The heady days of venture capitalists funding any idea with a Web presence and IPOs without business plans are long gone, but entrepreneurship existed prior to the Internet and will continue long past when the net becomes a ubiquitous utility like the telephone. Business has changed fundamentally since the dot-com boom even if investing hasn’t. To be successful in the business world today, you absolutely have to incorporate some sort of technology. If you don’t, your competitors will and they will have a lower cost of doing business because of it.
This is the general idea that suffuses Kevin O’Connor’s new book The Map of Innovation: Creating Something Out of Nothing. O’Connor might not be a household name, but he’s started several businesses that have achieved recent notoriety: Flexplay, which makes DVDs that become unusable after a certain period of time, and DoubleClick, which needs no further introduction. This book synthesizes his experiences in conceiving a business idea, soliciting funding, and getting it off the ground. While we may dispute the utility of his business ideas, they have been largely successful. That means that he might have something valuable to say.
I’ve read a lot of books on entrepreneurship in my quest for self-employment. They’re usually divided into two groups: those written prior to the Internet or only cursorily treat its affects and those created during the dot-com frenzy. The former are marginally useful since they offer some guidance on entrepreneurship even though their lack of technical considerations mitigates this usefulness. The latter are completely useless since they typically engage in strident hyperbole and grandiose pronouncements.
The Map of Innovation is different since it was written well after the dot-com hype had subsided. Even though the author built his major business, DoubleClick, during the IPO land grab, the book is remarkably free of the thinking that permeated that period. O’Connor’s focus is to get a business started on fundamental principles like profitability, great employees, and broad vision. And that’s exactly what a business book should target. If it seems obvious, O’Connor recognizes this: “I find that the best business books are obvious. But that isn’t surprising. The fundamentals of what you have to do are so obvious that they almost always get overlooked.”
The book is divided into four parts with an appendix containing DoubleClick’s business plan: 1) coming up with ideas, 2) developing the best idea, 3) getting funding, and 4) hiring great staff. These, unsurprisingly, are the steps that he believes are vital to founding a successful company. Of these, I think that his idea generation chapter is the weakest one of the bunch. This isn’t terribly important, though, since most people reading his book will probably have a few business ideas of their own or can come up with them readily.
My favorite part is dedicated to developing the best idea. It covers how determine the viability of your idea (how to vet it thoroughly) and how to present that idea in a business plan that will attract attention. O’Connor helpfully includes a basic outline for a business plan and then covers each item in considerable detail. I’ve read many books on constructing a business plan, yet I found his explanation to be the clearest and most straightforward one I’ve encountered.
The chapter on obtaining funding for your idea presents a series of solicitations starting with family and friends and ending with venture capital. O’Connor brushes off the problems with venture capitalists like dilution of ownership and the common occurrence of founder expulsion. He does offer some sage advice about how much money to seek and how that money should be spent. In light of his entrepreneurial history, it is unsurprising that he suggests such funding sources. His relations with venture capitalists were positive and he willingly withdrew from the corporate limelight.
Overall, the book is an excellent primer for anyone interested in creating a technology-oriented startup. It won’t provide all of the information necessary for the would-be entrepreneur, but it’s a good start. O’Connor tries to suggest that it would also be useful for new projects in an existing corporation but I don’t buy it. The advice just doesn’t apply as well. The only weak spot of the book is his Brainstorming Prioritization Technique, which is obviously a pet theory of his that he couldn’t bear to pare down. It amounts to brainstorming and then picking only three to six items from the brainstorm. It is painfully obvious and an altogether common idea generation method—and luckily is quickly read. The advice about venture capitalism is easily tempered by also checking out Arnold Kling’s Under the Radar: Starting Your Net Business Without Venture Capital or Philip Greenspun’s experience with venture capitalists.
[UPDATE: More thoughts on startups.]