I had the pleasure this evening of hearing Jerry Kaplan talk to the Silicon Valley Chinese Software Professionals Association on the topic of The Five Biggest Mistakes Entrepreneurs Make. Kaplan, a former co-chairman of Egghead.com, co-founder of Onsale and GO, and author of Startup:A Silicon Valley Adventure, gave a thoroughly entertaining and informative presentation which I’m going to try to summarize here.

The arc of the presentation broke into three main areas, vaguely reminiscent of a scene between John Cusack and Jack Black in High Fidelity: a set of top 5 lists (alright, some of them are more than 5, but who’s counting – consider them “bonus tracks”). Where possible, I have included interesting remarks and anecdotes – the thoughts are Kaplan’s, any transcription or interpretation errors are mine.

Top 5 Mistakes Entrepreneurs Make

• They have unclear goals: If you don’t define your goals, how will you know when you’re successful? The exercise of writing down your goal for your venture focuses your thinking. Kaplan recounted one business venture for which he and his partner defined success as a valuation of $20 million – a fact that they had to recall when their venture reached a $2 billion valuation and they needed to figure out what to do.
• They’re trying to prove they’re smarter than other people: This is the wrong reason to start a entrepreneurial venture – these people have a tendency to lay blame on others, and avoid responsibility for their failures.
• They’re get too greedy: This mistake reflects a tendency by amateur entrepreneurs to hoard equity. There’s a saying in Silicon Valley about equity: “Equity is like manure. If the you pile it all in one place, all you have is a smelly pile of shit. Spread it around, and you create the conditions required to make things to grow.”
• They hire people they like: That’s not to say that you have to hire people you hate, merely that an entrepreneur must avoid hiring the people they like instead of the right people for the job.
• They don’t know when to let go: Company are like babies – when they’re small, they need you and there’s something satisfying about being needed and having to take care of everything for them. But when they’re 13, they just want your money and for you to go away. As the person that starts a company, you need to recognize that starting a company requires a completely different skill set than the one that grows the company to $100 million. Be prepared to let go – and make sure your team is prepared for you to leave.

Top 5 Critical Attitudes Entrepreneurs Need

• The belief that they can make a difference: To overcome the odds against success, an entrepreneur needs to passionately believe in the idea that one person can make a different. And that they are that person.
• Passion for making things happen: The people that make good entrepreneurs can’t help but make things happen. Lots of people have ideas, but if you don’t try, you’ll never succeed.
• Unjustifiable optimism: If you’re going to be turned down by 30 venture capitalists, you’re going to need something to keep you going. Great anecdote: FedEx, early in its development, couldn’t make its payroll and it looked like the company was going to fold – so the head of the company took the remaining money to Las Vegas, bet it all, and won. You have to believe you’re going to succeed.
• High tolerance for uncertainty: You’re not always going to have all the information you need, when you need it. If you wait for all the information, it’ll probably be too late to do anything useful. Deal with it.
• Urgent patience: This is a balancing act between trying to get things done, and realizing that things take time.
• Genuine concern for other people: The only way you’ll succeed is if you actually care about the people you work with – it breeds loyalty, and that breeds success. People love to work for people they know care about them.

Top 5 Critical Skills Entrepreneurs Need

• Leadership: Leadership is a difficult thing to define. When things are going well, you don’t need leadership. But when things are going badly, the ability to get people to come together, make compromises, and move forward is what makes the difference between success and failure. That’s leadership.
• Communication skills: Most people won’t remember what you said five minutes after you said it. You have to keep it simple. Which leads to the next point…
• The ability to make sure people know their jobs: Communication is critical to making sure everyone knows where they fit in the company, what will happen if they aren’t successful in doing their job.
• Know when to make a decision: Amateurs make decisions too early, before they have corrected all of the pertinent information. Perfectionists wait until everything is certain. An entrepreneur needs to learn to live in between those extremes.
• Teamwork: Key to utilizing the people you hired (presumably the right people, right?) is having the sense to delegate tasks, accept their input, and let them get the job done. You can’t do it all yourself.
• The ability to “telescope”: An entrepreneurs needs to be able to “zoom in” to examine the detail in various areas, while maintaining the ability to “zoom out” and take in the big picture.
• The ability to be direct, but polite: At some point, you’re going to have to be able to be polite, but direct. Example: at some point you’re going to have to figure out how to say “Bob, it might be a good idea if you took a shower before you came to work”, but nicer.

Kaplan’s talk kept to a fairly constant theme: there is no cookie cutter to being a successful entrepreneur. The central parameter that determines an entrepreneur’s success is their ability to be honest in their assessment of their own abilities. I especially liked Kaplan’s comment that the personality of a company reflects the personality of the founder(s). Something to think about.