It's rarely happening.
Five or six years ago, venture capitalists were throwing money at any kid with a high-tech idea. It didn't matter if he had a business plan or even if he knew what one was. The Internet was hot. Dot-com start-ups were even hotter. VCs couldn't get the money out of their pockets fast enough.
But then the dot-com bubble burst. The kid with the cool idea was sent back to school or sent home to live in his parents' basement while he licked his wounds. Start-up after start-up went bust. Latte machines were packed up and the Herman Miller chairs were sold on eBay. The boom was over and the bust was financially devastating -- to the high-tech community and to the country's overall economy.
But as we rapidly close in on 2005, what is happening to the people out there trying to get a start-up off the ground. Many of them are doing it right this time, says Guy Kawasaki, CEO and a founder of Garage Technology Ventures, a VC investment bank for emerging technology companies. Now the author of the new book The Art of the Start, Kawasaki says financial backing is available if the gal with a dream moves beyond the dream and into the business world. Have a business plan? Have a business team already set up? Know who your competitors are and how you're going to distribute this product?
Well, now you're talking.
In this interview with Datamation, Kawasaki, a former Apple Fellow at Apple Computer, Inc., talks about the critical needs for a start-up, building a real business, and if we'll ever see another time like the dot-com boom.
Q: What part of the industry will generate the 'next great thing'?
No one really knows. We didn't know where the next thing was coming from last time, and we didn't see the end of the boom -- or at least we didn't take the appropriate actions. Why should anyone believe us now? The job of a venture capitalist is not to predict the future but to recognize when an entrepreneur has, and sink his teeth into that entrepreneur. Most venture capitalists, frankly, are too old and too rich to create the future.
Q: After the excitement and over-indulgence of the Internet boom, do
you think there will be another great technology boom, or did the dot-com
bust make us all too cynical for it to happen again?
Memories are short, and greed is ever present. There absolutely will be another great technology boom. I just hope it's in my lifetime because this time, I know what to do when there's a bubble.
Q: Why did all those dot-com business fail and what can we learn from
The overall answer is that we, the tech sector, is too hard on ourselves. Sure, lots of dumb companies started and were funded. Mea culpa. I was part of this. But lots of smart companies started too, and they did change the world. Can you imagine a world without the Internet and companies like Amazon, NetFlix, Tivo, eBay and Google? Would you like to go back to electric typewriters while we're at it?
Q: Most of the VC money was pulled away when people saw that so much
of the dot-com craze was smoke and mirrors. Is that kind of abundant
money coming back?
We have gone from a period of irrational exuberance to irrational depression, and now we're swinging back to the middle. However, we still have a slight hangover, so we won't behave like drunken sailors. But all venture capitalists aren't requiring 'proven teams, proven technology and proven traction' to fund deals -- at least, not the venture capitalists with courage. If you want to see a venture capitalist with real courage, look at Sequoia Capital.
Q: When someone gets that great idea for a business or product, what
is critical that they do? What do they generally do wrong?
The list of critical actions feels, at times, endless. However, entrepreneurship is simple: you create something, you sell it, you collect the money. Everything you do has to support three functions. If it doesn't, don't do it.
Q: What do these entrepreneurs need to do to make up for that lack of
Build a real business. -- a business that fills existing needs or creates new needs. But not a business that's built on wishful thinking or the assumption that you can keep raising money until you figure something out. The challenge is that sometimes you only discover you have a real business after the fact. Who really knew 'back then' that millions of people would want to sell their junk on eBay?