Chapter 66 Section 1 Winner and loser

In the past fifty years, 30% to 40% of venture capital in the United States has been invested in Silicon Valley, which only occupies 5/10,000 of the country's land area, and has created countless myths in Silicon Valley.Here, a company goes public about every ten days.Among the top 100 companies in the United States, Silicon Valley accounts for 40%, including leading companies in the IT field Hewlett-Packard, Intel, Apple, Sun, Cisco, Yahoo, Google (Google), and now very popular YouTube, Facebook, and biological companies. Gene Technology (Genentech).Of course, the world's largest venture capital firm KPCB, Sequoia Ventures and many large investment companies are also in Silicon Valley.Silicon Valley also has Stanford University and UC Berkeley, the top two universities in the world in the number of top majors.

The climate of Silicon Valley is a Mediterranean climate, which is like spring all year round. It is one of the most livable places in the world.There are only five small regions in the world with such a good climate.At the same time, Silicon Valley is the most culturally diverse area in the world, and it is the area where people of all races get along with each other most harmoniously. Among them, the first and second generation immigrants account for more than half of the population.Thanks to the ingenuity, wisdom, hard work and bravery of people of all nationalities, Silicon Valley has been the fastest growing place in the world for decades.California accounts for one-sixth of the U.S. economy (GDP), most of which comes from Silicon Valley. In 2005, employees of Silicon Valley star Google contributed one-eighth of the state's tax increase.It is no exaggeration to say that Silicon Valley is the most legendary technology capital in the world and has made unparalleled contributions to the development of world technology and economy.

It is precisely because of Silicon Valley's success in the field of technology that it has created countless millionaires and even billionaires.In just a few years, some young people have made inventions and creations that their predecessors have not completed in a lifetime—from integrated circuits, personal microcomputers, Ethernet, Unix operating systems, disk arrays, mice, graphics workstations to web browsers (Web Browser) , relational database, Windows software, Java programming language, all-electric sports car and so on.In return, the wealth they gathered surpassed the accumulation of several generations of some famous families in Europe and America.Half of the top five (six people in total, of which the fifth is tied) on last year's list of the richest people in the United States came from Silicon Valley.Many people talk about the mansions in Beverly Hills, Hollywood, but in terms of scale and value, they are nothing compared to the mansions in Atherton next to Silicon Valley.

Countless books, newspapers, television, and today's Internet tell a story about Silicon Valley: "Two or three dropout college students (preferably Stanford) even inadvertently invent a What the hell, a few (brainless) venture capitalists came and gave them millions of dollars. Two years later, the burnmoney.com company started by these young people went public, and Wall Street Overjoyed, regardless of whether it was profitable or not, it tripled its stock price on the same day. These founders became billionaires overnight, and the employees who followed them to drink soup also became millionaires. Rich people. Next, they built million-dollar mansions and drove Porsches and even Ferraris. Everyone built a building for their alma mater, so the buildings of Zhang San Li Si Wang Wu are everywhere.” I can’t say This kind of publicity never happened.In fact, it has happened more than once, but the probability of this kind is not much greater than the probability of winning the lottery jackpot, but it is definitely much smaller than the probability of being hit by a car. (In fact, the number of people who died in traffic accidents in the world is as high as 1.2 million, but there are not so many people who make a fortune by starting a business.) In Silicon Valley, people who catch up with the above-mentioned opportunities are said to have won the "Silicon Valley Mark Six". (Silicon Valley Lottery) lucky winner.Although the possibility of things happening is very small, the power of role models is infinite, and the news effect of such stories is great.The media and Wall Street are happy to create legends and companies.Twenty or thirty years ago, the idol of young people was Jobs, and later Jim Clark of Netscape and Jerry Yang and Filo of Yahoo.This decade was Google's Page and Brin, and later may be Facebook's Marc Zuckerberg.The legends of these successful people have ignited the dream of starting a business in the hearts of young people, just as Hollywood stars have brought countless boys and girls their star dreams.That's exactly what venture capitalists and Wall Street want.Only when more and more people join this entrepreneurial game can investors have good project investment.

Around me, there are many young people who are looking forward to entrepreneurial success and are fearless.They are energetic and smart.For various reasons, I often need to listen carefully to their business plans.Frankly, I pour cold water on these people who indulge in entrepreneurial dreams more than encouragement.Although I know they need more encouragement, but in the environment of Silicon Valley, they have received countless encouragements.Therefore, I feel that unnecessary politeness and insincere encouragement may make them more smug, so that they not only lose everything, but also lose the conditions on which they depended.After all, the competition in Silicon Valley is too brutal and the chances of success are too low.I sometimes jokingly say, "If you don't believe that you will be killed by a car in this life, why do you believe that you will win the Silicon Valley prize? The latter is less likely." They will jokingly say, "Maybe you are blinded by money."

We might as well look at the possibility of entrepreneurial success.According to statistics, even in 2000, the peak of the dot-com bubble and the easiest time to start a business, only 2 to 3 percent of small start-ups (Startups) eventually succeeded or were listed or acquired.Most of them died young, and these entrepreneurs became unknown.People have always only remembered the names of heroes.After the Internet bubble burst, I interviewed many entrepreneurs at Google (they have a nice name called the founder of such and such a company), and there are many of them who are very smart, have solid professional knowledge, and are very motivated. Ensure that they can become successful entrepreneurs.However, many of them are not suitable for entrepreneurship.

For a small company to succeed, there are many factors that must be present at the same time. (1) First of all, the founder is very important.No dreamer is enough to be successful, because all successful people are doers.Anyone who has read it knows that there are two types of smart people in the book, one is leaders like Cao Cao and Sima Yi, and the other is advisers with ideas, such as Guo Jia and Zhuge Liang.What the company needs is the former type of people.Entrepreneurs also have to be a lot of energy, because they have to be able to survive a few years of working 16-20 hours a day in a humble garage.They also have to be generalists because they have to do all the dirty work in the early days of the startup.Dr. Mike Cohen, the co-founder of the well-known voice technology company Nuance, told me that starting a business is a very troublesome thing. In the early stages of starting a company, you have to do chores as small as installing a fax machine .A successful entrepreneur must have a small but fine team, in which everyone has to care about personal gains and losses, and share the joys and sorrows. Otherwise, success will be achieved, and failure will be blamed on each other.Technically, they must have their own diamonds, and their skills must not be easily learned and imitated by others.If you see that Yahoo is making money and start building a website, you are basically sure to fail.

(2) But it is not enough to have a good team and technology. They have business acumen and must find a profitable business model (Business Model). The success of Ebay and Google is very important because they found a good business model very early.But finding a good business model is sometimes harder than inventing a technology, and even the most experienced venture capital experts often stumble on this.KPCB, the king of venture capital who has successfully invested in companies such as Google, Sun, and Ebay, also wasted tens of millions on a cool product "Segway" that has no market prospects. (I will explain why Segway has no way out in a later chapter.) The reason why I have not been optimistic about Web2.0 is that they do not have a good business model so far.

(iii) The next step is judgment and execution.Usually, it is not difficult to start a company, but it is not easy to grow it from small to large and make it profitable.In this process, there are many roads to go, and it is inevitable to encounter countless forks. Any wrong choice may make the originally good company fail to operate and close down, because small companies cannot fight against big companies. Any mistakes.Execution is the factor that ensures that the correct decision can be realized in the end.Judgment and execution come largely from experience.It is not easy for young entrepreneurs to have extraordinary judgment and execution ability. In order to ensure the success of a well-started company, venture capitalists generally seek a professional CEO for the company while investing. This is the purpose.

(iv) It is not easy to truly meet these conditions.The success of a start-up company largely depends on whether the external environment is good or not. Many promising companies will die with the recession of the economic environment because of the wrong timing of their establishment.For example, companies established in 2000 rarely succeed.In this way, there are very few companies that can survive. (5) Finally, and most importantly, entrepreneurs must have good luck.Dr. Ke Yan, co-founder of Netscreen, the world's largest firewall company, told me that the key to entrepreneurial success is luck.

When a small company is successfully listed, the stock can only rise by 2 to 3%.The stock prices of most companies are mediocre after listing, or even lower than the listing price (that is, the original stock price often referred to in China).Leaving aside, let’s just say that the current prices of Vimicro and Spreadtrum, two very good semiconductor companies listed in the United States in China in the past two years, are less than half of what they were when they were listed.Even Black Stone, the largest private equity company in the world, has a share price half that of when it was listed half a year after its listing (in the words of Chinese investors, it is called falling below the issue price).What is even worse is that shortly after listing, the company has to be delisted or bought by private equity funds because it cannot continue to make profits or fail to meet the expected profits.For example, Seagate, a well-known hard drive manufacturer, and Orbitz.com, the largest online travel agency in the United States.In fact, NetEase, which is now in full swing in China, was once ordered to be delisted by Nasdaq.According to the regulations of the US Securities Regulatory Commission, after a company goes public, the shares of employees (including the founder himself) can only be sold after 180 days.Therefore, 180 days after a company goes public, its stock price will plummet, because employees can sell stocks, making the company's stock supply likely to exceed demand.Therefore, after all, there are very few people who make a lot of money through the success of entrepreneurship. The process of starting a business itself is unusually difficult.Even if it succeeds in the end, looking back, there are constant dangers.A very successful entrepreneur told us that he and his partner started their own company after earning a lot of money in the previous company.Soon, the millions of savings of the two were burned. They were so difficult that they used credit cards to buy equipment and barely paid the interest on the credit cards every month.Their luck was very good. At this time, they found venture capital and raised tens of millions of dollars. However, it was almost burned out in just one year.Fortunately, at that time, two monopolistic multinational companies competed with each other at any cost, which made them very profitable, and they were able to be acquired by one of them at a very good price (more than one billion US dollars).But, in retrospect, there was a fine line between success and failure. Silicon Valley brings together 30% to 40% of venture capital in the United States. Every day in Silicon Valley, hundreds of companies are established, but at the same time, hundreds of companies are closed.For those companies that fail, no one cares, or even knows they exist.Even many once brilliant companies, like Netscape and SGI, people quickly forget about them.Among these thousands of Silicon Valley companies, some legendary stories like Cisco and Google were finally created.It seems that starting a company in Silicon Valley can become one.Don't you know that once the success is over, countless failed companies are the denominator for the few successful ones. The above questions are what every technology entrepreneur must seriously consider before deciding to resign or drop out of school to start a business.