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April 7, 2006
Entrepreneurs and Everest
In some recent talks on startups I have ended up musing more about mountaineering. Why is that? Because there is an interesting parallel problem (and one that has nothing to do with any of the usual cliches about climbing).It goes like this: All too often companies defocus after their first venture round, promptly screwing up so badly that it takes ages to recover, if they ever do. Their mistake: They implicitly treat a Series A financing as a customer milestone, which it assuredly is not.
There is a useful parallel with mountaineering, where the most dangerous time for climbers isn't the ascent, but the descent. A combination of elation and exhaustion -- and general loss of goal focus -- means that more climbers (on a proportional basis) buy it on the way down than the way up. By way of background, consider the following factoids about deaths on Mount Everest between 1980 and the present day:
- Overall death rate: 1.8%The perverse upshot of all of this: One of the most dangerous times in a young company's existence is when it first gets funded.
- Descent death rate: 3.4%
[Source: Huey and Salisbury, Success and Death on Mount Everest, American Alpine Journal, 2003.]
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It's posts like this that has made Infectious Greed one of my favorite stops on the web.
Concise, valuable lessons which are great reminders and can be easily passed along to my team.
Great stuff Paul.
I hadn't noticed Dorrian, but now it has even more meaning, don't you think?
And thanks Chris. I appreciate the kind words.
Great metaphor, Paul. The atmosphere gets kind of thin up on top of some of those Web 2.o mountaintops too, I expect.
Definitely.
I completely agree. In addition, companies - especially the CEO - put so much energy into the financing that they take their eyes off the business for some period of time. Young companies are fragile and - when you get done with the financing, go have a "closing dinner" (totally inappropriate in most cases - it should be called an "opening dinner"), and then get back to work, you realize how incredibly fucked up things have become. Of course, this then leads to a very painful first board meeting post financing.
The metaphor is great - you get to the top and yo feel like you are done, but all you've accomplished is that you've gotten to the top. A mountain climb is usually a roundtrip - you have to get back down. The financing is merely a stop along the climb (usually - at best - a false summit.)
There is an analagous story from sleep research. Not surprisingly people who have gone without sleep tend to have more accidents. Many of those are automobile related. The typical story involves running into a tree only a few miles from home after days and days of minimal sleep. The theory goes that just as they approach home they begin to let the stress etc. go and almost immediately they fall asleep.
The time after milestones, that's the hard part.
There is anothere Everest parallel and this has to do neither with the ascent or decent, it has to do with approaching Everest, ever notice how when you see Everest in the horizon you think that you are approaching, yes its just there, it won't be long until you are right there, you are so close, still not there yet, you still feel so close. In the same way entrepreneurs undertake a huge market/idea/customer and they see the humungous opportunity just there in front of them, they think they are so close, they keep on going forward and still think that Everest is yet so close, all perspective is lost when the final goal is so large no matter how far you are, as you approach you think you uare getting closer and closer, yet you never get there in the time you think it would take you to get there
Seems you hit a deep cord, although not the first time, with this one.
Funny how you can relate this story to many different area of life...
Great post and a worthwhile discussion.
In my mind, venture capital is a nascent, immature industry which has a long way to go by way of systems and efficiency. The way venture financing works in 2006 is a long shot from a proper financing market.
For one thing, VC's should start acting more like hedge fund managers and less like consultants; not to mention - some kind of mystical alchemist-type-oracles. I think, it would be good for everyone if VCs developed clear valuation/decision making guidelines, and had the mindset to quickly say yes/no and get out of the way.
I mean...the mental picture I get when thinking of an A round is something like a badly butchered root canal, and that's not right. Actually, it's pretty ridiculous - when raising money, the whole thing is like a contorted kissing contest where building a good company takes back stage to making a good personal impression on your financier.
It's pretty pathetic, with people getting involved in politics remnant of high school popularity contests.
As a former aspiring mountaineer (Having a daughter changed my thoughts on that), and now as an Entrepreneur and adventurer in the outdoors, I can relate to your post. My current company shunned financing for exactly the reasons in your post and in the comments. The amount of time if would have taken me to do it, and then the complications arising from getting the check and being able to make mistakes because money is in the bank--It just wasn't worth it to me. My advice I give: forget funding, get out there and bootstrap yourself a technology company. Funding is way overrated, and will just mess up you and your company. I've done it both ways, and having no investors is NICE!
Have you ever noticed the name of my blog, Paul? I'll keep this post in mind as we keep climbing.