Startup School 2012 Themes

After having some time to decompress and re-digest my notes from Startup School 2012, I’ve collected my primary takeaways in the form of themes echoed by multiple speakers. There were many interesting anecdotes and nuggets of advice that I have not attempted to list. Note that these are my subjective views and it’s likely different people gained different insights from the speakers.

1.   There are still many opportunities for startups to leverage the Internet

Ron Conway believes that the Internet is still in its infancy. When asked about whether he felt Facebook could have been founded earlier, Mark Zuckerberg pointed to university e-mail addresses as necessary to its early success. Zuckerberg speculated that there is some social-networking equivalent of Moore’s Law that dictates the long-term, exponential growth of sharing. Mark pointed to Wikipedia as an example. In his eyes, Wikipedia was able to achieve success earlier than Facebook because it needed less sharing to sustain itself. Thus, as more sharing occurs in the future, there will be new opportunities for startups that did not exist before.

2.   Big growth opportunities in eCommerce

A few speakers pointed at eCommerce as an example of a space now reaching the sustainable sharing threshold necessary for success. Hiroshi Mikitani cited Rakuten’s rapidly growing mobile revenue, currently growing 300 to 400 percent year-over-year. This point should certainly be taken with a grain of salt, as several of the speakers addressing this topic have vested interests in this industry that could affect their objectivity. Both Mikitani and Ron Conway have made substantial investments in Pinterest, whose success is certainly tied to the success of eCommerce. On the other hand, the fact that Mikitani and Conway have made a number of substantial investments in eCommerce shows that they are willing to put their money where their mouth is when it comes to eCommerce.

3.   Technology as an extension of fundamental human wants and needs

To Mark Zuckerberg, Facebook is a natural extension of the fundamental human need to connect with other people, noting that humans are highly geared toward social interaction. To that end, Facebook extends the number of meaningful social relationships humans can maintain beyond the Dunbar number of 150. In the same vein, Ben Silbermann stated that Pinterest is not just about eCommerce; Pinterest is about helping people find others that have similar interests and helping them find their passion. Ben Horowitz noted that the line between wants and needs is not real. Many people have made statements to the effect that technology development was at its end as people’s needs had been fully met. Ben pointed out that over time “wants become needs.”

4.   Startups are difficult

Many speakers described long, arduous journeys to success. Ben Silbermann challenged the commonly used maxim that startups are like running a marathon, stating that there was much more uncertainty in a startup than a marathon. Speakers identified several common difficulties:

i.  Gaining traction. David Rusenko related how weebly did not really gain traction until 48 months after the first line of code was written, in spite of early publicity from TechCrunch, Newsweek, and Time. Patrick Collison of Stripe recounted long hours spent coding and an alert system that guaranteed someone would be available to provide customer support at all hours. Ben Silbermann stressed how important it was for startups to “be great one thing,” and to ship when they have their “one thing.” He also related how long finding that “one thing” can take.

ii.  Funding. Many speakers including Ben Silbermann and David Rusenko related personal stories of investor rejection.  Jessica Livingston of YCombinator and others described a common “herd mentality” problem whereby investors refused to fund “ugly duckling” startups due to other investors not having funded them already. Ron Conway acknowledged this challenge and cited several successful startups he had failed to fund when given the opportunity including salesforce.com, Pandora, Palantir, and Kickstarter. Amusingly, even Mark Zuckerberg said that Facebook’s early growth was limited by the number of $85 servers they could afford.

iii.  Unique problems. Several founders described non-technical problems that were crucial to the success of their startups. Travis Kalanick of Uber discussed process management and operations problems that required logistics expertise not typically necessary for most startups. In addition, he touched on the regulatory issues facing Uber, stating that all truly disruptive startups would face resistance from entrenched, outdated industries, and the governments supporting them. Ben Silbermann described how Pinterest focused on marketing campaigns like “Pin it Forward” and user meetups to tackle non-engineering problems necessary for Pinterest’s success. Patrick Collison said he feels empathy for business people attempting to break into tech because he felt similarly out of his element working with the financial industry to build Stripe.

5.   People are important to a startup’s success

Ron Conway described how he funds people and not startups. His practice of following founders regardless of whether or not their last startup succeeded allowed him to get in on the ground floor of Twitter after following Evan Williams from Odeo. Unfortunately for most, Ron also said that within 10 minutes of meeting someone, he has already decided whether he would invest in them. Tom Preston-Werner described how a company’s people, product, and philosophy were all interconnected and necessary for success. Jessica Livingston stated that incompatible co-founders was a common reason for startups to fail. Ben Horowitz said he looks for “Founders with courage and skill to build.”

6.    There’s more than one path to success

While founders described common themes, their startups addressed very different needs and markets. Joel Spolsky related two very different personal success stories in Stack Exchange and Fog Creek Software. He described a dichotomy of startup growth options:

i.  Get Big Fast. These are startups like Facebook and Stack Exchange, which rely on network effects and lock-in to be successful. Because success is market dependent, it is important to grow rapidly. As a result, problems are solved with money from venture capitalists. Quantitatively, expected value could be viewed as a 1% chance of a 10 billion dollar valuation.

ii.  Organic Growth. These are startups like Ben & Jerry’s and Fog Creek software, which develop products that are valuable to even just one customer. These companies must focus on being frugal because mistakes can kill you. For these startups, it’s important to bootstrap and break even quickly, rather than taking outside funding. Joel expressed the expected value of an organic growth company as a 90% chance of a 10 million valuation.

While the media focuses on the success of “Get Big Fast” companies, millions of companies go the route of “Organic Growth.” Ultimately, Joel said said that failure to choose one of the two methods of growth kills startups.

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