Yesterday was a pretty special day.  Not only did I get to attend the White House ceremony at the Rose Garden for the passing of the JOBS Act, but I got to see one of our CEOs featured as an entrperneurial hero.

I have written in the past about the JOBS Act and its importance, so I won't repeat that here.  The president was on point in his remarks (see the video I took below), pointing out that his job is "Fighting every day to make sure America is the best place on earth to do business."

But the coolest thing for me was seeing our portfolio company CEO, John Belizaire of FirstBest, standing next to the president on he podium as exhibit A of the kind of entrepreneur we should be celebrating in this country.  John's parents were Haitian immigrants who arrived in America with nothing.  John worked hard as a kid, fell in love with technology and software, and after a stint at Intel decided to start his own software company at a young age with a few friends, called The Theory Center.  After a few years, he successfully sold it to BEA for over $160 million.  He stayed on as an executive at BEA for a few years and then started another company with his same team called FirstBest, which we invested in.  The company recently raised a $10 million growth round and is revolutionizing the front office of insurance companies.  I loved seeing John up there on stage and hearing his story of participating in a roundtable and meeting the president beforehand (see picture below):

John's story, like many others, is playing out all over this country and this world.  It makes me glad to be doing what my partners and I do – trying to help more John Belizaires achieve their dreams.

At one point, Naval Ravikant of AngelList and I were observing that we need to marshall the same energy and resources behind the JOBS Act for the next big agenda item for the entrepreneurial community:  immigration reform.  Stay tuned.     

In the very first year of a company, there are a few very tough, make-or-break decisions that founders need to make.  My colleague and friend, Professor Noam Wasserman, teaches a class called "Founder's Dilemmas" at Harvard Business School that delves into these decisions and has become a "must-take" session for aspiring entrepreneurs.

Noam has turned the materials and research from his class into a new book:  The Founder's Dilemmas, where he analyzes the fundamental trade-offs such as when to found a company, who to found it with (if anyone), how to determine roles and responsibilities, equity splits, choosing investors and many more sensitive issues.

This is a serious book for a serious endeavor: creating a company from scratch that can be a world-beater and life-changer.  Analytical, insightful and even a bit wonky at times, Wasserman's story arc is less about war stories – although the books is chock full of them, featuring the founders of Twitter, Pandora and others – and more about the decision tree every founder must climb.  Rather than having these decisions happen by chance, Wasserman's book is a towering guide to making these decisions thoughtfully and purposefully.

Every founder should read it – and take the time to digest its rich data and lessons.

These last few weeks have been about as encouraging as any that I can remember when it comes to economic news.  The US economy seems to be, finally, recovering nicely from the Great Recession (The Economist tongue-in-cheek headline this weekend:  "Can It Be…The Recovery?").  The Europeans have finally (it seems) renegotiated the Greek debt crisis to bondholders satisfaction.  Although they have alot of work left to tax and cut their way out of the secular debt morass, there appears to be enough progress to buoy the stock market, with the S&P 500 reaching its highest level in four years.  And, finally, finally, finally, we saw overwhelming bipartisan support from the House of Representatives in support of a bill that will help small businesses raise capital, called the JOBS Act, which passed 390-23 last week and is now being debated in the Senate.  When is the last time the House passed a major economic bill with that large a majority?

I have written about the need for structural reform to small business fundraising in the past.  With the JOBS Act, we finally have two, much-needed major reform elements:  (1) an "onramp" to make it less onerous for young companies with revenue less than $1 billion to go public; and (2) an ability for companies to raise up to $2 million in capital by soliciting small investments from many individuals.  Both of these are very important mechansims to encourage more capital to flow into young, innovative companies.

The Senate appears to be stuck, though, and needs to hear from the business and start-up community.  NVCA Past Chair and head of the IPO Task Force, Kate Mitchell, has done incredible work to help craft a bill that takes a balanced view to the IPO crisis.  HBS Professor Bill Sahlman has written eloquently in support of the bill, in the face of criticism from the NY Times' and even Bloomberg View (who appears to support the bill with a few tweaks).

Here's the call to action:  sign this petition on AngelList and show your support for the bill.  Email your senators and underscore your support.  This is an important battle – one worth fighting.  If you want to reach out to Senator Kerry or others, the NVCA has set up a page here.

There's a principal in signal processing regarding measuring the quality of information coming through a channel called the signal to noise ratio.  It is a measure of how much valuable information (signal) is included in a stream of data relative to the amount of useless information (noise).  The formula looks like this – the power of the signal as compared to the power of the noise:

My father was a PhD in information theory and has a theorem named after him (the Bussgang Theorem), so I've always found this area of study interesting.  I would observe that the start-up universe is a particularly noisy world to operate in professionally – in other words, there's a very low signal to noise ratio.

The SXSW conference is emblematic of this issue.  I wasn't able to attend, but when I ask my colleagues who are there, the first thing they talk about is the overwhelming amount of noise, or sheer volume of new start-ups, that are being worked on by entrepreneurs.  Online media blog DigiDay mused that SXSW has gotten so noisy that no one can stand out any more.  We are living in the "NewCo Era", where the combination of the plummeting in the cost to experiment and the explosion of entrepreneurship and disrupting technologies is causing a proliferation of new companies to be formed.  Rather than wring our collective hands about the dire implications of this trend in the start-up world, I'd simply observe that from the perspective of the entrepreneur, it is getting harder and harder to rise above the noise.

So how do the best entrepreneurs cut through the clutter and distinguish themselves and their companies?  How can they grab the attention of customers, partners and investors in an era of overwhelming, defocusing flow?  Here are the top five behaviors I have observed in entrepreneurs who seem to be unaffected by the amount of static around them and are able to stand out amidst the noise:

1. Put on your blinders.  I've noticed that many great entrepreneurs have the ability to ignore the inputs around them, even (gasp) to ignore their inbox.  Some of their friends may brag about achieving "zero inbox" nirvana (i.e., having read and processed every email that comes in), but the great entrepreneurs I work with actually actively strive to avoid having 
   a "zero inbox".  Instead, they consciously block out reacting to inputs and focus their proactive energy on their priorities.  Speaking of priorities…
2. Focus relentlessly on the customer value proposition.  The entrepreneurs I love working with wake up every morning thinking about their customer.  There are so many distractions when you are building a start-up, but if you solely focus on your customer and addressing their pain point every day, you will be in a strong position.  One of my portfolio company CEOs sometimes looks bored during our board meetings when we cover topics like finances, operating metrics and recruiting.  But when we get to the portion of the meeting where we talk about his customer, he totally lights up and is full of war stories and compelling ideas.  You obviously can't solely focus on the customer value proposition, because you also can't run out of cash, ignore competition and neglect to build a world-class team.  But that leads to the next characteristic…
3. Focus on very few things.  Great entrepreneurs are brilliant at keeping things very simple and focusing only on a few of the highest-priority, highest-impact items.  I learned this lesson from a mentor early in my professional career.  There is something to the "power of three" (keep your mind focused on only three goals at any given time) or even the "power of one".  I try to maintain the discipline of writing down my three summary goals for the year on one-page and keep it in my folder at all times, pulling it out every few weeks and reminding myself of them.  The priorities may change, but the discipline of focusing on very few things should never change.
4. Avoid bright, shiny objects.  A corollary to focusing on very few things is that you should actively avoid "bright shiny object syndrome".  This is the well-known start-up disease of entrepreneurs getting distracted by the latest interesting new idea or opportunity.  One of entrepreneur friend of mine is susceptible to this – his last three meetings were the most important ones in shaping his thinking and setting his priorities and he finds it hard to ignore the inevitable distractions that comes out of a positive partner conversation.
5. Be a contrarian.  Contrarian thinkers stand out from the crowd, plain and simple.  The start-up world tends to encourage a form of groupthink.  There emerges a conventional wisdom in the blogosphere that is propogated and validated thruogh the various social channels.  But great entrepreneurs relish the opportunity to challenge the status quo and conventional wisdom and go against the grain. The best ones develop that contrarian point of view so fully that, over time, it wins out and itself becomes the new conventional wisdom.

The Economist had an article this week called "Slaves to the Smartphone" that bemoaned the "horrors of hyperconnectivity".  Similarly, being a slave to your inbox isn't going to help you build a great company.  So don't be afraid to ignore it.

For the second year, Fred Wilson of Union Square Ventures was kind enough to come to HBS to meet with the class Professor Tom Eisenmann and I co-teach called Launching Technology Ventures.  Similar to last year, it was a terrific session.

I started the class off by encouraging the students to live tweet the entire 90 minute session.  The Twitter stream (which you can see here, using the hash tag #hbsltv) nicely captured our dialog.  The class is made up of 100 "start-up ninjas", half of whom will start their own companies in the next year or two and half of whom will join start-ups.  The class covers the fundamentals of lean start-up theory, seeking product-market fit, and scaling challenges post product-market fit.  We do not have a final exam.  Instead, students need to write two blog posts, comment on two of their classmate's posts and participate in a business model excercise modeled after Steve Blank's "business model canvass" exercise at Stanford.  You can see the course blog here.

A few of the takeaways that struck me:

• Fred observed that failure is typically a valuable and powerful experience – forcing introspection, humility and an extra drive to prove something to others.  He observed that the entrepreneurs he has been most successful with typically had a major and personally defining failure in their career.

• He repeated a comment that we drew out from last year's conversation, which I particularly like:  "Start-ups should be hunch-driven early on and data-driven as they scale".  What was interesting was discussing the profile of the entrepreneur that has good hunches – often they come from outside the domain, yet are obsessed with the opportunity to disrupt the new field with a fresh perspective.

• We discussed the role of gate-keepers in start-ups.  Fred is skeptical of businesses that involve gate-keepers.  In fact, he encouraged the students to look for industries that have gate-keepers, and compete directly with them (e.g., education).

• When evaluating whether you want to join a company, think like an investor.  Conduct extensive due diligence on the team, the product and the market opportunity.  Ask yourself whether you would invest your money in the company before deciding to invest your career.

• Entrepreneur and start-ups have many varied models for success.  Don't try to follow someone else's model.  Stick with your personal passion and your authentic leadership model.  If you don't have your own start-up idea, go join a 50 person company and leave when there are 500 employees.  And if you have an idea and no one can talk you out of it, go be an entrepreneur. (Interstingly, Fred confessed that if he could have done it over again, he wishes he had joined a start-up for the first 10 years of his career.)

• We had an interesting dialog about the various start-up ecosystems – Silicon Valley, Boston, NYC – and how long it takes to build that ecosystem.  Our mutual friend Brad Feld has written extensively about this topic and is writing a book on it that should be coming out shortly.

At the end of the class, Fred had an encouraging perspective for MBAs around the world, not just in today's classroom.  He observed that the start-up community is all the richer due to the contributions of MBAs.  Just be sure not to be arrogant about your knowledge or degree – instead, put your head down and do great work!

I became a venture capitalist over nine years ago, leaving my entrepreneurial career at the ripe age of 32.  At the time, I had been an entrepreneur for ten years across three companies, and felt helping start Flybridge Capital represented an exciting opportunity to team with a few friends to create a new kind of venture capital firm.  Equally compelling for me was the challenge of personal reinvention – pushing myself out of my comfort zone to learn a completely new operating model and face a new set of challenges.

I was reflecting on this as I read the fanfare over the last few weeks about former Red Sox All-Star pitcher Curt Schilling releasing his inaugural game, the Kingdoms of Amalur.  Talk about personal transformation!  Schilling retired from over 20 years in professional baseball to become a start-up entrepreneur, forming his gaming company, 38 Studios, in 2006.  I documented his transformation in a Harvard Business School case study called Curt's Next Pitch, along with my friend and colleague Professor Noam Wasserman.  

The launch of the Kingdoms of Amalur an amazing accomplishment.  Schilling has had to figure out a completely new blueprint for operating in the world of technology start-ups.  He joked with me when we were working on the case that much of his language had to be relearned – for example, "burn rate" used to be a good thing, representing how fast your heater sped towards the plate at the batter.

You don't have to be a World Series MVP to appreciate the difficulty in personal transformations.  It's something I see entrepreneurs struggling with all the time – sometimes they are trying to transfer their skills from one industry into another, other times they are trying to adjust to the new phases of their business – from inception to adolesence to more mature, scaling issues.  

Here are a few general lessons I've observed that are patterns of successful efforts towards personal reinvention:

• Don't be afraid to ask for help – and even risk looking dumb.  People who have achieved great success in one field become very proud of those achievements.  It is hard to take a step back and recognize that you need help to learn a new blueprint in the new field.  And sometimes finding people who you feel safe with – and able to ask the most basic, dumb questions – can be of great help.  Schilling sought out gaming executives from the very beginning who could mentor him and teach him the ropes and was never afraid to "start with the basics".  I remember struggling through all new concepts and modes of operation during my first year or two as a venture capitalist and leaning on my partners as well as mentors from other firms – and, importantly, swallowing my pride when doing so.  Too many folks get stuck dwelling on their past accomplishments rather than pushing forward into new fields.  As Ulysses says:  "Pride hath no other glass to show itself, but pride." In computer science terms, you would call that a "doom loop"!

• Understand your personal strengths and weaknesses – and how they fit in the new model.  Many entrepreneurs do not conduct enough deep self-reflection.  They may have the intellectual firepower to analyze the criteria for success in the new field, but lack the emotional IQ to appreciate how their own skills map.  What are your top three core strengths that make you special and unique?  What are the three things that your spouse or parents would say are your biggest faillings that you need to work on?  And how do these relate to the new field?  Delver deeply into who you are and how you operate, and then you will be better positioned to undergo the personal reinvention required ot tackle the new field.  Jerry Colonna has a nice guest post on the topic of "learning to lead yourself" on Fred Wilson's blog.

• Mantain the core success attributes – have the right, flexible mindset.  No matter what field you are tackling, there are an obvious set of core attributes that help individuals achieve success.  In the context of changing fields, the most important arguably is the importance of avoiding rigid thinking.  Don't keep applying the same blueprint and remaining stuck on a particular approach to company-buidling.  Instead, concentrate your energy on the growth and change required to make the adjustments to the new domain.  Stanford researcher Carol Dweck's book, Mindset, is a nice summary of the approach that successful people take when facing new challenges.  She observes that those that are able to achieve consistent success across fields have the following attributes:
  • A passion for learning
  • A passion for stretching themselves
  • Avoid dwelling on how great they are, but instead focus on getting better
  • Surround yourself with people that will challenge and push you

These are the lessons for personal reinvention and facing new challenges.  Over the course of six tough years in launching and building his company, Curt Schilling appears to have figured this out.  Will you?

There continues to be great interest around the world regarding how to build innovation clusters.  Inspired by a similar presentation that Fred Wilson did on the NYC start-up scene many years ago, I pulled this presentation together.  I just updated it for a group of Harvard Business School students and was struck by how much has changed and progressed in a positive way.  I would venture to guess every major US technical hub would say the same.  Like Boston, the NYC, SF, Silicon Valley, Boulder and Austin start-up scenes are all on stronger footing and more vibrant and diverse than ever as compared to a few years ago. This should give all of us great optimism for the future.

Enjoy:

"Leadership is the art of getting someone to do something you want done, because he wants to do it."

    - Dwight D. Eisenhower

I'm a business book junkie, so when my friends at Penguin (publishers of my book, Mastering the VC Game) told me I should meet with the author of Taking People With You, I jumped at the opportunity.  Author David Novak is Chairman and CEO of Yum! Brands (Taco Bell, KFC) and runs an organization of 1.4 million people, so I figured he'd know a little something about leadership.  Having Warren Buffet quoted on the front cover is a relatively positive signal as well.  The fact that Yum! is a member of the human capital leadership network of my portfolio company, i4cp, sealed the deal.

Two big surprises came out for me in reading the book and talking to David.  The first big surprise:  David is a very humble guy.  He talks alot about his personal failings, highs and lows, and even inserts his personal "timeline" chart.  He tells a great story of how horrible a speaker he was in the early days of his career, and how he was always trying to be something he wasn't.  Novak emphasizes this notion of authenticity throughout the book, pointing out (as many others have before him) that only by being brutally honest with yourself and being an authentic leader can you get others around you to follow.  He shares a terrific quote from GE Chairman and CEO Jeff Immelt:

"I'm always searching for a certain kind of humility in our most senior leaders, people who don't think they know it all…You're fighting arrogance and bureaucracy every day, and if you have people that act that way, then it's never good." 

The second big surprise for me was that, despite being a "big company guy", David was very savvy about entrepreneurship and the translation of his leadership lessons to entrepreneurs.  He has some very practical advice about culture-building and making sure that entrepreneurs keep everyone around them involved ("no involvement, no commitment").  And he uses evocative phrases to emphasize how to be a change agent ("Shock the System" is one of my favorites.

The book reminded me of a lesson I learned early in my career as a young vice president at Open Market.  One of the older executive team members took me aside one day and encouraged me to stop pushing my version of "the answers" onto my team  Instead, he advised, hang back more and focus on communicating the vision and high-level business objectives, and then coach the team to develop the answers.  True alignment is the key to ownership and accountability, Novak writes, and if the team around you doesn't embrace the problem with the same passion that you do, they will never really be committed.

And, believe me, entrepreneurship requires 100% commitment.

Many people complain that great entrepreneurs do not necessarily make great leaders.  I would encourage entrepreneurs to take a page from folks like David Novak to exercise their leadership muscles.  

Even big company folks have something to teach the rest of us.

I am co-teaching a class at Harvard Business School on entrepreneurship called "Launching Technology Ventures" along with my friend and colleague, Professor Tom Eisenmann.  The class kicked off this week with two cases:  Dropbox and Aardvark.

As I reflect on the class discussions, one of the interesting tension points that arose is the challenge an entrepreneur faces in selecting their primary product design approach.  Should they follow the Steve Blank, Customer Development Process school of product development or the Steve Jobs "vision" school?  In other words, should they pursue a user-centric design paradigm — setting priorities based on rigorous tests and listening excercises that determine what users want — or should they pursue a more top-down approach akin to Steve Jobs, who famously said: "It is hard to design by focus groups because most of the time people don't know what they want until you show it to them. "

Steve Blank's book, Four Steps to the Epiphany, has become an instant classic in Start-Up Land for good reason.  Along with the complimentary book by Eric Ries, The Lean StartUp, it provides an incredibly useful guide for starting companies, testing hypotheses and creating products that users love.  Dropbox and Aardvark were terrific first case studies for the HBS students — both adhered to user-centric design principles quite religiously, but sprinkled a little founder vision in for good measure.

In the case of Dropbox, founder Drew Houston was brilliant in developing an MVP (minimum viable product) that was no more than a simple prototype and then used a rudimentary online video to test user reactions to the prototype.  Houston kept focusing on a test and learn approach to product development, event creating a "Votebox" feature that allowed users to vote for the product changes they wanted most.  But Houston did not strictly follow the Blank/Ries paradigm religously.  For example, after launch, he ignored the most requested feature that users asked for:  enabling the service to synchronize files outside outside the Dropbox folder.  In ignoring his customers' top request, Houston was exerting a Steve Jobs-like, top-down vision in order to stick with the focus on simplicity.

In the case of Aardvark, a social search start-up that was later acquired by Google, co-founder Max Ventilla, was obsessed with following user-centric design principles.  At one point in the case, Ventilla notes:  "We were wary of relying too much on vision and intuition in developing a product."  Yet at the same time, the company refused to provide an archiving capability in the early days of the product, focusing the service on a conversation paradigm rather than Quora's reference paradigm.  Again, the insertion of a Jobs-like product vision.

So in both cases, founders adhered to the Steve Blank school of product design, yet allowed their vision and instincts to overrule user feedback.  What's going on?  When should you choose between the two?  

First, I would observe that the dichotomy may not be as stark as it seems.  Blank is careful to point out in his book that when a company first begins, "there is very limited customer input to a product specification."  Therefore, "start development based on your initial vision."  Yet, in both the Dropbox and Aardvark cases, the founders ignored their customers well into the development cycle.  

I would submit that there are two guiding principles that founders should use when considering overriding their users.  First, when the feedback is in violation of a coherent set of product principles.  In the case of Dropbox, this was an unwavering focus on simplicity.  In the case of Aardvardk, a focus on social search being a conversation.  Second, founders should only have the confidence to develop these principles and  override their users when they possess very strong domain knowledge.  When product-centric founders deeply understand their customer's viewpoint and have tremendous customer empathy, they have the right to make hunch-based product decisions rather than data-driven.

That said, founders should never let themselves off the hook to applying the test and learn principles of Steve Blank to monitor their decisions and continuously validate them.  And the bar should be very high for such overrides.  As the 19th century German philosopher Arthur Schopenhauer observed:  “Talent hits a target no else can hit.  Genius hits a target no one else can see.”

Founders who override their users are betting on genius.  Steve Jobs and Drew Houston have proven that genius pays off.

I am a card-carrying Democrat and supporter of President Obama.  I will vote for him again in November.

But the attacks against Mitt Romney's record at Bain Capital – by both his Republican brethren and Democrats – and the demonization of the private equity industry are really starting to annoy me.  I won't vote for him for president based on his policies and the policies of the party he represents, but I believe Mitt Romney's business track record at Bain Capital, and the private equity industry as a whole, is deserving of a full-throated defense.

First, Bain Capital is a great firm.  I have co-invested with them and some of my closest friends are managing directors there and you will not find a smarter, higher integrity, harder working group of professionals.  They have also been incredibly generous with their success and become philanthropic leaders, both in the Boston community and beyond.  If you are going to pick on a private equity firm for bad behavior and hubris (of which there is plenty), they are the last ones to select.

Second, the work of private equity is a healthy part of our capitalist system.  Damning private equity as a maket force is absurd in a free market economy.  Should bad, poorly managed companies be allowed to destroy value?  Should fast-growing, innovative businesses receive capital and support to accelerate their growth?  And should hard-working pensioners and retirees be allowed to invest their svaings in an asset class that outperforms nearly every other one available?  Private equity has an important role and should be lauded, not lambasted.  The WSJ does a nice job of making this case here.  

I'm not saying Romney, Bain Capital or private equity are perfect.  I'm sure there were bad bets made or cases or situations where Bain Capital was overly aggressive in pulling out fees and, as a result, bankrupted the businesses they invested in, such as GS Industries.  And Romney, as much good as Bain Capital does for investors, entrepreneurs and businesses, is a bit fast and loose with his soundbite claim of creating 100,000 net jobs at Bain Capital.  Dan Primack of Fortune does a nice job of running through the fact and fiction behind the various claims here.

But the fact that Bain Capital has amassed over $60 billion in investor capital, and the fact that there are over 2,300 private equity firms managing $2.4 trillion, suggests that this is a massive force in our global economy that attracts the best talent, capital and companies for a good reason. 

I am tired of seeing politicians from both sides of the aisle talk out of both sides of their mouth.  Capitalism is a force for good and we are counting on the capitalism system to enable us to grow our way out of this economic malaise by creating wealth and jobs, expanding free trade and innovation.  So let's stop this name-calling nonsense (is Warren Buffet a corporate raider?) and instead focus on the important policy issues surrounding the economy, health care, foreign policy and social policies.

That's why I'll vote for Obama for President again in 2012.  Not because Mitt Romney is anything but a spectacular entrepreneur and business executive.