I went to an event last week that reminded me why I love living and working in Silicon Valley. I'm going to describe it in some detail so that my friends from Ohio and New York can get a glimpse into this ecosystem.
The event was a Meetup event hosted by Hackers & Founders entitled Geeks vs BizDev in Startups: The All Stars Discuss.
It was a typical sort of “panel discussion” format popular in Silicon Valley – many of the civic and tech organizations hold them – Churchill Club, SVASE, SVForum, the Kauffman Institute, scores of standalone events (e.g., Startup Weekend, trade conferences at the San Jose or Santa Clara Convention Centers or the Moscone Center in SF), and dozens of Meetup groups talking about special interests (like the Hadoop Users Group).
The “Geeks vs. Suits” evening caught my eye because Ben Horowitz was the featured speaker … in a “fireside chat” with a Harvard B School professor who teaches entrepreneurship. I love reading Ben’s blog posts – he’s an excellent writer with insightful things to say – and this was a rare opportunity to hear him speak. The rest of the panel seemed really good, too … but more like the “panel discussion” participants you get every week in Silicon Valley. (They were actually much better than average, but I didn’t know that until I went to the event.)
Before the speaking started, there was going to be a 2-hour “Startup Fair” to showcase 20 startups from around the Bay Area. Most were trolling for talent, some for customers, some for investors, ... and all of them wanted the attention of the 350 people in attendance.
Even though the formal program started at 7 pm, I went earlier to visit with the startup companies in the “Startup Fair.” To keep this post manageable, let me link to another post with pictures and descriptions of those companies. They form a good cross-section of startups scrambling for money, talent and recognition here in Silicon Valley. Check it out!
While milling around, I bumped into a friend who’s an executive recruiter. He was telling me about a visa that the US government offers to foreign nationals who want to get a US green card by investing here. If they invest at least $500,000 in a new U.S. business and that business creates 10 or more jobs, the investor gets a green card. It’s called the EB-5 program. The US needs more [legal] immigration, and this is a smart approach, as is the “Startup Visa” program wending its way thru Congress. Successful Chinese entrepreneurs are doing this a) to get a foothold in the US for their property and money -- hedging their bets by diversifying away from 100% China-based property, and b) giving their kids access to American higher education.
The speakers were broken into two chunks – a panel discussion moderated by a Microsoft marketing executive, and the “fireside chat” with Ben Horwitz. My notes from the first panel discussion are here.
Last, Ben Horowitz and Tom Eisenman (a prof at Harvard B School) took the stage for a “fireside chat.” Eisenman asked great questions. And Ben had extremely good points, delivered in very entertaining ways. Examples:
- When asked how he got such good quotations from rap songs to accompany his blog posts, he said, “No, no! You have it backwards. I’m listening to the song and the lyric gives me the idea for the blog post. Of course, it’s gonna match!” He also observed that hip hop and rap music have a lot of conflict and other emotional issues like betrayal, communication, loyalty and the like … and “that’s the most interesting and important part of business, isn’t it?”
- When asked “why are your posts so long?”, Ben answered, “It’s the emotional parts of management that are the hardest parts, no? Dealing with the jackass engineer doing midnight re-writing of other people’s code, the manager who kisses up to bosses and abuses subordinates, or the director who takes credit for the ideas and work of people he works with. That’s hard, and it takes a while to explain the nature of the problem and the possible solutions.”
- Eisenman, who was there with a group of MBA students from Harvard on tour in Silicon Valley, observed that “The rule of thumb VCs told me they used [in 2007] when doing “pre-money” valuation of companies was to add $500,000 for every full time engineer and subtract $250,000 for every MBA.” He went on to observe that this trip, his VC friends tell him that the values have doubled – $1 million per engineer and minus $500,000 for every MBA. Horowitz gave a detailed analysis of the situation as he saw it, and that’s when I gained a huge amount of respect for him. He shared his experiences at Silicon Graphics, Lotus and Netscape (and later at AOL and OpsWare/Loudcloud). He compared the MBAs of the 90s with those of today, especially in the context of radically lower capital requirements and inexpensive consumer internet distribution. The points were good and insightful, and reinforced with stories from his own experience.
- Horowitz suggested that one way to solve the problem of functional organizations distrusting and fighting each other was to “do a Freaky Friday on ‘em” – assign the top managers from each organization to run the other one …. not temporarily, permanently!” When you think about that, it’s brilliant. The newly arriving manager will need to cultivate the subordinates because he/she won’t know how the department runs. The subordinates will get insight into the other organization from the new boss. The two warring managers will begin to see the other’s point of view. Assuming it doesn’t blow up entirely, it’s a brilliant idea.
- Another Horowitz comment: “Trust and communication, you see, are trade offs. If you deeply trust someone, you and they don’t need to communicate a lot. If you don’t trust someone, virtually no amount of communication will change that. So, if you see communication breaking down, don’t communicate more. Restore trust.” That is SO true.
- Horowitz had some great turns of phrase, too. Here are some I remember:
- An observation about the relevance of “products” vs. “selling efforts” in startups. “The error of the 90s was that products don’t matter. The error of the 2000's is that products are all that matters.”
- “Being part of a startup is often an oscillation between euphoria and terror …. and both are amplified by a lack of sleep.”
- “If you don’t know what you want, you definitely won’t get it.”
- He referred to the move to sell the cloud services of Loudcloud to EMC and cut the business back to software (renamed Opsware) as “the Big Pivot” – a Shaq-sized pivot!”
- Horowitz took a giant swipe at Microsoft when talking about a Netscape story, then muttered, “I’ve really hated those guys … until recently, when they bought Skype from us.” (Remember, we were in the Microsoft briefing theatre, eating their food.) That remark got a big laugh.
- “Outsourcing your engineering in a tech startup is totally ridiculous.”
- When asked for advice, he repeated “have a big, compelling idea – for all the reasons you’ve heard, but also for what you say to the 20th employee hired. At that point, stock option grants will be smaller, and the excitement of the earliest days is gone. Unless you have something really important and consequential, you won’t be able to attract the top talent you’ll need.”
- “The reason we like to keep founders as CEOs, and help them grow into the CEO role, rather than hire experienced CEOs to take over is because we’ve seldom seen a hired CEO make the next product. Sure, they can optimize what’s there better. They can launch what’s in the pipeline. But they often miss the next cycle … because they aren’t living at the core of the vision … or they don’t have the credibility to re-direct the company in a major way. Only Steve Jobs could have cut back on the many Mac models and launched completely new initiatives in consumer electronics.”
- Answering the commonly asked question “which should you focus on, building users or monetization?” Horowitz answered “Listen, there are products. And there are byproducts. Create something valuable! That’s all you should focus on – that’s your product. If you do that, good things will come. Those are the by products. Even Twitter, which is lambasted for not having a business model is reportedly making hundreds of millions of dollars a year. So, focus on value. The money will follow. By the way, that’s the best career advice I can give, too!”
