by John Vrionis, partner at Lightspeed Venture Partners
And, if we’ve done our job right, by the time the journey ends, they’ve grasped and internalized the following five mantras:
1. Successful Entrepreneurs Start with an Insight. And Experience Creates Insight.
The best startups begin with an insight and a missionary passion to turn that insight into a company. So many young people today are enthusiastically responding to the call to be entrepreneurs, and while energy is important, what matters far more is insight.
For the most part, you don’t get insight without experience. And often the best kind of experience comes when you don’t get what you want. Entrepreneurs typically need time and a taste of failure before they gain the insight that they’ll need in order to succeed. For example, I don’t expect all of our young fellows will create successful companies out of the gate. My sincere hope is that they’ll gain the empathy they need to be great entrepreneurs and the practical experience to have good judgment when they make tough calls later in their careers.
2. Market and Timing Matter Most.
Disruption Creates Opportunity. A successful startup can take a disruptive idea and turn it into a great business, IF the size of the market opportunity and the timing are right. The best startups are born when an entrepreneur has a vision that leverages macroeconomic change and a significant technical inflection. Execution becomes about exploiting the one advantage a startup has over the legacy competition: speed. Startups have the potential to learn and iterate faster than established companies.
3. Only Desperate People Buy from Startups. Step 1: Get Out There and Find Them.
Andy Rachleff, Stanford Professor, legendary VC and one of my mentors, has a saying that’s always stuck with me. “Only desperate people buy from startups.” I believe there is a process to great entrepreneurship. The single most important thing an entrepreneur can do FIRST is test the validity of their insight by identifying a segment of customers who are truly desperate for a new solution. People who are truly in pain will buy from you even if the product is buggy or missing key elements (hello Fail Whale). The key is to keep hunting until you find that group.
Having the discipline to find the desperate segment is hard. And often, for the technical founder who loves to build and code, it can be incredibly hard to ignore the siren song of temptation to tinker with product features to satisfy initial customer prospects. This is undoubtedly the WRONG answer. When you start socializing an idea, keep looking until you find that desperate “Yes! When can I have one?” “No” is actually the second best answer. “That sounds interesting. Let’s meet again so you can tell me more” is the call of doom. I tell our fellows another Rachleff-ism almost every day: Iterate on market, not product.
4. Be Exclusive. Strategy Is What You Choose Not to Do.
Startups are by definition resource constrained. The good news is that innovation thrives when there’s a goal and a lot of constraints, because that helps focus creativity. The best startups channel their efforts and adopt a strategy of excluding whatever is not necessary. They rule out nice-to-have features, distant customer prospects and enticing possibilities in favor of a streamlined effort toward a clearly defined goal. They give up balance, which leads to dilution of focus, in favor of an “all in” and committed attack. But this is REALLY HARD TO DO. Billy Bosworth, CEO of DataStax, had a saying for this process of exclusion. “It’s not like physics hard, it’s like dieting hard.” Amen. Exclusion demands discipline, but it’s the best path forward.
5. Values Are More Important Than Valuation.
The young entrepreneurs we engage with are usually prepared to learn about and practice the strategic and tactical elements of entrepreneurship, but they’re usually surprised when we start talking about “soft skills”—integrity, values, empathy and treating people the right way. They never expected to hear that coming from VCs. There’s a misperception in the tech industry that you have to be a shrewd, calculating, probably backstabbing VC to get the chance to back the best startups.
I’ve learned through experience that when you treat people the right way, not only is it a more fulfilling way to live your life, but also word gets out and like-minded people find each other. It turns out that the people who start the rare companies—the ones that change how we go about our lives—are very collaborative with each other. Just like you wouldn’t talk to only one buyer if you were selling your house or car, savvy entrepreneurs don’t just pitch one VC when raising money. They talk to other startups to learn what it’s really like to be funded by a particular VC before they make their choice.
It’s a brutally competitive industry, and from an outsider’s perspective it looks like the competition is about price or the amount of money. However, those are not what ultimately determine which VCs and entrepreneurs form relationships. It’s about who you can count on when the chips are down. Sure, the pitch is all about track record and reputation and success, but everybody at the table knows that sooner or later the startup is going to hit a bump in the road. Maybe a big bump. What makes or breaks a relationship between a startup and a VC is how they can align to jointly manage difficult times. That’s what the smart entrepreneurs are looking for, and it’s what I look for, too. Shared perspective and similar values are the bedrock of any close relationships—including the ones between VCs and entrepreneurs.
I’ve come to believe that entrepreneurs are born and not made. Within them burns a passion to solve problems and spot opportunities the rest of us mere mortals cannot. They make mistakes, but the most successful leaders handle those with humility, absorbing the lessons of their failures and turning them into experience and fresh insight. And if they’ve conducted themselves well through difficult times, behaving with integrity, putting the needs of others ahead of their own and always acting with professionalism, they’ll likely get what they most need in order to succeed: a loyal following of top-notch people and investors who are prepared to fund their latest idea—and their core values.
John Vrionis is a partner at Lightspeed Venture Partners who focuses primarily on early stage enterprise and consumer technology investments. In addition, John is the founder of Lightspeed’s Summer Fellowship Program. John holds an MBA from Stanford University Graduate School of Business, an MS in Computer Science from the University of Chicago and a BA from Harvard University.
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