Feb 2, 2011
This article was recently published in Xconomy.
The three asses of entrepreneurship—A smart-ass team with a kick-ass product in a big-ass market: Never before has entrepreneurship been so succinctly captured as in this line coined by Jeff Clavier of Softtech VC.
I met Jeff during the Silicon Valley "tech trek" organized by the MIT Sloan School of Management earlier this month. As a part of the Entrepreneurship & Innovation certificate requirement, this trek was a way of introducing the class to the world of Silicon Valley, the hotbed of entrepreneurs and innovation, in a thriving ecosystem that fosters enterprise like no other place in the world. For me, this was a trek back home.
It all started early in the morning on January 3, when at breakfast, we met with Jim Kim of Khosla Ventures. After watching a talk by Jim and Bill Aulet of the Entrepreneurship Center at MIT Sloan School of Management, about 120 students from the MBA class of 2012 went out in groups to visit companies in Silicon Valley. Some wanted to visit startups operating in stealth mode, while others sought companies like Facebook and Google, that, until a few years ago, were startups. A few of us chose venture capital firms like Softtech VC in Palo Alto.
Jeff started Softtech VC in 2004 with a unique view to investing in “next generation capital efficient companies.” His very first investment gave him a 17x return within 11 months. Since then, he has invested in 70+ companies. The other key take away from this meeting with Jeff was that start ups should get acquired, and not sold. What he meant by this remark is that a startup should be in a position where there is inbound interest to acquire it rather than the startup being out there trying to solicit buyers. This one simple line made a world of sense to all of us.
Next stop was the Plug and Play Tech Center in Sunnyvale. Plug and Play is an incubator that provides office space, facilities and even funding opportunities to start-ups. It has partnered with Google, eBay, Nokia, Microsoft and Yahoo to mentor startups in its community and also organizes events where startups and investors can meet and interact. A visit here underscored why Silicon Valley remains the best place for a tech startup. The place reeks of entrepreneurship!
On Tuesday, we drove around the peninsula to San Francisco, where we met with the founders of Hipmunk, a travel website that is a serious competitor to Kayak. Just when you thought that online travel was a saturated space, come these two sites (Hipmunk and Kayak) to prove all of us wrong. With a co-founder who had met success with his earlier start-up, reddit.com, Hipmunk has raised $1 million in angel funding and is Y Combinator-backed. Tucked away in a nice loft on Bryant Street in the Mission in San Francisco, Hipmunk’s biggest challenges are building relationships with clients and Google’s proposed acquisition of ITA. This space is definitely not done yet.
Then followed a visit to a company that I had been eagerly waiting to meet with – Ticketfly. Ticketfly is the latest entrant in the crowded space of event ticketing here in the US. It is founded by two entrepreneurs who had earlier started Ticketweb, which was acquired by Ticketmaster. They are back to doing what they know best, creating a company in the event ticketing space.
But Silicon Valley is not all about success stories. We got our dose of reality, when we met with an ex-entrepreneur who unsuccessfully tried to run a technology driven startup. Business development could not create a market for the technology, and hence it had to fold. The lesson was that it’s not always about the technology, but also about a market for that technology. It is very easy for us entrepreneurs to get trapped into thinking about the coolness factor of technology, and overlook the fact that there might not be a demand for that technology. Only one company has figured a way to tell the market what it needs—Apple!
It was also while we were on this trip that news broke about Goldman Sachs investing in Facebook. One couldn’t help but feel that the valley is once again in a bubble—a bubble driven by Google and Facebook, along with Zynga, Kayak, and the like. Tech company valuations are at a high, and while it doesn’t feel like 1999 all over, the valley could definitely burst like a bubble again. Nevertheless, the valley oozes entrepreneurship. The ecosystem respects entrepreneurs. Everyone who lives in the valley dreams of starting a company someday. Some eventually will, while others will eventually work for them as the spirit of entrepreneurship thrives here.