Since Bill Hewlett joined with Dave Packard in 1939 to create what is today one of the world’s largest computer companies, there has been an evergreen debate as to who is more important in starting a tech company: the techie or the business guy? Steve Jobs or Steve Wozniak? Bill Gates or Steve Ballmer? Jim Clark or Marc Andreessen?
I propose that it is time to reject the notion of the business man or business woman entirely. The underlying problem is that there are really three different components here, and like the classic three-legged school, they are all essential for success, albeit with differing relative economic values. What confuses us is that the components can all reside in one person, or multiple people. And what upsets people is that there are different quantities of those components available in the economic marketplace; and the law of supply and demand is pretty good about consequently assigning a value to them.
Perhaps surprisingly, the components are NOT the traditional coding/business pieces; nor are they even coding / user interface / business / sales, or whatever. Rather, here is the way I see it, from the perspective of a serial entrepreneur turned serial investor, listed in order of decreasing availability:
1) THE CONCEPT
A business starts with an idea, and while the idea may (and likely will) change over time; it has to be good at some basic level for it to be able to succeed in the long run. How excited am I likely to be when I see a plan for a new generation of buggy whip, or another me-too social network? The basic concept has to make some kind of sense given the technical, market and competitive environment, otherwise nothing else matters. BUT good ideas are NOT hard to find. There are millions of them out there. The key to making one of them into a home-run success brings us to…
2) EXECUTION SKILLS
It is into this one bucket that ALL of the ‘traditional’ pieces fall. This is where you find the superb Rails coder, and the world-class information architect, and the consummate sales guy, and the persuasive business development person, and the brilliant CFO. Each of the functions is crucial, and each is required to bring the good idea to fruition. In our fluid, capitalistic, free-market society, the marketplace is generally very efficient about assigning relative economic value to each of these functional roles, based upon both the direct result of their contribution to the enterprise and their scarcity (or lack thereof) in the job market.
That is why it is not uncommon to see big enterprise sales people making high six figure—or even seven figure—salaries or commissions, while a neophyte coder might be in the low five figure range. Similarly, a crackerjack CTO might be in the mid six figures, but a kid performing inside sales may start at the opposite end of the spectrum. Coding, design, production, sales, finance, operations, marketing, and the like are all execution skills; and without great execution, success will be very hard to come by.
But, as noted, each of these skills is available at a price, and given enough money it is clearly possible to assemble an all-star team in each of the above areas to execute any good idea. That, however, will not be enough. Why? Because it is missing the last, vital leg of the stool, and the one that ultimately—when success does come—will reap the lion’s share of the benefits.
3) THE ENTREPRENEUR
Entrepreneurship is at the core of starting a company, whether tech-based or otherwise. It is not any one of the functional skills above, but rather the combination of vision, passion, leadership, commitment, communication skills, hypomania, fundability, and, above all, willingness to take risks, that brings together all of the forgoing pieces—and creates from them an enterprise that fills a value-producing role in our economy. And because it is this function which is the scarcest of all, it is this function that (adjusting for the cost of capital) ends up with the lion’s share of the money from a successful venture.
It is crucial to note that the entrepreneurial function can be combined into the same package as a techie (Bill Gates), a sales guy (Mark Cuban), a user interface maven (Steve Jobs), or a financial guy (Michael Bloomberg). And that it is the critical piece which ultimately (if things work out) gets the big bucks.
The moral of the story is that, for a successful company, we need to bring together all of the above pieces, realize that whatever functional skill set the entrepreneur starts out with can be augmented with the others, and understand that the lion’s share of the rewards will (after adjusting for the cost of capital), go to the entrepreneurial role, as has happened for hundreds of years.
Article by David S. Rose. Described by BusinessWeek as a “world conquering entrepreneur” and by Forbes as “New York’s Archangel,” David is a former Inc. 500 CEO, serial entrepreneur, and the founder of New York Angels. He is the founder and CEO of Gust, the angel financing platform used by over 50,000 accredited investors in 1,000 angel groups and venture capital funds to collaborate with over 250,000 entrepreneurs in 95 countries.
This article was originally published by Berkonomics
Published: November 13, 2013
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