Advice for a young entrepreneur

I spoke recently to an entrepreneurship class at Carnegie Mellon. The professor approached me saying she wanted to hear from an entrepreneur early in their career who was not yet rich. Check.

I tried to skip the standard fare, “Fail fast!” but still focus on some fundamental truths that have been important to getting me this far (and that I wish I’d understood from the start):

About Me
I’ve had five jobs.

I did trivial, boring work for a giant corporation, MasterCard. My main goals during that time were boosting my hourly rate and managing my fantasy football team. I decided that I needed work that felt meaningful.

I left for the most interesting company that would hire me, O’Reilly Media, a company that is very active in the cutting edge of web technology. That company is surrounded by an amazing community of innovators and inventors.

Eventually it dawned on me that I was more interested in being part of inventions than studying them. So I joined Odeo, a podcasting startup, as their director of engineering. Podcasting was very hot at that time and people thought it was the next big social media trend, on par with blogging. We failed, and the market failed, to do anything big in podcasting, but we did have one significant success. We spun out a side project that is now huge: Twitter. That’s by far the biggest success I’ve witnessed first hand.

After that, I helped some friends launch a personal finance startup, Wesabe, which, famously (in tech circles), got crushed by Mint (that would be a pun if the outcome was reversed). I do hope that somebody else tries to tackle that space because the problem we were working on remains unsolved.

Then I started my own company and launched our first, and hopefully not last product,CrowdVine. I had this idea that anyone should be able to create their own social network site, like a miniature Facebook. I didn’t know why this would be useful, I just thought it would be cool. I also had a goal to build the company as a privately owned entity that was investor-free, so we ended up specializing in the first profitable vertical we could find, which is conferences. This genre of software has a major impact on ability of conference attendees to network.

So that’s the work history feeding these observations: working at a large company, a mid-size company, a start up that pivoted into something huge, a startup that went under, and my own startup which has reached the point of profitable small business but wants to be much more.

#1. Surround Yourself With Interesting People
Without this step, I wouldn’t even be here.

O’Reilly taught me that if I didn’t like the projects that other people were giving me I could go out and create my own projects. I’ve always been ambitious, but until I really ran headfirst into inventors I thought ambition was about working hard and getting promotions.

The second thing interesting people do is turn turds into gold. That’s certainly what happened at Odeo. We had no traction in podcasting but one person on the team did have the golden idea for Twitter. That person, Jack Dorsey, paired with two more people was able to put together a compelling prototype in two weeks.

The third reason, is that even if your company fails completely, the interesting people you worked with will disperse to other interesting places and invite you along.

#2. Focus on the right things.
Focus on the right things. But what are the right things?

Steve Blank, a well regarded professor of entrepreneurship at Stanford and Berkeley, describes a startup as a learning organization. If business advice was reliable, a startup would simply be building and selling a new product. But it’s not. A startup is about learning what’s useful and why, and then learning who’s buying and why.

In my own business, we got tons of advice on how to grow. We should do partnerships, we should sponsor conferences, we should get trade show booths, etc. But we measured all of those ways and realized that they lost money. And, just to double check that we weren’t simply bad at marketing, we watched our competitors try and fail to grow through those methods. So my advice on advice: trust but verify. After trying and measuring, the things that do grow our business profitably are word of mouth, blogging, and newsletters. So that’s what we focus on.

It ends up being simple, but it starts out as a confusing jumble of contradictory signals and advice. Your main job, essentially, is finding out what the right things to do are and then doing them.

#3. Be useful.
This last one is not especially optimized for making millionaires, it’s just a bit of personal philosophy behind why you would work so hard as an entrepreneur.

There’s basically two ways to be financially successful as a company. One, you could rely on time-tested business fundamentals. I call this the Warren Buffet model.

Two, you could rely on the greater fool theory, which is that with enough hype, smoke, and mirrors you can find a buyer who is an even greater fool than your investors.

The greater fool theory is so reliable that it could even be called a fundamental rule of business which is why I said this is philosophical advice. I know people who’ve gotten rich both ways. But you only have so much time on this earth, why bother being small minded?

And that lets me finally get back to what my company is actually doing at this moment in time.

So much of the startup world is arrayed around the greater fool theory that I felt like my best chance was to build a company that was independent of that system. I think of bootstrapping as a very slow form of raising money. But now that we’ve done it, I have a reliable stream of income and never have to raise money again. It’s really just at this moment in time that we can switch from doing whatever it takes to survive to actually testing our ability to make a major impact.