You Can't Be Half An Entrepreneur

I'm a big fan of the HBO show Boardwalk Empire.

One of the famous quotes from the show is "You can't be half a gangster."

That line was said by one character urging the other to start acting like a full gangster and use all the tools at his disposal (violence) to resolve issues in their illegal endeavors; otherwise they’ll both probably end up on the wrong side of a gun barrel, since their competitors will be acting like "full gangsters".

This quote and the reason for it reminds me of one simple truth in entrepreneurship. "You Can’t Be Half An Entrepreneur". In short, if you want to build your own start-up, you have to go all in. You cannot expect to be successful if you only have half your efforts focused on an endeavor as challenging as building a company. 

When I decided to do my first start-up, I quit Microsoft cold turkey, moved to Silicon Valley, and lived in my friend's pool room.  I had no funding, no health insurance, and dwindling savings. It didn't matter to me though.  I knew if I did not go all in now, I would never go for it.  Eventually, we raised $10 million in venture capital, hired over 30 top notch engineers, and sold Spock 3 years later.  None of this would have been possible if I took the advice of some people who told me to stay at Microsoft, slowly build out my idea, and only quit when I had funding lined up.  

In my travels, I have gotten to know many people who work at big companies like Microsoft, Google, and Yahoo who want to be entrepreneurs.  They ask me for advice and connections, yet many of them just cannot pull the trigger and quit their job to go for it. They keep moving their idea at a snail’s pace and hope that somehow, all the pieces will come together in the future and then they can comfortably leave their jobs.  

This group usually asks me for introductions to VCs. I always say no. I tell them that no VC will take them seriously if they are not already working on their concept full-time.  For every person slowly moving an idea along in a company, someone else has committed themselves full-time to the same idea. Plus, most VCs worry about non-competes or issues around IP if employees start a company while still employed by someone else in the same industry.

I get other people who want to be entrepreneurs yet complain about how they cannot afford to leave, given family obligations.  To this group, I just tell them to forget their start-up dreams. They will never leave given valid commitments to supporting a family. So why waste time dreaming of something you won’t do.  I tell this group to double down on their current job and try rising as high as they can in their company.  

If you look at really successful Silicon Valley entrepreneurs, you see that many of them went all in with regards to building their company.  In many cases, these entrepreneurs risked a lot by quitting something important.  

Both Bill Gates and Mark Zuckerberg left Harvard to start their companies. 

Both Bill Gates and Mark Zuckerberg left Harvard to start their companies. 

They both knew they could never reach their full potential by balancing two commitments. Plus, both saw that their respective markets moved too fast for them to wait to graduate. 

When Jeff Bezos started Amazon, he left a very comfortable banking job in NYC, moved to Seattle and started Amazon out of a garage.  He committed himself so much that VCs like Kleiner Perkins could not resist funding him.  His ambition and commitment to making Amazon a success were just too big to ignore.

When AdMob's founder, Omar Hamoui, decided to leave Wharton's MBA program early to begin AdMob, I'm sure many people thought he was nuts.  Yet, only a few years later, AdMob sold to Google for over $700 million.  He knew that he could be an early leader in the new space of mobile advertising.   If he waited another year to graduate fromWharton, he would have missed the market.  

All of the examples above show the level of commitment necessary to be successful in building a company.  All the founders above risked a lot by making these moves.  Yet, the only reason they were able to succeed was that they went all in.  

If you’re someone who is working a corporate gig and thinking about starting your own company, I recommend that if you believe in your idea, believe in your abilities, and can afford to take the risk, then go for it. You only live once, and you want to look back at life and say that you gave 100% towards your dreams.  

Just remember, if you decide to stay half an entrepreneur, nothing good will happen. You'll waste time dreaming and probably do a really bad job in your current gig.  Not to mention, your competition will be working full-time to win in the same market. In short:  Don't Be Half An Entrepreneur. Either go all in the game, or stay out of the game. It's being half in that will get you in trouble.  

Read more: http://www.businessinsider.com/you-cant-be-half-an-entrepreneur-2012-9#ixzz277nvW9AO

The Only Two Ways To Build A $100 Million Startup Read more: http://versiononeventures.com/the-only-2-ways-to-build-a-100-million-business/#ixzz277nEUK68

With tens of thousands of new start-ups being created every year, the potential of a company to truly scale and become a large, stand-alone business is more crucial than ever before.

A great product is always the foundation but a clear distribution strategy becomes essential to cut through the noise.  

So most early-stage VCs have started to evaluate investment opportunities with an imaginary benchmark in mind: can this company become a $100 million opportunity?

Generally speaking, there are two ways (and only two ways) to scale a business to hit that $100 million threshold:

• Your business has a high Life Time Value (LTV) per user, giving you the freedom to spend a significant amount of money in customer acquisition. High LTV can usually be found in transactional or subscription businesses.
• Your business has a high viral co-efficient (or perhaps even a network effect) that lets you amass users cheaply without worrying too much about the monetization per user or spending money on paid acquisition.

Route One: High LTV per user

The exact definition of a “high” user LTV depends on the specific vertical, so it’s typically better to analyze the ratio between Customer Acquisition Costs (CAC) and the Life Time Value of the customer. In my experience, having an LTV that’s three to four times greater than CAC makes a business (and potential investment) interesting.

The biggest driver for high LTV is repeat purchase behavior (in an e-commerce business) respectively a low churn rate (in a SaaS company). Companies that score highest in this criteria are typically:  E-commerce businesses that fulfill regular needs and offer a differentiated experience or SaaS businesses that help businesses or individuals manage core activities.

As a VC, the biggest challenge in evaluating LTV models is that metrics can dramatically change at scale. For example, Customer Acquisition Costs often increase once the more efficient marketing channels are maxed out and the company needs to find new users through less efficient means. In addition, churn tends to rise as a company grows. Early users of a product are often strong advocates and company ambassadors, while those users acquired through paid marketing channels down the road show far less loyalty.

Route Two: The Viral Effect

The other way to scale a business is through a strong viral and/or network effects that lets businesses grow to tens of even hundreds of millions of users. With this model, user acquisition is generally close to free, and monetization per user is often low (advertising-based or freemium businesses).

Many businesses built in the early days of the Facebook platform (like Zynga) benefitted from a huge viral co-efficient and scaled very rapidly. (As we all know, this is no longer the case as Facebook has essentially removed most of the free viral channels and businesses must now pay for most of their user acquisition via Facebook.)

Even more interesting are businesses that create network effects like marketplaces or social networks. Not only do they acquire lots of users for free due to viral effects but also create important barriers to entry and lock-in effects as the network grows over time.

Startup Purgatory: No Man’s Land

Unfortunately, many consumer internet startups find themselves stuck in the middle of these two strategies: they have a low monetization per user and limited viral effects. That unfortunate combination makes it rather difficult to reach the $100M mark.

As the consumer Internet space becomes more and more crowded, every startup founder needs to be thinking about these two ways to scale a business. Too often I have seen entrepreneurs believe that customers will automatically flock to their cool new service, completely underestimating how tough it is to cut through the noise and build an audience.

To build a standalone company and capture the attention of investors, you need a viable way to scale your business. The earlier you figure this out the better, since it may require you to build your product differently. While the $100 million mark may seem far away in those early days, it’s important to begin thinking about paths to reach this threshold from the start.

Read more: http://versiononeventures.com/the-only-2-ways-to-build-a-100-million-business/#ixzz277n9a4Go