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Hello! Welcome to the Startup Triathalon, a cute way to think about the stages of starting a company. I'm Jon Monsarrat, and I'll be speaking today primarily about advanced entrepreneurship. I've been to too many lectures where they say "OK, a business plan is a plan for your business." Instead, this lecture is going to skip the book stuff and describe the hard stuff that tripped me up when I started my own business.
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After a brief self-introduction, I'll sketch roughly the stages that a startup goes through, and then hop right into the pitfalls to watch out for. I've got a top ten list that I packed nearly 20 items into.
Finally, we'll wrap up with some soul-searching about whether entrepreneurship is for you and I'll dispell some common myths.
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OK. So, who am I? Again, I'm Jon Monsarrat. I do lots of things, but my major accomplishment in business was founding and running a startup company named Turbine. I started out an engineer at Brown University and while being Turbine's CEO managed to transform myself into a businessman. I ended up going back to MIT to get my MBA, among other things playing the mascot, the MIT Beaver. Now I'm an independent business consultant.
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Turbine is an Internet company focused on making computer games. When I wrote this lecture I was on Turbine's board. In 2009, Turbine employs 350 people, and has a number of hit games, including Lord of the Rings Online and Dungeons & Dragons Online.
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At the time I wrote this lecture, our big game was called Asheron's Call, and was and is a massively multiplayer game. That means that thousands of people, potentially 100,000 people, can interact online in a virtual world. Sort of Dungeons & Dragons set on the Internet.
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OK, enough about me. Here are the basic stages of a startup. First, at the B.S. stage, you're just kind of talking without really meaning it. Usually you gather for lunch with your buddies. Then one day you have a meeting without going to a restaurant. Suddenly, you're getting serious!
You should give a lot of thought to your founders. These are people you'll be relying on and working closely with for years.
Then go to a corporate lawyer and get the incorporation paperwork. There are fewer forms to fill out than you might think.
At this stage, don't quit your day job. Everyone's working part-time and you're building some sort of demo. Here starts the cycle. You're building demos based on very little money. But as you get better and better demos, you can raise more money, and that extra money helps you pay people to create better demos. Eventually somebody goes full-time.
Eventually, you have to find a business partner. Almost no company, except consultancies, provides a "whole solution" to the customer. For example, at Turbine, we make a great game, but we need Microsoft to distribute and advertise the game — that just takes too much money and business clout for any small company.
Finding a business partner usually involves going to a computer conference. You get a hotel room and set your demo up there. Then you collar important executives on the show floor and drag them back to your hotel room demo. If they like it, you get to fly out to their HQ and do it again -- and hopefully they are paying airfare.
Finally you sign a partnering deal, like Turbine signing with Microsoft. Getting "blessed" by a company in your industry makes you much less risky, and at this point you can probably raise real Venture Capital, serious money in the millions of dollars, which sounds like a lot until you're running a company of 30 people.
Finally, you finish the product, ship it, make some more deals, ship some more, and eventually either sell the company or "go public". Discussing this in detail is basic stuff outside the scope of this lecture, but suffice it to say that none of the stockholders gets a penny until the company either sells or goes public, so everybody wants this to happen at some point.
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An Elevator Pitch is a cute phrase meaning that you have to speak clearly and concisely about your company and its strenghts. For example, if a venture capitalist were stuck on an elevator with you, you might only have 30 seconds to convey your basic message and secure a follow-up meeting. I have actually done this in elevators by declaring "Well, this is an elevator so I might as well give my elevator pitch." Usually they laugh and then let you do it. Once this actually worked for me.
Anyway, here is an example of what an elevator pitch might be like. I'll do Turbine's in two slides. 30 seconds. Have your stopwatch handy?
Slide one. Turbine is a hot Internet startup dedicated to Internet computer games. Unlike car racing games (left) where you can't really interact with the other race car drivers, our games (right) involve 50,000 or more people interacting in a virtual world. It's like a Country Club, because it's social, but we also give players something to do.
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Slide two. Our company will lead the market because we have proprietary Internet technology to increase customer appeal, and the content tools necessary to keep customers returning to the game month after month.
Done. The basic idea of the elevator pitch is that if you can't keep it short, the message is probably too complex. You need to use the right buzzwords (Internet and proprietary) and avoid jargon that businesspeople won't understand. Note how using a country club metaphor makes the customer appeal (i.e. competitive advantage) clear without my having to talk about Dungeons & Dragons, which is a subject to complex for the elevator.
Going through this exercise is more than good communication. I think you'll find it forces you to rethink and be very clear with yourself about where your company is targeted.
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OK. So here are Jon Monsarrat's top ten things about entrepreneurship.
around you. When a problem comes up, instead of shrugging it off, try to think, at a meta-level of abstraction, "Why did that happen? How can we keep that from happening again?"
Part of this notion is to try to evaluate yourself and change where you think you need changing. Another part is to take a disagreement and break it down into its fundamental components. Usually two reasonable people who disagree turn out to have differing assumptions. Sometimes you can test these assumptions, or carve ways to reduce risk and satisfy everyone.
Being introspective also means sharpening your social perception. Everyone already has social perception of course, but I'm talking about really keeping your eyes and ears open for subtleties.
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Once you start paying attention to introspection and social cues, you'll see even more personality quirks than you normally see, and you'll see how they connect to the efficiency of your business.
Some examples include:
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"Bill Gates Doesn't Dance" refers to life-long goals. Some people, like Bill Gates, succeed because they pour their heart and soul into their business. It becomes their life.
It's tough to compete with these people. They'll give up everything and as a result they have more time than you. You're trying to keep up a social life and not stress yourself to an early grave. People who boast about how little sleep they're getting (and I used to be one of these people) should wake up and realize that you're more efficient overall if you're getting proper sleep nightly.
The solution here is obvious but it's funny how people don't seem to follow this notion. Don't try to compete. Figure out what life-long goals you want to achieve, and go for them in whatever appropriately balanced way you choose.
Some CEOs feel they "must" work until their eyes pop out. This is the delegation fallacy. You can always delegate work and take some time off. If you really think you can't delegate, I have to ask why. If your product idea is a good one, you should be able to raise a little more money and hire some extra help. If your product idea isn't that good, why are you killing yourself over it?
Planning to get a life around 2035. Some people have this notion that they'll work really hard to "build a career" and then kick back and enjoy life later on. How much later on? Sometimes they lose track of time and hit retirement without really having smelled the roses.
Balance isn't just about career and hobbies. It's also balancing short- and long-term goals. For example, I used to work in biotech. In the long-term, it was great to work in a field where I could potentially help save lives. But in the short-term, I hated it. It's not very interesting to be a programmer in a field dominated by biologists.
In the reverse way, I loved the day-to-day work when I ran Turbine, which is a games company. But I realized I was not accomplishing much in the long-term except making some kids happy, which is what some people want as their life's legacy, but not me.
Finally, I just came across a notion I hope will help you. Usually whenever there's a lull in my life, I get bored and start getting excited about new projects. I make a ton of commitments and suddenly I've overpromised to everyone and I'm pulling all-nighters trying to complete all the projects. That's no fun.
What I need to start doing instead is, when I'm bored, it's OK to take on a bunch of new project, but some of them should be optional projects — things with no deadlines, or with scattered and spread-out deadlines. That way I never get too much to do at any one time. I can always drop the optional stuff when life gets too hectic.
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Getting organized is all about making lists. I love lists, and highly recommend that you write everything down. Everything. Think of it this way. Let's say you're in the supermarket. You think of an idea for your company.
If you write it down, you can forget about it. The list will remind you later. If you don't write it down, you have to keep it in your head. You might forget it, and you'll probably worry that you'll forget it. Trust me, it's less stressful just to keep some paper in your pocket and write things down as you think of them.
I would also recommend keeping a log of what you do every hour of every day. Sounds like overkill, but it can be valuable to see how you're spending your time. One thing I discovered is that nobody really works 16-hour days. What about real work, not counting goofing around although you may happen to be in the office? The most anyone can really work over a sustained period is 10 hours a day, 7 days a week. One month I average 12 hours, 7 days a week, and it nearly killed me.
Another way I've used introspection recently was in figuring out employee problems. You're an even-tempered, forgiving person I imagine. Let's say you've got a problem employee who says angry things in team meetings. This only explodes once a month or so, with a variety of minor incidents.
The problem here is that it's impossible over a six month stretch to remember all the little incidents. As humans, we just tend to forget and not be very good at correlating this stuff. So, by writing down the incidents, I was able to track the problem, identify it as a trend, resolve the problem, and then watch to see if the problem got better, worse, or stayed the same (frequency and severity of 'events').
Another thing I've done in list-making was to resolve a household chores bet with a roomate. She bet me that she was doing more work around the house than me. I thought she was wrong.
OK, so we sat down with a spreadsheet and figured it out. Each chore had a "difficulty / grossness" rating, a "number of minutes" time factor, and a "frequency" setting how often the chore had to be done. Multiplying those things out gave us some semblance of how much effort we were each putting into chores.
OK, I can hear you laughing out there. What a weird and geeky way to think about chores, by putting them in a spreadsheet. I can tell you this though. That spreadsheet helped us to resolve an issue that our intuitions were not good enough for. It was a complex situation and we figured it out. How often can you say that about human interpersonal relations?
So my advice is, stop chuckling and give it a shot sometime.
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People tend to act in their own best interests. You've heard the expression "step into their shoes". Great, but how many of us really follow this through all the way?
One example of this in action in when companies expect their employees to do backbreaking overtime, without compensation. Usually they want the employees to "do it for loyalty". Well, guess what. Employees are usually working for their own careers. They want to benefit themselves. Sooner or later the employees will figure out that "loyalty" just means a one-sided relationship. Or they don't figure it out, work like dogs, and get burned out.
Another example is when you're proposing a deal to someone, start from their perspective. Lead with what you can do for them. It makes them much more receptive when you get around to what they can do for you.
Finally, it's important to be a little paranoid and make sure you understand the motivations of the people around you. Trust your mother, but watch her.
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Every industry has certain success factors, called market drivers, that your company must have to succeed. Usually they are tied to customer appeal. It's vital to think of your company as achieving success by hitting market drivers.
For example, at Turbine, our games are attractive because there's a huge community of people playing the game, and they can interact with each other. Obviously, we want to have great computer graphics, but we really have to stress community — that's the market driver that's even more important to our success than graphics.
This is a complex concept, so let me illustrate with another example on the next slide.
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