The New Entrepreneur
February 7, 2005

By Bill Reichert

A new generation of entrepreneurs has emerged from the rubble of the high-tech crash, but if you think we've gone back to "the good old days" of entrepreneurship and venture capital, think again.

California did not invent the entrepreneur, but it certainly shaped the stereotype over the years, from Bob Noyce and the Fairchildren with their Cold War pocket protectors and engineer buzz cuts, to Jobs and Wozniak, shaggy and jean-clad, dropping out and changing the world from their garage, to Page and Brin parlaying a Ph.D. project into billions of dollars. Famous entrepreneurs throughout high tech history are elaborations and variations on the stereotype; Bill Gates, Larry Ellison, and Michael Dell helped created the model of the bold, brash, aggressive, passionate, wildly successful entrepreneur.

As the tech world emerges from its long, painful drought, investors again look to these standards of entrepreneurship. Gone are the "tourists," as one VC disparagingly called the dot-com generation. Back are the "old-fashioned entrepreneurs," as another VC referred to them: the gritty company-builders who want to create something of lasting value, not just make a quick buck. As my partner Guy Kawasaki puts it, the post-drought generation of risk-averse investors is now more interested in "serial" entrepreneurs who have been there and done that, and are less interested in "cereal" entrepreneurs who are still eating Cap'n Crunch for breakfast.

To be sure, the entrepreneurs starting companies today are not like the ones we saw, and now ridicule, in the late 90s. But they are also not like the ones we saw in the 80s and early 90s. We are not going back to an earlier breed of entrepreneur. If you are an investor looking for the kind of entrepreneur who built companies in the "good old days," you are making a mistake. The innovators who are creating companies today represent a new breed of entrepreneur, a species that can trace its lineage back through each of the species that went before, but which is very different nonetheless.

If you examine the DNA of the New Entrepreneur, you will see many traits that characterize the earlier versions: the desire to do something different, the boldness to follow a different path, and the persistence to follow through in spite of extraordinary obstacles. And you will also see some new traits: The New Entrepreneurs are more battle scarred, less innocent, more realistic, less delusional, more bootstrap-oriented, less dependent on traditional venture capital, more operational, and less IPO-focused. They are less naive and have more business discipline and savvy. This business savvy comes not from getting an M.B.A., but rather from living through the last 10 years and trying to launch new businesses during the dramatic rollercoaster we experienced. The entrepreneurs we see today are, frankly, more capable than they were in the 80s and 90s-and they have to be.

The New Entrepreneur reflects the new requirements for success in the new environment in which companies are being created and grown. First of all, there is no such thing as a lone entrepreneur in a successful high-tech startup. Although individuals become the icons for companies and entrepreneurship, the real story is that every successful company is truly built by a team. This has always been true: Packard had his Hewlett, Gates had his Allen, Jobs had his Wozniak, Yang had his Filo. Today, it is even more true and more necessary.

The entrepreneurial team has expanded along with the core competencies required to launch a company. Just as designing an advanced circuit or developing commercial software has become more complex in the past 20 years, so has starting a high-tech company. In today's environment, it's not enough to have a core technology and a target customer. You have to have the engineering management talent, the product marketing talent, the business development talent, and increasingly, the global talent. Hardly a team comes through our doors these days that does not already have a development activity in place overseas: in Israel, China, India, or even Bulgaria. And at the other end, they have initial customer development underway internationally, not just in the United States.

And so the face of the New Entrepreneur has changed, quite literally. It has always been true that California does an exceptional job of tapping immigrant talent, generally in the product engineering function. Now we have a large and growing pool of multinational talent available to run companies and build global markets, not just develop products. The teams that are starting successful companies these days have a much broader worldview than was common 10 years ago. Increasingly, it's a worldview that includes a female perspective. Women are still a small percentage of entrepreneur teams in high tech, but the percentage is growing.

Today's startup teams also embody deeper science. Another change in the complexion of startup teams is their academic background: teams today are much more likely to include a couple of Ph.D.s and some world-class professors, including a Nobel laureate. This reflects one of the positive evolutions of the last 10 years as the flow between universities and emerging technology companies has increased dramatically. In the old days, academic/industrial relations were much more narrowly focused between large corporations, such as IBM and AT&T's Bell Labs, and the major research institutions. In the 90s, three forces changed the dynamic: the research universities began to understand that cultivating relationships with emerging technology companies could be very productive, the venture capital industry realized that there is potential gold inside the ivy-covered walls, and entrepreneurship became a credible path for Ph.D.s that used to think of commercial activity as beneath them.

These changes in the entrepreneur profile represent an enormous return on our collective investment in the irrational exuberance of the late 90s. As a nation, we have probably spent something close to $500 billion on entrepreneur development over the past 10 years, if you consider the venture capital, corporate capital, and public capital that have been spent on high-tech startups during that period. We tend to focus on the flood of money that was wasted on goofy ideas and flawed business models, but we have not given full respect to the value that investment has created, not just the eBays and Googles of the world, but (more importantly) the experience pool and the knowledge base that has been created, and the propagation of best practices throughout our economy.

Ten years ago, the infrastructure for starting a tech company was highly concentrated in Silicon Valley and Boston. As far as starting a high-tech company was concerned, Southern California might as well have been a foreign country; it was challenging, to say the least. Today, the infrastructure for starting a company and making an investment in Southern California is as robust as it is in Silicon Valley. The same story applies to Seattle, Salt Lake City, and Phoenix, and increasingly, Cambridge, Singapore, Shanghai, and elsewhere in the world.

What does all this mean? It means that we are much better off now. We are poised for an extraordinary era of creativity and entrepreneurship, an era in which entrepreneurial energy and innovation will reach more broadly, more rapidly, and more deeply than in any other era in history. Some will hesitate, and many will fail. All will confront skeptics and naysayers. But the bold will seize this opportunity and create a new generation of successful companies.

Bill Reichert is a Managing Director at Garage Technology Ventures and can be reached by emailing reichert@garage.com.

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