Bossy Know-It-Alls Failing – – the Woes of VCs Turned Entrepreneur

by Larry Chiang on December 12, 2009

Larry Chiang studies other people’s mistakes. If you were a prickly pear, he will document your failures in technicolor detail. Last month, Harvard Business School featured him in an article controversially titled, What They Don’t Teach You At Stanford Business School“. If you liked How Star Fleet Academy is Like An MBA” and Learning to Love the Waitlist“, you’ll love this post: “7 Blunders of VCs Turned Entrepreneur”.


By Larry Chiang

Bossing around an entrepreneur and being one are two totally different things.

Maybe b-school was a little too nurturing but making a successful jump from VC to entrepreneur is really rare. I break down seven cliche mistakes. Yes, they need to be taught in b-school immediately.

Self Celebrational Versus Awe Inspired.

Being smarter than a billionaire you met during b-school’s show-and-tell, does not make you a better entrepreneur. This fundamental fact sinks many want-preneurs.

Many times a visiting billionaire will express more awe of being a room on b-schoolers. Remember, when a smart person and a dumb person are stuck in an elevator, the smart person leaves smarter. True story.

VCs Are Not Able to Dumb Down

DDSS stands for Dumb it Down, Sandbag for Success.

Entrepreneurs are rewarded in finding a simple formula that works versus appearing intelligent to b-school peers. Robert Downey Jr recommends going, “partial retard” in his character from Tropic Thunder.

Look at the Silicon Valley’s biggest hits and see if you can’t identify their partially retarded theme:

“eBay” – concocted a partially retarded backstory of allegedly selling beanie babies and Pez dispensers in the 90s

“Yahoo” – a dumb but cute-funny, pre-orgasmic sound upon discovering a search result on a Stanford server with the same name.

“Google” – please. The site (and campus) still looks like romper room time with Barney.
“Duck9″ – are you effen kidding? The home page is a logo with a dumb riddle.

Too focused on perfect formula vs market pain.

What do you call a mish-mash or under experienced payment executives doing peer-to-peer payments? The payPal founding team.

You can bet, the PayPal mafia (since their $1.5B exit) focused on market pain.

Too cerebral.

They do not pay you to be smart. They do not pay you for researching a silver bullet technology. They pay you to promote. They pay you to raise the $0.02/share stock price by promoting adoption of your technology.

Another trapping of too cerebral-palsyness is knowing too much about too many things. Entrepreneurs hone in like a laser beam. Heck most entrepreneurs do not even know what a credit FICO score is or a credit crisis or have talking points on the impending Obama Presidency [insert pic here]

VCs read coverage and this rss habit needs to be KICKED when you put the CEO hat on.

Too unproductive.

Why are VCs turned entrepreneur lame-duck?! Maybe it is the ex VC’s pedigreed family. Maybe it is the blue blood family money… Maybe criticizing and producing are too different from each other. Maybe consulting and executing are too different from each other.

Also, meetings taken by VCs for your new upstart can not be logged as productivity. Those charity meetings are taken as a hedge because they think you will fail and be a VC again.

Fire the wife. Fire the girlfriend. Your new wife and your new mistress have a new name… and it is called D-u-c-k-9. Or Asse9. Or Buck9. Or elephant9 if you are stealing my URL (yes “Elephant9″ is
registered to a Sand Hill Road squatter).

Too talentless.

Academic talent does not usually translate into entrepreneurial talent — some would argue academic talent NEVER translates into entrepreneurial talent, but then they’ve never met Tom Chiang (dad).

SOLUTION. Re-gear, retool and start sandbagging for success. I mention sand-bagging because it is defined as deliberately misleading someone to think you NEVER did b-school. You can not ramp up entrepreneurial talent while clutching your tier one MBA status.

Too inflexible.

Welcome to beta male-ness. You were an alpha (sort of) back when you were quoting the size of Fund XIX. Live, embrace AND WALLOW in your new tier two status.

Mr. Ex-VC, want an exercise in ego flexibility? Hand out slices of pizza at the next blogger meet-up that WordPress produces. Kiss blogger ass (or Asse9) right near the butt crack.

SOLUTION: sell your condo and go “native”. I own three homes but live in a dorm room on University Avenue… Eff you, because this advice is falling on deaf ears.

Too non promotional.

Sell it. Rarely does something sell itself. I can not repeat this point enough.

Sell it don’t smell it

“The key to sales is to get them to sign on the line which is dotted,” Alec Baldwin in Glengarry Glen Ross.

Too historical.

Majors from the last war that are now Generals understandably fight to re-win lost battles. B-school does something similar to us when we pour over HBS case studies.

So, you are damned if you know history and you’re damned if you don’t know history. But the biggest factor VCs have in not making the jump to entrepreneur is…

Too unable to weather a storm.

Entrepreneurship is 90% bull shitake, so weathering a first storm motivates most exVCs into “cutting their losses”. Get ready for a future storm with my litmus test…

Can you handle a full staff mutiny?
Can you ramp up sales while 70% of your staff is laid off?
Can you buy your assets back in BK court and restart?
Does the thought of that make you cringe?
Can you sell your way out of a wet paper bag?
Can you charm you suppliers and vendors for 2-10 net 90 terms after you
signed docs for net 30?
Can you negotiate your debts with collectors minutes before your Stanford Summit panel?

Most entrepreneurs wither-and-wilt by the third storm they face. Most VCs fold after the first major set back, hit the panic button and then have a yard sale (term stolen from skiing when you lose all your gear in a crash down the mountain). Entrepreneurs live in the panic zone. Most VCs highest form of panic is mixing up the starbucks on Alameda de las Pulgas versus the one by the Safeway on Sand Hill Road.

Stay tuned. When I cover (err crash) Sundance. I’ll cover the four mistakes of actors turned directors and maybe host an after party.

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Larry’s book releases 09-09-09

This post was cranked out in about an hour so email me if you see a spelling or grammatical error(s)… larry@larrychiang com

Larry Chiang is the founder of Deep Underground Credit Knowledge 9 (Duck9). He hacked Fair Isaac’s FICO credit alogorithm and battles lies told by the credit industry such as Fair Isaac’s claim that the average FICO is 720.

Text or call him during office hours 11:11am or 11:11pm PST +/-11 minutes at 650-283-8008. If you email him, be sure to include your cell number in the subject line.

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