Several of you wrote in asking for more highlights from John Doerr's Feb. 2 speech at Stanford. My favorite request came from Hugo in Portugal, who wrote, "Post part two demmit!" Here at Deal Flow, you ask, you get.
At Stanford, Doerr used a public speaking format I'd seen him use once before. He starts by taking questions from the audience, then writes them on a blackboard, and then tries to address them in the allotted time. He doesn't get to every question, but at least he talks about subjects the audience wants to hear about. It's pretty cool. So, I'll try to use the same approach by paraphrasing a couple of questions from the Stanford audience and the answers from Doerr.
Q: What makes a great venture?
A: Doerr listed four criteria. 1) "Absolutely A+ passionate founders," combined with 2) "an attitude on their part that technical excellence matters enormously." 3) "A large, rapidly growing, not-well-served marketplace." 4) "A reasonable approach to financing the company." On that last point, he means not raising too much or too little money, and not being a stickler on terms. "The best way to finance your venture is not by trying to negotiate a really tough arrangement with a financial backer," he said. "Instead, it's getting the technical risk up front early in your venture."
Now, some seasoned entrepreneurs may roll their eyes when they hear a VC telling future entrepreneurs not to be tough negotiators. But Doerr was saying that instead of focusing on contract terms, entrepreneurs should focus on using as little money as possible to build their first product. That money often costs founders a larger percentage of their company than any subsequent money they raise. After all, the investors are taking a big risk at the pre-product stage since the engineers haven't yet proven their plans will work. Once a startup has a working product, it has gotten its biggest risk out of the way and often can raise more money at a higher price per share.
Q: What makes a great entrepreneur?
A: To answer this question, Doerr borrowed some terms from Randy's Komisar's book, The Monk and the Riddle. "Entrepreneurs are not mercenaries. They're missionaries," Doerr said. The crux of his argument boiled down to this: "If you're taking on a mission for the money you'll make, you'll fail." Great entrepreneurs are driven by passion, not paranoia. They're strategic, not opportunistic. Mercenaries are driven by financial statements. Missionaries are driven by mission statements and by obsessing about customers. You get the idea.
Q: What makes a great group?
A: "Great groups are about developing a collaborative advantage," Doerr said. For example, the real secret to Google's success is the team it has built. Lone rangers don't succeed as entrepreneurs. Great companies start with strong founders, but the true test of founders is their ability to hire and retain talent. To learn about groups, Doerr recommended Warren Bennis' book Organizing Genius.