What’s An Entrepreneur to Do?

Startup-sign

Common wisdom is that 9 out of 10 internet startups fail within the first four years of operation.  The reasons for failure are varied.  Among them are: (1) poor execution; (2) no viable market; (3) too much leverage; (4) under-capitalizing the business; (5) lack of competitive advantages; (6) competing head-to-head withindustry leaders; (7) picking a niche that is too small; (8) breakup of the founding team; (9) poor pricing strategy; and (10) growing too fast.

Non-technical entrepreneurs with innovative ideas have a new foe to grapple with even before they get off the ground: convincing a programmer to build your killer app.

How crazy is the demand for engineers?  Google paid a staff engineer $3.5 million to turn down Facebook’s employment offer.  That’s more than Delicious Founder Joshua Schachter just received from Union Square Ventures and Andersson Horowitz for his new stealth social project!  There simply aren’t enough capable engineers with creative minds to go around.  Google has over $22 billion in its war chest.  Apple has a $50 billion war chest.  Facebook has $836 million in funding.

These industry giants have been squelching innovation recently by purchasing startups, not for their innovative ideas but for their engineering teams.  Take a quick look at Facebook’s acquisition history:

Zenbe – 11/10 –  Talent AcquisitionAlan Chung, Jay Harlow, Joe Stelmach

drop.io – 10/10 – Talent AcquisitionSam Lessin + others?

NextStop – 9/10 – Talent AcquisitionCarl Sjogreen, Adrian Graham, Josh Riedel + others?

Chai Labs – 8/10 – Talent AcquisitionGokul Rajaram, Jon Burke, Adi Himawan, Patrick Nguyen

ShareGrove – 5/10 – Talent Acquisition – Adam Wolff, Kent Libbey

Divvyshot – 4/10 – Talent AcquisitionSam Odio, Paul Carduner, Michael Yuan

Octazen Solutions – 2/10 – Talent Acquisition – 2 Malaysian Developers

FriendFeed – 8/09 – Talent AcquisitionPaul Buchheit, Bret Taylor, Jim Norris, Sanjeev Singh, Ana Yang, Kevin Fox, Tudor Bosman, Casey Muller, Dan Hsiao, Benjamin Golub, Ben Darnell

Parakey – 7/09 – Talent AcquisitionBlake Ross, Joel Hewitt

Although Facebook didn’t disclose the price tags on the majority of their acquisitions, we can assume that they spent around $100 million to bring on board about 25 top flight engineers.  That’s approximately $4 million per engineer.  That puts Google’s $3.5 million offer to keep a staff engineer in perspective.

Paul Graham and others basically mandate that all startups have technical co-founders to have the best chance of success.  So how can a first-time entrepreneur with an idea and hustle compete?

1. Find Undiscovered University Talent: There is an incredible wealth of talent in universities and a ton of these engineers don’t yet know their worth in the marketplace.  Attend your local computer science department’s mixers, networking events and conferences.  Hangout with the students and pitch your idea.  You’ll be surprised by how bored the most talented students are with their schoolwork.  Plenty of engineers in college have ideas of their own, so convincing them to believe in your startup is the biggest challenge.

2. Learn How To Do It Yourself: Most investors won’t bat an eye at a startup without a working product.  It doesn’t have to be pretty.  It has to be functional.  Pick up a book and teach yourself how to program.  It’ll be the best investment you can make.  

3. Go Work For Someone Else: It is almost as difficult to build a strong sales/business development team as it is to build a rockstar engineering team.  Startups in New York, Boston, and the Valley are having trouble finding ‘A’ players for their sales and biz dev teams.  No, it won’t be your idea.  No, you won’t have nearly as much equity as the founders.  Get over it.  If you do fantastic work for a startup that truly breaks out you’ll work with engineers who will say ‘yes’ when it’s your turn to take the lead.

I leave you with a random quote from the end of Pacquiao-Margarito 24/7 that I found particularly insightful:

A fighter was once asked what defined him? He held up his fist in a familiar pose. He knew other ways to answer. Far beyond the sports of boxing, identity could be among the most fundamental of struggles. Deciding who you are, determining how you like to be known, resolving how you’ll be remembered. It’s a set questions, these two men are answering. Striking in different ways.”

Find out what you want from entrepreneurship and go get it.

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What’s An Entrepreneur to Do?

5 thoughts on “What’s An Entrepreneur to Do?

  1. Mark says:

    This is a real problem that has had a giant disconnect for years. As a business entrepreneur myself, I run into the same issue. If someone could solve this disconnect, they would create a great service.

  2. Andy Freeman says:

    > Non-technical entrepreneurs with innovative ideas have a new foe to grapple with even before they get off the ground: convincing a programmer to build your killer app.Actually, talent acquisitions are not a significant foe.The significant foe is that most "Non-technical entrepreneurs with innovative ideas" don’t bring anything worthwhile to the table.Engineers have ideas too. More important, we spend a lot of time evaluating ideas, so the bar is actually fairly high.Here’s a tip – the reasons why startups fail are not the same as the reasons why "ideas" don’t even start.

  3. Bill says:

    What makes someone an "entrepreneur"? I’m an engineer, but what made me an entrepreneur was starting a business. Between being a kid and leaving college, I started a half dozen. Many of them were bad ideas, but, none of them required an engineer to work, even though I was an engineer. As an engineer I see a lot of people who do not understand engineering, who see it as something akin to being a mechanic– somehow beneath them. Who feel that their role is to be the "visionary" or the "idea guy" and to have engineers "build their killer app" for them. Maybe business school is instilling this sense of entitlement.What exactly are you bringing to the table, if anything? Think about that if you want to attract an engineer. Did you build a business in college that netted you six figures? Then I’m listening. If not, why do you now think that you’re ready to run one? I’ve got a big list of ideas, and many of them are genuinely innovative. If you’re not an engineer, how can you innovate on engineering? If you’re not innovating on engineering, then what do you know that nobody else knows? If everybody else knows it or it is obvious, then it isn’t innovative.If you do have a truly innovative idea, start doing customer development. Start doing market research. Start designing the product. You can design a product with paper and pencil. No real skill is required. You can develop customers by talking to them. You can get pretty far along without having an engineer, and you’ll be much more likely to attract one if you do.

  4. Mark says:

    Bill, you bring up some very good and interesting points and questions. I don’t look at programming or engineering as something beneath me. In fact, I’d like to bring on a technical partner for the project. There are people interested, however it’s difficult to know how good an engineer is or if they are right for the project. How can you tell?Also, I think you’re right in the sense of entitlement, which needs to change. Engineering work is not simply something that can just be easily "farmed out" with a grand visionary looking over their shoulders.As for my project, here is the situation:2 business guys devoting full time to this project. This means we don’t have other jobs as distractions. We both work on the project everyday full time. We have spent a large amount of time making wireframe mockups so not only the developer, but ourselves can get a better understanding of exactly how the product will look and function. We also offer financial backing. We are paying for this ourselves out of our savings.Here’s what I’ve noticed.Engineers say business guys are worthless, that anyone can do what they do, and that the technical people are what drive the ultimate success of the startupBusiness guys say that engineering can be done by anyone, and anywhere in the world. It would be foolish to think one engineer is that much better than another. That you just find one and tell them what to do and voila.I think both are completely wrong. There’s a huge disconnect here. Does it start in the schools? Or the media? I’m not sure, but something needs to change.

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