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bi-weekly column with timely,
relevant and possibly irreverent
insight into the BC technology
industry.
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Something Ventured:
November 10th, 2006
By
Brent Holliday
Greenstone Venture Partners
The Valley Way (Redux)
“Come on baby...
And she had no fear.
And she ran to him...
Then they started to fly.
They looked backward and said goodbye...
She had become like they are.
She had taken his hand...
She had become like they are.
Come on baby...
Don't fear the reaper” – Blue Oyster Cult, Don’t Fear
The Reaper
A few years ago, I wrote one of my more popular columns
called “The
Valley Way, Eh?”. It was a 10 point essay on how the
Silicon Valley company/employee/entrepreneur looks at a
start-up company differently than we do. I wrote it in
a hotel room in San Jose right at the end of the
bubble. Two years after that, when misery gripped the
Valley, I thought that perhaps I had written about a
snapshot in time… a mania brought on by the dotcom and
networking bubbles. Nope, six years later it turns out I
was bang on. It’s different down there and this week I
want to re-iterate why.
Ron Stevens, CEO of mixpo, fka Pixpo, fka How2Share,
spent 15 years in the Valley as part of six different
companies. He now resides here for personal reasons and
can’t get over how different it is here. Now, “here” is
not meant to just be Vancouver. It actually refers to
everywhere else but “there”, which is the Silicon Valley
(with the possible exception of parts of Boston and
Austin). So Ron doesn’t pick on Vancouver, per se, it
just happens to be that he can only compare this market
to there. You with me? Good.
Ron has espoused to me on many occasions the differences
between (as he likes to think in sports metaphors) the
professional league and the minor league. It is not
derogatory, as I will explain, but you can’t help but
feel some civic pride well up inside you and want to
call him an a—hole and let him pack up and go back if he
doesn’t like it here… but that’s not the point. This
isn’t about insults. It’s about reality and a heavy
dose of it.
So, six years ago, I told you what the Valley was like.
Now I want to tell you what it is like here and compare
that to the Valley and see why guys like Ron are left
scratching their heads. This is all focused on the
technology start-up and the really, really big ideas
that could create >$100M in value. It also only really
applies to the first 20 or so people that you hire
because they get the rocket ship built and lifting off.
Keep that in mind. Here are the five traits that I see
(and Ron has observed) in companies/ employees/
entrepreneurs that block the creation of a really,
really big technology company:
1)
Founderitis – One of the most amazing phenomena I
have witnessed over a decade working with BC start-ups
is the attachment of the founders to the company. When
the sweat has been poured, the midnight oil has been
burned and the shape and strategy have emanated from one
person or a small group of company starters, the
attachment is nothing short of parental. You hear it
all the time… “this is my baby”. The company becomes
your offspring. Heck, some entrepreneurs even name the
company after their offspring! And, just after
unconditional love, the second strongest feeling of a
parent is protectiveness. So the founders will not let
anyone else tell them that their baby is ugly, that it
has a funny odor or that it ain’t worth half of what you
think it is worth.
Founderitis is rampant. I have a thousand anecdotes
about the condition. If you don’t want anyone’s money
to grow your business, founderitis is just fine. If you
want money, you get shareholders and, guess what? You
work for them. All of a sudden, your sweat and tears in
the past are less relevant. It is all about what
happens now. If you do not have the capability to move
the company forward fast or to grow to obscene heights,
you will be removed. It’s business, not personal. But
more than wanting to keep your job or wanting to be the
CEO, the offensive part of founderitis to Valley
veterans is the attachment to one idea. Valley people
shrug it off because there is always another company to
start. If this is a pain for you, if this role is not
right for you, move on. One thing about the Valley that
is so vastly different is the idea of sunk cost. We want
it back, because we earned it. They don’t care. You may
have poured your heart into it, but it didn’t work. Go
pour your heart into something else. Get over it.
2)
Fairness – We have a strong sense of fairness in
Canada. Most US people have the same values, by the
way. In a technology start-up, looking to rule a market
segment and reap great rewards, fairness becomes
relative. It’s not fair that they ask us to stay until
10 pm every day this week, you say. True, because it
wasn’t explicitly in your job contract. But is it also
not fair that your competition is using Chinese or
Indian labour, has $10M more than you in the bank and is
getting their product out the door before you. If you
don’t bust your butt, you will lose and your company
will go out of business. Hmmmm.
Sure, there are rules. Rules of law protecting
workers. Rules of conduct protecting businesses. But
more so than in 2000, when you compete in 2007, you will
be competing on a very flat earth with lots of new
workers who can do what you do. Worker productivity
here must improve dramatically to offset the wages that
pay the higher cost of living in this lovely urban park
that we call home. If you want fair, get a job with a
union backing you up. If you want to sit on a
rocketship, then forget fair. Instead, get the Valley
attitude of “do what we have to do to win”. They know
it’s not fair to be paid what they are being paid to
work as hard as they do. But they don’t care. They
want to win. They want to make the options worth
something.
3)
Minutiae – If I could count the number of times
that I have argued the finest detailed point of a vice
president’s employment agreement or the clause in the
subscription agreement that has a chance of actually
happening about as small as the chance that Jack Layton
will be Prime Minister, well, I’ve lost count. And you
know what? Shame on me. Shame on me for falling into
the trap of minutiae. The gigantic time-sucking vortex
of lawyer-paying meaninglessness. The company needs to
run fast, grow fast, get in front of customers and sell
hard. Minutiae is like a cancer, the more there is the
slower the company grows until it chokes to death. Why
do we feel compelled to protect our interests in such
labyrinthine ways? What drives us to spend hours
contemplating miniscule details. In a start-up that I
changing the world, the details can wait. If you want
to cover your ass for every possible permutation in this
and several parallel universes, then have at ‘er. But
you will be forgoing productivity for protection and
making a smaller company for your effort.
The Valley folk pay lawyers and accountants just like we
do. But the negotiations seem to be very different.
Perhaps the local lawyers need to jack up their rates so
that we talk to them less, but they make the same amount
of money… because that’s what happens down there. It
gets done faster.
I’m picking on legal documents, but minutiae happens at
all levels and areas of a company. People in insanely
great companies need to see the forest, not the trees,
and keep moving.
4)
Practicality – We do have a very exciting mix of
cultures in Vancouver leading to an extremely high index
of creativity. Creative types have been stereotyped as
a little odd, to say the least. You could argue that
this crowd we live in would be less practical and more
open to change and chaos. But for whatever strength of
culture and counter culture in our midst, we still seem
to be a fairly practical, civil lot. Now, I’m not
saying the Valley is anarchic. Nor am I saying they
dress better. They actually lack culture there… almost
completely. I think it is more the attitude of freedom
from caution and embracing of change that permeates the
Valley. They are not practical when it comes to
committing to win. They want to win the big prize and
they might try ten times before they hit the right one.
It does not seem very practical to have a resume of
failed companies. It does not seem very practical to
take a lot of stock options because they rarely turn
into anything. It does not seem practical to value the
company over your personal life. Yup. We might have
better nightlife here because we think we are “edgy” and
“nouveau”, but we are really still very practical
folks. As I said six years ago, risk means standing on
the edge of the cliff and leaning.
5)
Fear – This is the main event right here. We
fear failing in our society more than we value winning.
That is fundamental to understanding why these seemingly
nerdy, intelligent people from the Valley have no life,
except their work. They are so stimulated by the idea
of creating the insanely great company and reaping the
vast rewards of doing so, that they forego other worldly
pleasures. They don’t care if they fail. They pick
themselves up and, like lemmings, head into the next two
storey, non-descript technology park building to start
the next one. We shrink in fear of losing “our baby”,
disappointing our shareholders, having failed companies
on our resume or damaging our reputations. And that
fear is exacerbated by the relative lack of success on a
Google-like scale. Without huge successes, people won’t
catch the whiff of excitement of winning and the fear of
losing continues its prevalence.
OK, so now you’re pissed. I’ve insulted you because you
think you are building an insanely great company AND you
get the benefit of living in this paradise we call BC.
You say you can have it all, if you have the discipline
and the smarts. I believe you can… on a smaller scale.
You can make a very comfortable living and still ski on
the weekends. You can sell a company for $20M, make
your angel investors happy, buy a fancy car, vacation in
Tuscany and take your kids around the world by boat for
a year. You can do that because you are smart,
dedicated and found a very good niche for you
innovation.
But, you didn’t build Google or Intel or Genentech.
That’s what I’m talking about. How do you find twenty
or thirty talented people in your field of expertise in
Vancouver who are willing to risk it all to be a global
leader? Twenty or thirty that lack founderitis, can
ignore “fairness”, can avoid the minutiae, are free from
overt practicality and who lack the fear of failure.
The point of my thesis and Ron’s observation is that it
is tough to find these folks in meaningful numbers
anywhere but in the Valley. It’s tough, but it could
happen. Just screen your first twenty employees well.
Measure their fear of failure.
There is nothing wrong with loving your family and
valuing it over your work. Work to live is a very noble
and proper way to go through life. In fact, the reason
Canada is a great place to live is that people have that
option and most take it. If you are smart and a bit
lucky, you can be very successful and focused on family
and recreation. But if this is you, you are not cut
from the type of cloth that creates the biggest
technology successes. At least not among the first few
who share the biggest upside in those successes.
By the way, venture capitalists are, by and large, not
in the group either. We like our lives and let the
entrepreneurs do the sweating. So I am not on any
soapbox from personal experience. But I have seen what
it takes and it is a rare quality when you are outside
of the Silicon Valley.
What Do You Think? Talk Back To Brent Holliday
Something Ventured is a bi-weekly column designed
to supplement the T-Net British Columbia web site with
some timely, relevant and possibly irreverent insight
into the industry. I hope to share some of the
perspective and trends that I see in my role as a VC.
The column is always followed by feedback (if its
positive or constructive. I'll keep the flames to
myself, thanks).
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