Always New Mistakes

April 3, 2008

Why forcing an entrepreneur into a big company is a mistake

Filed under: Business — Tags: , , , , , , — Alex Barrera @ 3:16 pm

Lately I’ve been hearing many negative comments about creating startups and being an entrepreneur. Most of them can be reduced to: “You should work for a big, well know company and after several years you can go and start you own“. In my experience this idea is pretty widespread. I’ve heard it from my father, from my friends, from friends of friends, etc. The problem with it is that, ALL the persons that express this idea have a common characteristic: they are conservative.

The idea that working in a big company you have better odds of creating a successful startup is bullshit. There are no statistics for that. Even more, people like Paul Graham from Y Combinator recently wrote an essay precisely about this same issue:

We’ve now funded so many different types of founders that we have enough data to see patterns, and there seems to be no benefit from working for a big company. The people who’ve worked for a few years do seem better than the ones straight out of college, but only because they’re that much older.

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The three most common benefits I keep hearing about working in a big company are the following:

  • At a big company you’ll have the chance to get high profile contacts that might aid you when you go and create your own startup.

Contacts are of great help, everyone knows that by now, nevertheless, the idea that you’ll haveexecutive-talent.jpg better and more contacts working in a big company has no ground. First of all, to contact truly influential persons is, in general, way beyond a normal worker. You’ll need several years to reach a status within a company to get access to the management team or high profile executives. I’m pretty sure Apple employees can’t phone Steve Jobs or mail him at any time with total freedom. Even if this isn’t true (there are always exceptions), the psychological perception for many top executives is that they are better and you are worse, that they belong to the executive class and you don’t. This means that even if you can reach them, you won’t be seen as an equal and the true advantage of recommendations et al. will be diminished. Of course, there are always special cases, but we probably wouldn’t be talking about a BIG company then.

Secondly, contacts within a same company are pretty much endogamic. This means that, if you work as a beta tester, most of your friends and coworkers will be related to the beta testing environment. Reaching interesting and influential persons in other fields is much more difficult.

Finally, the rate at which you contact new people is determined by external factors like thewaiting4raise.jpg number of people in your department or how frequently you engage with other departments or clients. If we throw some numbers we get a glimpse of the big difference. I usually go to a couple of entrepreneur meetings per month. In average I meet 2 persons of interest for my startup at each meeting. That makes 4 good contacts each month. In the software industry (my field), projects usually take between 2 to 6 months on average (even more if it’s a huge project in a big company). During that period and if you are lucky you’ll meet an average of 3 persons (which might not even be good contacts) at the client. That means that for a 6 month project you’ll only meet 3 new persons and probably only 1 or even none will be of interest to you. Check that against 15-20 interesting persons in a 6 month period by yourself (and no, you can’t go to many entrepreneur meetings if you work at a big company). Although this estimates will also go down if you keep meeting with the same persons, it’s clear which rate is better. Please, as usual, takes these numbers with caution, they are very gross estimates and there are always exceptions.

  • Working in a big company you’ll get the change to work or see really big projects that employ huge resources. This vision will help you when working on your startup.

Nobody disagrees that you acquire very interesting experiences while working for a big company. Specially if you work with large teams. The problem is that when building a startup you won’t be managing huge teams or resources, you won’t (normally) need real-time critical systems either. You won’t even deal with a lot of clients at first. So, even though it’s a plus if you have the experience, it’s not critical, as a startup is NOT a big company.

  • Working in a big company will give you a good resume and it will be easier for you to find investors.

Good resumes are always good things. Specially if umbrella.jpgyou approach investors, your team’s resumes must be great. The problem is that many persons don’t differentiate between the team and the founders. An investor isn’t looking for a top notch programmer founder, they are looking for people with experience setting up companies, growing companies, selling companies. They are looking for people with a track record of not wasting money in useless things. They are looking for a true leader that is able to get the best out of his team. If you are also a top notch programmer then be it so. Working at a big company won’t get you more money from investors. VCs that invest on people only because they are ex-googlers or ex-yahoos are wrong and they’ll pay for it. That it’s harder to find investment if it’s your first time and you haven’t been working at a known company, true. Impossible to do it, false. Actually, most of the investments I see are to founders with not experience in big companies, just take a look at Apple, Microsoft, Google, etc.

So, in conclusion, from my point of view, there isn’t any competitive advantage in working on a big company. Actually for me it’s the opposite. Two years of inferno, with a tight leash around your creativity and without the freedom you’ve got in a startup. Worst of all is that the environment affects you in a negative way and it takes a while to get used to breath again. Finally, the years after graduation are the best to play the high risk game of creating a startup as people haven’t got so many financial debts (a house, a family, etc.). Wasting those precious years in a restrictive environment instead of changing the world is wrong.

Choose what YOU want and follow your gut. If you don’t feel comfortable at a company, take the time to think about what you really want. And most of all, don’t listen to those that try to project their own insecurity on to you, as that will only block your true feelings.

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As usual, everyone is invited to drop a comment. I would love to read what other entrepreneurs or big company guys think about this. It would be interesting to have a VC or an angel to comment on this issue as well.

Images: leakyfaucet.wordpress.com, legendsofhorror.org, lifedynamix.com, synergy.ralf.netmindz.net, interbgr.com

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January 28, 2008

Synergies do matter

Filed under: Business — Tags: , , , , , , — Alex Barrera @ 10:55 am

imag0274.jpgDuring Christmas I took a trip to Venice with my family. One of the days we decided to go to a classical music concert in one of Venice’s churches. Being a big music fan, as I am, it was pretty exciting. The concert was the 4 seasons from Antonio Vivaldi (If you haven’t listened to it I highly recommend it) and it was gorgeous. On our way home I thought about the concert and I was amazed at the musical complexity of the composition (the last time I listened to it was a long time ago). I thought about how music now our days isn’t half as complex, in musical terms, as it used to be. Not that I don’t like current music, I do very much, it’s just that it’s not as technically brilliant. And what has this to do with synergies? A lot actually, composers like Vivaldi, Wagner or Mozart came to Venice during a period where the arts and music were flourishing there. If you were a composer or a painter you had to be there, at least for some months. Venice, and Italy in general, became the center of the Renaissance and the most important place to be if you wanted to be someone. Many famous painters and composers had their studies in Venice and students traveled all they way around the globe, just to study with them.

Now, taking about the present, we are experiencing something similar in Silicon Valley. Some people argue that if you have a tech startup you need to be in Silicon Valley. Some others argue that it’s not necessary, that you can find similar tech hubs in Europe. There has been a lot of buzz about this, specially between Paul Graham and Ryan Carson (organizer of the FOWA conferences). Some argue that you need to be there because it’s where the VC money is, because it’s where all the big tech companies are, because it’s a place where you can find good engineers.

The reasoning behind these affirmations is, somehow flawed. In my opinion there is only one reason why it’s desirable to be there: synergies. It’s not about the money, there is plenty of money a startup can use (business angels, banks, loans, corporations, etc.). It’s not about the big companies (kind of. I’ll explain this later), you won’t succeed with a bad idea even if your office is across Google’s campus. It’s not about good engineers, you can find them elsewhere. Granted it’s harder, not because they don’t exist, but because they are scattered. So, if it’s not about all the reasons I underlined before, then what is it?

The single reason for being at the Valley are synergies. Due to its importance, Silicon Valley attracts very smart people. It works as a huge talent magnet. And it’s not only Silicon Valley, it’s Stanford and UC Berkeley as well. What I’ve seen while I was over there (yes, I’ve there for some months), is that people aren’t geniuses (some are synergy_ball.jpgindeed, but there are very few), it’s all about the environment. Having dinner over there typically involves at least 3 or 4 top persons of a given field, be it computer science, biology, literature, chemistry, mathematics, etc. Your ideas are evaluated by top notch scientists every single day and at every single conversation. That means that if you idea is bad, you’ll know about it pretty soon. On the other side, you’ll get incredible feedback and ideas from around you. That’s something you don’t find easily. I mean, you might get ideas from your buddies in your local town, but you won’t get feedback from the guy that invented Internet. Trust me when I tell you that there is a great difference in the quality of the conversations. And that’s what happens, you eventually start getting “smarter” by being around smart people. You adjust your line of thought to theirs and you boost your personal limits. That’s a synergy. It’s not about the sum of the ideas, it’s about boosting the collective ideas to levels well beyond the sum of each individual one. Obviously, Silicon Valley won’t transform you into a smart guy if you don’t have the brains.

sk-c-1367z.jpegAs I said before, it’s not about working next to Google, it’s about talking with the guys at Google and an infinite exchange of knowledge. Another good thing about synergies is that they generates feedback. Once you taste it, you get more and more and more. The more you get, the more you want. That means that you try to contact more and more people and your social network grows and grows. People at the Valley are always open to new ideas and newcomers and they try to foster healthy discussions. I talk about this because in many countries, specially in Europe, people don’t discuss, they don’t ask questions or worst, they can’t find people to discuss ideas with. And even though you might find a small group of persons you like to chat and argue with, it’s just at such a small scale.

If you read the first paragraph again, you’ll hopefully see the parallelism between the Renaissance and Silicon Valley. Why were there a huge number of awesome Italian painters during those centuries? It wasn’t a local dna anomaly. It’s because the brain is incredible plastic and can work at different rates depending on the outside stimulus. If these are smart stimulus, your brain can set into its higher gear, if the frequency of the stimulus is sparse, it won’t adapt to such high processing levels.

There is a problem with this environment though. It’s well described with this phrase: “can’t see the forest for the trees“. When you are surrounded by the same people and work on the same things, you can’t see the big picture and that can be very dangerous. That’s probably one of the worst characteristics of Silicon Valley. You always need to stay in touch with people from different places to avoid loosing the “big picture eye”.

I don’t want to make this post about how Silicon Valley is the greatest place in the world because it’s not. I just wanted to analyze the power of synergies and how the moment something gets democratized it diminishes the power of synergies. And that’s another problem with synergies. They withhold an incredible power, but at the same time they are very hard to obtain. You need just the right environment and that’s not always possible. For example, some centuries ago, University was something exclusive. It gather the best of the best. It was the center of all enlightenment and so it promoted synergies. Everyone that went to University (generally speaking) was there because they wanted to learn (and because they where wealthy also).

At some point, University was democratized (in Europe) and many people that couldn’t afford it where suddenly able media_20543_en.jpgto study and obtain a higher education. This was something incredible, as it promoted literacy in many places, but strikingly it had some secondary effects. This democratization rendered the high intellects apart, diminishing the power of previous synergies. The more mainstream something becomes, the more difficult is to build synergies. This is because in a big group of people, the norm is that most of them don’t care about learning. I say this last phrase with great grief as I would wish it could be the other way round. Nevertheless, when most of your environment thinks like that, it’s much harder to find brilliant people as they are scattered all over the place. Again, don’t get me wrong about this issue, I’m not defending the elite schools or Universities either.

In conclusion, getting the right balance between elitism and mainstream and being able to maintain a reasonable number of synergies can be a very tough quest. So, have you ever been part of a synergy with someone? What are your experiences?

Image credits: pburch.net, rijksmuseum.nl, gla.ac.uk

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