I explained to Lenny what I do: I incubate startups. To that end, I provide the scarcest commodity of all, leadership and experience. I help the people build their ideas into successful businesses. Neither an angel nor a consultant, I support entrepreneurs as a kind of junior partner, a full member of the team, an owner and a decision maker, not a hired hand. I invest my time, and, in return, I receive an equity stake in the business. With that stake, I think like a team member, and sink or swim with the founders.
Some people call me a virtual CEO. When Steve Perlman founded WebTV a few years back, I agreed to help him get started, first as an advisor, and then as a member of his board. Gradually I became more active in the business, but I declined to assume a traditional role as an executive in the company. One day in 1996 Steve presented me with business cards that read “Randy Komisar, Virtual CEO, WebTV.”
The title stuck. I started working with a handful of companies at a time. I generally devote myself to each for a year, perhaps two. In that period we should be able to raise money, develop the product or service, identify the market, create a business model, prove out its basic tenets, and hire an operating team. With that team in place, I retreat to an advisory capacity and give more hands-on attention to the next startup.
My specific work in each of the companies depends on the backgrounds of the founders and the particulars of the business. My work is improvisational. Though involved in all the planning and major decision making, I don't play any day-today operating role. On the org chart I'm a bubble around the management team. Startups require frenetic execution and relentless perseverance. My role is to keep my head out of the cyclone and provide insight, direction, and stability. I try to bring to each company the experience I've gained—raising money, setting strategy, building and leading teams, establishing strategic relationships, developing products and services and bringing them to market, doing deals. And I make available to the startup all my contacts in the industry.
Good entrepreneurs are passionate visionaries, usually with one or more exceptional talents, but rarely have they actually built a company from scratch. I fill in the gaps in their experience. The actual CEO is ultimately responsible for all the company decisions. As a Virtual CEO, I simply provide the team with guidance and leadership when necessary. I can be very outspoken, if I fear that we don't have room for a misstep. But the CEO is in charge; I'm there to make him or her successful.
When I advise a startup, the business for me is the founders. It's an expression of their collective vision. As a director of a publicly held company, I accept a fiduciary duty to the investors, but in a privately held startup I don't favor the investors over the founders. This is probably the crucial way my thinking differs from a VC's.
“Lenny, let's be clear on a few points here,” I said. “I need to understand why you're starting Funerals.com in the first place.”
“To prove I can succeed in this startup game,” he said. “And to get rich, why else?”
“OK,” I said, “but what will you do if you make the money? You have to do something, you're too young to clip coupons.”
He shrugged. “There are other things I want to do.”
Ah—the crux of the matter.
“There's nothing wrong,” I said, “with cashing out and making a lot of money—unless those ‘other things’ you intend to get to are what you'd rather be doing all along.”
I pointed at his plan. “My experience tells me if you do this for the money, you'll just end up howling at the moon. The money's never there until it's there. There must be something more, a purpose that will sustain you when things look bleakest. Something worthy of the immense time and energy you will spend on this, even if it fails.”
He began rearranging his files, giving himself busywork, time to think.
“What am I missing?” finally erupted out of him. “Isn't that how it works out here?”
“Lenny, that approach simply isn't interesting to me. I don't have time to invest in merely building bank accounts. I realize as much as the next guy that the average startup will be acquired. By any calculation, there's no call for the number of independent companies that we're creating in the Valley. Many are simply products or services masquerading as companies. I can accept that as the dictate of the market, but I can't muster the energy for a company whose founders never hope to accomplish anything more than making some bucks. By setting your expectations low, you almost guarantee mediocrity.”
The Konditorei had filled with the din of young children. One or two of the kids ran around berserk, their Nordic nannies chasing after them. I spotted an old friend, Sarah, from my time at Apple in the mid-1980s, and got up to give her a hug. She lives nearby with two small children now, married to one of the ex-vice presidents of engineering during the Sculley regime. She loves to ride horses, but the kids seem to occupy all of her time. I only run into her here, at the Konditorei. Whenever I see her quickly growing children I marvel at how much time has passed. Better watch out. I had never planned to grow old in this Valley.
I introduced Sarah to Lenny and then sat back down as she walked to her car, threatening to really get together one of these days.
“You know,” Lenny said, “I have to tell you, I don't get this at all. I thought you'd just say you didn't like the products. Too creepy. Or you didn't like my tie. But this is Silicon Valley. Where you go to get rich.”
Yeah, yeah. The entrepreneur's casino. Everyone knows the score. Get the venture money and return it at rates that make a loan shark misty-eyed.
“I'm not talking about Silicon Valley,” I reminded Lenny. “You asked if I was interested, remember? This is how I look at a business.”
Lenny raised an eyebrow. He must have felt like he'd stumbled into some renegade lodge of Freemasons. He thought he'd learned the secret handshakes, the passwords, the arcane rituals. But what he'd learned obviously wasn't working on me.
“Are you saying I shouldn't be doing this?” he asked accusingly. “You telling me to give up? Is that what you think?”
“Not at all. I never tell anyone to quit,” I said. “I may not want to be involved, or I may think your idea is likely to break your heart and your bank account, but I never say quit.”
“Then I'd like to know your opinion. If we get the money, even if you don't join us, what do you think of our chances?”
“Lenny, your plan calls for raising as much money as possible and then launching your business as soon as possible. You predict an opening in the on-line market for these funerary goods, and you need to fill that hole quickly and completely.”
“Right,” he said. “It's that Internet land rush. If we're going to dominate the market, like you say, we'll have to sprint, even if we start today.”
Lenny's eagerness to charge ahead was laudable. It certainly matched the way the Valley now works. Over the last several years, with more money, more deals, and less attention paid to any single company, a new investment model has taken hold. Fill each startup with rocket fuel as fast as possible and blast it into space. The ones that fly, fly, and if the rest of them blow up, c'est la vie.
“It's not quite that simple,” I quipped.
“What are you saying?” Lenny wanted to know. “We shouldn't move quickly?”
“Lenny, you're selling known products to an existing market. Your competitors—at least your brick-and-mortar competitors—are identifiable. That all says you're probably a Better-Faster-Cheaper startup, and your goal is to unseat the brick-and-mortar incumbents. Your biggest bet is that people will buy these things on-line. A big bet indeed, but there is no brain surgery in it. So the rocket ship model is probably the right one for Funerals.com. You should get on and go as far and as fast as possible.”
“Then what's the problem?”