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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."
In case of a /.ing
Myth #1: A brilliant idea will make you rich.
Myth #2: If you build it they will come.
Myth #3: Someone will steal your idea if you don't protect it.
Myth #4: What you think matters.
Myth #5: Financial models are bogus.
Myth #6: What you know matters more than who you know.
Myth #7: A Ph.D. means something.
Myth #7: I need $5 million to start my business
Myth #8: The idea is the most important part of my business plan.
Myth #9: Having no competition is a good thing.
Myth #10: After the IPO I'll be happy.
...use soap, water, and deodorant liberally.
You can let yourself slide back in to the "code daily, shower monthly" schedule after that seven-figure VC check is in the bank, k?
Slashdot? Oh, I just read it for the articles.
Myth #7: A Ph.D. means something.
Reality: The only thing a Ph.D. means is that you're not a moron, and you're willing to put up with the bullshit it takes to slog your way through a Ph.D. program somewhere.
I agree with the second part of this statement, but take issue with the first. I deal with PhDs all day, every day. Many of them are indeed morons who happen to have a great depth of knowledge in one miniscule area. After several years of doing this job, I've concluded that the only thing a PhD proves is that you were able to devote several years to a PhD program.
This guy's the limit!
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.
No, he resigned from GOOG (his last employer, afaik) some time ago.
Try Corewar @ www.koth.org - rec.games.corewar
Blogs are a good source of business advice
siener's youtube channel
Myth #1: A brilliant idea will make you rich
:P
No a brilliant idea will make some other company rich because a single person doesn't have the capacity to make a full item. I've had many ideas that made other people rich in my life. I never run out of them. But I still live in the boonies
God spoke to me.
He should take a look at a company called Microsoft. Creating a no-competition environment seems to have worked out well for them.
Two words: iPod and iTunes
Only to idiots, are orders laws.
-- Henning von Tresckow
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.
Nigel Tufnel: The numbers all go to eleven. Look, right across the board, eleven, eleven, eleven and... Marty DiBergi: Oh, I see. And most amps go up to ten? Nigel Tufnel: Exactly. Marty DiBergi: Does that mean it's louder? Is it any louder? Nigel Tufnel: Well, it's one louder, isn't it? It's not ten. You see, most blokes, you know, will be playing at ten. You're on ten here, all the way up, all the way up, all the way up, you're on ten on your guitar. Where can you go from there? Where? Marty DiBergi: I don't know. Nigel Tufnel: Nowhere. Exactly. What we do is, if we need that extra push over the cliff, you know what we do? Marty DiBergi: Put it up to eleven. Nigel Tufnel: Eleven. Exactly. One louder. Marty DiBergi: Why don't you just make ten louder and make ten be the top number and make that a little louder? Nigel Tufnel: [pause, blank look and snapping chewing gum] These go to eleven.
- 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.Yes, but that's very hard - even moreso for technical people. We (and I count myself as one) do not have the same desires as the average consumer. Not even close. If you are enthusiastic about anything and think you've got a lock on what the public thinks based on your likes/dislikes, you're either (a) amazingly gifted or (b) totally deluded. Your chance of falling into category (a) are probably less than 1 in 10,000.
Never underestimate how apathetic your customers are to the minutiae of your product or service. Ease of use will trump techical superiority in almost all cases.
You are correct, but saying that knowing what customers want being the good idea is like saying that all you have to do to win the lottery is to pick the correct numbers. As few numbers as there are, it's damned hard to do so, and looking at last weeks numbers doesn't mean squat for what will win this week.
Is it just my observation, or are there way too many stupid people in the world?
- Sales team. The first person you'll ever need is the VP for sales. Then you'll need a good, experienced sales team. No matter how expensive they are, these people will make or break a business. I ended up leaving my job and joining a startup precisely for this reason.
- Time frame and financial needs. One thing all startups underestimate is the need for quality assurance. Generally, testing for defects takes more time than assembling a product. Thus, the time to market should be at least tripled and the cost doubled from what you expect.
- Intellectual property. True, patent protection is overrated. However, there are thousands of inventors and companies waiting to sue your ass off if you infringe on their patents. More important than filing your patent is to research whether you infringe on others' patents or not, and settle any licensing issues. This will get very costly, and in this case getting good lawyers is worth their weight in gold. We pay roughly $5000 per patent examined, but they decreased the number of patents we thought we would license from 40 to 2.
- Company share. Many inventors don't want to relinquish control over the company, and want to maintain a majority stake at any cost. Most investors wouldn't agree with that, with a good reason - a researcher running a company is recipe for disaster. And as the classic saying goes, it's better to have 5% of $100 million than 100% of nothing.
- IP ownership. I talked about infringing on others' IP already, but what about the inventor's IP? The inventor must transfer all the rights to the invention to the company. Otherwise, the inventor will exercise undue influence over the business, and sooner or later (rather sooner) this will create conflicts between the inventor and the management.
There are plenty more rules of the game, but this game is too flexible to make any of them universal. The best thing is to give over your technology to a seasoned entrepreneur and just ride along.Best exemple of this: iTunes.
A lot of people on Slashdot will complain that it takes too much memory, is heavy on the CPU, doesn't have enough settings/parameters, have DRM in store-bought songs.
Normal users see a pretty program that's easy to use, that does everything that they want, including buying a single tune for 0.99$ 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.
But he just reiterates what I've read in many other places (although he puts a different spin on it).
I've read that you are essentially protected, as an inventor, by the act of inventing. You have created the work on which other things may try to be based, but you are protected by virtue of the fact that you first created it. The patent puts some extra teeth into the matter, but most of it is completed by the creation itself.
I've never quite heard it reasoned, however, in the way the author did.
It's also refreshing to read this from a business perspective instead of from the perspective of "Inventors - pay us money to patent your ideas, and then you'll be rich (if you can find a way to do something with your idea)."
Take it to the limit, everybody to the limit, come on, everybody fhqwhgads.
This whole article smacks of one critical difference between entrepreneurs with an idea and business majors.
Entrepreneurs with an idea think that money exists as a tool to bring ideas to realization, and they want their idea realized. The money to them is rather irrelevant if it's just doing the same old shit.
Business majors think that ideas exist as ways to make money, and they want their money. The realization of the idea is rather irrelevant to them if it's not the best way to make money.
At the end of the day, both can be opportunities for each other, but neither needs the other.
A brilliant idea can make a business major rich and powerful, but they can still get rich with the same old capitalist tactics they're familiar with and nary a novel idea in sight.
On the other hand, a lot of money can motivate people to support your idea and get it out into circulation, but there are other ways to motivate people than money. For an example of this, look at RMS.
It's my opinion that the best way for an individual to get their idea out there is to not only discard the existing business models, but to create models where other parties particpation is rewarding in and of itself, rather than some distasteful task they are being bribed into completing. If you can do that, it will scale globally and you don't need a dime to pay them. If you can't, you'll probably get crushed by the existing players with WAY more money than you and either be destroyed or absorbed.
Unless you're an existing player with tons of money, of course. Then you can bribe people to get behind whatever silly idea comes into your head.
-1 Uncomfortable Truth
A PhD emphasizing in what field of business? I see a lot of misinformation on Slashdot today based on an equivocal and homogenized definition of business PhDs as graduated MBAs. PhDs save a few pragmatic areas such as Operations Management are destined for academics and research in a specialized area of study. All these careless references to PhDs irrespective of their areas of expertise are akin to lumping Biology, Physics and Chemistry as a Science PhD. For future reference Marketing, Information Systems, Accounting, Management, Finance, HR, etc all have PhD programs with in the business college. Go back to bashing MBAs in the professionally world and criticize PhDs in the correct context to gain some measure of credibility.
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
Microsoft is probably the canonical example of a successful business, and it has never had a single brilliant idea in its entire history.
False. Microsoft bought many of the most intelligent technicians in the world from its competitors, and some of them had brilliant ideas while working for Microsoft. How Microsoft used those ideas may not have been so brilliant, but they were there.
And if they don't have any brains then it doesn't matter what they do.
What a contradiction! He spent the whole article blasting away at variants of the myth that smarts will make you rich, and then goes and says something like this. The fact is that many people without brains can wind up very rich and in control of armies of lawyers, and they can harm you.
One of the ironies of the programming world is that using Lisp is vastly more productive than using pretty much any other programming language.
Sounds like religion to me. I have worked with Lisp, and I have not found this to be true. In my experience, different languages are often better suited for different tasks, and those who believe that one language is optimized for everything just have a biased view based on their own preferences.
A C programmer, by contrast, can't do anything useful except as a member of a team.
More religion. It depends on what you are trying to do and how good you are with C, of course, but situations do occur, in the real world, where one programmer can do something useful with C.
and no one will give you the money to hire someone to do it for you
Uh, well, maybe it is unlikely, but there are VC's out there and sometimes they do make investments in a new idea.
Meh. That's all I feel like saying for now. I agree with the overall theme of what he said, but some of these bits are far too ill-founded to go unchallenged.
No, they will own everything your butt produces.
t
Or they'll do both. They'll sell what doesn't exist in order to get the business going, and the development team will have to try and keep up. You will succeed, as long as the development team can do this. But you will reach a point where you grow a little bit too quickly, and sales starts to promise too much. The development team flounders, and mistakes start happening. Sales is able to sign bigger and bigger deals with bigger clients. But the expectation for development is that "they have always been able to pull it out in the past". Burnout ensues. This is where the execs will sell off the company and make out like bandits.
# Time frame and financial needs. One thing all startups underestimate is the need for quality assurance. Generally, testing for defects takes more time than assembling a product. Thus, the time to market should be at least tripled and the cost doubled from what you expect.
What? Did I just read that? Holy crap. I want to come work for you. I have been doing QA and testing for 13 years. Finally someone who gets it. Did you read my statments to the first point? QA and testing wasn't even considered an afterthought at one startup I was at. Not only did the execs not understand what it was or what it was for, they wouldn't listen to the people who did know. If your executives don't get it, and are only there to pump and dump a company, your best bet is to GET OUT. They will promise you anything, and deliver nothing.
Yes, I am bitter. But I am much happier since I got out of that environment. There is a reason that startups fail - because they end up being about someone somewhere in the company focusing on getting rich instead of building a company.
My beliefs do not require that you agree with them.
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.
Which part of "Patent protection does serve one useful purpose: it can make investors feel warm and fuzzy, especially naive investors." is hard for you to grasp? Nobody gives a rats ass about wether or not their bogus startup patents will do well in litigation, or in negotiations for licensing. They exist solely to make stupid investors feel good about you, so they will give you money. I know my patents are bullshit, wasting more money on having them filed by a professional crook will not change that. I just need to say "look, we have 12 patents" to the stupid investors so they think we are special and give us money.
One of the best things about having your own business is that you can walk away.
Unless you have investors in which case, at least ethically, you're locked in for the ride. Note that this can mean five or ten years in a "zombie" company struggling along. Even if you think your next big idea is the shit, you still get to deal with a product nobody wants and the tech support nightmare you created for yourself because you took the kings' shilling while it seemed like a good idea.
Word to the wise: sometimes failure is the preferable option.
Dave
I write a blog now, you should be afraid.
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.
Clearly, you've never worked in technology marketing. It is very difficult to find out what customers want - even when you ask them, they don't give you correct answers. And if your Shiny New Thing is really revolutionary - well, then it gets even more difficult as consumers can't figure out how to integrate it into their lives. I worked with one of the first companies to sell voice mail, and one common response was "But why would I want a machine to answer my phone?".
I had a business plan for a product that would intercept calls to your home, ask the caller to ID himself, and then announce the call. It would hang up on telemarketers. I thought it was a fairly simple concept, but when I tried to explain it to non-technical people, they would ask "What does it do?" (after the explanation), and "Why would I want one?" (after they had just agreed that they found telemarketing calls very annoying).
What was once true, is no longer so
Probably yes.
Because if your idea can be "stolen" by anyone, then it's because the idea is so lame anyone can implement it and succeed.
If it's really so brilliant and so smart that it is really worth something on an by itself, then you may be the only one who "gets it" and only you would be able to move it forward.
But if you avoid any investor seeing your idea (no, they won't bother signing NDA's), you'd better be able to pull the trick on your own, because they won't help.
http://www.dieblinkenlights.com
If she goes to Baskin Robins, the other 29 choices are there, along with the choices she'd like to be limited to. That doesn't make the other 29 choices go away. That's the whole point of "too many choices are bad".
This isn't a "vanilla and chocolate are parts of the 31 flavors" logic equation, it's about people's ability to make a decision based on the number of choices available. It's easier to pick a number between 1 and 2 then between 1 and 31.
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.