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Web valleyofthegeeks.com


Zack Urlocker
Saturday, December 08, 2007

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Can you spare a million?People are always wondering about Entrepreneurs. If they’re investors, mostly they wonder when they’ll see their money again. Silicon Valley has a rich history of celebrating Entrepreneurs dating back to when Hewlett-Packard was founded in a garage, a long time ago in a galaxy far, far away, because there was no room at the inn. Three wise men and two guys named Steve went boldly where no man had gone before bearing gifts of oscilloscopes, myrrh and forging one ring to rule them all, one ring to bind them, one ring to bring them all and make long distance calls for free.

Ok, I may be getting the details a bit confused, but the Entrepreneur has always been important in Silicon Valley. Even today, with the latest Internet startup iBankrupt.com, the Entrepreneur performs a vital function in Silicon Valley. After all, someone has to burn through all the profits that the Venture Capital firms are making.

There are three essential ingredients it takes to build a successful company: an entrepreneur, a business plan and money. The Entrepreneur’s job is to build the business according to plan before running out of money and without going to prison. Without the entrepreneur, there’s no vision to spark the success. On the other hand, the entrepreneur is just as often going take that spark and turn it into roaring flames until he burns through all the capital with nothing left but a big smoking crater in the ground. That’s what’s known as "down side risk".

Origins of Entrepreneurship

The word Entrepreneur comes from French. It literally comes from the words "Entre" meaning "in between" and "preneur" meaning "jobs". So it’s not surprising many Entrepreneurs get their start after being fired from previous jobs.

In the early days of Silicon Valley in the 1960s and 1970s, a would-be Entrepreneur would slave away in the engineering department of a large hardware company for many years before asking questions like "How come the bosses make all the money?", "With all this hardware being made, don’t people need software?" and "What exactly is meant by software?" Usually by this point their managers had noticed that the engineer is too busy asking philosophical questions to get any real work done and fires him thus giving birth to a new startup company.

ABCs of VC

There’s a myth that today’s high tech titans are focused solely on the IPO or "Initial Public Offering" of stock on the open financial market. Sometimes the IPO is also known as the Initial Panicked Offering if the company is running out of money. In fact, it’s not the IPO that matters its OPM: other people’s money. The Entrepreneur needs to raise funds in order to get the business off the ground.

Unlike well established companies which need to worry about things like P/E ratios, and revenues, a startup seeking funding really only needs to focus on one thing: the M/PP ratio: Millions per PowerPoint slide. If you can raise $25 million from a dozen PowerPoint slides, that’s an M/PP ratio of just over 2-1 which is quite respectable.

What makes an Entrepreneur successful?

The consulting firm Price WaterHouse Coopers Buzby Berkely Donner and Blitzen, recently completed a 12 year study of Entrepreneurs and found that 77% of all Entrepreneurs had a single trait in common: they were in debt. In addition, over 63% or entrepreneurs studied said that they wanted to build an ideal work environment, create new ideas, and develop a new technology that changed the world. It should also be noted that 97% were pathological liars.

In Silicon Valley, most entrepreneurs come from the ranks of engineering. This prepares them to deal with the important element of running a business such as ensuring that software is no more than 6 months late and that hardware does, more or less, what it is you said it was going to do, when you agreed to put your children in hock to the VC Report.

What makes an Enterpreneur successful? First and foremost it’s an unwavering belief in their vision for the company. The willingness to stick with it through and through. To not let minor obstacles, like divorce, litigation, or even a possible prison sentence get in their way. Heck, Larry Ellison gets through all that before his Monday morning sales call!

As the saying goes, a true Entrepreneur is as committed as a pig at a bacon and eggs breakfast. Everyone else is just making a contribution. And he knows he’s got to "break a few eggs to get this turkey to fly". Even if they are other people’s eggs, so to speak. Most entrepreneurs are risk takers. Many Entrepreneurs hang glide. And still others are betting against another Kiss reunion tour. What separates a successful entrepreneur from the garden variety is his or her ability to get others to believe in a bigger vision. As Bill "Herbert" Gates often says, "A chicken in every pot and a PC on every desk running nothing but Microsoft Software".

Not surprisingly there are a lot of so-called serial entrepreneurs. These are individuals who successfully create a company and then go on to do it again. Think of them as Entrepreneurotics. For example, Jim Clark founded Silicon Graphics and later after he was ousted, Netscape Communications. This was followed by WebMD, MyCFO.com and a host of other companies. Netscape, for example, generated revenues of over $600 million per year and had a market capitalization or value of over $6.5 billion. Unfortunately, expenses were something like a billion dollars per year. So Jim Clark got fired from that gig also. Still it was good while it lasted and Jim Clark is one of few Entrepreneurs who founded three billion dollar companies and managed to get fired from every single one.

One important rule of thumb: If you’re going to fail, fail big. And preferably using someone else’s money. There’s nothing like a few hundred million in debt to keep the bankers interested.

About the author
Zack Urlocker is a pseudonym for a Silicon Valley software executive. Mr. Urlocker previously played trombone with the Beatles and also co-wrote "The Road Ahead" (originally titled "Bill and Zack’s Excellent Adventure") with Bill Gates. He is currently working on a broadway musical entitled "Valley of the Geeks".

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