Dan Rosen (co-founder and general partner of Frazier Technology Ventures and chair of the Alliance of Angels) and Russ Stockdale (Vice President of Marketing and Strategy for Clearsight Systems) gave a clear, concise and compelling presentation at the MIT Enterprise Forum in Seattle tonight on the importance -- and necessity -- for passion and discipline in any entrepreneurial venture. Just before the event, they merged (interleaved) their two presentations, and they took turns sharing their insights and experiences with the promises and perils along the entrepreneurial path. Their slides will be posted somewhere, sometime, but I wanted to post a few notes here while everything is still fresh in my head.
Dan led off, emphasizing the importance of both having and expressing a high level of passion and energy in a new business and its business plan (despite the high level of boredom one might experience in composing such a plan). He compared a startup to a marriage, with respect to its [potential] longevity, its ups and downs, and the prospect of being on the losing end of a divorce settlement. The statistics Dan quoted at the end of the presentation regarding the success of startups suggests that far more startups end in divorce than marriage.
Discipline is the other key ingredient to a successful startup, starting with the ability to deliver a clear and focused message, knowing what it takes to ship your product, understanding the market and segments you will be serving, and clearly articulating a business model and the factors that impact it. Russ proposed a test to determine how clearly one can articulate the value proposition of a new business, which he calls the "XYZ Test":
It's an X that does Y for Z
- X is a category of product or service
- Y is a benefit (not simply a feature)
- Z is a customer
He then led us through an audience-participation exercise where we tried to pick out the X's, Y's and Z's from descriptions found on the web pages of seven startups (I was impressed that he was willing to include his own company's description of its product). The benefit to the entrepreneur of passing this test is that it forces one to make a commitment ... reminding me (as so many things do these days) of the W. H. Murray quote "the moment one definitely commits oneself, then providence moves too. A whole stream of events issues from the decision, raising in one's favor all manner of unforeseen incidents, meetings and material assistance, which no man could have dreamt would have come his way."
One of the interesting and potentially provocative quotes, made with a request that the identity of the person making the statement would not be revealed (um, and I will try to further obfuscate by noting that several members of the audience were asking questions and making comments throughout the presentation), was:
"IP [Intellectual Property] is an annoyance, not a barrier, for any determined competitor. Execution on that intellectual property is the key."
Many other things Dan and Russ talked about were resonating deeply with me (some filling with me joy and anticipation, others filling me with fear). Although there were several areas in which objectivity was stressed (e.g., realistic assessments of the market, one's team and one's customers), there were many aspects which are intrisinsically subjective. Both Dan and Russ emphasized the value of doing a "gut check" for important decisions, such as whether/when to seek funding and whether to hire a new employee. Dan suggested that "'Adult supervision' needs to be there, but not be the driver", suggesting [to me] a "Love and Logic" approach to startups, and that one needs to both give full expression to one's inner child (passion) while maintaining a connection with one's mature self (discipline) ... full engagement and integrity.