Guy Kawasaki
The Gospel According to Guy
April / May 2005
Volume 3 Number 2
Guy Kawasaki is a serial businessman who also happens to be a serial author. Best known as one of the Apple Macintosh computer's earliest evangelists, he is now managing director of Garage Technology Ventures, an early stage venture capital firm for high-tech companies. His newest book, The Art of the Start, debuted in November and it is a swift read about everything you need to know to start a company, a non-profit, or a new division in a large company. The book is laid out in a style that makes for easy reading, driving home big points such as "Make Meaning" in whatever you start, and leaving trivial advice in FAQs, or frequently asked questions at the ends of the 11 chapters. The book is loaded with "Kawasakisms," And even some advice on how to make company T-shirts. He spoke with Dean Takahashi at his home in Atherton, Calif., in the heart of Silicon Valley.
Takahashi: Are you a serial writer or a serial entrepreneur?
Kawasaki: I alternate from one to the other when one gets too hard or too boring. I flip flop.
Q: What gave you the urge to write this book?
A: During the day I'm a venture capitalist. We get pitched hundreds of times a year. Too many entrepreneurs come in and make the same mistakes every time. Pitching, partnering or branding. The mistakes are so consistent. The book was suggested by an editor who knew about the Garage Technology conferences we put on. The goal is to make it easier for them to avoid the common mistakes.
Q: Some of the examples go way back to your days at Apple in the 1980s. How much of your advice is timely, and how much of it is timeless?
A: I drew from the beginning of my career in 1979 all the way up to just a year ago. Mostly my failures. They are a much better teacher than success. In one sense, Apple lost the big battle. Of course, these examples are timeless. An author can only use what he knows. But people may get bored of the Apple examples. I tried to search out current examples too. You buy a book by an author only if they know what they're talking about.
Q: The book uses graphics to deliver big points, and then it zeroes in on supporting comments. It leaves the small advice for the end. Why did you organize it this way?
A: The orientation of the book was I wanted something extremely tactical and how to. The entrepreneur reads the book to learn, not for entertainment. If you read in the book that your pitch should be short, you should know what that means. Some people think that 25 PowerPoint slides is short. I say it's 10 to 12 slides. But what should be on those slides? I tell them what it should say. I leave nothing to chance.
Q: Why are the FAQs there?
A: The FAQs are there because some information doesn't fit in the chapters. But they're important enough to be in a FAQ. The purpose is to take heed of those issues. The parallel is to web sites and the way they are organized.
Q: It's a funny book. Why did you use that style?
A: I'm a WYSIWIG (what you see is what you get) kind of guy. I don't set out to be funny. I would really have to set out to be serious because I'm not naturally that way.
Q: Some of the advice is very specific. Why are you so particular about things like making sure you do your business plan after you do your pitch?
A: What's in the book is what has to be done. Many VCs I know are giving my book out to CEOs of startups. At the end of the day, most VCs will tell you there are nuances. But if enough people came in having read the book, we would all be better off. It's not like Guy is insisting that it has to be 10 to 12 slides for a pitch and that 13 is not OK. The problem is that most entrepreneurs show up with 60 slides for a 45-minute meeting.
Q: What are the common mistakes that entrepreneurs make?
A: The most common mistake we see that is of the greatest danger is that the entrepreneurs do a top-down analysis of their market. They say the market is $50 billion in size and they say I'll be conservative and say we'll get 1 percent of that. It never works out that way. They should do the bottom-up analysis first. Start with how many sales people you can afford. If I can afford to hire five sales people. They can do 10 calls a day. There are 240 working days a year. If they make a sale 5 percent of the time and make so much a sale, the most you can do in a year is $400,000. If you do the math, there is no way you can do 1 percent of $50 billion.
Q: Your company had to scale back from a few years ago.
A: We were caught up in the whole dotcom thing. We never should have used a lower case "g" in our name. It's hard to spell, hard to search for. It doesn't stand out. We assumed the business of funding entrepreneurs would just keep growing and we hired people to take care of that future business. We had to lay people off.
Q: What's the best pitch you've heard recently?
A: BitPass. We funded them. They're selling digital content with micro-payments. One of the best things is that you can immediately use it and understand it.
Q: One of your big ideas at the beginning is that an entrepreneur must make meaning. Explain that.
A: I entertain a naïve believe that you don't start off for a quick flip or a liquidity event. It's not just for profit. This is relevant to guys starting the next Google or those starting a charitable board. You need to make the world a better place. Increase the quality of life. Right a terrible wrong. Prevent the end of something good.
Q: What do you think of startups that get their technology from the government?
A: I can honestly say that a venture capitalist doesn't care how or where a good technology comes from. The government route is a great path. VCs are most concerned about the team. If you have a great pitch, you can find a team. It's hard to know when you have a great team. It's easier to know when you have a great pitch.
Q: I didn't understand one thing in the book. You said on the one hand that you should forget proven teams. But you should hire A players. What does that mean?
A: Say you are starting an online news site. You hire an editor from The Wall Street Journal, Fortune magazine, and the sales force of The New York Times. They're proven. But when they make a sales call and say they are from Takahashi.com, they're just another caller. Because they came from a great company doesn't mean they are great. On the other hand, if you hire someone who is doing the online edition of the Stanford Daily or someone who has been blogging, you've found an A player.
Q: You talk about the bomber analogy when making pitches. Explain that.
A: The B1-B bomber is a smart, expensive airplane that flies 30,000 feet in the air. A Navy Seal is right there on the ground with a knife in his teeth. And the A-10 Warthog bomber flies 1,000 feet off the ground in close support of the troops. With the B1-B bomber pitch, you talk about how the market is going to be $100 billion by 2010. With the Navy Seal pitch, you start talking ones and zeroes, software code, database storage. I don't care about ones and zeroes. The Warthog cares about costs and hitting targets and the troops that you support. It has a clear vision. That's the analogy to making pitches.
Q: You're particular about lawyers.
A: Based on my experience at a large company, they will always say no. I say you put the business needs before the legal needs. Get together with a partner and set the terms of a business deal. Then bring in the lawyers.
Q: What degree of outsourcing do you support?
A: You can always outsource payroll. But should you outsource engineering to India if you are a startup? I think for version 1.0 of a product, the answer is no. It's so hard to jump start version 1.0. The distance between engineering, marketing and everyone else should not exceed 30 feet.
Q: How should entrepreneurs deal with rejection?
A: Rejection is a part of life. It's a matter of learning from it and learning to avoid it. I wish I could say every rejected idea is a good idea.
Q: What's different about this book?
A: Everything in my book is probably in another book. There's probably a book all about pitching and it is 300 pages. But I've got 10 chapters, 200 pages, and I tell you in about 25 pages what you need to know about pitching. I'm trying to put 10 books into one for you so you can get to it. This is the Cliff's Notes version of the management book.
Q: You close with talking about the art of being a mensch.
A: It's a Yiddish term for someone who is ethical and decent. It's important that you not just try to make money and flip the company. They have a moral obligation to the world. The richer you are, the more you have an obligation.
Q: How do you figure out a company's valuation?
A: It changes all the time. But each full-time engineer is worth $500,000 to a company, and each full-time MBA is worth negative $200,000.
Dean Takahashi is a reporter at the San Jose Mercury News.
Kawasakisms:
The best reason to start an organization is to make meaning —€” create a product or service that makes the world a better place.
In the beginning, every entrepreneur is scared. It's just that some deceive themselves about it, and others don't.
Don't compromise on your company name. Have a first initial that's early in the alphabet. Avoid numbers. Pick a name with verb potential. Like Xerox or Google.
When pitching, explain yourself in the first minute. Observe the 10/20/30 rule: Ten slides. Twenty minutes. Thirty-point-font text.
Schmoozing is a contact sport. You can't do it at home or in the office alone. So force yourself to attend trade shows, conventions, seminars, conferences and cocktail receptions.
How can I prevent success from going to my head? Just remember that you could be gone in a split second, and "richest person in the hospital" and "richest person in the cemetery" are lousy positioning statements.
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