Mark Zuckerberg interviewed on 60 Minutes

Leslie Stahl interviews 23-year-old Mark Zuckerberg on 60 Minutes.

Facebook’s “Toddler CEO” is grilled about his age, the Beacon PR disaster and going public.

[The Gateway II — extended version] Team Talk

Last week we discussed idea generation and evolution. Here we’re assuming that you’ve got an idea, developed it into a planned product or service and you are now working out who else you need to work with to help turn your dream into reality.

First of all, you probably need co-founders. A quick analysis of all the recent success stories points to 2 or 3 being the optimal number. For example, Bill Gates had Paul Allen at Microsoft [current team of CEO Steve Ballmer and Chairman Bill Gates above left] , Larry Page has Sergey Brin at Google and Mark Zuckerberg initially had Andrew McCollum and Dustin Moskovitz at Facebook.

Setting up a business on your own occasionally works e.g. Jeff Bezos with Amazon, but the process of bouncing ideas around just isn’t possible in the same way. Finally, if the core team start off as 4 or more, people often end up dropping out due to having differing expectations or effectively becoming a ‘spare part’ due to there being an overlap of skills within the team.

A good way to improve your understanding of these sort of relationships is by reading Founders at Work (by Jessica Livingston, Partner, Y Combinator) – a collection of 32 candid interviews about the early days with founders from the likes of Apple, Hotmail, Yahoo!, PayPal and Firefox.

Having read the book myself, it seems that a common pattern emerges – complimentary skill sets. Guy Kawasaki (Author, The Art of the Start) explained the dynamic well at the annual TiE conference in 2006:

“If you’re a great engineer, you need to find a great marketer. If you’ve got a great engineer and a great marketer, then maybe you need to find someone who’s good at operations. If you’re a youthful young visionary, then you need to find adult supervision.”

OK. The last sentence is slightly tongue in cheek, but the point is clear enough and you can draw upon analogies from any number of sporting teams. However, it’s not necessarily essential to cover every single base of skills in the initial team. You’ll learn and develop skills on the job. For example, with GroupSpaces I started off having done a couple of banking internships and an alumni fundraising campaign which furnished me with reasonable finance and sales skills; and my co-founder Andy Young started off with several years of Web development under his belt. After working together for a couple of years, Andy’s developed into a top graphic designer and my understanding of management, marketing and corporate law has developed tremendously. That’s now resulted in us having pretty much all the bases covered

The other thing to bear in mind is quality. You need to “Keep the A-team the A-team”. In the speech mentioned above, Kawasaki also touched on the rationale behind this saying:

“A-team players hire A-team players, B-team players hire C-team players, C-team players hire D-team players and if that happens, before you know it, you’ve got Zee-team players.”

And finally, remember – lots of people have exciting ideas, but they’re worthless without good execution– it doesn’t matter how fantastic your idea is if you don’t have a sufficiently talented team to make it happen.

I’ve got a team, who else do I need?

Find the right mentors. For any first time entrepreneur, this is absolutely crucial. Unfortunately entrepreneurship isn’t something you can learn by studying, you learn by doing. I remember a Harvard MBA saying something particularly memorable to me while we were having dinner at Smollensky’s in Oxford last August:

“Business is a trade; you learn with an apprenticeship and you improve by practicing.”

Where this school of thought derives from is mistakes. You learn about how to start a business by trying stuff out and making mistakes. Gradually you realise what works and what doesn’t and this is called “experience”. This is where the mentor comes in particularly useful. Any good mentor will have lots of experience and can hopefully share the lessons from many of the mistakes which they themselves have made in the past so that you don’t have to make them yourself.

The PayPal Mafia are a prime example of the benefit which good mentors have. PayPal’s original CEO Peter Thiel invested $500,000 in Facebook when Zuckerberg went to meet him in June 2004, 5 months after they launched the website. Having already taken PayPal from zero to a $1.5bn sale to eBay in 2002, Thiel clearly knew his way around Internet business. Now that Facebook has over 50 million users and has been valued at 10 times this figure ($15bn) with 23-year old Zuckerberg and Thiel still composing 2 members of the 3-man board, most would credit Thiel’s guidance significantly.

Further evidence of the value of mentors and experience is provided when one realises that of the original PayPal team, Reid Hoffman (former Executive VP, Business Development) founded LinkedIn, Chad Hurley and Steve Chen (former developers) founded YouTube, Max Levchin (former CTO) set up Yelp and then Slide, and David Sacks (former COO) has recently started Geni. With a combined valuation in excess of $5bn, it’s not hard to see the value in sharing lessons learnt in setting up particular types of business.

At a more mundane level, it can make a big difference having someone with experience to call on when you want to incorporate a company, draft a shareholders’ agreement or even just write important letters.

My idea needs money to make it happen. Where do I go?

1. You’ve probably heard of Venture Capital. VCs (Venture Capitalists) give entrepreneurs cash in exchange for shares in their company. Generally, Venture Capital investments are £500,000+ and firms often don’t want to invest less than £1M in companies for their portfolio. In the UK, VCs tend to only invest in proven concepts; now this could be the entrepreneur running the company (i.e. he/she’s been successful before) or it could be that the company already has a well-developed product and lots of customers. It takes time to get to this sort of stage and a VC would almost certainly want the entrepreneurs they invest in to work full-time on their company. Therefore, this one’s unlikely to work for you.
2. Angel Investors are affluent individuals who provide capital for start-ups and they typically invest their own funds. This is in contrast to VCs, who invest the pooled money of others via a professionally managed fund. Investments of £50,000-£500,000 are typical angel territory, and like VCs, they probably want shares in your business. Connecting early-stage companies and angel investors can be difficult outside of personal networks, so angels often get together in “angel networks”. Formed out of a group of angels, these function like a real-time version of Dragon’s Den. Once every couple of months, a few lucky entrepreneurs get to pitch their idea to the network at a presentation and they are subsequently asked questions. Hopefully they end up receiving offers of investment too. Popular angel networks in the UK include London Business Angels (LBA), Oxford Investment Opportunity Network and Oxford Early Investments (OION & OEI) and the Great Eastern Investment Forum (GEIF).
3. Micro seed funding (as oppose to “seed funding” which is synonymous with “angel-level funding”) has been pioneered by Y Combinator (YC) in recent years. It is a biannual scheme with an intensely competitive application process: first, hundreds of entrepreneurs around the world submit answers to 25-30 questions; next, a chosen few teams are interviewed; finally, around 10 receive funding each cycle. For the chosen ones it was well worth running the gauntlet – not only do they receive somewhere between £5,000 – £15,000, but the teams also spend 3 months living in a start-up hub, get the opportunity to meet many successful entrepreneurs and at the end pitch their ideas and products at an Investor Day. In addition to YC which runs in Boston each summer and Silicon Valley each winter, Techstars (Colarado) and Seedcamp (London) have also launched micro seed funds.
4. If all the above options sound like too much hard work or you don’t feel confident of going through the gruelling process necessary to get financed through one of them, you can always resort to the Three “Fs”:

   >> Friends
   >> Family
   >> Fools

   Typically, people in these groups might give you up to £50,000. The great benefit here is that you’re unlikely to have to do lots of legal work agreeing everything and you can work under a more relaxed arrangement

In terms of student entrepreneurs receiving funding, Oxford Entrepreneurs society (OE) seems to be leading the way in the UK. Having spawned 5 companies who have received at least 6 figures of funding since its inception in 2003, they are developing a reputation for deal flow. As Thomas F. A. Whitfield (Founder, Miomi.com) said:

“Entrepreneurs build companies; OE builds entrepreneurs.”

And with highly motivated alumni such as Sumon Sadhu (currently on Y Combinator in Silicon Valley) graduating and setting up Imperial Entrepreneurs in 2006, the future looks bright. Today – LSE, KCL, Warwick, Bristol, Bath and a growing number of other universities also have societies using similar models. So if you’re looking to raise some money to help make your idea happen, the entrepreneurship society at your university should be one of your first ports of call.

Now you’ve got an idea, you’ve worked out what product or service you’re going to provide, you’ve formed an initial team, got your mentor(s) in place and hopefully raised a little bit of start-up capital. Surely this is great news? But wait. Don’t you still have a degree to do?

Coming up next week: How do I balance my degree with my business?

You can view the original version of this article on page 8 of this week’s edition of The Gateway.

Facebook Co-Founder Andrew McCollum speaks in Oxford

 

Andrew McCollum

At 6.15pm on Monday this week, Andrew McCollum, Co-Founder of Facebook spoke at the Said Business School in Oxford. Afterwards, I had the honour of meeting him along with Andy Young and some other Oxford students.

Andrew first introduced the genesis of Facebook referring to 3 founding members: Mark Zuckerberg, Dustin Moskovitz and Andrew McCollum. In Andrew’s words:

“Mark was the high-level thinker, Dustin did operations – stuff like looking after the servers and communicating with the users, while I did all the graphics for the first version of the site, lots of backend development and also built up a reputation as ‘the solver of hard problems’.”

The majority of Andrew’s talk focused on product strategy. With Friendster and plenty of other social networks already up and running when thefacebook.com was launched on 4th February 2004, many people have wondered what led to Facebook’s ridiculous penetration of well over 50 million people’s lives. Andrew explained that it came down to what is called the “social graph” – a notional graph of everyone in the world where each node is a person and each edge is a connection between two people. By trying to simulate pre-existing relationships and interactions in the offline world, they were making it easier for users to carry out tasks they wanted to do anyway – except it was more efficient and easier on Facebook.

Another key to Facebook’s success in the early days was that they only implemented what Andrew described as “everybody features”. Things like profiles, private messaging, the wall, photos, groups and events. Despite receiving many requests from people to implement them earlier, features like videos and notes (a.k.a. blogs) were deferred because they wouldn’t have been used by a particularly high proportion of users. They were trying to keep the user interface as clean and intuitive as possible for everyone.

However, Facebook don’t always mollycoddle users. Their implementation of the News Feed on 5^th September 2006 is a good example of this. Product managed by Ruchi Sanghvi, release of this feature totally disrupted the user experience for everyone on Facebook and within two days the backlash from users led to over 1 million people joining groups in rebellion. This even included one entitled “Ruchi is the devil” – an issue Mark clarified in his first apologetic blog post in response to users. But Facebook didn’t remove the feature, they improved the privacy settings, stood their ground, and today most users probably regard the News Feed as one of the most useful features on the site. I certainly do.

The point Andrew illustrated when he talked about this was that you need to push users in the direction you know they want to go in – even if they don’t yet know it themselves. Why? Because it will ultimately lead to a better product.

The final part of Andrew’s talk I’ll mention is about the key form of virality – word of mouth. He said the correlation between:

• success of a web application, and
• probability of a user telling a potential user about the application

is close to 1. And what is it that will cause someone to tell someone else about a website? A compelling experience. Whether this is using a feature that makes your life so much easier, or even being bitten by the zombie reincarnation of some guy you went to primary school with, working out how to provide compelling, emotive experiences is the key challenge for anyone looking to build a viral Web application. It’s something that Andy and I have recently been focusing on with GroupSpaces, and we’re just beginning to see some results from our e-mail newsletter feature.