Wednesday, February 22, 2012

San Francisco vs. Palo Alto vs. South Bay

A history lesson on startup geography, inspired by this post by Michael Arrington:

The South Bay / Peninsula / San Francisco tango is a long tradition in the tech industry. Silicon Valley famously started in downton Palo Alto, with the famed HP garage (which I've walked past many times).

During the chip-dominated era (there's a reason we call it Silicon Valley), the South Bay reigned supreme. Intel, Cisco, and their brethren all hang out in the South Bay.

Once software became a bigger deal, Palo Alto and its proximity to Stanford (along with virtual suburbs Mountain View and Menlo Park) took over as the place for startups to get their start. Think everyone from Google to Facebook.

Yet during the dot com boom, San Francisco had its share of adherents, especially among media companies, which thrive on young creatives that don't need to worry about raising kids.

It certainly seems like San Francisco is the center of things these days--every company founded by twentysomethings seem to want to move to the city, but that's a reflection of the number of consumer/youth-oriented companies being started. I haven't heard of any chip manufacturers relocating their fabs to the Marina. And the current flavor of the month, Pinterest, is firmly ensconced in, where else, Palo Alto.

In the end, there are people who like and hate San Francisco, just as there are people who like and hate Palo Alto. And then there are the people who need the cheap land in the South Bay.

Monday, February 20, 2012

Passion Turns Failure Into Success (Lessons from 11 years of Blogging)

A couple of weeks ago, I ran across this post from Jason Cohen. In it, Jason uses a series of excellent graphs to demonstrate one of the uncomfortable facts about entrepreneurship:

Success feels like failure until it feels like success.

Here's how Jason put it:

"What was going on during those first six months? Was the future bright and shiny even when there was no impressive customer curve? When half the customers were just personal favors called in and new signups didn’t happen daily?

Or was it barely-controlled chaos, not able to sleep at 2:43am for worry about how to make payroll in seven months or whether the numbers would look good enough by next spring to raise another round? Unsure which products to double-down on and which to kill, and worried the wrong choice would tank the entire company? Staying bright and cheery on the outside for the press, customers, and even employees but with Damocles’ Sword hanging overhead?"

I've worked on companies that failed, and I've worked on companies that succeeded (as in IPO succeeded). I've never had the good fortune to work on a company which felt like an immediate and continual success. I suspect that no one has. Google nearly went under several times. Mark Zuckerberg just wanted to sell off Facebook so that he could focus on his idea for a file-sharing network.

The closest I came was probably with Ustream, where usage surged upward month after month, and even there, the growth was extremely lumpy, depended an awful lot on random dumb luck (who knew people would go nuts over a puppy cam?), and in the back of my mind, I kept wondering, "How the heck are we going to pay for all this bandwidth?"

That's where passion comes in.

Following your passion doesn't guarantee success. But if you're following your passion, you're far more likely to persevere through what Seth Godin called "The Dip."

Only passion can keep you going through when feels like months of failure. Take this blog for example. I've been blogging since 2001. When I started, I was an unknown failed entrepreneur (if you don't believe me, read my first blog post), blogging was the province of a limited number of crackpots, and there was no conceivable reason to believe that my writing would help my stalled career.

Exactly 11 years later (my first post was on 2/20/2001), I'm no household name, but I've achieved a modicum of success, most of which I can attribute to my blogging (both here and in guest posts in places like TechCrunch, Mashable, and Venturebeat). And the only reason I persisted through 11 years and 1,460 posts is the passion I have for writing and expressing myself.

In one sense, it's hard to calculate an ROI on the time I've spent blogging (since I average about 30 minutes per post, that's 750 hours I've invested--$375,000 at a $500/hour billing rate). On the other hand, the value it's brought me is priceless, both personally and professionally.

I couldn't have known that when I started. In fact, it took 20 blog posts before I even got my first comment! The only thing that kept me going was my love of writing.

The beauty of passion is that it keeps you going, even when you expect no reward for your effort. That persistence is what allows you to push past the feeling of failure and reach success.

The Myth of the Celebrity Entrepreneur

A couple of days ago, I ran across a blog post asking how unknowns could compete with celebrity entrepreneurs. It's a common question, and becoming more relevant as the expansion of the startup ecosystem (including trade press like TechCrunch and Mashable, who act as our version of paparazzi) and the relative paucity of IPOs in comparison to acquisitions has generated a surge in the ranks of serial entrepreneurs.

In his post, Justin Krause relates how he and a neighbor built and launched virtual message board SkyChalk, only to see it fizzle out. Then he notes that Caterina Fake's latest startup, Pinwheel, is doing the same thing, and with a slightly envious tone, concludes that "connections and money may be more important than the product itself."

To put in bluntly, this is balderdash.

Yes, celebrity entrepreneurs have a major advantage when all other factors are equal. But all other factors are seldom equal.

Take Silicon Valley's three most valuable companies: Apple, Cisco, and Google. All three were founded by unknown, first-time entrepreneurs. Even the current crop of hot companies fails to demonstrate the dominance of celebrity entrepreneurs. While there are a number of successful serial entrepreneurs like Zynga's Mark Pincus, the single biggest hit is Facebook, whose founder Mark Zuckerberg was an unknown college dropout.

In some ways, unknown entrepreneurs have an advantage. Their efforts aren't subject to unrealistically high expectations (e.g. Color), and have time to build momentum. (Small comfort, I know, when you're an unknown entrepreneur desperate for anyone to pay attention, but an advantage nonetheless)

Another advantage is that a lack of resources forces you to attack opportunities that others overlook. When you have overwhelming advantages in terms of being able to raise money and generate press, the temptation is to attack known markets where you feel certain of a good payoff. Yet the most valuable companies result from disruptive innovations that create new markets.

Of course we'd all rather be celebrity entrepreneurs than unknown guys in coffeeshops. It's a lot more comfortable to start a company when all that's at stake is your reputation, and not your life's savings. But if you are an unknown guy or gal in a coffeeshop, your best strategy isn't to lament your fate--it's to find an opportunity that the celebrity entrepreneurs have overlooked.

By the way, that's exactly how those celebrity entrepreneurs achieved their initial success. Each of them started off as an unknown guy or gal in a coffeeshop, including Caterina Fake (who was certainly not appearing on the cover of Newsweek when she was an Art Director for Salon).