Taking my own advice

When should you start a company? This is the quintessential entrepreneurial question. A running debate rages: when do you have a feature rather than a company? When is a company being started because it should be rather than when it merely can be? What does it take to make a company successful? This debate heats up appropriately when exits are plentiful and lots things get funded that shouldn’t.

When potential entrepreneurs ask me when they should start a company? I tell them you should start a company when you can’t do anything else. When you have an idea that has such a grip on you, you can’t sleep at night. When you know it would be far worse not to pursue a venture than to fail miserably trying. If you have any intelligence at all, it is the only way you can do such an irrational thing as start a company.

It is called risk capital for a reason. Over half of all funded ventures fail: by most accounts fewer than 30% succeed in any meaningful way. The exercise of venture investment only becomes rational when 20% of the ventures in aggregate can provide ridiculous returns (better and 10 to 1). With diversity and persistence this looks somewhat rational and perhaps even highly lucrative when managed across multiple funds with portfolios of companies.

But take a specific venture, there is no rational for it being a good idea. In my experience companies succeed when they are meant to succeed; when all the stars align. It is like the old advertising adage: “we know half our advertising is a useless waste of money; we just don’t know which half.”

Don’t get me wrong, you need to do all the right things to succeed: identify a market; develop a compelling value proposition; get the right people; manage your cash well; keep maniacally focused, etc. etc. But all that’s not enough. You also have to have uncanny instinct (or maybe just dumb luck). When a prospective venture posses you, dominates your thoughts, doesn’t let you sleep, and jolts you from aha moment to aha moment yielding seeming clairvoyance, then you know it is time to start a company. New Stealth Co has that grip on me. I am going to build a wildly successful company and it will change the world.

To see the future go to China

I spent the last 10 days in Shanghai. The first thing you notice is scale, the second is smog. Shanghai makes places like San Francisco, Portland and Seattle look quaint. It has the density and building size of Manhattan but rather than Manhattan’s 13 by 2 mile foot print with 1.5 million residents, the central planned area of Shanghai is square, about 26 miles on each side, and has over 10 million people. There are 5000 buildings over 18 stories tall in this one city alone.

China is moving large percentages of its population from rural areas into its cities. Their cities have increased by 300 million people in the last decade. This means that China has built urban infrastructure to accommodate a population the size of the US in only the last 10 years.

The governments of China and Shanghai developed the master plan of Shanghai in 1995 and they are on track to complete it by 2010. They are planning an International Expo in 2010 to celebrate this accoumplishment. You can see the master plan at the Shanghai Urban Planning Museum, a must see if you visit Shanghai.


I was in Shanghai in 2006 when it had 3 subway lines. On this visit they had 8 operating subway lines. They know transportation, especially in the inner city, is one of their largest challenges: so they simultaneously built 5 additional subway lines through an already developed city.

Just to show off they put in a Magnetic Levitation train that runs from the airport some 16 miles into town. It takes 8 minutes for an average of 120 miles per hour. Its top speed is 435 km/hr making it the fastest train on earth.



You can judge China to be good, bad, idyllic or evil: there is no question it is a totalitarian government with a sketchy record on human rights. However you should appreciate the magnitude of the challenge of developing a country with 1.2 billion people. China has literally built a city from the mud that is one of the most highly productive and cosmopolitan on the planet. And in so doing, it is raising the standard of living and quality of life for 10s of millions of Chinese people.

The start-up – doing the right things well

I don’t understand why people make startups so complicated. Successful startups do the right things well. This means there are only two things to do: (one) figure out the right things; and (two) do them well. All the other stuff doesn’t matter. A startup is about delivering a differentiated value proposition to a target market. The right things are always about developing the differentiated value proposition and delivering it. You have to articulate the right things clearly and be able to count them on one hand.

The luxury of a startup is having a small group of talented people maniacally focused on a small number of right things. In most other business situations you have competing objectives that pull the company in different directions. Established companies have to consider existing customers and existing products. Just think of the budgeting cycle at a company of any size. Managers compete internally for funds to satisfy different objectives –new product development, sustaining engineering, marketing programs, and channel support: departments battle other departments; new initiatives battle against existing business processes.

In a startup the compromises are only around the optimal way to do one thing – doing the right things well. The luxury is everyone pulling in the same direction within the business constraints of the startup (money, staff, technology, market acceptance). You have to be able to tolerate some loose ends and chaos. Because dealing with them would mean expending energy on things that are not part of “the right thing”. In a startup you need people that can handle, in fact can thrive on, there being a little “broken glass”.

I love startups: they are not very complicated and the fun is in the chaos.