John Doerr's Startup advice!

• Interviewer: Let's say you're advising a 28-year-old engineer or marketer who's worked at a successful high-tech company for a few years and is moving up the ranks. Then one morning, his pals say, "We're all meeting at the House of Pancakes at 9 p.m. We've got an idea for a startup. Do you want to come?" Should he go?
• [original article, Fast Company, check source below. Michael S. Malone (MSMalone@aol.com) is one of Silicon Valley's most influential journalists.]
• John Doerr: Absolutely. Remember, Compaq was conceived at the House of Pancakes. But before throwing in with the group, I'd advise the 28-year-old to think carefully about the business opportunity, the markets, and the technology. And think hardest about the team.
• Interviewer: Why the team? Doesn't the best technology and product win?
• John Doerr: In the world today, there's plenty of technology, plenty of entrepreneurs, plenty of money, plenty of venture capital. What's in short supply is great teams. Your biggest challenge will be building a great team. There's enormous change underway in every facet of the world. Some is technology driven, some is market driven. All that change creates unprecedented opportunity. But to take full advantage of those opportunities, focus on the team. Teams win.
• Interviewer: So our 28-year-old goes to the startup meeting. It's now midnight, and they're on their 11th cup of coffee. Looking around that table, what does this person need to consider?
• John Doerr: That's the moment of truth. That's when you ask: "Are these the people I want to be in trouble with for the next 5, 10, 15 years of my life?" Because as you build a new business, one thing's for sure: You will get into trouble.
• Also, measure the members of the group against some hard standards. Are they great at recruiting other talented people? Are they great at selling? In a small company, everybody is selling all the time. Believe me, selling is honorable work -- particularly in a startup, where it's the difference between life and death. And make sure that the group has a sense of humor. You're going to be spending a lot of time living together as a team. Of course, everyone you'll need for a great startup isn't going to be there at that first meeting. Teams always need to grow, to get stronger and better. But be sure to answer the question, "Is this a group I wouldn't mind getting in trouble with?"
• Interviewer: Does it make sense to look around the table and start to identify the skills that the group needs? For example, do you start listing functions such as marketing, sales, or personnel that you need to go after?
• John Doerr: That's one way to do it. Often the founders at the House of Pancakes all come from the same department, usually engineering. They're expert in their own world. But frequently their world is all they know.
• But you might think about it differently. For instance, when you're putting your team together, look for really smart people. It's fundamental. When you get exceptionally smart people on your team, that's a big plus. Besides smart, look for a combination of experience, drive, commitment, and passion. You don't want all experience -- but you also don't want all drive, energy, and passion. Getting that mix right is the difference between ventures that achieve greatness and startups that are merely successful, or worse.
• Interviewer: Let's say the team thinks it's got the right mix. Who writes the business plan?
• John Doerr: Let the most articulate team member lead or edit the writing, because it is a communications piece. But don't obsess over the plan. The better plans we've seen are the shorter ones -- often 30 pages, but sometimes just 3. The Intel business plan was one page. The Sun business plan was three pages. What we're looking for in a plan is how that team thinks about its business. We can figure out the rest in conversation with the founders.
• Interviewer: What's the most important part of any business plan?
• John Doerr: I always turn to the biographies of the team first. For me, it's team, team, team. Others might say, people, people, people -- but I'm most interested in the team as a whole - its mix of experience and personalities, its chemistry.
• Interviewer: Of course, once it has a great business plan, our team still has to get it to you. How can the members possibly get your attention?
• John Doerr: Just send an email message to jdoerr@kpcb.com to get my attention. But to really stand out, get a referral from a CEO or vice president we've backed-they're all listed on our web site. Today entrepreneurs are smarter about raising money than ever before. They know there's lots of venture capital around. The really thoughtful entrepreneurs talk to other entrepreneurs before starting the process. I've never met a successful entrepreneur who wouldn't take time out of his or her day to help an aspiring entrepreneur think about a new business. So if you're serious about the venture, invite a successful entrepreneur you admire to lunch.
• Interviewer: Most successful startups have a leader from whom everyone else takes their cues. What do you look for in a leader?
• John Doerr: Great leaders are great communicators. They have incredible integrity: they're usually the first to recognize problems. They're ruthlessly, absolutely intellectually honest. They are great recruiters: They're always building their network of talented people. And they're great sales executives: They're always selling the value proposition of the enterprise.
• Interviewer: When a team comes in to see you, do you look at them and try to identify the leader? And if there isn't one, do you try to recruit one before you work with the team?
• John Doerr: We're always looking for great leaders. But no, we don't need to recruit one before we'll work with a team. Just as important as the leader is the technical genius. At the heart of every great technology company is a technical genius. Apple had its Steve Wozniak, Sun had Andy Bechtolsheim and Bill Joy, Netscape has Marc Andreessen, @Home has Milo Medin. A great marketing company like Intuit has Scott Cook.
• These founding geniuses are the heart and soul that represents the real reason for doing the startup. Its more than, "Lets build a big business and get a lot of stock and make money." The idea is, "Let's do something that's technically excellent. Let's make a difference." Sooner or later as the venture grows we can help the founders find someone like Netscape's Jim Barksdale, Intuit's Bill Campbell, or @Home's Tom Jermoluk.
• Often the founding CEO -- Marimba's Kim Polese, Amazon's Jeff Bezos, or Lightspan's John Kernan -- will go the distance. Which brings us back to the team. The biggest problem you are going to face is attracting and retaining the people that will build your business. You are competing in a world-wide scramble for talent. The very best people in technology and marketing want to work in the best organizations.
• Interviewer: Let's say that our team from the House of Pancakes has contacted you and gotten its chance to make a presentation to you here in the Kleiner Perkins conference room. What are you evaluating?
• John Doerr: The team thinks it's selling us on the technology and the product or service. But actually we're thinking about them -- the team members. We want to understand who they are, how they will work together.
• For example, I'll ask them to sell me their product. I'll ask them to recruit me to join your team. I'll ask practical questions about how they'll live and breathe the business, "If I were on your team, I might qualify to be your vice president of business development, or sales. How will you manage me and the other team members? How will we agree on priorities? How will we measure whether or not we're getting the right job done? What's your instinct about process versus results? How will you stay ahead of competition? What will you do when someone isn't working out?"
• I'm checking your instincts, your navigation system, your values -- the hygiene that's vital to healthy, growing, winning teams.
• Interviewer: You've read the business plan, and you've met with the team. What are the chances you'll invest?
• John Doerr: We receive and read 2,500 plans per year. We meet with at least a hundred teams a year. We invest in about 25.
• Interviewer: So the odds are 100-to-1 against this team?
• John Doerr: No, for those teams that actually make it to the meeting, the odds are maybe 4-to-1. Most of those 2,500 plans that we receive are unsolicited junk, mailed with the same cover letter to as many as 100 venture investors.
• Look, this is not a matter of odds, like a lottery. It's a matter of quality. Here's a key, KPCB has invested in over 250 ventures. In almost every case, the project was referred to the partnership by someone -- a CEO, an engineer, a lawyer, friend, or another venture capitalist -- known to both the founders and our partnership.
• The odds are not against you. In fact, they're with you. There's never been a better time than now to start a new business. America honors, supports, and encourages new business. Not that it's easy. But part of the American dream is building a new business that creates jobs and financial independence.
• Interviewer: How worried does the team need to be about failure? If this startup craters, do their careers go down with it?
• John Doerr: A San Jose State survey found that across the nation, 4 of 5 new businesses fail. But, when backed by professional venture capital within 20 miles of this office, 4 of 5 new ventures succeed. Think of Silicon Valley as an incredibly effective system for getting people, projects and capital together. You can change your job without changing where you park your car.
• Later this morning I have a meeting to wind up a failed venture. Investors put $15 million in four rounds. We're writing off our investment. There were 40 employees. Other companies in our portfolio have already offered jobs to over half the team. The investors are circulating resumes to help all of the employees get great jobs. As long as you work hard with the team and don't lie, the venture industry doesn't penalize failure.
• Interviewer: But realistically, if members of the team already have one failure on their records, is it a deal-killer when they come looking for venture capital?
• John Doerr: It's a caution. I can't remember a team which failed, stayed together, and was backed together in a second venture. Typically the founders regroup into other efforts. In a well-publicized failure, Jerry Kaplan and I lost a ton of money at GO, trying to do something revolutionary in pen computing. Now we're backing Jerry again as the CEO of OnSale, a really hot Web "presence" innovating in online auctions. It's a venture we're thrilled to be involved in. The other founders of GO haven't fared badly either: Mike Homer is vice president marketing at Netscape. Bill Campbell is President and CEO at Intuit. Stratton Sclavos is Verisign's CEO. Randy Komisar ran Lucas Interactive. Robert Carr is Autodesk's chief technology officer. Great people are so hard to find that even if one particular startup fails, you're not tainted for life.
• Interviewer: Let's go back to our startup team in the pancake place. Now at last, we get to the matter of money. They want to do their startup, but at the same time they've got families to feed and bills to pay. Are they all going to have to mortgage their homes to start their company?
• John Doerr: Founders rarely mortgage their homes to finance a venture. We don't ask for it. There's already plenty of stress in starting a new venture. We are, however, seeing lots of Internet companies that bootstrapped their businesses. Guys like Jeff Bezos, the founder of Amazon.com. He was working on Wall Street as a quant, thinking ahead of the Net phenomenon. Jeff thought long and hard about the best possible businesses to build on the Web. He was incredibly systemic, and early. So he was able to self-fund Amazon.com into business with a little seed capital from family and friends.
• Interviewer: So why would Jeff Bezos go to John Doerr?
• John Doerr: Jeff Bezos came to Kleiner Perkins because, in his words, we are a center of gravity in the Internet. Amazon was also pursued by other venture capitalists. We had to compete like crazy for the right to invest in Amazon. Jeff approached us the same way Intuit's Scott Cook did. Jeff said, "I'm not going to publish 30 business plans along Sand Hill Road. No one will pay attention. Instead, I'll work through my network of friends to find the good firms and best fit for Amazon." Bezos figured he could grow without VC money, but would like their help. It's less about capital than it is experience and relationships. So he interviewed and auditioned his venture backers. Adding an investor like Doug Mackenzie or John Doerr to a venture is like hiring a vice president. So he carefully checked references. He talked to entrepreneurs from KPCB ventures that won, and some that failed.
• Entrepreneurs should insist from the beginning that the VCs communicate clearly with them. Their time, and ours, is very valuable. When the first meeting is over the entrepreneur might say, "I'd like a yes or no right now, but I understand you may be more deliberative and will need more than one meeting or one business plan. So what's your level of interest and what's the next step?"
• Frankly, you'd prefer a swift no to a long, drawn-out maybe. Those are death. Unfortunately, few teams ask that. So I volunteer it. It's the only responsible way to handle 2,500 incoming plans and 100 meetings a year. Now, more than before, if KPCB decides not to back a venture, another good firm will.
• Interviewer: And our team at the House of Pancakes? What's their fate? If the team makes it, how many of the original members will be left in few years?
• John Doerr: It needs the passion and commitment to go beyond success - to build a durable enterprise. The best entrepreneurs don't focus on success. They focus on building a company that can be a leader in the global economy. They know success will follow. If you focus on success, you won't get there. If you focus on contribution and customer value, then you can win.