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Aril 12, 2000 Event
The Best of Times, the Worst of Times: Building Long-Term Success Amidst Straining Values and Infrastructure In all of history, there has never been a more perfect time to start an Internet venture: abundance of financing options, cool dot-com cachet, and a thriving industry that produces dozens of new e-millionaires every month. Yet the very market conditions that allow entrepreneurs to create start-ups are compromising their ability to transition these ventures into legitimate and lasting businesses. The incredible influx of new dot-com companies has taken its toll on the principles and resources once taken for granted in the new economy boom. Though the Internet gold rush makes it very easy to START companies, the resulting dilution of values and infrastructure makes it near impossible to successfully BUILD them. Much has been written about the questionable motives of dot-com opportunists. Enthusiasm for promising ideas and dedication to building lasting entities sometimes take a back seat to comments such as "I deserve to make my millions" or "I can’t wait for a liquidity event so I can retire." However today’s entrepreneurs can’t be picky; a severe shortage of talent often forces companies to take who they can. On the infrastructure side, simple requirements such as real estate (both office and living space) and outside legal counsel are precious and often require equity as a securing chip. Most every start-up in the Bay Area has some story that illustrates the clear imbalance of resource supply versus demand. Is it possible to build a Yahoo! or Amazon amidst straining values and infrastructure? Surely this environment won’t block the creation of long-term value. How can entrepreneurs overcome the challenges of today to build the success stories of tomorrow? Some choose to incubate start-ups outside of Silicon Valley's geographical boundaries to take advantage of better people attitudes and more plentiful resources and support systems. Others contend that nothing has changed, arguing that a talented team, solid idea, and good-old fashioned dedication will win the day. If nothing else, the obstacles ahead will serve to reinforce the Darwinian certainty of hard-core attrition where only the truly committed survive.
Key Learnings
SURVIVAL OF THE FITTEST
Even amid constrained resources, the best companies will continue to secure capital, top talent, and other key resources. As the number of funded ideas and competition for employees increase, factors such as team strength and venture backing will be amplified as determinants for where prospects go. Ultimately, losing players in this game will provide a ready pool of experienced hires who will cycle into more successful ventures.
DRIVERS OF LONG-TERM SUCCESS
The foundation for long-term start-up success is built early and independent of the specifics of the business idea. Company culture, team structure, compensation models, and employee ownership drive lower churn and better execution as ventures mature and grow in size. Assuming that the business ideas have potential, the biggest success stories rely on business structures that work at any size across variable market conditions.
ADVANTAGES OF BEING IN SILICON VALLEY
There are few places with the all right ingredients -- talent, ideas, capital, partners, and the right service firms -- that enable startup success in both the short and long-term. Silicon Valley, having all of them in large volumes, continues to the be the most desirable place to start ventures and grow companies. Other emerging hotspots for venture creation, such as New York, Boston, Seattle, and Austin, provide good alternatives in the near-term and great options over time as they build comparable infrastructures.
THE SCARCEST RESOURCE: PEOPLE
While Silicon Valley has an abundance of tech talent relative to other geographical areas, an ever increasing number of startups are getting funded. As the startup-to-hirables ratio increases, high-risk, high-reward startups are attracting valuable human capital, creating a paucity of experienced hires for many mid-sized companies. This startup-first mentality amongst job seekers could diminish the prospects of hockey stick growth curves which were typical for one year old companies in the not too distant past.
QUOTES OF THE NIGHT
"Greed is a good thing -- especially in these times."
"Everyone is more selective now and wants equity. I went from pitching VCs in the morning to my landlords and lawyers in the afternoon."