Five Lessons for Entrepreneurs – LinkedIn’s Reid Hoffman
Five key business lessons that could serve to help entrepreneurs and other innovators as they look to the coming decade:
1. Look for disruptive change. As you are about to start a new venture, ask yourself these questions: What is becoming possible or necessary that wasn’t possible before? Is a new product or service able to take over an existing market or create a new market? When I co-founded LinkedIn in 2003, the tech industry was in a deep depression. I looked at all the opportunities created by the Internet and had the idea that eventually everyone would need a professional profile online. This profile would enable them to connect with similar professionals and share news, tips and other information. The development of online professional profiles that people could create and control themselves led to an enormous, disruptive change in the recruiting industry. It provided a way for people to directly reach the best candidates rather than hoping for responses from a listing in the paper.
2. Aim big. Regardless of whether a start-up is targeting a big idea or small one, it will still require the same amount of blood, sweat and tears — so aim big! What is big? It is a new product or service that creates or dominates a significant market. If the market is small or your product is only a marginal improvement over what is already available, you will be taking the same risks but for a much smaller potential gain. I am on the board of a company called Shopkick, which aims to revolutionize retail shopping through a mobile application and incentive program that will enable retailers to attract new and more frequent shoppers. Shopkick founder Cyriac Roeding didn’t think small. He is targeting ALL retail shopping.
3. Build a network to magnify your company. A lot of people seem to think that behind every great start-up is a single entrepreneur with an idea. The reality is, great companies are built by a number of people with talent who are surrounded by supportive networks. Going beyond recruiting exceptional talent, the most successful entrepreneurs bring in advisers, investors and even early customer relationships. Building out this network of alliances massively increases the size and probability of a positive result. Zynga, a global social-gaming company based in San Francisco and founded four years ago, has raised a great deal of capital yet the company’s founder and CEO, Mark Pincus, has yet to use most of it. He raised that money in order to bring in strong board members who could help him build his gaming empire. The capital those investors bring to the table is just insurance.
4. Plan for good and bad luck. Whenever you are about to embark on building a new company you should assume two things: You will have good luck and you will have bad luck. Good luck is not as simple as “it works out.” Rather, good luck is when you suddenly discover a great opportunity and can quickly shift to go after it. Bad luck is what happens when your idea doesn’t work out. It doesn’t mean instant failure, but means you need to go to plan B. PayPal was founded at the turn of this past decade. When we launched the first product, the company still thought of itself as a mobile payments company. We came upon some good luck when we noticed the massive traction and growth from just one week of providing payments for eBay’s marketplace. The company quickly pivoted so that its main focus was powering eBay’s marketplace.
5. Maintain flexible persistence. Very often entrepreneurs are given conflicting advice. They are told, “Be persistent! Stick to your vision! Drive through adversity!” At the same time they are told, “Listen to customer feedback! Pivot on key data! Know when to change!” The challenge for entrepreneurs is to be able to follow both pieces of advice at the same time. In other words, you must know when to maintain flexible persistence. Over the years PayPal has made multiple significant pivots. The company started as a mobile encryption platform. Then it was a mobile payments company. Next PayPal was a combination mobile and Web site payments company. Finally PayPal became an email payments company. Each pivot over the life of the company was the result of rethinking the business but maintaining the vision. The focus was always to become a payments operating system; but the nature of the operating system changed multiple times.
Reid Hoffman is co-founder and chairman at LinkedIn and a Pprtner at Greylock Partners. He is a member of the founding team at PayPal and has been an angel investor and adviser to dozens of organizations including Facebook, Zynga, Flickr and Last.FM. He currently serves on the boards of LinkedIn, Zynga, Shopkick, Kiva.org and Mozilla. His complete profile can be found at http://www.linkedin.com/in/reidhoffman.