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David Perry could be the poster boy for the new breed of entrepreneur emerging from the Harvard Business School.
Founder of the B2B marketplace Chemdex and CEO of its parent company, Ventro, Perry was one of the few members of the class of '97 to start their own companies upon graduation. His post-HBS career, brief as it is, bears all the hallmarks of entrepreneurial life in the new economy: bold ideas; personal risk; the lure of Silicon Valley; and the ups and downs of a public company in a volatile market.
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While still a student, Perry wrote a B2B business plan at a time when most thought Internet B2B was years away. After graduation, he turned his back on secure job offers, packed up his belongings, and headed for California in pursuit of opportunity and capital. And in a little over a year on the NASDAQ, he's watched his company's stock soar as high as 245 a share and plummet to as low as 4.
"This has been an amazing experience," said Perry in a keynote address at the annual Entrepreneurship Conference. "In three-and-a-half years, I have learned more about how business works and about myself than I could imagine doing in any other environment.
"It's one of the most compelling, most rewarding experiences I can imagine in the business world. You get to create something from scratch, and, if you do it well, you can change the world in the process. That's what being an entrepreneur is all about."
Where can you learn the most?
But the entrepreneurial path is not for everyone, said Perry. Whether to go the start-up route or that of a more traditional business is a decision, he said, that comes down to one simple question: Where can you learn the most?
"It's the nature of the economy we live in right now, especially the evolution of technology and how fast it's driving change, that the most important ingredient to success — whether you're doing an Internet business or some other business in any way affected by technology—is the ability to learn very quickly and evolve.
"If you're not in a job where you're learning very quickly, then people are passing you. You're falling behind where you need to be."
Being where you can learn the most, said Perry, may or may not mean starting your own business. "The thing you have to be very careful of," he said, "is not to take a job that goes sideways. A start-up, whether it's successful or whether it fails, can be an enormous learning opportunity. The start-up that doesn't do either for a long period of time is the one that's scary.
"Make sure you don't get into a position where you're wasting time."
Perry also offered these lessons for HBS students and others considering starting their own businesses.
Hire people who know what they're doing. The biggest weakness in all of the business plans he sees, said Perry, is that people put together founding groups composed of their friends, with one as CEO, one as president, one as CFO, one as COO, and so on.
"If your goal is to build a real, large, important, and profitable company, you want to bring in people who've been in that industry before and done these jobs before.
"If you fill out your ranks with people who are just like yourself, you've doomed yourself from the start. It doesn't mean you shouldn't start a company with your friends. It just means that if you do, you're going to hire your bosses, you're going to bring in people above you."
Don't be greedy with your equity. "You've got enough risk in the business already," said Perry. "Don't add more risk on top of it by taking less money to avoid dilution, trying to get a higher valuation but maybe a less quality investor, worrying about giving out stock options to senior employees early. Don't worry about that.
"If it works, there will be plenty to go around. If it doesn't work, you'll own more of zero, which isn't particularly valuable.
"The most important thing you can do is make it successful. If you make it successful, it's good for you professionally, it's good for you financially, it does wonderful things for your career options going forward. If you don't make it successful, you get almost none of those benefits."
Your equity, said Perry, is one of the most valuable things you have. Use it "to get people aligned with what you're doing, and don't worry too much about how much you own."
Don't be paranoid. At HBS, said Perry, he discussed his idea with just about anyone who would listen. "The downside of that is now a lot of people know what you're working on. A lot of people know what your idea is. The upside is you've now gotten feedback from all of those people. You've gotten to pitch your idea in a practice environment, over and over and over, and to refine your ideas as you've done so.
"People will tell you things you've never thought of. They'll ask you questions you can't answer and force you to go back and answer them. But it's much better to do that in an environment where you're getting feedback than to do that in an environment where you're trying to hire people or get customers or raise money."
There is a risk, he agreed, that someone could steal your idea. But it's worth the gamble. "The thing that will differentiate you is not the quality of the idea, but how well you execute on it, how well you evolve the idea as you go forward, and talking to people along the way will help you evolve it."
Starting a company is not a highlight reel. When start-ups are successful, everyone hears about the things that go well, said Perry; the things that don't come up are all the hardships along the way.
"People ask all of the time: 'When you started this, how did you know it would work?' I didn't know it would work. I still don't know it will work. I have doubts every single day.
"I tell you that because you're not alone in thinking that. There's this huge amount of uncertainty about what we do. That's the reason that it's valuable that you accomplish it.
"People who have been successful have been able to fight through that uncertainty and create a valuable company anyway. Not because they didn't have the uncertainty, but because they managed to control it."
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