Lessons of Successful Entrepreneurs
The best way to become an entrepreneur is to jump into the water and get your feet wet, said several successful businessmen at the Harvard Business School Entrepreneurship Conference.
Successful businessmen told a roomful of students that ultimately, the world outside the classroom will be their best teacher in entrepreneurship.
"If you are taking an entrepreneurship class, you want to be a venture capitalist," said Andrew J. "Flip" Filipowski, chairman and CEO of Silk Road Technologies. For the true entrepreneur, he continued, reality is the superior teacher; and school is an excuse to delay failure.
Although their topic was "Post Boom Internet Opportunities," panelists spent most of the time at the 2005 Entrepreneurship Conference, held March 3rd at Harvard Business School, discussing their successes and failures as entrepreneurs.
The common themes: Jump in, take risks, challenge yourself, trust your instincts, and learn from both experience and the experienced.
I've got an idea!
If he were starting up a new business today, said David Fialkow, managing director of General Catalyst Partners, he would first employ the "earnest young man routine" to get an interview with an old guy in business who could explain the ins and outs of the industry. "Keep your hand out of your pocket, show up, and be prepared to listen," said Fialkow, a college dropout who helped create UPromise and a number of other successful ventures.
The goal is to get to market as quickly as possible, Fialkow continued. If you have a good idea, put smart people around a table for a few days, give them good food, and let them figure out the business model, he continued. He also said start-ups should spend more time on market verification and market feedback than on the "front office" issues of building a business.
Fialkow's lessons included trust your instincts; develop solid mentors; hire young, smart people; and pick industries that are going through a sea change. He recalled how a two-dollar ATM fee he once paid at an airport spurred him to start his own ATM network featuring out-of-town banks. Other ventures he helped create were a credit card processing center for supermarkets, duty-free shops on cruise ships, and his current stint at General Catalyst, a private equity fund.
Filipowski, who founded software maker PLATINUM Technology and sold it to Computer Associates International in 1999 for approximately $4 billion, said one ingredient for his entrepreneurial success was doing enough deals to get lucky every once in a while. He still receives royalty checks in the millions of dollars each year from a $40,000 investment he made in a pet business, which he thought had no chance of succeeding.
HBS professor Thomas Eisenmann, who moderated, asked panelists about the "Get Big Fast" strategy popular in the 1990s—which essentially meant buying or otherwise acquiring many customers as quickly as possible.
"You don't want to be in a business model that acquires customers cold," said Fialkow. His UPromise received some $100 million in financing and spent half of that in customer acquisition activities, he said. "That's nuts."
Steve Hafner, founder and CEO of Kayak.com, an online travel information site, said an alternative to growing your own customers is to secure distribution through partnerships, such as Kayak's partnership with AOL.
But there are times when a customer acquisition strategy might be sound given the circumstances of the moment, said Filipowski. "I believe in assessing the current environment and taking advantage of it."
In a discussion on the pluses and minuses of receiving venture capital, Hafner said his company sought funding not so much for the money as for the expertise—"We wanted adult supervision." Entrepreneurs run incredibly fast and focused, leaving little time for thinking about strategy and tactics to respond to events happening in the industry.
Entrepreneurs should be wary if they decide to go the VC route, said Fialkow. "They're smart, but not smart about what you're talking about." The best source of information and funds, he added, is angel investors with domain expertise.
The conference was sponsored by the Entrepreneurship Club at Harvard Business School.