As is necessary in venture capital, I am often thinking about how to optimize the launch of businesses. At the same time, we often hear about success being many parts hard work and some parts dumb luck, i.e. no matter how hard you work, you'll need a bit of luck to truly make it. Well, I'll add a bit more to that as I often say to entrepreneurs.
One of the things which the Valley does so well is capitalize on luck. What I am always enamored by is how quickly companies get launched in the States. Further, after they are launched, they are either quickly successful or dead. This may sound like a bad thing but it's exactly the opposite. There's nothing sadder in my eyes than seeing a business three years or even five years down the road returning mediocre success (known as a "living dead" in VC jargon). It may be a sustainable business yet you'll oftentimes see people who could be doing so much more with their skillset and experience. Granted, not everyone can be number one. That's fine and I am not talking about those business which reach a point where the entrepreneur and his team are perfectly OK with it. I'm addressing those folks who set out to change the world and build a team around them to support this.
What happens in the US as opposed to other parts of the world? Well, if a company is started and shows some signs of success, additional capital is quickly pumped in and it isn't drip fed (see my previous post on this!) The best players are then found and brought on board. If success continues, additional capital is injected or an exit event (IPO or trade sale) takes place. If the company is launched and doesn't see much traction, it's usually far less likely that additional money will be invested. Once 18 months out or so and still unsuccessful, a company is shut down and people move on. They not only move on but they repeat. This is the beauty of the Valley and the ecosystem which has been built there.
Yet, let's get back to luck. Things usually only seem to have luck involved when viewed in hindsight. You never really know if you are lucky at the moment it's taking place. Further, luck is a bit intertwined with timing. Often it's about being in the right place at the right time.....or better put for our industry, having a product at the right time for the right market. So, if you ask yourself why so many times the Valley or some region with a cluster of start-ups is better than another region, don't forget that for there to be luck, you need an environment where this luck is capitalized on. Further, you need speed to capitalize on this luck and the right people to execute.Therefore don't worry so much about being lucky or not. You can hardly influence that. Rather, focus more on executing like mad whenever you do get lucky and capitalize on the luck you've had.
I don't get why people insist on "those folks who set out to change the world and build a team around them to support this."
How many internet companies in the past 10 years "changed" (and i mean for real) the world?
Unless you believe Facebook, Zynga and the like change the world...
Posted by: Jan Lukacs | January 10, 2011 at 11:35 AM
Jan, you're correct in that the term may be misleading. By "change the world" I am addressing more the companies who are looking to be financed by VC's and grow big. "Change the world" in my industry translates to "deliver a big exit!" Lifestyle businesses are fine and I address that but you are correct in stating that it may be a misleading term in this regard.
Posted by: Paul Jozefak | January 10, 2011 at 12:30 PM