Thursday, June 30, 2005
The World According to Clark
By Michael V. Copeland, April 27, 2005
Every time technology lurches forward and creates huge new opportunities, Jim Clark cashes in. First with Silicon Graphics, then with Netscape and half a dozen other startups, Clark's genius has been to get there just a little bit ahead of the pack with his over-the-horizon thinking and his acute technical skill. That combination has made him a billionaire and afforded him the opportunity to spend his days tuning his megayachts and pondering where the next big thing lurks. Senior writer Michael V. Copeland caught up with Clark, just back from a sailboat race in the Caribbean, to get his thoughts on starting a company today.
WHAT TRAITS SHOULD EVERY GOOD ENTREPRENEUR POSSESS?
Discontent and anxiety. Most entrepreneurs are not content with the way things are. But if they're smart, they are extremely anxious too. Most ideas are going to happen whether you do them or someone else does. It's the person who feels most anxious about it and builds the prototype who is likely to win. The best entrepreneurs tend to move quickly and efficiently. They don't waste a lot of time making decisions.
WHAT IS A STARTUP'S FIRST PRIORITY?
The first thing you need to focus on is cash flow. As soon as you hit cash-flow positive, you are not using cash-you can still be unprofitable, but you are not using cash. The next goal is profitability, which, unlike in the late '90s, is very important today.
WHEN YOU INVEST IN A COMPANY, WHAT ARE YOU LOOKING HARDEST AT?
I am much more inclined to go with the people than the idea. A good team can take an average idea and make a great company, but a bad team can take a great idea and totally screw it up.
DO FOUNDERS MAKE GOOD CEOS?
It's very, very rare that a founder, especially if they come from a technical background, is going to be the appropriate person to be CEO. If you are the founder and the technical person, you must put the company's survival and success ahead of your own ego. Get a good CEO to run the business. At Silicon Graphics, all of us, myself included, would have been better off if I had gotten a CEO involved first, before raising the capital. We would have gotten a much higher valuation because, from a VC's perspective, there is less risk involved with a businessman onboard.
SHOULD YOU START A COMPANY WITH AN EXIT IN MIND, EITHER GETTING ACQUIRED OR GOING PUBLIC?
I think focusing on the exit is the wrong thing to do. The best businesses are created with the objective of building long-term, sustainable businesses-not an exit. They are usually the ones that have a much bigger exit.
WHAT CAN KILL A COMPANY BEFORE IT STARTS?
The reason so few companies are successful is that most people don't have a lot of common sense about what will sell and what won't. You need to be very pragmatic about whether people will pay for a product based on your great idea. You can't just say, "This should be great, and I am sure the world will beat a path to my door." Once you have an idea for a product or service, you need to test the market. Talk to your potential customers about what they want. And don't try to make the product do everything for everyone. Engineers often make this mistake. It's the Swiss Army knife mentality. They want to put everything into it. Don't. Go out and talk to customers as quickly as you can and put a copy of the product in front of them to get their feedback. When we went out to sell our first product at Silicon Graphics, people came back and said, "We don't want that; we want this." We sold them what they wanted.
IS TECHNOLOGY STILL THE THING THAT WILL CREATE THE NEXT CROP OF EARTHSHAKING COMPANIES?
Sometimes a particular confluence of technology occurs that enables huge opportunities like the Web and Netscape. There is a set of things developing now that at some point will lead to similar confluences of technologies and markets that are then ripe for exploitation. I don't know what the next big thing is, but I have no doubt that it's coming.
Every time technology lurches forward and creates huge new opportunities, Jim Clark cashes in. First with Silicon Graphics, then with Netscape and half a dozen other startups, Clark's genius has been to get there just a little bit ahead of the pack with his over-the-horizon thinking and his acute technical skill. That combination has made him a billionaire and afforded him the opportunity to spend his days tuning his megayachts and pondering where the next big thing lurks. Senior writer Michael V. Copeland caught up with Clark, just back from a sailboat race in the Caribbean, to get his thoughts on starting a company today.
WHAT TRAITS SHOULD EVERY GOOD ENTREPRENEUR POSSESS?
Discontent and anxiety. Most entrepreneurs are not content with the way things are. But if they're smart, they are extremely anxious too. Most ideas are going to happen whether you do them or someone else does. It's the person who feels most anxious about it and builds the prototype who is likely to win. The best entrepreneurs tend to move quickly and efficiently. They don't waste a lot of time making decisions.
WHAT IS A STARTUP'S FIRST PRIORITY?
The first thing you need to focus on is cash flow. As soon as you hit cash-flow positive, you are not using cash-you can still be unprofitable, but you are not using cash. The next goal is profitability, which, unlike in the late '90s, is very important today.
WHEN YOU INVEST IN A COMPANY, WHAT ARE YOU LOOKING HARDEST AT?
I am much more inclined to go with the people than the idea. A good team can take an average idea and make a great company, but a bad team can take a great idea and totally screw it up.
DO FOUNDERS MAKE GOOD CEOS?
It's very, very rare that a founder, especially if they come from a technical background, is going to be the appropriate person to be CEO. If you are the founder and the technical person, you must put the company's survival and success ahead of your own ego. Get a good CEO to run the business. At Silicon Graphics, all of us, myself included, would have been better off if I had gotten a CEO involved first, before raising the capital. We would have gotten a much higher valuation because, from a VC's perspective, there is less risk involved with a businessman onboard.
SHOULD YOU START A COMPANY WITH AN EXIT IN MIND, EITHER GETTING ACQUIRED OR GOING PUBLIC?
I think focusing on the exit is the wrong thing to do. The best businesses are created with the objective of building long-term, sustainable businesses-not an exit. They are usually the ones that have a much bigger exit.
WHAT CAN KILL A COMPANY BEFORE IT STARTS?
The reason so few companies are successful is that most people don't have a lot of common sense about what will sell and what won't. You need to be very pragmatic about whether people will pay for a product based on your great idea. You can't just say, "This should be great, and I am sure the world will beat a path to my door." Once you have an idea for a product or service, you need to test the market. Talk to your potential customers about what they want. And don't try to make the product do everything for everyone. Engineers often make this mistake. It's the Swiss Army knife mentality. They want to put everything into it. Don't. Go out and talk to customers as quickly as you can and put a copy of the product in front of them to get their feedback. When we went out to sell our first product at Silicon Graphics, people came back and said, "We don't want that; we want this." We sold them what they wanted.
IS TECHNOLOGY STILL THE THING THAT WILL CREATE THE NEXT CROP OF EARTHSHAKING COMPANIES?
Sometimes a particular confluence of technology occurs that enables huge opportunities like the Web and Netscape. There is a set of things developing now that at some point will lead to similar confluences of technologies and markets that are then ripe for exploitation. I don't know what the next big thing is, but I have no doubt that it's coming.
