Ever wonder how Steve Jobs and Jeff Bezos discuss a new business idea? When the Apple engineer warned Steve Jobs about iPhone 4 antenna issues, what do you expect Steve to say? Unless you are working at Apple or Amazon, it’s really tough for us to find out the answer.
However, after you have read this book: “Code Name Ginger: The Story Behind Segway and Dean Kamen’s Quest to Invent a New World“, you’ll get a better idea about how intense these two business legends could be during a business discussion, especially for Steve Jobs 🙂
The book is about the invention, development, and financing of the Segway, the incredibly innovative electric vehicle. If you don’t want to read the whole thing, there is an excerpt from the book on HBS Working Knowledge called Steve Jobs and Jeff Bezos meet “Ginger”. This article is about a meeting between the Segway’s team, John Doerr, Steve Jobs and Jeff Bezos. They were discussing the positioning of Segway and how they should launch the product.
Here are some of the highlights from their discussion:
When the VC asked, “What does everyone think about the design?” Jobs answered, “What do you think?” It was a challenge but not a question. And then he said, “I think it sucks!” When they asked him to explain, he said, “It just does. Its shape is not innovative, it’s not elegant, it doesn’t feel anthropomorphic. You have this incredibly innovative machine but it looks very traditional. There are design firms out there that could come up with things we’ve never thought of,” Jobs continued, “things that would make you shit in your pants.”
After further intensive discussion and debate by Steve and Jeff, Dean Kamen, the inventor of Segway, concluded that, “This is the most energetic discussion we’ve ever had and like all good energetic discussions it leaves you with more questions than answers, and leaves you questioning everything you thought you knew. And that’s good.”
If you want to find out the details of their discussion, check out this post or the book. You will know what set these two entrepreneurs apart from the rest. If you want to drive your startups or small business forward aggressively, you better learn how to start an energetic discussion like this one.
Why did so many successful entrepreneurs and startups come out of PayPal? I long have been fascinated by the extraordinary achievement from the ex-Paypal team and wonder about the reasons behind their success. In the past, mass media tried to answer this question several times but still couldn’t give us a clear answer.
I once asked David Sacks the same question during an event in Los Angeles. He told me the secret is that Paypal has built a “scrappy” culture. No matter what problems they faced, they would find a way to solve them. I kind of got the idea, but was still confused about the execution details.
So when I saw some of the past Paypal employees answering this question on Quora, I was super excited! After all, they should be the only ones who can tell people the inside stories.
On Talent Management
“Peter and Max assembled an unusual critical mass of entrepreneurial talent, primarily due to their ability to recognize young people with extraordinary ability (the median age of *execs* on the S1 filing was 30). But the poor economy allowed us to close an abnormal number of offers, as virtually nobody other than eBay and (in part) google was hiring in 2000-02.” (by Keith Rabois, former Executive Vice President of Paypal)
“Extreme Focus (driven by Peter): Peter required that everyone be tasked with exactly one priority. He would refuse to discuss virtually anything else with you except what was currently assigned as your #1 initiative. Even our annual review forms in 2001 required each employee to identify their single most valuable contribution to the company.” (by Keith Rabois, former Executive Vice President of Paypal)
“Dedication to individual accomplishment: Teams were almost considered socialist institutions. Most great innovations at PayPal were driven by one person who then conscripted others to support, adopt, implement the new idea. If you identified the 8-12 most critical innovations at PayPal (or perhaps even the most important 25), almost every one had a single person inspire it (and often it drive it to implementation). As a result, David enforced an anti-meeting culture where any meeting that included more than 3-4 people was deemed suspect and subject to immediate adjournment if he gauged it inefficient. Our annual review forms in 2002 included a direction to rate the employee on “avoids imposing on others’ time, e.g. scheduling unnecessary meetings.” (by Keith Rabois, former Executive Vice President of Paypal)
“Refusal to accept constraints, external or internal:We were expected to pursue our #1 priority with extreme dispatch (NOW) and vigor. To borrow an apt phrase, employees were expected to “come to work every day willing to be fired, to circumvent any order aimed at stopping your dream.” Jeremy Stoppelman has relayed elsewhere the story about an email he sent around criticizing management that he expected to get him fired and instead got him promoted. Peter did not accept no for answer: If you couldn’t solve the problem, someone else would be soon assigned to do it.” (by Keith Rabois, former Executive Vice President of Paypal)
“Driven problem solvers: PayPal had a strong bias toward hiring (and promoting / encouraging, as Keith mentions) smart, driven problem solvers, rather than subject matter experts. Very few of the top performers at the company had any prior experience with payments, and many of the best employees had little or no prior background building Internet products. I worked on the fraud analytics team at PayPal, and most of our best people had never before done anything related to fraud detection. If he’d approached things “traditionally”, Max would have gone out and hired people who had been building logistic regression models for banks for 20 years but never innovated, and fraud losses would likely have swallowed the company.” (by Mike Greenfield, former Sr. Fraud R&D Scientist of Paypal)
“Self-sufficiency – individuals and small teams were given fairly complex objectives and expected to figure out how to achieve them on their own. If you needed to integrate with an outside vendor, you picked up the phone yourself and called; you didn’t wait for a BD person to become available. You did (the first version of) mockups and wireframes yourself; you didn’t wait for a designer to become available. You wrote (the first draft of) site copy yourself; you didn’t wait for a content writer.” (by Yee Lee, former Product & BU GM of Paypal)
On Culture & Ideology
“Extreme bias towards action – early PayPal was simply a really *productive* workplace. This was partly driven by the culture of self-sufficiency. PayPal is and was, after all, a web service; and the company managed to ship prodigious amounts of relatively high-quality web software for a lot of years in a row early on. Yes, we had the usual politics between functional groups, but either individual heroes or small, high-trust teams more often than not found ways to deliver projects on-time.” (by Yee Lee, former Product & BU GM of Paypal)
“Willingness to try – even in a data-driven culture, you’ll always run in to folks who either don’t believe you have collected the right supporting data for a given decision or who just aren’t comfortable when data contradicts their gut feeling. In many companies, those individuals would be the death of decision-making. At PayPal, I felt like you could almost always get someone to give it a *try* and then let performance data tell us whether to maintain the decision or rollback.” (by Yee Lee, former Product & BU GM of Paypal)
“Data-driven decision making – PayPal was filled with smart, opinionated people who were often at logger-heads. The way to win arguments was to bring data to bear. So you never started a sentence like this “I feel like it’s a problem that our users can’t do X”, instead you’d do your homework first and then come to the table with “35% of our [insert some key metric here] are caused by the lack of X functionality…” (by Yee Lee, former Product & BU GM of Paypal)
“Radical transparency on metrics: All employees were expected to be facile with the metrics driving the business. Otherwise, how could one expect each employee to make rational calculations and decisions on their own every day? To enforce this norm, almost every all-hands meeting consisted of distributing a printed Excel spreadsheet to the assembled masses and Peter conducting a line by line review of our performance (this is only a modest exaggeration).” (by Keith Rabois, former Executive Vice President of Paypal)
“Vigorous debate, often via email: Almost every important issue had champions and critics. These were normally resolved not by official edict but by a vigorous debate that could be very intense. Being able to articulate and defend a strategy or product in a succinct, compelling manner with empirical analysis and withstand a withering critique was a key attribute of almost every key contributor. I still recall the trepidation I confronted when I was informed that I needed to defend the feasibility of my favorite “baby” to Max for the first time.” (by Keith Rabois, former Executive Vice President of Paypal)
“Extreme Pressure – PayPal was a very difficult business with many major issues to solve. We were able to see our colleagues work under extreme pressure and hence we learned who we could rely on and trust.” (by Keith Rabois, former Executive Vice President of Paypal)
Today at TechCrunch Disrupt, DST co-founder and CEO Yuri Milner, talks about Internet is big everywhere in the world, especially in countries like China, Russia, Japan and South Korea. According to Milner:
…the pace of change is really accelerating. You can become very big very fast.
So how fast can that be? Let’s look at Sina’s Mini-blog, the Twitter clone in China. It’s growth is phenomenal. For instance, Charlene Choi, a pop singer in Hong Kong (see attached picture), has signed up an account with Sina 4 days ago. And now she already has more than 100,000 followers and average more than 1,000 comments per tweet! (Sina’s mini-blog has implemented a Facebook-like commenting feature)
That’s really freaking fast.
The scary part is that this Twitter clone still hasn’t gone mainstream yet. Given that China has more Internet users than the US now. I believe the network effects that we are witnessing in this country is only the tip of the iceberg. Will it be 10x more powerful? I don’t know. But more and more US startups are starting to pay attention to the rise of this digital superpower now.
One interesting fact: you actually cannot search for Google’s chinese name on Sina’s Mini-blog. Such a serious censorship software! 🙂
This guest post was written by Bob Reiss (@bobsreiss), the author of Bootstrapping 101. Reiss is an Army veteran and graduate of Columbia University and Harvard Business School. He has been involved in 16 startups and is a three-time INC 500 winner. He has been the subject of two Harvard case studies and is a frequent speaker at University Entrepreneurial classes.
The smartest entrepreneurs plan on growing and are prepared for change.
I have a few words of advice for first-time entrepreneurs, as well as seasoned business owners looking to hit a new stage of growth. My advice is this; write your business plan in pencil. I realize this may be difficult for all you non-golfers, but doing so will illustrate two important principles.
- Change is inevitable
I have little doubt that you (the small-business owner) will shortly have to change, amend, modify, scrap or abandon your original business plan altogether. One of the attributes of successful entrepreneurs is flexibility. By writing your business plan in pencil it forces you to look at change as the only constant. Make change your friend, embrace it and work it to your benefit.
The reasons why your original plan will need to be changed after your company is operational are myriad. It’s likely you under or over-estimated your competition, margins, cash needs, competencies and suppliers. Or you misjudged market need and size. Every entrepreneur discovers new opportunities that didn’t appear until there was actually a business up and running.
- We must avoid business plan worship
When we see documents neatly typed (and maybe even received praise for them), we are reluctant to change. Especially for those who attended business schools where the plan took on a larger than life importance. People whose plans got high marks, or even worse, won a business plan contest, tend to feel their plan is inviolate. They also tend to believe that if they rigorously adhere to the plan it will yield the riches of their dreams. It’s my hope that the mental image of a pencil will remind you that change is good and will help you reach your goals.
Most small-business owners that I know never wrote a business plan. In 16 start-ups, I’ve never written one. And John Altman, a very successful entrepreneur, founder of six companies and former professor of entrepreneurism, never wrote a business plan for his start-ups, either.
Most people who write a business plan do it to raise money or because someone told them that’s what they’re supposed to do. The fact is that a detailed plan is only required if you want to raise money from a bank or venture capitalist. And both hardly ever offer a loan or invest in early stage companies. So your energies are wasted writing those long and thick plans.
Now don’t get me wrong. I strongly believe in planning, just not in long, voluminous tomes that will probably go unread. For most sole proprietors, that business plan can reside in your head, or–if you must commit it to paper–on a napkin.
If you really want to write a plan, try this. At the start of each year write what your goals are and specifically target new areas of distribution and the names of new accounts that you want to clinch. Also, put on paper the names of current customers with whom you want a deeper relationship and the strategies you’ll employ to do so. This plan should only run one or two pages. I also recommend you write down your accomplishments and shortcomings from the previous year. While you can do this exercise primarily for yourself, I would also share it with members of my team.
As your company gets bigger, that’s when those written planning documents become paramount. As your company grows you want to be sure all your employees are on the same page and equipped with the knowledge of how they can contribute to the company goals.
It is a reversal of commonly accepted logic to suggest you postpone the business plan until you’ve reached a growth spurt. But, as John Altman said on this point, “If you’re going to empower the other people in your company, guess what; you’d better give them a map to the highway you’re on! Otherwise, they can’t share that vision in your brain.”
(This article first appeared at www.entrepreneur.com – 5/14/10)
Entering any Asian market involves commitment, patience and hard work. If you are determined to expand your web business into Asia, echelon 2010 is the one Tech/ Startup event you simply can’t miss. echelon 2010 (formerly known as unConference Singapore) aims to be at the frontier of the Internet and web technology landscape, where the main focus will be in bringing together the top brass of the web technology industry from various parts of the startup eco-system to facilitate discussion on the hot topics in the web startup scene.
echelon 2010 features keynotes, panel discussions, case studies, pitching sessions and exhibitions spread out over 2 days over the following areas:
- Mentorship, Investments and New Funding Models
- Cloud Computing and Enterprise Web
- Social Gaming and Social Networking
- Mobile Applications and Location Based Services
- Product Management and Marketing
- Social Media and Online Marketing
- Startup Cultures and Lessons
- Indonesian Startup and Mobile Landscape
It also features impressive lineup of speakers this year, including:
- Dave McClure, Founders Fund
- Joichi Ito, Creative Commons
- Noah Kagan, Gambit
- Vishal Gondhal, Indiagames
- Rex Ng, 6waves <-- one of my favorite startups in Hong Kong!
- Aneace Hadded, Taggo
Below are the testimonials from some of the event attendants last year:
“UnConference 2009 was an awesome experience for the iTwin team. It provided us with the best possible platform to reach out to the enthusiasts, influencers and entrepreneurs of the Singapore tech scene. It was a great group of people to get inputs and reactions from. The feedback we got that day was a huge boost (and help) for us. I also credit UnConf 09 for setting in motion a favourable chain of events that helped us move iTwin forward significantly. Our best wishes to the e27 team for echelon 2010.”
— Kalyan Takru, iTwin
“First, the organizers, e27, did an amazing job of not only organizing this conference, but getting big-shots from Cisco, Google, Salesforce and Skype to come down and share their insights. This is above and beyond anything I’ve seen in KL, and great both in terms of exposure and education for us.”
— Chak Onn Lau, Foldees
If you are interested in participating in this huge event, you can register a ticket on this site.
To many people, DST, the Russian Investment Firm, came to the web industry pretty much out of nowhere. Yet, in the past 16 months, this five-year-old company has purchased nearly 10% of Facebook (worth near $2 billion), led a $135 million financing round for Groupon, invested $180 million in Zynga along with others, and paid $188 million for AOL’s instant messenger service ICQ, which holds more than 50% of Russia’s instant messenger traffic. It’s like they are gathering all the hottest collectable toys today! And they make it look so easy.
So are we witnessing the birth of an Internet giant of this era? What is the story behind this secret company? Why did all the hottest startups take its capital when they still have enough funding in the bank?
Let’s reveal the story behind this extraordinary company now.
According to its website, DST only has four partners, who have a strong complementary background from operations, investments and finance. And they also have seven analysts, all veterans of Goldman Sachs, Morgan Stanley or Citibank. Their investors are all well known investors or institutions, such as Goldman Sachs, Tiger Global and Alisher Usmanov, one of the Russia’s richest man. A Russian newspaper, Kommersant, estimated that Alisher should own no less than 30% of the company.
Based on this long term strategic partnership, DST and Tencent are positioning themselves to benefit from global Internet growth. And obviously, DST’s portfolio companies like Facebook and Zynga will also benefit from these influential connections. Not only increase their exposure to the fast growing emerging Internet market, but also get the expertise from Russia, Euro and Asia Internet companies which are traditionally better at monetizing online games and social networks.
Invest for the Very Long Term
Yuri Milner, founding partner of DST, has analyzed all the tech IPO in the past 10 years, and he thinks that many companies went public too early. In his point of view, some companies didn’t have to go public that early. He thinks that if IPO is only driven by liquidity concerns, companies can get the additional capital from private sources, like DST, in order to release the financial pressure of the company.
Based on his experience, it turns out that only providing 5-10% of the liquidity could be enough for a good company to move forward for a few years and still makes IPO. In this way, the team will have more time to focus on product development making the enterprise more valuable in the long term. The fresh capital will also provide a cushion for the company as it continues its fast-paced growth and explores new revenue sources beyond advertising.
Like what Mark Zuckerberg said:
Facebook did not need the money. The financing will serve as a cash buffer to support our continued growth, allowing us to scale.
and Mark Pincus, CEO of Zynga, said:
Milner is a natural choice for any Web business that is at scale and interested in bringing more investors—but not in an IPO. He already had a very sophisticated understanding of social gaming. It was a very good alignment of goals.
After all, given that Yuri Milner greatly admires Warren Buffett, who is known for his long term investment advice, it’s not surprising that they have similar investing style.
Their strategy is to make huge bets on market leaders at very generous valuations that other investors can’t afford. DST’s terms are very different from traditional VC deals. For example, they first invested in Facebook in May 2009 at a $10 billion valuation and later funded employee buyouts at a $6.5 billion valuation (a 35% discount for common stock). They did a similar deal with Zynga as well.
In this way, it will provide an attractive exit opportunities for early employees and founders. Milner explained, as the company grows, the spread between common and preferred stocks will become narrow. That’s why they want to invest early.
Also, according to VentureBeat, DST not only did not request a board seat, their deals happened really fast. From start to finish, it only took about a week with a term sheet of one or two pages. This investing style is extremely similar to what Warren Buffett did 🙂
The way they bought preferred stock from the company and common stock stock from employees has become the hottest new way to invest in startups. People refer it as “DST deals”.
Expert in Scaling and Monetizing Social Networks
In the eye of DST, display ads are dumb. They believe that social media sites can do much more than that, such as virtual goods, micro-payments, social ads…etc, because the site knows who the customers are.
Yuri Milner was the CEO of Mail.ru, a Russian web portal, where he turned the company around operationally and positioned it to become the number one Russian speaking website. Their portfolio also includes two large social networking sites in Russia, Forticom and vKontakte.
With all these companies, DST already controls 70% of all Russia’s web traffic. Most importantly, these sites have already figured out how to make money using various business models, such as collecting micro-payments from users and selling virtual goods, something Facebook not very good at in this stage.
You may ask why those Russian sites are so profitable? One of the reasons is that Russia has the word’s most engaged social networking audience, according to comScore. The average Russian web user spent 9.3 hours on social sites, while the U.S. users spending 4.5 hours on them.
Given all these track records and experience, Milner is confident that Facebook, which has more than 400 million users, will be able to get into these new sources of revenue.
The Man – Yuri Milner
As you can tell, Yuri Milner, who earned an MBA at the Wharton School, is not a regular entrepreneur. He really knows how to play this game.
Marc Andreessen, a Facebook board member once said:
Yuri and his team were bringing in a level of knowledge about these businesses that was the best I’ve ever seen. They are walking encyclopedias of all business models of Internet businesses globally.
Milner was able to convince Mark Pincus, Zynga’s CEO, to get their additional funding when his company was already cash rich. Mark once said:
Milner already had a very sophisticated understanding of social gaming. It was a very good alignment of goals.
Although his company has so much capital, Milner did not blindly invest in big name startups. He typically follows a company for one to three years before investing. Prior to investing big money in to major US consumer web companies, Milner bought into smaller Eastern European web companies which is using similar strategies to better understand their different business models. Like Andressen said:
Milner and the DST team are walking encyclopedias of Internet business models.
At the same time, he is aggressively pursuing new investment opportunities. He spends as much as 75% of his time traveling to meet global startups which are in his potential investment list. He told Bloomberg BusinessWeek:
“I am making big investments. You just have to be personally involved. We monitor close to 50 companies globally that can be potential investment opportunities. I’d like to see DST as a significant global investment company in the Internet arena.”
DST is planning to invest $1 billion dollars on emerging web social startup companies around the world. And most of the new investors he is bringing in now are non-Russian. Milner really turns DST into a global investment group.
Although we are still not sure if DST’s investment will eventually pay off, it seems to me that Milner and his team are doing some great things for the startup and web community. Their real Big Hairy Audacious Goal probably is to become the Berkshire Hathaway of the tech industry in modern time. Can they make it? Is Milner going to be the next Warren Buffett? Time will tell.
When Zynga’s valuation is approaching $3 billion, with the possibility of an IPO over the next year, I wonder why the iPhone platform still hasn’t created a monster startup like Zynga yet. Apparently, I am not the only one with this question in mind. Ray Valdes from Gartner recently did an excellent analysis of the difference between these two developer ecosystems after attending the Facebook F8 conference.
So there is a long-standing perception in the market that the iPhone App Store represents a gold-mine opportunity for developers. This perception is not only found in the developer community, but among the broader audience of consumers and also investors, contributing to a high stock-market valuation for the platform owner. However, the gold-mine perception seems to me to have aspects that are more illusion than reality.
Check out the post for more!