Eugene Kleiner was always my favorite VC! My fascination started when I was doing my MBA and read his famous ten laws:
- Make sure the dog wants to eat the dog food. No matter how ground-breaking a new technology, how large a potential market, make certain customers actually want it.
- Build one business at a time. Most business plans are overly ambitious. Concentrate on being successful in one endeavor first.
- The time to take the tarts is when they’re being passed. If an environment is right for funding, go for it. Eugene, more than anyone, knew that venture capital goes in cycles.
- The problem with most companies is they don’t know what business they’re in.
- Even turkeys can fly in a high wind. In times of strong economies, even bad companies can look good.
- It’s easier to get a piece of an existing market than to create a new one.
- It’s difficult to see the picture when you’re inside the frame.
- After learning some of the tricks of the trade, some people think they know the trade. This reflected some of Eugene’s own humility; he recognized that many venture capitalists thought they were experts when they had just a bit of knowledge.
- Venture capitalists will stop at nothing to copy success.
- Invest in people, not just products. Eugene always respected founding entrepreneurs. He wanted to build companies with them not just with their ideas.
After being around startups for more than ten years and dealing with couple of them I know how true they are! “Build one business at a time. Most business plans are overly ambitious. Concentrate on being successful in one endeavor first”. Let focus and be successful in one technology/product and then jump to the new one. For the first four to five years, your product is your technology and your technology is your product. Your CTO is your VP of engineering and your VP of engineering is your CTO! When you have not delivered your first product, there is no need for future technologies and products. Even if you have the best portfolio of patents, without a solid product and revenue they are worthless! Do not believe me, ask Irvine Jacobs from Qualcomm.
“Even turkeys can fly in a high wind. In times of strong economies, even bad companies can look good”. This is the story for early 2000 and 2007! When companies were out to raise money and no one vet them based on “their” value and what they have and not based on what is the hype out there. Companies with positive cash flow can go through the present storm and come out more solid and successful. Companies need cash and looking for investors to come out of this storm; will come out diluted and weak!
“It’s easier to get a piece of an existing market than to create a new one”. If market does not exist and you plan for a “potential” product for a “potential” market; good luck!
And my favorite; “Invest in people, not just products. Eugene always respected founding entrepreneurs. He wanted to build companies with them not just with their ideas”. Guys, if you think the founders are not right people to run the company for first five to six years, you do not have a company! DOS was not successful; it was the combination of Bill Gates and DOS which was a success. Apple Computer was not successful; it was combination of Steve Jobs and Apple Computer which was successful. Intel RAMs/Processors were not successful; it was combination of Noyce/Moore/Grove and their RAMs/Processors which was successful.