Launching a successful startup is one thing. But how do you go about duplicating that success again…and again…and again.
I decided to ask David Friend, CEO of online backup company Carbonite. David has successfully launched six startups to date. He co-founded five previous companies: Sonexis, FaxNet, Pilot Software, Computer Pictures Corporation and ARP Instruments. On top of that, he’s a trustee for the Brookings Institution in Washington, D.C. and the Berklee College of Music in Boston.
David was kind enough to share some advice on how successful first-time entrepreneurs can repeat that success and dispels some of myths around entrepreneurship.
What are the biggest challenges in moving from successful first-time entrepreneur to successful second-time entrepreneur?
Clearly, having a good partner, or a couple of good partners, is important. If you think about raising money from a venture capitalist – if you’re just sitting there with a slideshow and you don’t have a product yet, there are a lot of risks in your business plan because you may not be able to build it.
The second point is to do your homework before you start. Most companies are built around a product. Most companies when they launch a product they spend money on market research. They go out and talk to people. They got a pretty good idea where the target is before they get going. A lot of entrepreneurs just start companies before they’ve figured out whom the customer is.
Before we started Carbonite Jeff (Flowers, co-founder and CTO) and I probably spent $30,000 or $40,000 out of our own pocket just on market research, just to go out and do some surveys and interview people. Before we spent $2 million dollars building a product and trying to raise money, we wanted to make sure that at least if we built it there were some people out there who were saying “Yeah, if you build it, I’ll buy it.”
Speaking of funding, is it easier to raise money the second time around?
You never get to the point where the money just comes without a high degree of questions. Most venture capitalists had heard of me through some means or another so if I called them up and said “I’d like to do business with you,” most of them would meet with me. So it’s probably easier than if you are somebody who’s two years out of college. Nevertheless, good business plans and good teams eventually get an audience. It may take a little more work but they will eventually get heard.
If you’re a first-time entrepreneur it’s a good idea to surround yourself with people who do have a track record. The more you can reduce the risk to the investor, the more likely that you’ll be taken seriously.
You have probably met lots of repeat entrepreneurs. Do you notice any difference in attitude among those who are able to repeat prior success and those who can’t?
There’s certainly an element of luck in any business. When Carbonite got started there were just a lot of lucky things that happened. Digital photography came in, the cost of broadband became ubiquitous, storage costs were plummeting. Sometimes people are at the right place at the right time. I’ve seen lots of companies that the only thing that made it work was that these guys were really lucky to be where they were at that moment in time. But then you see other people who maybe haven’t had home runs, but they keep having a succession of singles and doubles and good solid base hits.
You look at these people back in 1998 and 1999 and it seemed like everywhere you looked there was a router company. Most of them got sold to bigger companies at a profit and it’s not that these guys really knew what they were doing, it’s just that they were at the right place at the right time with something that was hot. If they didn’t sell, they went out of business.
You mentioned scoring singles and doubles as a goal. Do you think that thinking has shifted because of the Facebooks of the world who come in with a home run?
The vast majority of those fail because it’s really hard to anticipate those things. I’ve had some dealings with (Mark) Zuckerberg back when they were a little bitty local company (in Boston), and I don’t think they had a clue how big this thing was going to get. It’s pretty hard to go in with the intention of building something like Google or Facebook.
But do you think there’s a mythology surrounding entrepreneurs now? Do people envision Mark Zuckerberg in the dorm room or Steve Jobs in the garage, when in reality most successful entrepreneurs are people with business plans who strategically build connections and leverage them?
Those guys are one in a thousand. Most entrepreneurs are building off a previous success, or maybe they’re coming off a business that failed, and they are going to go back in and try again. But it’s like any other skill. It’s just like learning to be a good sports player or violinist: you practice at it, you get better, and you don’t make quite as many mistakes the next time. These aren’t college kids who fall out of their beds and suddenly are billionaires. That just doesn’t happen very often.
What advice would you give to entrepreneurs who are coming off their first successful business and are looking to build the next one?
You need to put yourself in a position where you are going to see a lot of ideas going by fast. You’re never going to spot that perfect car unless you are on the street watching all the cars go by. You just get out there and you talk to people. You go to a mixer at MIT and you join entrepreneur clubs. You just listen to people talk about all their different ideas.
Jeff Flowers and I always have a list of a half of dozen really interesting business ideas. When we get to that point where we’re in between companies, we get that list out and we start to talk about it. And we start looking for other ideas. You don’t want to jump at the first thing that comes along. You want to be methodical about it. You don’t go from having an idea to trying to raise money or even building a product. You go from there to trying to validate whether you are just breathing your own fumes, or whether there is really something there.
View Comments
