“I'm not talking about Silicon Valley,” I reminded Lenny. “You asked if I was interested, remember? This is how I look at a business.”
Lenny raised an eyebrow. He must have felt like he'd stumbled into some renegade lodge of Freemasons. He thought he'd learned the secret handshakes, the passwords, the arcane rituals. But what he'd learned obviously wasn't working on me.
“Are you saying I shouldn't be doing this?” he asked accusingly. “You telling me to give up? Is that what you think?”
“Not at all. I never tell anyone to quit,” I said. “I may not want to be involved, or I may think your idea is likely to break your heart and your bank account, but I never say quit.”
“Then I'd like to know your opinion. If we get the money, even if you don't join us, what do you think of our chances?”
“Lenny, your plan calls for raising as much money as possible and then launching your business as soon as possible. You predict an opening in the on-line market for these funerary goods, and you need to fill that hole quickly and completely.”
“Right,” he said. “It's that Internet land rush. If we're going to dominate the market, like you say, we'll have to sprint, even if we start today.”
Lenny's eagerness to charge ahead was laudable. It certainly matched the way the Valley now works. Over the last several years, with more money, more deals, and less attention paid to any single company, a new investment model has taken hold. Fill each startup with rocket fuel as fast as possible and blast it into space. The ones that fly, fly, and if the rest of them blow up, c'est la vie.
“It's not quite that simple,” I quipped.
“What are you saying?” Lenny wanted to know. “We shouldn't move quickly?”
“Lenny, you're selling known products to an existing market. Your competitors—at least your brick-and-mortar competitors—are identifiable. That all says you're probably a Better-Faster-Cheaper startup, and your goal is to unseat the brick-and-mortar incumbents. Your biggest bet is that people will buy these things on-line. A big bet indeed, but there is no brain surgery in it. So the rocket ship model is probably the right one for Funerals.com. You should get on and go as far and as fast as possible.”
“Then what's the problem?”
I explained that there are two issues. The first faces all Web rocket ships. We're awfully early in this market to be declaring the first-movers the victors. Our perspective is too short, and it colors the lessons we think we're learning. 3D0 was a first mover in the so-called next-generation video game business, yet it was completely overrun by later entrants Sony and Nintendo. And that's just one example I happen to know firsthand. It's not clear that being the first-mover will provide the rash of Internet startups a sustainable competitive advantage. Ultimately being right, or better positioned, may be more important than being first. “Your second hurdle,” I told Lenny, “is that, in spite of all that's known about your products and market, you still face some big unanswered questions.”
As happens with most startups, Lenny's plan raised questions that couldn't be answered until he actually launched Funerals.com. How many people will buy funeral goods on the Web? For goods evoking so many layers of complex emotion, can you do without human contact? What's the market segment that will respond on the Net, and what are the specific products and services those people want? What's the best way to attract customers? How will you work with local funeral homes to ensure a satisfactory experience for customers?
“None of those answers is obvious, Lenny,” I said, “but each answer is crucial to your success. Your rocket may fly in the wrong direction and blow up, or run out of fuel.”
Lenny was skeptical. He had no trouble naming a half dozen rockets that flew just fine.
In fact, the Rocket Ship Model of startup investment has recently produced many of the most prominent Valley successes. But for every one of them, there are many potentially viable companies that might have eventually prospered if they had been incubated longer.
When too much money is pumped too fast into a startup, there's no room for mistakes. The initial product and the initial fix on the market have to be right. There's no way these companies can stop and reconsider what they're doing without a great deal of pain. They lose momentum, and that sense of momentum — in terms of market acceptance, financing opportunities, partnership interest, and the ability to attract talent—is crucial in the Valley. The dreaded “restart”—writing down a company's value and raising new money around a fresh direction for the business—means all the previous work was for naught. Everyone loses, especially the founders. More often the walking wounded are simply sold off for the value of their assets, or scuttled entirely.
Some startups, Brave New World startups especially, need to proceed more gingerly, because there are no precedents to guide them. They need to feel their way for a while, operate by trial and error. In those cases, my approach is different, because my goal is to optimize the company, not maximize a portfolio. Take one of the startups I'm working with right now. It's offering a new kind of marketing and promotion service on the Internet, but how and when the market is going to develop—who knows? A typical VC might have pounded money into this business and forced it to ramp up before it had enough experience with customers and the service to aim properly. My advice? Stay small and remain flexible for the time being, so we can keep close to the market, learn from prospective customers, and afford to take some missteps. You have to be able to survive mistakes in order to learn, and you have to learn in order to create sustainable success. Once the market is understood and the product is fully developed, then move fast and hard. If, on the other hand, we discover with this approach that there's no market after all, we won't have wasted truckloads of money.
“Don't get me wrong, Lenny,” I said. “I'm all for moving fast. There are times when the rocket ship is the right way to go. It may be the right way to go for Funerals.com. I'm only saying it's not necessarily the case. That's an important question for you to confront.”
I looked at my watch and saw it was time to move on. I stood up.
The Konditorei was in its midmorning lull. Only a few real estate agents were coming in to perk up with some caffeine before confronting their first desperate clients of the day. Selling million-dollar teardowns and multimillion-dollar fixer-uppers could take it out of you. Luckily demand far outstrips supply in this market. After the first dozen curb calls, you could usually count on hungry home buyers to knuckle under, feeling thankful for the privilege to bid on condemnable estates. I recognized one of the agents and nodded hello.
“Hey, Komisar,” he said, “I have just the thing for you, a very private, charming Asian-inspired place on the ridge. Terrific view, not even listed yet. I could get you in for a peek.”
“Sam, I have enough to worry about without taking on a new house. I haven't paid for the one I'm in yet. Look around for another ‘motivated’ buyer. You may even have to get out of your chair to sell this one.”
Lenny reached over for the business plan that was still on the table. His hand on the document, he tried one more time. “Why don't you take a copy of the plan. If you have the time, I'd appreciate talking to you about it again.”
I accepted the package, knowing there was almost no chance I would ever get back to it. I hear one hundred plus pitches a year, and I can only commit to a handful.
“I'm not discouraged,” he said as he reassembled his materials. “I've had problems before, and I've solved them.”
“I'm glad to hear that,” I said. I meant it. Lenny had that entrepreneurial spirit. He had the determination and sheer willpower to turn mountainous obstacles into speed bumps.
He reopened his file case and withdrew a thick folder. I read the label: “Business Plans.” It was full of documents, a couple of inches thick. He hefted it, testing its weight.
“I've done six, no, seven versions of the plan,” he said. “Every time I make a presentation and someone asks a question not covered in the plan, I addr
ess it. I'll revise the plan on the plane tonight, improve it.”
A gust of wind whipped the pages open.
“Out of curiosity, Lenny,” I asked, when he had the pages under control, “how'd you pick this idea, funeral goods?”
“It's a huge brick-and-mortar market with a lot of problems. I figured the Internet might offer a chance to take advantage of those problems. Besides, it's a horse race, and all the other horses are slow.” Or dead, I mused. I resisted jokes about the glue factory.
His answer sounded slightly glib.
“You mean you looked around for a good Internet business to start, and this was it?”
He hesitated while he put away the folder. “Let's say I had some, uh, experience with a funeral home.”
He clasped his hands in front of him on the table and looked at them.
“So it's revenge too,” I said.
He considered that for a moment. “I like ‘justice’ better.”
He slid back in his chair and stood up, looking me directly in the eye.
“Pardon a personal question,” he said, “but from what Frank told me, I guess you've done all right. So—if I may— before I leave, let me turn this around. If it's not the money, why do you do this? Why are you still breaking your back around here?”
“That's not an easy answer,” I said, and I tried to explain.
It comes down to my realization over the years that business isn't primarily a financial institution. It's a creative institution. Like painting and sculpting, business can be a venue for personal expression and artistry, at its heart more like a canvas than a spreadsheet. Why? Because business is about change. Nothing stands still. Markets change, products evolve, competitors move into the neighborhood, employees come and go. There's always the “son of Lenny” to threaten all you hold dear.
Business is one of the last remaining social institutions to help us manage and cope with change. The Church is in decline in the developed world, ceding leadership to a materialism of unprecedented proportions. City Hall is subservient to the economic interest of its constituencies. That leaves business. Business, however, has a tendency to become tainted with the greed and aggressiveness that at its best it channels into productivity. Left to its single-minded pseudo-Darwinian devices, it may never deliver the social benefits that the other fading institutions once promised. But, rather than give up on business, I look to it as a way, indirectly, of improving things for many, not just a lucky few. I accept its limitations and look for opportunities to use it positively. In the U.S., the rules of business are like the laws of physics, neither inherently good nor evil, to be applied as you may. You decide whether your business is constructive or destructive. I help people understand this and express themselves in what they do, trying to make a difference through business.
It probably wasn't the answer he expected. He chuckled.
“Creative? Personal expression? Making a difference?” he mused. “Must be nice, but that's not my experience. I can't remember how many ideas I've brought into my company that have gone nowhere. We fight for the bottom line. ‘Beat the numbers. Beat the numbers.’ I've given up. So I play the game, do my job.”
No wonder he was hawking a startup.
“I didn't say every business situation is creative or constructive,” I responded. “I only said business at its heart has the potential for creative expression and positive change.”
He rubbed his hands as if they were cold.
“I really wish that were true,” he said. “But I've never seen it.”
“It took me years to understand it,” I said. “It's not obvious.”
I pulled on my leather jacket. We shook hands. He stood by my bike as I put on my helmet and revved the engine.
He seemed at a loss for what to say. Another frustrating day. No money. His cofounder bailing out.
“I'd like to stay in touch on this, if that's OK?” he asked.
“Send me an e-mail. That's the best way.”
I slowly pulled away from the curb. Lenny and I would probably never see each other again. Nonetheless, I wished the best for him. Another short-timer struggling to do something he hoped would, if it succeeded, clear the way for what he really wanted to do, whatever that was. In my rearview mirror I glimpsed him standing alone at the curb, briefcase in one hand, file case in the other.
Chapter Four
THE
DEFERRED
LIFE PLAN
I ARRIVED BACK HOME LATE that evening after dinner with some old friends at the Iberia, another of my local spots. It was a bit of a “My Dinner with André” gathering. We postulated, between the paella and a few bottles of Spanish wine, on just how high the market could go and wondered whether there would be a bottom if things deteriorated. By my second glass, I was holding forth on the metaphysics of business, the human and social dimensions of commerce. My companions—all variously involved in the Valley as founders, funders, or functionaries—had heard this bit so many times, they just nodded in faint agreement and tried to steer the conversation back to the practicalities of buying low and selling high.
My afternoon had divided neatly into two parts: First back at the Konditorei for another pitch from a group of upstarts proposing to use the Net to improve customer service, retention, and recovery. Then a board meeting at which, depending on how you wanted to look at it, we wrestled with an impending cash crunch or we readied the company for a public offering. What looks like a cloud to one person is a chance to sell umbrellas to the next.
My wife, already off to bed, had left a light on. Debra is a high-powered senior executive at Hewlett-Packard, now one of the Valley's most venerable companies, decades beyond its scrappy start. Tika and Tali, our more-or-less Rhodesian Ridgebacks, shoved their muzzles through the door as I opened it, their tails drumming the wall in unison.
I ditched my boots, poured myself a Calvados, and headed to my office for the final task of the day: clearing phone messages and e-mails. Through the window, the distant lights of San Francisco twinkled like the Milky Way.
* * *
TO: [email protected]
FROM: [email protected]
SUBJECT: Dead or Alive?
Randy, any chance yet to talk to the Funerals.com guy? Unusual idea. Lemme know what you think.
Frank
* * *
A sandy-haired, softening, former fraternity boy out of UCLA, Frank is a genuinely nice guy. But his easy affability hides a fierce competitive streak. On the brink of forty, he's been in the business for more than a decade. He knows as well as anyone that it is important first to evaluate every aspect of a new idea with analytical precision but that, in the end, the decision to fund or move on is a matter of instinct. Frank can apply all the right metrics, but it is his nose that gives him his edge. He has a deep respect for entrepreneurs, coupled with a no-nonsense attitude toward performance. He would pull his support in an instant if he felt a founder wasn't cutting it.
Until Frank's note, though, my morning with Lenny had become a distant memory. Funeral goods. Bacteria. Make it big, then cash out.
I hit “Reply” and tapped out an answer:
* * *
TO: [email protected]
FROM: [email protected]
SUBJECT: Re: Dead or Alive?
We missed you at dinner tonight. All the usual suspects and the usual conversation—denigrating your portfolio and discounting your returns as the blessings of an innocent. I tried to defend you, but it was futile.
As for Funerals.com, the funeral goods market appears to be huge, so it merits some serious consideration. Lenny himself seemed bright, energetic, and driven, and also naïve and inexperienced. He doesn't have a team. His plan is fairly polished but incomplete, and his strategy limited—lots of fundamental issues still to be resolved. All in all, I didn't find anything here of particular interest to me, but you might do some more due diligence because of the market potential.
best
r
* * *<
br />
I looked the note over. I wanted to be honest and fair. Lenny was hard to read. His drive and desire were plain to see, and he had the makings of a good promoter, but something was missing.
Yawning, I hit “Send” and then deleted Frank's e-mail. Case closed.
I worked through the remaining messages one by one— FYIs from some of the companies I work with, a few queries from friends of friends suggesting we meet to discuss new ideas, and one from my sister the accupuncturist in Boston letting me in on a new herbal remedy. Then an e-mail from Lenny. I noted the time; he'd sent it well after midnight in Boston.
* * *
TO: [email protected]
FROM: [email protected]
SUBJECT: Thank You
Randy,
Many thanks for meeting with me this morning. I learned a lot from your reactions, and I revised the Funerals.com plan on the flight home. It's stronger now, with your help.
Thanks.
I hope you'll have a chance to look at the revised business plan I've attached. I incorporated the changes you suggested. It's a huge market, and someone is going to make a killing in it.
Let me know any thoughts about the new plan. I hope you'll reconsider working with us.
Thanks again.
Lenny
The Monk and the Riddle: The Art of Creating a Life While Making a Living Page 6
