Tag Archives: entrepreneurship

Every once in a while, someone leaves a snarky comment on this blog along the lines of “Well, have you ever started your own company?” I usually leave them alone, although occasionally I can’t resist responding. In general, I just think that my experience co-founding one company in one industry does not really qualify me to say anything that knowledge and logic wouldn’t qualify me to say anyway. In particular, having been through the experience, I can say that the amount of luck you need dwarfs any other attributes you bring to the table, so starting a company is not a particularly useful filter.

But now Michael Malone has managed to aggravate me with an op-ed in the Wall Street Journal called “Washington Is Killing Silicon Valley.” And Silicon Valley being one of the parts of our economy I know particularly well, I feel compelled to respond.

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Silicon Valley is often touted as an example of what is best about American capitalism – entrepreneurial, risk-taking, innovative, hard-working, and sometimes fabulously successful. Of course, it is also periodically criticized as a land of con men and get-rich-quick schemes.

Sequoia Capital, perhaps the most venerated VC firm in the Valley, held a “secret meeting” in October to discuss the impact of the credit crisis and economic downturn on the technology industry and startup companies. The slides have been leaked, beginning with a tombstone with the words “R. I. P. Good Times.” (By the way, those of you not from the business world – particularly those with academic backgrounds – may find the presentation amusing for the way it combines large amounts of incommensurate data with an extreme scarcity of verbs, thereby avoiding the need for a coherent argument. My favorite is slide 42. But believe me, this is far better than most business presentations.)

One of the first employees of my company has a much more original and intelligent perspective on what the recession means for Silicon Valley.

If anyone is looking for a silver lining, Michael Fitzgerald has a post called “Bad Times Are Good Times for Entrepreneurs,” and I couldn’t agree more. On September 14, 2001 – at the trough of the technology meltdown, at the beginning of a recession, and on a day when the stock market was not even open because of the 9/11 attacks – I quit my job and co-founded Guidewire Software. It was a great time to start a company for a number of reasons:

• There were talented people looking for new opportunities.
• The ordinary costs of doing business (space, equipment, etc.) were depressed.
• As a private company, you don’t have to worry about quarter-to-quarter performance. Your investors (if you have them) will have a long-term perspective.
• Most importantly, when you first start a company, you aren’t expected to sell anything, so the fact that no one is buying doesn’t matter. Your jobs are to research your market, research your potential customers, design your product, build your product, and (if you need it) raise money. Depending on the industry you are in, all of this can take a couple of years. Even then, if the recession isn’t over yet, you are selling to a small number of early adopters, who will not be making decisions based on the overall state of the economy. It will be even longer before you have the kind of sales volume that is susceptible to changes in the economic cycle.
• This didn’t apply to us, but if there is enough dislocation in the economy, it is bound to create new business opportunities that can be captured by startup companies.

Guidewire today is a leading provider of software to insurance companies with customers in Russia, Brazil, Japan, the United Kingdom, Australia, and New Zealand, in addition to the United States and Canada. Seven years from now there will undoubtedly be dozens or hundreds of successful companies that were started in the wake of the credit crisis.