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Ten Geek Business Myths
hpcanswers writes "Venture capitalist Ron Garret has posted a list of eleven (despite the title) common mistakes entrepreneurs with a technology background make. A common theme is that good ideas sell; in reality, what a customer wants sells. By extension, having a Ph.D. and holding a patent are not particularly helpful if the intended end-user does not have the same level of understanding of the widget as the creator does."
It's ironic. The two things that make engineers so good at engineering are the two things that make them so unsuited to running a business.
Hubris is a trait of engineers that makes them strive for greatness in their products. After all, you can't really have good pride if you're constantly getting negative reactions to your stuff. However, it also leads to a close-mindedness and tunnel-vision in regards to other technologies and solutions. A good businessman must be able to survey the market and understand the positioning of his product. Someone who thinks that they have such a great solution that it is applicable to any and all problem domains is selling snake oil. See Netscape and Sun's Java for two examples of solutions that were billed as much more than they realistically were.
Laziness is a good trait for engineers because it forces them to seek efficient, easily-implementable solutions to everyday problems. Automating tasks is absolutely essential to creating value in a company. However, the business side of running a business is not reduceable to a script. There are serious tradeoffs that must be weighed all the time in order to guide a business down the road to success. These can't be automated. The laziness trait leads engineers to seek easy solutions when they should be seeking difficult-to-find synergies. Well-designed software is modular with simple interfaces. Well-run businesses are well-integrated and derive their strength from business units coordinating with each other, not simply acting as a pipeline from one end to another.
So we have a PhD who still thinks LISP is the best thing since sliced bread and has experiance building networking hardware that was fast, but not compatable with Ethernet. Sounds like a real academic to me. He does have a good point in "make sure customers for your product exist before you start your company", but overall the article reads like a bit of venting steam from an academic that tried to make a go of it in the "real world" and discovered just how different life is on the outside.
I read the internet for the articles.
- Bundle your OS part with the purchase of any PC compatible machine, not just the hardware we built.
- Only license your core apps (Office, SQL Server) on non-threatening operating systems to prevent switching.
- Bundle TCP/IP connectivity with the OS.
- Bundle a web browser with the OS.
- Make LDAP accessible to mere mortals (AD).
(Of course, these five are also reasons why some people hate Microsoft.) If his target audience is techies (who value "innovation"), then it's not a compliment - period.Perhaps you would like to step into the role of a PhD who *does* perform research and development? I've found that most of the time when people say stuff like this, they have no real idea of what is involved in either obtaining a PhD or working as one.
The PhD not only demonstrates that you are capable of thinking critically, it shows that one is able to communicate, analyze and create new "content" and make advancements. Speaking as a PhD, the job is much harder than I ever thought, though it is fun and I would not do anything differently. Having to write grants, write papers, teach, perform science, deal with administrative duties all at the same time is a much harder job than most folks realize. Of course that is just academia. If you add in work in the private sector on top of that, you have even more responsibilities (though prospects for more money). Some PhDs of course stick to industry and do quite well. That's all fine and dandy, I just like the additional challenge of academics in addition to commercial work.
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Best exemple of this: iTunes.
A lot of people on Slashdot will complain that it takes too much memory, is heavy on the CPU, doesn't have enough settings/parameters, have DRM in store-bought songs.
Normal users see a pretty program that's easy to use, that does everything that they want, including buying a single tune for 0.99$ on an otherwise 10-20$ CD. Add "connect cable to sync iPod automatically without doing anything else" and you've got a winner.
When the linux community finally understands that (too many) choices are bad (and that automated everything isn't evil), linux on the desktop will be a real viable alternative. In the meantime, OS X is the only real-world alternative to Windows.
Now let's sit back and see my score go to "flame/troll" by some linux user that doesn't see (or doesn't want to see) the point I'm making here.
"Myth #8: The idea is the most important part of my business plan."
The idea is really such a smal component. Engineers and Ph.D's tend to have a problem with this in particular. They always want the perfect product. The important part is finding the point of the marginal value curve that meets the market, then finding a way to exploit that market and excluding the competition from taking your market space. Not that the idea is the easy part, bu when compared to the rest of a business plan it is a very small thing. Millions of people have great ideas, turning them into a product that meets the end customers needs/wants is the real challenge.
Heh... am I the only one that finds it deliciously ironic that a venture capitalist is advising brilliant phds with good ideas that they needn't worry about other people stealing their ideas and shouldn't protect them?
Kind of like a wolf telling you that you don't need to worry about fencing in your sheep.
-1 Uncomfortable Truth
True.
But there is also the point that (for some) education is a worthy pursuit in and of itself. It's value is intrinsic instead of instrumental.
Since I began my PhD studies, I have worked (all expenses paid) on three continents, including taken my family on a semester-long assignment to Europe, and influenced national policy. I'm actually putting off defending my prospectus for a week because I have to meet with the National Academies to finish up a report with them. Because I've made the right connections (and I would like to think I'm proficient at my work), I'll leave school with very little debt (I'll owe about as much on my car as on my student loan).
If I had to go into industry and I never used my advanced degree for anything in the professional world, I would still consider my graduate work worthwhile. In fact, I would still consider the last six years of my life the best of my life.
That said, I do know a great deal of PhDs who are, in fact, morons.
I'd rather have someone respond than be modded up.
If success is not merit based then what is success based on?
First and foremost "Success" is ultimately an abstraction. It's highly subjective. Academia's merit-based system quantifies "success" in a manner which is inconsistent with the real world.
Generally speaking, you can't take a test and as a result, make yourself happy or financially secure or loved in any substantive sense.
Plus, in the academic world, showing up is a major factor, which won't cut it in the real world if you really want to advance.
For the purpose of illustration, let's say success is point B and you are point A. In school, you get to point B by sitting on a vehicle that is on a track that is clearly headed towards point B. All you basically have to do is keep your hands and arms inside the car, push a little, and you'll get there. Compare this with the real world, where point B is never in one spot for very long -- it moves around, and there aren't really any reliable maps or means of transportation. You're left alone to get there, and everyone that was on your academic ride is now a competitor and less-motivated to help you. This is why so many people come out of college and don't know what the hell to do. College doesn't teach resourcefulness as much as it teaches compliance. The typical academic skillset does not lend itself well towards entrepeneurial pursuits.
I have to agree. Vulture capitalists can be the worst offenders when it comes to stealing ideas. They will never agree to any kind of NDA, and if they like what you present, but not your team, they'll sometimes go build a team on their own to pursue your idea. Of course, if they really do hate your team, you probably will fail anyway.
Those were all really good points in the article. I've personally stumbled into most of those traps (being the prototypical geek). Just for fun, I'll list some of my mistakes that correspond to his points:
#1 - A brilliant idea will make you rich.
In 1991, I started DataDraw as a company on the side that would sell software to make teams of programmers more productive. It's a great idea, with huge potential to benefit the whole planet. All it requires is that all those programmers out there understand how they can be more productive, care, and then take action to change. The harsh reality: they don't figure it out (go read datadraw.sf.net if you think you're really smart); they don't care (it's all just money after all); they don't like to change (show me your computer language of choice, and I'll guess your age within 5 years).
#2 - If you build it they will come.
Err... see #1. The next company I started also suffered from this problem. A friend and I started OpenASIC to solve the terrible communication problems between EDA tools. I wrote a very complex and fairly complete LPM module generator, simulator, and various readers and writers. My problem this time was that I BELIEVED what the customers were saying. Just because every major EDA and FPGA company issued press releases supporting LPM doesn't mean that they actually want anything to do with it (it's basically now an Altera specific format). Learning the difference between what a customer will buy, and what he says he will buy is key.
#3 - Someone will steal your idea if you don't protect it
I've had ideas stolen by professors and managers, and I've been stiffed by clients who decided not to pay me after they learned all they needed. The underhanded BS that happens in startups is unreal. Stop worrying about protecting your ideas, and worry about the guy who's gonna try and steal you blind.
#4 - What you think matters
I agree and disagree with this point. Many geeks imagine that if they like something, then so will customers. That's just plain wrong. However, if you actually listen to the customers, and go build what they ask for, you're sure to go broke. You have to be like Steve Jobs, and figure out that people want to pay more for a music player (not less), and that looking cool, and being bone-head easy (so dummies can use it) is what counts. You wont get average customers describing themselves as vain and stupid, but you'd better understand that most people are!
I started a company in 1996 called FPGA Technologies, with the purpose of creating embedded FPGA IP for SoC applications. I listened to all the SoC guys complaining about rising tooling costs, and heard their very enthusiastic response to my proposed FPGA cores. So, I went and built it... and got out when I realized that the customers were wrong. FPGA cores are waaaay to big to make sense in SoC applications. Stupid vulture capitalists keep on funding these poor doomed startups that want to do the FPGA IP thing. It makes a great elevator pitch, but a lousy product. The latest is M2000, which will most likely go broke when investors get fed up with them.
#8 - I need $5 million to start my business
That's funny coming from a VC, since few VCs will consider investing in a company that needs less than $10M to go public. They often have hundreds of millions of dollars to invest, and they can't waste time tracking every $1M investment.
However, I believe there's a huge opportunity for geeks like us to get semi-rich doing non-VC funded startups. In 2000, I moved to North Carolina, and started ViASIC. We have some angel investors, but no VCs, and our investment to date has been qu
Beer is proof that God loves us, and wants us to be happy.
I think I see the problem with your old business.
You didn't make anything available except a code download.
No documentation. No description of capabilities, purpose, performance, extensability, flexibility, etc. No examples of what the code could be used for.
Just code.
I have code that could do amazing things, but I'm trying to make it useful, documented, and have examples before I try to do anything business-related with it. Without the documentation and examples behind an attention-holding introduction, no software has a chance to do anything but bit-rot.
I do not fail; I succeed at finding out what does not work.