If you found the dot-com boom of the late 90s confusing because you couldn't understand how having a domain name became a substitute for a business model, or you wonder why VCs are willing to subsidise people's taxi rides to build Uber into a giant brand, you might think that business makes no sense. Alternatively, you might start reading, researching and asking questions to work out what's going on.
Tren Griffin, whose day job is senior director of strategy at Microsoft, did the latter and in his spare time he writes about business and investing, collecting quotes and advice from a wide range of experts -- including Snoop Dogg, Jim Clarke (founder of Silicon Graphics and Netscape), Bill Gates' father, and investors like Warren Buffet and Charlie Munger.
A Dozen Lessons for Entrepreneurs goes further than those online columns, but it also sticks to more traditional sources -- more than 300 pages of quotes, advice and explanations distilled from four years of interviews with 30 investors. These range from big names like Marc Andreeson, John Doerr, Reed Hoffman and Peter Thiel, to business coaches and advisers you may not have heard about unless you're a student of the VC world (Bill Campbell coached Steve Jobs, Larry Page and Jeff Bezos, while Mark Suster has been encouraging the startup scene in Los Angeles). Others you'll recognise by the companies they've invested in, even if you don't know their names.
For each expert, Griffin assembles a dozen quotes which he explains and annotates, often with quotes and anecdotes from other investors or his own experience in technology. He points out, for example, that because Bill Gates had a father who was a lawyer and a mother who served on dozens of business boards, when it came to negotiating the contract for DOS with IBM, he knew the difference between a licence and an outright sale, and ended up taking IBM to the cleaners.
The 16 topics on the 'concept map' at the beginning of the book reflect the areas that Griffin is most interested in, but other important ideas show up more than once. He doesn't use the now-standard Microsoft term 'growth mind-set', but the idea of being a learn-it-all rather than a know-it-all person appears several times.
If you get confused by terms like 'convexity', 'moat' and 'Mr Market' (which are some of the key repeated concepts), there's a glossary -- but most of the explanations are better covered in the meat of the book. 'Convexity' in financial terms is still about curves -- situations in which the chart you draw of the expected results from an investment involves either very large wins or trivially small losses. These are the opportunities every investor seeks, and there's much discussion of the power laws that mean that only a few investments will deliver big payouts. But grand slams like Google and Facebook are what keep the VC industry going.
Theory and experience
What both investors and startup founders are looking for is the good and surprising product. Griffin spends a lot of time on the idea of 'contrarian' investing -- putting money "where other investors and business founders are not looking" and finding the very small number of good ideas that no-one has done yet because they seem like bad ideas. In contrast, there are the good ideas that everyone is backing and the important-to-avoid bad ideas that seem like good ideas.
What emerges from all this is that successful investors don't just have a theory of investing, they also have the experience to recognise patterns -- the way a team gels, for example, or the way a CEO reacts to problems -- that point to a business that could be one of the breakouts.
"Staying close to the warmth of the herd was a good strategy for most of human evolution. But great entrepreneurs and great venture capitalists are not normal people. They are oddballs in the best possible sense of the word, and no two of them are exactly alike."— Tren Griffin
People matter: you need a strong founder who will stick around, as well as talented and committed employees. "The excuse department is now closed," Mark Suster tells Griffin. Startup leaders need an impossible combination of humility, luck and skill. A business plan won't survive contact with the customer, but you have to take the time to make sure that a business is at least possible: planning is essential, plans are not. Don't despise sales: getting your product distribution right is important -- and don't let the PR team show off your minimal viable product before it's actually viable.
One of the best explanations of what VCs actually do is in the last interview, with Ann Winblad, co-founder of Hummer Winblad Venture Partners. "The role of venture capitalists is to be great opportunists. The visionaries are the entrepreneurs," she tells Griffin. That's not saying investors are only in it for the money -- it's saying that most people, investor or founder, won't have enough good ideas to create multiple successes, so investors will need to find and back a wide range of visionaries.
Winblad also gives the clearest advice on how to spot a founder and team that will succeed. Are they going to try and keep too much control? Can they trust other people, including employees, customers and investors? And do they have the intellectual and physical stamina to found a company? "The majority of companies fail by self-inflicted wounds from the leadership team," she says.
Griffin ends the book by pointing out that a diverse team is a stronger team: with different viewpoints, diverse teams are more agile, resilient and productive.
Tren Griffin is an insightful writer who can explain complex financial ideas clearly and often amusingly, although you might need the glossary from time to time. Even the obvious point that businesses need to make money and pay their bills resonates when he points out that, despite all the other things CEOs need to consider, the overriding imperative is "never run out of cash".
Reading A Dozen Lessons for Entrepreneurs is more like having the opportunity to go for coffee with dozens of smart and occasionally controversial people than getting formal advice or coaching in starting or running a business. The best description might be 'thought provoking'. The quotes from Eric Ries aren't a replacement for reading a classic like his The Lean Startup, but you'll come away with a grasp of the key ideas.
You'll find yourself grinning as well as learning -- as when Griffin explains the importance of making mistakes, learning from them and then making new mistakes with a pithy quote from Will Rogers: "There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest of them have to pee on the electric fence for themselves."
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