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A Good Hard Kick In The Ass

Rob Adams’ bootcamp for entrepreneurs shatters new economy myths

(Washington, DC -- November 14, 2002) “I understand that all entrepreneurs want a checklist,” said Rob Adams speaking at today’s Netpreneur Coffee & DoughNets session. “They want to know exactly what to do to make things work. Unfortunately, it's not that easy. Quite frankly, if it were that easy, it wouldn't be as rewarding as it is.”

Adams, a serial entrepreneur and former Marine who now runs Austin Ventures' bootcamp for entrepreneurs, was here to discuss the lessons in his new book, “A Good Hard Kick In The Ass, exposing some of the common myths about entrepreneurship that continue to linger despite the bursting of the dotcom bubble.

“During the bubble,” he recalled, “we invested in some companies that did some things very, very well. Many of those companies, although not all of them, have continued to do well. We tried to take them apart and figure out what particular piece each of those companies did that made it really good at one particular aspect of business.”

Adams presented those lessons in the form of nine myths that he and other venture capitalists hear over and again from young entrepreneurs, the most common myth being: Good ideas are scarce.

No, he said, ideas aren’t scarce, they are commodities. He cited what he called the 1:8:20 Rule. “If one person in Austin, Texas, has an idea, there are at least eight people up and down the East Coast corridor that have it, and there are probably 20 people in the garages of Palo Alto in Silicon Valley that have it.”

What does that mean for entrepreneurs? That it’s the ability to identify a real market need and the quality of execution that makes or breaks a company more than any other factor—not the brilliance of the idea, or the speed to market, or the defensibility of the technology. It’s all about the business problem you’re trying to fix and how well you and your team execute on making it happen. Adams calls it “execution intelligence,” which is "the ability of a particular group of people in a particular place and time to make a company thrive.

Adams’ model for execution intelligence is Dell Computer. “Think of what Dell has done,” said Adams. “They have taken something almost as ubiquitous as paper clips, the personal computer, and they've executed to superhuman perfection. The way they've been able to do that is by hiring their management team. Who would have ever dreamed that some kid named Michael Dell who was an undergrad at the University of Texas would be the person who knocked off Compaq, forced IBM to get out of the PC business, and trashed a whole bunch of personal computer companies over the last 10 or 15 years, companies that most of us probably don't even remember?”

The second most damaging myth entrepreneurs fall prey to is thinking that “I know my customer.” All entrepreneurs believe that it’s true, but, instead, they have too often based broad extrapolations on insufficient evidence, such as limited conversations with just a few colleagues or locking developers away to work without market input. Adams advised talking to at least 100 potential customers before developing a product to see what people really need, how badly they need it, and what they’re willing to do to get a solution.

“We find that the best companies make this a part of their culture,” he said. “When they want to figure out a new product, they get everyone in the company on the phone. I mean the receptionist. I mean the engineers. I mean the salespeople. I mean the CEO. Everyone has a new appreciation for what it's like to sell something. Does it take 20 or 30 phone calls to get one interview done? Well, now you understand what it's going to be like to sell that product.”

That second myth is actually closely tied to the third, “I have to ship the killer product.” Both reflect too much focus on product rather than on the business problem being solved. When you follow this third myth, you try to build the coolest, most complete, most elegant product you can imagine, which delays your entry to the market, keeps you spending rather than making money, and blocks your receiving early market feedback. The key solution to both myths is a heavy emphasis on market validation, first to truly understand the market dynamics, and, second to help you identify the minimally functional feature sets that will get you into the market. Adams’ model for the latter is, of course, Microsoft which has a reputation for shipping imperfect and buggy products, but it gets them vital customer feedback for improving the product in frequent, future releases rather than developing in the dark.

Adams went on to discuss and shatter five more myths: Raise a lot of capital quickly; Investors fund business plans;  Investors want their money back quickly; Advertising is the hallmark of a good marketing plan; and I can use partners to sell my product. His emphasis was on the earlier three, however, which cause the most and most difficult problems entrepreneurs face. “They have the biggest impact on the probability of success for any company, in particular, technology companies. Market risk is what kills companies, not technology risk.”

What do all nine myths have in common? For one thing, avoiding them makes a company much more attractive to investors, customers, and other partners. According to Adams, “The more risk that has been pulled out of your company, the more valuable it is to an investor. Everything we talked about today incrementally reduces risk. If you can build a company where the risk is reduced because it's got a strong management team, a good product spec that isn't trying to do too much, an understanding of its market, revenue traction, and people paying money for the product, those are all things that mitigate risk and make the company more and more valuable to an investor.”

And although he spoke often from that investor’s perspective, it all amounted to sound advice for any startup, whether seeking outside funding or not. In fact, when asked by an audience member what form of funding he recommended for startups now, debt or equity, he replied, “Actually, the best would be bootstrapping.”

Copyright 2002, Morino Institute. All rights reserved.

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