to have people that want to take that risk. And when they take that risk they are going to go ahead and work their ass off for that. And when they do they will deliver it and that, that risk where they ended up taking a stake in my company rather than sold wall paper rather than a half a million dollars, three years later ended up becoming $15 million for them. So, when you look at it from that context there are enough people out there that are hungry. It’s not that many, but there’s enough out there, and when you can find them, everybody’s after the same journey and everybody’s after the same goal.

Entrepreneur3: So, I total agree with a lot of that. One thing that I would amplify and give it a little bit different view on is, there’s lots of different ways to be hungry. And some of the ways to be hungry can be very destructive for your company. Some of the ways for people to be hungry can be incredibly powerful for your company. I think you really want to find people not who are low ego, which is what people always talk about, but rather who have a strong ego and a desire to sublimate that completely into what it is that the company is doing. Which is a different thing, but is a very important distinction. So how do you do that? You have to be really careful to find people who are, you know, no one will ever be as deeply passionate about what the company is making as the founder, perhaps. But you need to find people who are really, really passionate about what the company is doing, as opposed to the fact that the company is hot, or the company is in an interesting space, or the company has funding from good investors, or whatever. That’s hard to do. I think there’s some tactical ways you can do it. At some of the companies I’ve been involved with, we’ve had people take title deflation on coming into the company which is a somewhat contrary to what a lot of management theory said, that’s a very bad thing to do. But actually I think it’s very good Litmus test to why is this person here, why are they coming here. There’s lots of other ways you can do that too. But those subtle differences can have a huge impact on how things go.

Interviewer: I think we’re actually a little past our time. But let me say thank you to all the panelists. I assume that some of you will be available for some people to come over and say hello to afterwards.

Thank you very much.

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