Yahoo almost bought Facebook for $1bln. “By the end of the conversation, Zuck was at least open to exploring a sale, which was all Peter asked. Then a few days later, Yahoo!’s stock feel by 20 percent, and it tried to discount the deal. That was it. No sale. Ultimately they were wise to hold out. Yahoo! had blown it, much like it blew the chance to buy Google for some $3 billion back before its IPO.”
Digg proved the haters wrong. “A few years earlier, tech news site CNET balked at adding “Digg This” buttons to the end of their stories. “We don’t do things like that,” they condescendingly told Kevin. By 2006, they were begging for buttons — along with The New York Times, The Washington Post, and others.”
Innovation is destructive. “From 1896 to 1930 there were more than 1,800 American car makers. Three survived.”
The right VC mantra. “The Founders Fund. Its ethos grew out of his experience with venture capitalists and was rooted in giving founders better terms and getting out of their way.”
Avoid the lure of venture capital. “But Jay had seen the evils of too much money at Equinix. When start-ups have it, they spend it. Sure, to really build out a big business, an entrepreneur would eventually need venture capital. But he could get pretty far on just a few million, and many could scrape that together from wealthy friends. By the time entrepreneurs really needed VC-level cash, their business would be far enough along that they could name the terms.”
Guerrilla marketing is the best. “Why couldn’t they mobilize into a grassroots army to spread Firefox? It worked. Hundreds of thousands of bloggers added “Download Firefox” buttons to their sites, while thousands of others chipped in for a $250,000 two-page ad in The New York Times. A group of college students in Oregon made a 220-square-foot crop circle out of the Firefox logo. Even the logo itself was designed by a volunteer. As a result, Firefox grabbed 10 percent of worldwide browser market share in about a year.”
Listen to your customers. “There’s no playbook for building a great community. It’s all about listening to the users and knowing when to give in to them and when to stand firm with your vision. Consider Yelp. When Russ and Jeremy first started the site, they never thought people would write reviews. They thought people would use the site to ping their friends and ask them to recommend, say, a good dentist. But then a funny thing happened: young women loved writing reviews and Yelp quickly reacted, redesigning the site so reviews were the dominant theme. Cute funny girls in their late twenties and early thirties brought in lots of guys. Especially when Yelp started getting its community together for offline parties at hip clubs around the city, and all those girls showed up.”
Your users own your company. “News Feed was undeniably a powerful and useful tool even for those who hated it. He didn’t do away with it, but he and his team coded all night to incorporate more tools to turn it off or control what it contained. Still, the company learned a valuable lesson: Facebook wasn’t just their company.”
Being early can kill you. “Just because those companies didn’t work at that time doesn’t mean successors won’t work now,” he says. “Just through the simple virtue of the fact time passed, a market developed.”
Fundraising needs to be fast. “Word gets out that someone is pitching and suddenly he or she has to close the deal quickly or the company seems stale. This is similar to listing a house on a market; you want your deal to have the appearance of being the hot commodity everyone wants. “You smell shopped, and no wants to buy a shopped good,” Max says.”
Two types of companies. “There are two kinds of start-ups in the Valley: those who create and evangelize a totally new type of technology, and those who see what someone else is doing and just do it better. Netscape was an example of the former, changing the way people used the Internet forever, but ultimately taking a drubbing in the browser wars at the hands of Microsoft. Google was an example of the latter, tackling search once everyone thought that AOL and Yahoo! owned it and executing search so much better that it won the market.”
How an acquisition works. “Companies have prolonged acquisition mating dance. The big company calls to “talk about a partnership.” The entrepreneur meets with representatives of the big company. Then some time passes. The big company sends out feelers again, wanting to learn more about the start-up. This back-and-forth continues until finally the subject of an acquisition is formally broached.”
Investors lost money, but companies survived. “In reality, nearly half of the companies funded in 1999 — the peak — were still in business five years later. If the failure rate for high-risk businesses was that low, perhaps not enough companies were started. The problem, he argues, wasn’t the number of businesses that were tried, nor was it the unproven business models. It was simply the huge amount of money that went into each one, money that was mostly wasted.”
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