The title of this blog is a quote from Mike Moritz of Sequoia Capital during a Fireside Chat with Guy Kawasaki of Garage Technologies, Paul Graham of YCombinator and Mike at the Revenue Bootcamp held last July. If your an entrepreneur and haven’t watched the video for this, I encourage you to watch it, as well some of the other sessions from the Bootcamp. They are available online here. I had the opportunity this weekend to watch a number of them and they were quite enlightening and this probably won’t be the last blog article I write that was spurred by them.
Anyhow the discussion was mostly around how Paul, Mike and the VC industry as a whole view the investment process for startups, etc and there was some great insight and advice provided by Mike, Paul and Guy over the course of the session, which I personally found very interesting. About two thirds of the way into the session there was a question about the profile of a typical entrepreneur they were funding and they were asked specifically if it was mostly young grads fresh out of college. Paul answered first, and said that while this was more common, they fund the full age spectrum.
When it came to Mike to answer, he jokingly said as his answer “By age 35, Mozart was dead.” This of course offended most of the older entrepreneurs in the room, and has resulted in this quote being circulated all over twitter and other social media where startups are discussed. Now in Mike’s defense, he then went on to say much as Paul had, that while the young entrepreneur under 35 was more common today, that they have funded firms spanning the spectrum including people who were grandparents. I also personally have no doubt that someone of Mike’s reputation and ability would never let a few grey hairs stop him from investing in a good idea.
Nevertheless, the comment struck a particular cord with me. Not just because, at age 40 and with 25 years of commercial systems development under my belt, I fall into the Dead bucket, but for two other reasons:
- This comment is a complete 180 from the advice and belief of the Venture Capitalists 20 years ago when I launched my first company
- Because I think the comment, although it was in jest, reflects a subtle truth and a bias in the current startup community, which I am not sure I agree with.
So at this point your probably thinking to yourself, why am I reading this? Paul’s a technology geek not a startup expert or VC, etc. He doesn’t know anything about this stuff. Well you might be surprised. In fact, people always think of me as a highly technical person, and I guess I am at that, but to be honest I always tell people I am a business person first who just happens to know a hell of a lot about technology.
To understand why this comment struck me the way it did, it is necessary to provide you with a rare but mind numbingly dull view into the early career of Paul Michaud. In my life I have started and ran one profitable technology company, 2 web sites, and pitched for venture capital for 3 completely different businesses (failed the first, declined the capital the second and missed the window the third time in 2002, but did get job offers to work for some portfolio companies). I have also been on the other side of things in my career in Investment Banking. I have advised on M&A’s, private equity investments, and general stock acquisitions of technology companies for hedge funds, corporate raiders, Wall Street Investment Banks and large asset managers.
Why I Think VC Attitude Has Done A 180
If this was a movie, we would now fade into the memory shot going way back…back…back…
Like most entrepreneurs, I was what you would call a highly driven individual even at an early age. By age 11 I had been invited by the Montreal Canadians to come and play hockey in front of some scouts in the Montreal Forum. By 14, I was quarterback of the football team, captain of the track team and ranked 7th in the country in national mathematics competition (The combination Jock and Nerd made high school, shall we say, interesting). I was also a member of a small Aeronautical Design Team building a prototype amphibious push prop airplane for which I wrote code on DEC PDP-11’s to simulate drag envelopes, stress on spars, etc. By 15, I had been asked by a Canadian Investment Bank to write programs to try and automate what some of their investment managers did manually for trading S&P 500 Equities and Equity Options. I continued to write these types of programs for the next 12 years. At 16, I won first place in all five categories I was entered in at the McMaster University Science and Engineering Competition and was the youngest member of my starting Engineering Class by two years. By age 18, I had dropped out to pursue my first Internet Startup.
So if today’s startups are Web 2.0 companies and the late 90’s was Web 1.0, I guess we could call my first company a Web 0.1 Alpha company, except that when I started it in late 1988, the term World Wide Web and Marc Andreessen’s Netscape were still more than 5 years away. Anyhow, the company was an information brokerage which specialized in providing access to electronic information to investors, banks and senior executives for a wide array of uses. For those who have not heard the term Information Brokerage (which is probably just about everyone) think of a cross between a Yahoo like portal and Google with a lot of manual process in the middle. Even in those days, we had access to 3500 electronic sources of business related data of all kinds, from news to financials, legal, etc. The data was very expensive and was hard to find and access. In 1989, I worked with Charles Schwab to design some of the first information packages ever provided to investors by discount brokerages and learned my first hard business lesson from them about how to get completely screwed if you don’t cover your legal ass. By late 1989, we had gotten some traction and started to pursue funding so that we could accelerate growth.
This is where I am finally getting to why Mike’s comment struck me as a 180 from what VC’s were saying 20 years ago. In 1989 I designed software to allow us to automate searching those 3500 computer systems, so that we could remove the manual intervention in the Information Brokerage business, thus allow us to cut cost and increase volume. Now remember this is still 5 years before Netscape and well before Google or Yahoo were a twinkle in anyone’s eye. In addition we had offers of multi-year contracts on the table from various firms including the predecessor to TD Ameritrade. Armed with this, we went looking for funding …… and failed. Now there were a couple of reasons for that failure, including:
- There was a recession going on in 1990-1992 so timing sucked
- We were a new idea that people didn’t really understand and couldn’t evaluate and we were about 5-6 years too early, so timing sucked again
But more importantly, we got told time and time again by VC’s and bankers to go hire ourselves a 55 year old front man, because no one was ever goin
g to fund a couple of 21 year old kids.
So now, here we are 20 years later and Mike’s comment (and the general view of the industry) would imply that a 55 year old should go get himself a couple of 21 year old’s to front him. It just struck me as ironic, how the world of the startup has changed so dramatically over that time.
Why Mike’s Comment Makes Me Worry About The State Of The Industry
So the irony aside, Mike’s comment also got me thinking about the state of the startup industry, the perceptions of the average VC and what Mike really meant. Lets start with the latter.
What I think Mike really meant by his comment is analogous to a comment I once had from an early mentor (the person who ran that Aeronautical Design Team). He told me once that if I was ever going to accomplish something great in my life, that if I hadn’t accomplished it by age 25, I likely never would. I almost made it.
The reality is, that at a young age, you are usually more driven, more creative, and have new fresh ideas compared to the average Dead person (over 35). That said, this is a general, statistical statement. It is not a hard fast truth. The reality is that while there is a higher percentage of driven, creative, entrepreneurially inclined 25 year olds, there are also many who are just as driven, creative and entrepreneurial in the Dead Zone, just not as many as a percentage. In addition, us Dead people are more hampered by family, commitments and life in general and are often unable to take the plunge into a startup.
I think that is what Mike meant. Not that a talented person with the right idea, drive, creativity, etc in the over 35 bracket couldn’t get funded, but more that it is unlikely that someone in that bracket is going to pitch a great idea (or any idea for that matter) to a VC in the first place. It does happen, but I suspect its more rare.
What concerns me more is the fact that I think Mike’s comment does represent a general bias, that young entrepreneurs are more likely to succeed than others with more life experience, and I am not sure I agree with that. If I looked back at that 18 year old Paul Michaud, what we had then and where I could have taken it. If I knew then what I know now (god I do sound like an old fart don’t I), I truly believe the story would have been very different. For one, I would have changed the business model we were using at the time, bootstrapped the search engine and continued to organically grow the business, instead of getting discouraged and shutting down (we were actually making money but shut down anyhow because we couldn’t grow it the way we wanted to without the capital). Imagine it we would have been there before Google or Yahoo and we were profitable already by 1990.
I guess if I look at myself as representative of those in the Dead Pool, with that entrepreneurial spark (and maybe I’m not typical), I would argue the following:
- If you had the spark at 25, you likely have just as much entrepreneurial passion today as you did years ago, circumstance just might not allow you to act on it
- The experiences, both successes and moreso the failures, have likely made the older entrepreneur a wiser founder than the 25 year old. Maybe a little more cautious, maybe not, but almost always wiser and more street smart.
I could be wrong, but if I was the VC, given two entrepreneurs with equal passion, drive, creativity, technical skills and an equally good idea, I would fund the older entrepreneur almost every time.
I look forward to your comments.
(Guest post by Paul Michaud, Global Executive IT Architect for the Financial Markets sector at IBM. Paul blogs at Techology Musings.)