Saturday, January 10, 2009

To succeed as an entrepreneur, give up the illusion of control



If you want to succeed in this business, you need to give up the illusion of control.

The fact is, when you're trying to make money from innovation and new technologies, no one really knows what's going to happen.

Why did Hulu succeed where Joost failed? Two years ago, all the smart money (including Sequoia, who won a *bidding war* for the Joost Series A) was busy anointing Joost as the future of TV, while shoveling dirt on Hulu's grave.

Yet at the same time, those who fail to plan are planning to fail. You can't let chaos and unpredictability serve as excuses for laziness or self-indulgence. The entrepreneur who believes that he or she can succeed by making "gut" decisions is unlikely to see much success.*

Planning everything is wasteful and counterproductive, while planning nothing leaves you reliant on dumb luck. As an entrepreneur, you need to find a middle ground that works for his or her venture.**

* Exceptions always exist, but those folks rarely produce a second success.
** Alas, this is easy to say, hard to do. But if you are having trouble working out this balance, feel free to head over to AskTheHarvardMBA.com and drop me a line.

Monday, January 05, 2009

Always Treat Money Like It Is Your Own (Part 2)

Fred Wilson has a good post up about why you should Always Treat Money Like It Is Your Own.

Fred's point is that using OPM (other people's money) often has a corrosive effect on decision-making. As he writes:

When you are writing a [personal] check every time you make an investment, it has a way of clarifying the mind.

Very true. But there is also another important reason to treat OPM like it was your own.

If you always treat money like it is your own, other people are more likely to trust you with their money.

I have always been entrusted with a lot of spending authority because people know that I am so cheap that I cannot bear to waste money, even if it isn't my own. And when people invest in one of my startups, they know I'll do my best not to spend their money unless it's absolutely necessary, even if it doesn't always make me the most popular guy in the office.*

* Two true stories:

1) At one of my companies, one of my employees complained about a bunch of work I asked him to do. "That's a lot of work just to save $25,000 per month," he said. He was lucky to make it home alive that day.

2) At another company, I brought back a hefty pile of prizes (including a tablet PC, a smartphone, and an Xbox) by winning a number of pitch contests at a conference. The guys at the office were quite crestfallen when I told them to eBay all the loot so that we could deposit the cash in the bank.