“Silicon Valley” and Lessons for Today’s Tech Startups
Nobody is watching HBO’s new hit series “Silicon Valley” more closely than the Valley and the tech community itself. Though my company and I are not officially based in the Valley, it’s hard not to chuckle at the dramatized situations the characters face, infused with developer lingo and geeky humor. We’ve all seen and heard it.
I’m no Peter Gregory (a billionaire VC character on the show), but as CEO of a company that was just acquired, I’d like to humbly think I know a thing or two about navigating the challenging, exciting and often unpredictable tech world. I’m enjoying watching developer-turned-entrepreneur Richard jump through hoops to get his compression algorithm startup Pied Piper off the ground.
Though I must admit that the real tech industry isn’t always so glamorous (sorry to break it to you, but toga parties with performances from Flo Rida and billionaires vying for the algorithm you developed aren’t everyday occurrences), I still can’t help but want to lend Richard and his buddies some advice. Some of the decisions they’ve made have been cringe-worthy, to say the least, but there are some real-world lessons to be learned from the young CEO’s missteps.
Define your vision
The first thing you should do, even before expanding your corporate ranks, is create a technological- and culture-based vision that will guide everything you do. Make it compelling. And whatever you do, don’t define your vision in terms of: “We’re the Airbnb for X,” or “We’re the Spotify of Y.” Richard and his incubator buddy Erlich Bachmann nearly fall into that trap. If your elevator pitch can’t be original, then your product or service might not be, either.
“Today’s user wants access to all of their files from all of their devices instantly. That’s why ‘cloud-based’ is the holy grail. Now, Dropbox is winning. But when it comes to audio and video files, they might as well be called ‘Dripbox.’ Using our platform, Pied Piper users would be able to compress all of their files to the point where they truly can access them instantly. We control the pipe, they just use it. That’s the vision in Richard Hendricks’ head.” — Erlich Bachmann, Senior Minority Owner, Pied Piper
Commit to organizational hygiene
Whether you’re looking for funding, IPO or acquisition, in the midst of financial conversations, your credibility goes through the roof if you have everything in order. Richard knew nothing about business planning, so he did the right thing by bringing in a business-development expert. And it’s not just finances that should be in order. The way you run your business, even down to the code, should be in tip-top shape. This organizational hygiene will show precision and forethought.
The guys at Pied Piper got into a few awkward situations after telling a reporter that their new company would make them billions. Likewise, competitor Hooli released a video about what its own product would do for the world, even as they were still trying to reverse-engineer the algorithm. Be realistic, and don’t put marketing or public roadmap details ahead of where you are. This applies not just to external discussions, but also to conversations with potential partners. You can be optimistic, but it needs to track back to the business.
“If we can make your audio and video files smaller, we can make cancer smaller. And hunger. And AIDS.” — Gavin Belson, CEO, Hooli
Don’t be afraid to tie your small boat to a large boat
Align yourself with someone who can support you and offer the stability needed to grow and go to market. Though Richard made the tough decision to turn down an immediate $10 million payday and buyout for his startup, he may have made a more sound choice in taking less funding from a VC who offered guidance while allowing him to retain majority control of the company. There will always be people or partners in the industry who have more experience in some aspect of running a business than you do. Don’t shy away from pragmatically bringing them into the fold.
Hire general counsel early
Don’t outsource legal advice to a shotgun service like LegalZoom or RocketLawyer — just don’t do it. Many young entrepreneurs also make the mistake of trying to do everything (including legal) themselves, but cutting corners will add up in the long run. Instead of downloading legal paperwork off the Web, hire general counsel and do things right the first time. VCs won’t want to get involved if they see the mess they’ll be getting into. Luckily for Richard, his VC put him in touch with a lawyer from the start.
Hire slow, fire fast
Cultural integrity is key to running a successful company and retaining engineers. Richard should have thought twice and hired the best employees possible, rather than just hiring his friends. I won’t be surprised if his friendships get in the way of smart hiring/firing decisions down the road.
Whether you’re a young entrepreneur looking to fund the launch of your compression-algorithm company or just trying to open your own cheese-themed food truck, “Silicon Valley” and the Pied Piper crew present some perfect learning experiences that can help keep you out of similarly dire situations. Best of luck.
Derek Schoettle, CEO of Cloudant, has more than 15 years of experience bringing new and disruptive technologies to market and achieving commercial success. Prior to Cloudant, he was VP, CME Sales, at Vertica Systems, which was acquired by HP in 2011. Reach him @cloudant.