Building For The Long Haul

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Editor’s note: This post was written by guest contributor Aaron Levie, CEO and co-founder of Box.net. His last post on TechCrunch was Competing Against The Big Guys.

At a recent Startup School, Mark Zuckerberg made some very poignant comments about Silicon Valley’s lack of long-term focus.  While the quick turnover of capital, people and innovation makes the Valley an incredibly attractive place for starting companies, it also produces an environment that’s almost hostile when it comes to building them for the long haul. The tension is remarkable, yet it’s rarely highlighted among the more explicit challenges – say, going up against the 800lb gorilla – faced by entrepreneurs.

Every so often, my non-tech friends half-jokingly ask, “Have you sold yet?”  And for the first few years of Box’s existence, to placate them, I would ask for just a couple more quarters. Right after we get our next product to market, after we double again, and so on.  But soon it dawned on me that I wasn’t going to stop.  I couldn’t.  There was just too much to do, too much unexplored territory. Even when things weren’t going well, the challenge of righting them was like another shot of pure adrenaline.

In many ways, starting a company in college (isolation) in 2005, before the dawn of TechCrunch (insulation), permitted a certain innocence.  My co-founder and I didn’t fully understand the Valley’s business model and constant churning nature until we were smack in the middle of it.

The advantages of being here are obvious – vastly more talent, capital, experience, and resources than anywhere else – but we often forget that most of us started companies simply as a vehicle to get our (hopefully) world-changing products to market.  How quaint.  It’s all too easy to get swept up in the social pressures and biases of the Valley, where we idolize those that have sold their companies for large sums of money, mourn those that didn’t sell soon enough, and overlook the decisions (and non-decisions) it took to build companies with true longevity.  Victory begins to have a complex definition.

Referring to the mysterious craft of timing exits, one of the greatest investors in the Valley recently told me, “you have to be suboptimal to be optimal.”  While remarkably true, this statement assumes you’re optimizing for some knowable, local maximum – what if you’re trying to build something far beyond today’s vantage point?  We often miss the entire point of why most of us start companies in the first place, which is why Zuckerberg was universally seen as arrogant and foolish when he passed up the opportunity to sell Facebook for $750 million to Viacom, even by the smartest and most experienced minds in tech.  He executed brilliantly, and now looks like a genius.  Yet, had it gone another way, most would have said, “I knew that thing had no legs.”  Funny how that works.

With hindsight being 20/20, it doesn’t take much imagination to concede that the regret of not pursuing the opportunity to truly change the world might outweigh the near-term guarantee of a robust bank account.  Even so, the odds – and public opinion – are generally stacked against you when you decide to optimize for the former.

Everything is working against you

When nearly everyone is rooting for the underdog, maintaining and gaining market leadership can be antithetical to the very nature of the Valley. In building for the long haul, you’re competing with dozens if not hundreds of companies with equal determination to move upstream.

Even the motives of the constituencies presumably on your side – customers, employees, founders and early investors – are not always perfectly aligned. While software is busy eating the world, investors are still only content with eating IRR.   The very financiers that make millions building up one internet leader eventually must go on and bankroll its demise.  As they should.

And if you successfully quell external forces and internal conflicts to reach a stage of public liquidity – the new Holy Grail in the Valley – it’s not as if you’re magically home free.  In nearly all respects, your problems only compound.  Vested employees parachute out, Sarbox slows you down, analysts speculate on acquisitions you have little control over, and the news cycle surrounding your company’s every move is now tied to the ‘buy’ and ‘sell’ decisions of investors arguably less savvy than your Sand Hill neighbors.  Can you imagine what would have happened to Facebook’s stock had they launched the News Feed as a public company?  It seems we’ll soon find out.

With opposing forces like these, why would anyone even try to build for the long haul?  Well for starters, it’s ridiculously exciting and also extremely gratifying, and you create far better companies and products in the process. If you do it right, you have a chance to change the world.

How you build for the long haul

1. Set up a vision that puts you many years out

Be sure your company is tackling a long-term, complex, pseudo-existential challenge that isn’t going away anytime soon.  Not only are these missions the most fun to be a part of, they’re the only ones that survive over the long haul.  Amazon.com started out as “Earth’s Biggest Bookstore.” Now it “strives to be Earth’s most customer-centric company where people can find and discover virtually anything they want to buy online.”  Platitudes aside, gnarly goals are essential.  And getting your vision right is so important, because it should drive everything you do, your product most importantly.  

Early on at Box, our vision was less than crisp and put us into a head-on collision with giants that would also want to help consumers store files online.  Through relentless refinement and imagining the shifting landscape over a decade-long view, we developed a roadmap and mission that represented perhaps a much larger challenge (making enterprise collaboration and content management simple), but one that allowed us to imagine how we could fit into this transitioning world.  This dramatically changed what we would develop and how we would go to market, always acting as a straight-forward guide for what we would do next.

Building for the long haul gives you the freedom and clarity to build out a product over a much greater time horizon, realizing an ultimate vision that is far into the future.  Fred Wilson calls it the Long Roadmap.  You get to move beyond a range of visibility limited this quarter’s priorities.  And it means that your product today will look almost nothing like what you eventually want it to become.  The stretch of time betweenMicrosoft Windows 1.0 and Windows 95 was a decade.  Even fifteen years after that, the product still has dozens of iterations to go.  I’m guessing with Evernote’s vision of “Remember Everything,” they’re going to be at this for some time.

2. Build an organization that can get you there

With long-term product planning comes the opportunity to build an entire organization based on your terms and vision.  You get to set the culture, pace, tone and attitude.  Watching a startup go from a handful of people to hundreds is an incredible experience. I can only imagine what it’s like to take it to thousands.  People will come and go at varying points; some will scale and evolve as quickly as your company and mission, others won’t.

It’s critical that your culture is established and enforced early on, in large part by hiring people that fit, and maintaining that bar without exception.  How many times have we heard that A-players hire other A’s, yet how many organizations stay disciplined when having to quickly build up their ranks?  Is your culture institutionalized to the point that deviating is a fire-able offense?  Are people unwaveringly convinced by and committed to the vision?

Most importantly, you must build an organization that understands this fight will have multiple rounds, and will require excruciating persistence and dedication.  Sometimes this is about long hours and insanely difficult work.  Other times it’s about maintaining composure when dealing with the mental stresses and strategic challenges that come with each of the many revolutions.  Every now and then it’s about complete reinvention.

3. Constantly reinvent yourself, your product and your ideals. Oh, and occasionally that vision

Nothing about the internet is set in stone.  The cycles between technology revolutions are shortening with every major innovation.  By extension, your company’s vision, competencies, and product should always be subject to reinvention.  Organizations that last are constant avengers of the status-quo.

Google made it its mission to manage the world’s information. As we’ve moved toward more of a social vs. indexed web, and now that computing cycles and storage have become exponentially cheaper, this strategy on its own looks less compelling. Google realizes the profundity of this change, and is shuffling resources and people extensively.  Larry “what-is-cloud-computing” Ellison has done an about-face, and is (at least publicly) betting the farm on the cloud.

If you’re not incessantly checking to see if your company’s tactics, strategies, and assets align with the current (and future) market, there’s simply no way to win.  Constant reinvention of your ideals and product is the only path to survival.  Amazon discovered that selling DVDs was no harder than selling books, and selling digital media was not so different from selling DVDs. Now, supplying devices is essential to selling that digital media.  Reinvention.

Now, I’m not saying that no one should ever sell.  God no.  There are generally more reasons than not to sell a company.  Sometimes you’ve been at it long enough, and you want a great landing for employees and investors. Sometimes your technology’s adoption will be accelerated or more impactful under another owner. And on the internet, this ambiguity is at its highest – with few moats to rely on, it’s a wonder that any survive.

But perhaps it’s the challenge, and thus the scale of the opportunity, that makes it so exciting. With the right conviction, you can build for a distant period with full acceptance of the difficulties and costs of doing so, ensuring that your product and organization are always better positioned in the future than the present.

And for those that can do this –reconcile the need to constantly grow and innovate with the reality that most companies fail or are subsumed– the glory and benefits are sweet.

Photo credit: Robert Scoble.