It was a treat to host Fred Wilson of Union Square Ventures at Harvard Business School today – his first time attending a class at the school. Fred, as most readers of this blog know, is a venture capital legend in the making and the investor in some of today's leading consumer Web properties, including Twitter, Zynga and Four Square [Fred's post on his visit can be found here].
Fred and I had a discussion about lean start-ups and pattern recognition with the HBS students in Professor Tom Eisenmann's class "Launching Technology Ventures". If you want to see some of the Tweets that came out of the class (imagine a professor encouraging students to grab their smart phones and live Tweet in class!) you can check them out here (#hbsltv was the hashtag).
A few takeaways from our session that I thought were particularly insightful:
- Early on in a start-up, entrepreneurs should be hunch-driven more than data-driven. If you are only data-driven, the risk is that you will move too slowly. It's more important to have a hypothesis about what might work and what might not work and then see what happens in the marketplace to prove or disprove that hypothesis.
- Lean start-up as a methodology or approach is very useful, but isn't a guarantee for success by any stretch. Think of the methodology as a machine. If you have garbage inputs, you will still have garbage outputs. There's no substitute for good strategy, great entrepreneurs and a very large market opportunity.
- When considering when to monetize your new product/service, think carefully about whether the monetization strategy actually improves the service or is a distraction. Banner ads on Facebook are a distraction (as Zuckerburg supposedly said in the movie Social Network, "No ads. Ads aren't cool.") But, for example, on Etsy if someone pays for a product, it inspires producers to create more products. Thus, the monetization is harmonious with building the service.
- If you are going to fail, and certainly with more start-ups being created and seeded we will see more failure, be sure to fail gracefully. How you handle yourself as you unwind / seek a soft landing will reflect heavily on you and will cement your reputation.
- Don't worry about whether you are building a feature, a product or a company. Build something great, have huge passion for it, engender affection with a large customer base, and let the rest follow.
- If you get traction, transform your company into a platform. The most valuable companies are those where third parties help you grow by plugging into your services like a utility.
- VCs don't make companies successful. They can believe in and support a company, but ultimately the entrepreneurs make or break the company's success and don't let anyone (particularly an egotistical VC!) imply otherwise.
As we ended the class, we tried to inspire the students to "go for it" and become entrepreneurial. I am always pushing students to consider if now is the right time for them (see my recent blog post: "Should I become an entrepreneur?") and pointed out that this was a time in their lives where they could afford taking more risk. Once they get married, have kids, buy a house and get a mortgage, it's a different ballgame. Fred quoted a friend who once told him there were three addictions in life: "calories, heroine and a paycheck". If you can break the last addiction, you are well positioned to become a potent entrepreneur!