First, be successful. Success breeds more success in entrepreneurship, according to fresh research at Harvard Business School. First-time entrepreneurs succeed roughly 18 percent of the time, according to the authors, while entrepreneurs who have managed to start a company and take it public succeed 30 percent of the time with their next venture. Serially successful entrepreneurs, the researchers found, are best at picking the right industries and the right times to start businesses. Furqan Nazeeri, chief executive of Viridus, in Arlington, reacted.
Selecting the ideal time to start a company is a skill, not just dumb luck. This is one of the striking conclusions of a newly released working paper by Harvard Business School entrepreneurial finance professor Paul Gompers, et al. Think about that. It means that guys like Mark Cuban were not simply lucky for starting a streaming video company in 1995 and selling it to Yahoo for $6 billion in 1998.
Gompers points out in the working paper that 1983 was the best year ever to start a computer company (52 percent of them eventually went public). Using a large set of data, Gompers' paper, Performance Persistence in Entrepreneurship, supports a few really interesting conclusions, including:
There are many other pearls in this 33-page paper, so I definitely encourage you to read it. For instance, one of my favorite conclusions that Gompers compellingly makes is that venture capitalists do not add value to the companies they invest in. How does he know this? Not surprisingly, the top-tier VC firms are better at picking unknown "star entrepreneurs," but once they've been successful in their first ventures (i.e. their "star" qualities are now public information) then the success of subsequent ventures is unaffected by whether the venture backer is a top-tier firm or a bottom-tier one. Ouch!
A suspension of spending. Last week, Cambridge-based Forrester Research revised its estimate for how much businesses would spend on technology in 2009. The original estimate had been 6.1 percent growth over this year, but Forrester's updated guess is just 1.6 percent growth in budgets for software, hardware, and services. Healy Jones, an associate at Waltham-based Atlas Venture, parsed the numbers.
This shouldn't really come as a surprise, and to be completely honest, I hope that we don't see a decline. Our conversations with [chief information officers] at large corporations, particularly financial services firms, have been pretty downbeat. Most of these executives are under pressure to be very careful with their technology spending next year. Forrester is projecting a 1.6 percent growth in software, hardware and services spend next year, for a total of $573 billion.
The item that worries me the most is that, in a flat spending technology environment, one line item tends to continue to grow and crowd out other spending: services. Technology management is becoming increasingly difficult, and the people costs of keeping systems running and patched/updated keeps getting more and more complex. If a CIO has the mandate to keep spending flat, and if additional employees, consultants and outside services are required to simply keep existing systems running, then new tech spending like software and hardware could actually fall a bit next year. Let's keep our fingers crossed!
Toughness required. Microsoft executive Don Dodge cited a 25-year old book, "Tough Times Never Last," written by the evangelist Robert H. Schuller, for some guidance.
We are all dealing with some tough times now. The expression "tough times never last, but tough people do" brought back memories of earlier tough times and how we found ways to make it through. Since 1980 there have been at least four major recessions . . . and recoveries. In several recent speeches I have reminded the audience that the stock market, and all markets, are driven by two things: fear and greed. Fear drives the market down, and greed drives the market up. When fear takes over, as it has now, the effects are devastating. But remember one thing, fear is temporary, greed is permanent. Greed always overtakes fear.
Start-ups are particularly vulnerable in tough times, since they don't have piles of cash and big lines of credit. However, start-ups have the advantage of being small and nimble. Start-ups can make changes quickly, find new ways to save customers money, and fill needs faster than big companies.
Things will get better eventually - the key is to do whatever is necessary to stay in business long enough to weather the storm. That means finding new ways to save money for your customers.
Be very clear about your "value proposition" and provide real examples of how your product/service can save money.
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