The Experience Problem

March 1, 2007

Over the course of this year as a Stanford sophomore, I have tried to start two companies. Needless to say things never got off the ground, otherwise I wouldn’t be blogging about it.

One of them never materialized simply because Vikram didn’t have enough time to work on the idea. It’s completely understandable; he’s a CS major at Stanford after all. Fortunately, by bootstrapping everything, we didn’t waste a lot of time or money and were able to avoid the pages-long business plan, the milestones, and everything else that “they” tell you to do when starting a company.

The second time around, our idea required technological expertise far beyond what Tim and I could handle. We needed a lot of funding for the idea, so we set out and wrote the business plan, made the PowerPoint presentation, built a relatively complex financial model, and created a teaser sheet we were both very proud of. One of our advisors—Taek Kwon—an EIR at Texas Pacific Group, liked it too, so we must have done something right.

I still believe our idea has a tremendous amount of potential, but after the meeting with Taek, I realized that we had less than a snowball’s chance in hell of getting the million or so dollars we needed just to build the website. The sheer amount of money wasn’t the problem—after all, VC’s seem to have turned the funding tap on full blast—the problem was that we were both inexperienced.

This follows from the post-.com-era mentality that investors should invest in teams, not ideas. We had the big idea, but I am humble enough to admit that we did not have a great team. Although our Board of Advisors was stellar, the founding team was not. Our Advisors included Taek, a former Director from Hotels.com, the Executive Director of Human Resources at General Motors, a First Vice President from Morgan Stanley, and last but not least an ex-nuclear physicst turned Flash studio owner. They were wise and experienced. We were just two 19 year olds stepping up to the plate for the first time in our lives (well, technically it was the second for me, but my first at-bat was a fence-building company, I’ll write about the lessons one can learn from building fences in the near future, hopefully).

In any case, I did not give up because I believed that two 19 year olds couldn’t raise the money or focus enough to succeed, I gave up because I believed that two 19 year olds without a background in technology couldn’t succeed. There are many cases where 19-year-olds have succeeded in flying color—Mark Zuckerberg with Facebook, Sam Altman with Loopt, Bill Gates with Microsoft, and the list goes on. The motivating factor was definitely there, although I reminded myself to never forget about all the 19-year-olds that failed that we haven’t heard about. Point is, those guys had the engineering background, whereas we couldn’t even build a prototype ourselves. We would have had to raise nearly $10,000 just to get that done. After the prototype, we would have had to raise an additional $500K or so to get a beta version of the website out.

To think that we could have done this without ever having done it before is slightly ridiculous in retrospect. But then there’s a part of me that keeps saying: “That’s what entrepreneurship is all about. Remember what Reid Hoffman said: you jump off the cliff and start building the plane on the way down.” Then I justify my decision by telling myself, “But you have to know HOW to build a plane first.” In other words, take risks, but make them calculated risks. So where does that leave us?

Well, first and foremost, I think I made the right decision in deciding not to pursue that venture for my sake and for Tim’s sake. Although we would have gained a lot of experience along the way even if we failed, I think we can both gain better experience in other ways. This brings up the classic chicken-and-egg problem: if you need experience to start a company, but you need to have started a company to have the experience, what on Earth are you supposed to do?

Well, my plan right now is to work for another startup. It’s not quite the same as founding your own company, but I’m hoping it will give me a good idea of how to go about running a startup. Tim’s argument against this was that working for one won’t teach you how to start one, it’ll just teach you how to work for one–how to work in a startup environment. I agree to a certain extent. I’m not going to learn how to write a good business plan, how to pitch to investors, and all that jazz, but is that what’s really important? Sure, it’s important, but it’s only a small part of starting a company.

I believe that if the idea is great and you have the requisite skills, you will be able to find someone out there to fund you, assuming you need funding (I’m not saying it will be easy—if the idea is good odds are most people will think it’s crazy and not want to fund you, but someone will). Once you have the funding, you get to the meat of the problem: growing the company into a profitable enterprise. That’s what takes skill. That’s where experience is crucial. That’s what I’m hoping to learn how to do by watching others and learning by example. I want to absorb their knowledge and their skills by being the inexperienced one in an environment of experienced entrepreneurs.

Once I’ve completed what you could call an “apprenticeship,” maybe I’ll hop back on the proverbial yellow brick road.

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