5 lessons I learned as an entrepreneur

My 4 years with the semiconductor startup that my fellow colleagues at SiS and I launched together remain a core part of my professional experience, despite the fact that most of the engineers with my background would have their eyes more on the Atheros-Qualcomm journey.

As an entrepreneur, I led a core project in R&D that required constant communications with clients of significantly different sizes, from giants like Samsung to small no-name turnkey design houses in Shenzhen. Due to the natural complexity of a semiconductor product I also shouldered a large portion of responsibility in marketing, where I helped identify the marketing strategy and did countless product presentations in Taiwan, Japan, Korea and China. I also got deeply involved in the mass production process, particularly the Quality Assurance part. The system solutions developed with clients also very often involved me at the last minute if something went wrong.

I was less involved in the capital side as we started as a big team (20+ people) like most semiconductor startups and the more senior colleagues shouldered that part of the responsibility naturally. I had of course direct communications with the VC that sponsored us and even was at the center of a minor dispute when the Board decided to sell our baby to a public company. It was a decent exit for early-stage investors, who contributed about $3.3M to start with, but overall I wasn't very satisfied with the way it's handled and therefore quit shortly after the deal was announced.

All the above happened more than 6 years ago. Since then I have gone through many more phases of my career and have rethought about many of the things during my startup phase where we could have done better. Now armed with the finance and MBA training as well as the VC working experience, many of the things get clearer and clearer. I hereby provide my list of the 5 lessons I learned from working as an entrepreneur for 4 years:

Lesson 1 — Be very careful with the VC you choose to work with

This seems to go without saying. However, when the business opportunity is right in front of us and all that is missing is cash, it's hard to say no to friendly VCs with briefcases ready.

Within the grand VC-startup eco-system, most of the internal problems — that is, ones not exerted by the market, the industry or the competitors but rather stemming from within in — the No. 1 topic has always been interest alignment. Since information is extremely asymmetric, every party in this game seeks to align interest properly. For VCs, this is an essential part of the game. For entrepreneurs, it's something that one must learn.

In our case, the VC is a foundry VC. At that time process technologies were getting more and more expensive and the foundries became pickier and pickier in granting unproven startups access to their process. Having a foundry VC removed this risk for us, but it created a lot of conflict of interest as the foundry started to exert its influence via the VC, essentially using our talent and resource to complete its own IP portfolio. The precious time to market we lost due to this side business with the foundry was an obvious problem. What was worse was the muddled focus. It took as 1~2 years to (almost) fully get out of the tangled IP licensing businesses with the foundry and focus on our core model. I believe that was one of the main reasons that we weren't able to drive the ball out of the park. Note that in the end the foundry VC hurt itself as well in missing out on potentially much higher return by accommodating to the needs of its mother group. This will always be a main problem with Corporate VCs, as well as for those entrepreneurs who have Corporate VCs as their early, and therefore most influential, investors.

Lesson 2 — Never fool yourself that your competitors won't catch up or don't even exist

Competitors always exist and they will always catch up with you however good you have been. I fully understand the gut-wrenching feeling when rumors told of an earlier-than-expected launch of competing product or services by a rival, after one has spent weeks and months with little sleep to finalize his or her own. But ignoring it or even denouncing it would only make things worse. I admitted that I've had my own shares of silo vision back then. The result wasn't pretty and looking back we missed out on some opportunities to adjust and reposition ourselves for better getting out of the price war launched by notably a Chinese rival.

My VC experiences so far confirm this. The pitches always seem weak if an entrepreneur tells us that there are no competitors IN THE WHOLE WORLD or he/she simply mentioned the big players that probably have something similar in their labs.

For those entrepreneurs that define their competitions too narrowly (and therefore claiming to have no direct competitors), it suggests that they would have trouble pivoting if their own specific offering turns out to be unwanted by the market, which in turn might have been the reasons why no other people had been doing the exact same thing.

For those that mentioned Microsoft or Google as competitors but couldn't identify specific product or project names, it means the entrepreneurs don't really know what market their product offerings serve and could be an issue going forward.

Put it this way, even LinkedIn, now a success and a seemingly prescient idea back in their early days, listed several competitors in their Series B pitch deck to Greylock. Unless you stumble across a real cold fusion, you will always have competitors — in fact, the Strategy professors in an MBA program will tell you the competitors for cold fusion are all other energy providers right now, as energy is commodity and cannot be differentiated from one another other than pricing and stability.

Edit Sep-16-2014:
I found that Reid Hoffman described the problem of entrepreneurs avoiding talking about competition more succintly then I did, therefore I quote him here word by word:

Entrepreneurs often say they have no competition, assuming that’s an impressive claim. But if you claim that you don’t have competition, you either believe the market is completely inefficient or no one else thinks your space is valuable. Both are folly.
— Reid Hoffman


Lesson 3 — Focus on the goal line, not the start line

Our startup broke even in its 1st year of operation. Till this day I can still remember how the VP Sales & Marketing bragged about this "achievement".

Now it seems much clearer to me that it's nothing to brag about and actually should be avoided — if your startup breaks even in its 1st year, it means either it's not an exponential growth market that a venture-type startup should be in, or the business model is not for the long-term success. In our case it's the later — we took certain IP development projects that we already were capable of doing. Those brought in a lot of revenue for a small firm but also diverted resources significantly away from our goal as a startup. Very little of the knowhow gained from those projects translated into the competitive advantages for our eventual business lines. Looking back we really really shouldn't have taken those projects despite the fact that the revenue opportunity represented looked really delicious.


Lesson 4 — Find the best people. Do NOT try to optimize your staffing cost/benefit

You shall always find the best people you could and pay them with the proper salary/incentive packages as you should. More specifically, if there are two candidates that score A- and B+ respectively in the interviews, always try to get the A- guy and don't even bother calculating how you could get B+ one at a cheaper price.

The reason for this is startups are extremely risky, both to you as an entrepreneur and to the people that you're trying to recruit. You want only talented and ambitious partners that have their eyes fixed on the potential upside of the company as you do. Hiring someone just because he's good ENOUGH to do what you want the position to do NOW at a lower price tag will never get you anywhere.

In our case, we have a series of marketers and sales coming in and out. Many of them were under-incentivized and it showed in the results that they quit the moment they sensed the upsides for them were not worth the risk and pain. Such departures are normal attrition in big corporates and would normally not impact the business too much. However, in startups they could sometimes be lethal. Some of them we hired not because they were excellent, but because they were probably cheap enough for the jobs.

Don't do that. You'd rather hire the best and grant him as much options as you could, then to choose the No. 2 thinking you could get more for less.


Lesson 5 — Speed, speed & speed

This again seems like another no-brainer. But as an entrepreneur you will always face the dilemma: shall I spend my hard-raised capital to push the deadline ahead by 1 week or shall I save the money and let the schedule play out?

Most of the time, the answer would be the former. You shall always push for speedy execution if you can afford to. For example, if you're a social networking startup with a distinct offering, you should push for user growth at whatever cost you can afford — paying more for stable and spacious servers, for cloud platforms that could easily accommodate your constant expansion needs, etc. You should not calculate the benefit and cost too much since your whole survival depends on whether you could scale up the user numbers quick enough so that it becomes self-sustaining. If you show the right planning and vision, the VCs will back you up. On the other hand, if you brag about how you've been able to find the best price/performance cloud platform for your services at some sacrifices of the user growths, you can kiss goodbye to the VCs and start looking for a job.

In our case, we worried too much about R&D cost early on despite having lots of cash in the coffers — remember, we raised $3.3M upfront! — It really slowed down some of the progresses and allowed our Chinese competitors to catch up with us. In other words, either you go all in or you don't play the game. It's that simple, this game of startups.



In almost every entrepreneur I interviewed, I was able to identify some weaknesses or problems over which I have reflected on my own entrepreneurship experiences. Most of the time I tried to remind those who came in to pitch about these pitfalls. Some listened attentively. Others got defensive.

My mentor told me multiple times that I should charge them for giving them these advices since they're obviously not ready for investors and would be the only party benefitting from these talks. My principles however remain the same: I learn as much by giving feedback on a startup's pitch, even if it's a bad one, as I do by just listening and analyzing. And since I could often see pieces of myself from the entrepreneur years in them, I really want to help as much as I could, at least within the 1-hr pitch time we give those that are invited to our office.

Occasionally the same startups would come back several months later appearing much more ready. It would then be very possible that the pitch this time would lead to a due diligence and an eventual investment, in addition to the satisfaction that I have enjoyed from obviously having helped some entrepreneurs get better.

An alternative view about competition

More on defensibility