Secrets to STARTUP SUCCESS

MAP YOUR SKILLS AND EXPERIENCE

Despite a few well-known examples of college dropouts who launch world-changing startups, entrepreneurial research supports the no­tion that the right kind of prior business experience, effectively ap­plied, greatly enhances a founder’s probability of success.8 Even in the technology sector, widely assumed to be the domain of young, upstart entrepreneurs, data point to a strong link between experience and success. A 2009 Kauffman Foundation study entitled “Education and Tech Entrepreneurship” discovered that the majority of success­ful tech founders are “middle-aged, well educated in business or technical disciplines, with degrees from a wide assortment of schools. Twice as many United States-born tech entrepreneurs start ventures in their fifties as do those in their early twenties.”9

Beyond bringing skills and relationships that will help you as an entrepreneur, the value of experience is primarily about pattern recognition. A person who has spent years in a particular industry can more quickly and accurately connect disparate data points into mean­ingful trends and opportunities, seeing cause and effect where others see only fog.

As with motivation, some types of experience are more beneficial than others. Map your own background and skills against the following six areas that prove valuable to almost any startup founder.

INDUSTRY, PROFESSIONAL, OR TECHNICAL EXPERIENCE THAT DIRECTLY RELATES TO YOUR CHOSEN STARTUP - What do you know how to do at the

Highest level? What can you do better than most everyone else? How does your technical skill set relate to your new business? Starting a business from scratch brings enough uncertainty and difficulty as it is without the added complication of learning an entirely new industry or disci­pline. When it comes to starting a new restaurant, I’ll back the kitchen manager with ten years at Outback Steakhouse over the career at­torney who loves to cook.

By the time they launched their first ventures, J. C. Faulkner and Mark Kahn had been working on the leading edges of their fields long enough to develop deep expertise and perspective. They understood their evolving industries, whose opinion to seek, and what questions to ask. They knew how to spot important trends and filter out irrele­vant noise. By contrast, despite her twenty years of banking experi­ence, Lynn Ivey was a rookie in the senior healthcare space. Her learning curve was a lot steeper than it would have been had she brought years of prior experience in the industry.

SALES AND MARKETING EXPERIENCE - The essence of business is the acquisition of customers, clients, and users. A founder who brings market-facing skills will enjoy a higher probability of success than a person who lacks these capabilities. Sales skills are best acquired through experience, ideally in the same industry as your new venture. But a strong track record of sales success in any industry implies that the founder brings an understanding of the importance of sales and all that it requires, as well as sales skills and habits that will transfer to new markets.

Early in the ascent of Modality, Mark Williams realized that growing his business would require a fundamental shift in his priorities and time allocation, away from product development and toward greater immersion in the market of prospective institutional clients and business partners. While Mark possessed a natural gift for relating to clients and partners—he’s often the most intelligent, poised, and humble person in the room—he was unaccustomed to filtering and prioritizing sales leads or converting high-potential prospects into closed deals. He has diligently worked on this skill set as Modality has grown, but readily admits that an earlier tour of business-to-business sales and marketing would have benefited him and Modality greatly.

LEADERSHIP EXPERIENCE - A wide range of prior leadership roles can provide experience and learning that translate well to the needs of a new venture. Whether in a business setting or not, any role in which you have to get things done through others will test and refine your leadership skills.

At the same time, leadership roles in large businesses usually bring valuable learning experiences for future entrepreneurs. Every big company contains a wide spectrum of leaders and styles, some better suited than others for the startup world, but the skills required to uti­lize the talent and time of others in achieving higher level goals will serve a new entrepreneur well in almost any new venture setting.

As with other aspects of experience, only you can fully assess how well your prior leadership roles match up with your new venture chal­lenge, guided by the questions: Where have you led? What have you learned about how to lead? How well do these experiences transfer to your startup role, and in what ways can you best leverage your leadership strengths?

GENERAL BUSINESS SEASONING AND EXPOSURE - Taking on a range of jobs early in a career almost always adds valuable business skills and perspective. “I was an English major in college,” says Mark Kahn. “I spent a lot of time in different jobs at News Corp. and got to touch many sides of the business. I think I got a better kind of education than one might get at a business school. It was a very good place to get to learn something that I just wasn’t really familiar with, to be honest with you. My father was a physician; my mother didn’t work. It wasn’t as though I was surrounded by business growing up, so it was my learning ground—and somebody paid me to do it, so that was a double bonus.”

What skills have you learned through your work experience that will serve you well in your founding role? Valuable examples include:

■ Negotiation (contracts, deals, etc.)

■ Organization, planning, and project management

■ Problem solving and decision making (critical thinking skills)

■ Financial acumen (financial reporting, accounting, etc.)

■ General technology skills and knowledge

■ Networking and developing business relationships

■ Effective communication and public speaking

■ Interacting with and influencing senior executives

Whatever your skill set, identify significant gaps between your own capabilities and what your venture will require, and ask yourself:

Who has the necessary skills that I’m missing? Who might bring the pattern recognition that I don’t possess?

PAST ENTREPRENEURIAL EXPERIENCE - Many successful startups are launched by founders who have learned from prior entrepreneurial efforts, and a range of experiences qualify—being a member of a startup team, for example, or launching a new venture within a larger company. Both J. C. Faulkner and Mark Kahn started small businesses during college (a pizza parlor and a storage service, respectively). Al­though dealing with fewer zeros than in their later attempts, they gained invaluable experience for the future. Also, they both worked with or ran new ventures within their employer companies prior to making their startup leaps. When it comes to prior startup experi­ence, success or failure is less important than the experience of going out on a limb, with something significant at stake, and making deci­sions in highly uncertain environments.

ADVERSITY - What have been your toughest challenges, professionally and per­sonally? How did you handle them? What did you learn from them and how might these lessons apply to your new venture? Answers to questions like these can build your confidence and prepare you for the most chal­lenging moments to come along your startup path.

Chris Holden continued to watch with interest as his former em­ployee, Mark Kahn, built a series of specialized websites on the wild­west Web of the late 1990s. He recalls Mark’s entrepreneurial adventure:

“He used his casino winnings to pull his team together, with no pay, and got the thing ready for prime time. One year into it, at the height of the dot-com bubble, he signed a deal with Martha Stewart’s company OmniMedia. They were going to buy the business for $16 million and the deal was fully negotiated. He signs the contract and sends it back to them for counter-signature, and it was the day the bubble burst, spring of 2000. The CFO of OmniMedia calls him up and says, ‘Hey, everything’s fine. We’re just going to sit on this. We’re busy with some other stuff. The markets are doing weird things.’ Long story short: They never signed the deal, and the whole thing crashed to zero. So, he had $16 million in hand, from his blackjack game to that point, then all to nothing.”

Mark Kahn soldiered on. “Even during that time, we didn’t say, ‘Oh, the e-commerce market is blown up.’ We tried to ride it out. We had 35 meetings (with VC firms), even though 35 said, ‘No thank you.’ You go to the next one and the next one and the next. That’s what you have to do if you are committed to the business.”

Unfortunately, the business ran out of money and stalled. Mark Kahn, needing to support a growing family, got a marketing job with another startup in New York City. Chris Holden joined a venture cap­ital firm specializing in digital media investments and continued to watch with impressed fascination as his former colleague picked him­self up and moved forward.

A few years later, when Mark Kahn had an idea for his next ven­ture, to create an Internet marketplace bringing online advertisers and publishers together, Chris Holden brought his firm, Court Square Ventures, to the table with startup capital. He had seen Mark Kahn deal with crisis and failure and come out the other end as a stronger person. “Right now it’s one of the most successful investments we’ve ever made,” he says of TRAFFIQ, Mark’s newest venture. “He plowed through his first failure, dusted himself off, and he did it again. And, he’s so good at taking all the lessons he learned along the way and packaging them within himself. He truly is—I hate to be so ex - treme—but he’s close to being the perfect entrepreneurial CEO.”

M

To this point, our discussion of your readiness as a founder has fo­cused on who you are, your motivation, personality, skills, and knowl­edge. The objective is not to be perfectly rounded in all areas—no founder will be—but to be well aware from the outset what you bring to the startup effort, where relevant gaps exist, and how to address those gaps. Consider the founder who plans to introduce a new tech­nology into the medical field, bringing deep expertise in technology but no experience in healthcare. Clearly, she will benefit from work­ing closely with partners who bring experience and relationships within the targeted medical markets. Or if an entrepreneur is highly conceptual and independent, but not very focused or socially in­clined, he or she will likely thrive in product development and plan­ning roles but may be less effective driving execution, leading teams, or building customer relationships. These are generalizations, so the key is that you apply the above questions to your specific situation to best align your strengths with the needs of your venture.

The realization that you don’t have to be a superhero in all areas is tremendously liberating, as J. C. Faulkner discovered in building his founding team at D1. “One of our philosophies,” he said, “was to ex­ploit each other’s strengths and forgive and shore up each other’s weaknesses. We came to the conclusion that each of us doesn’t have to be well rounded. The team has to be well rounded, but as individ­uals we don’t have to be perfect.”

Secrets to STARTUP SUCCESS

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