If you are an entrepreneur seeking a moment of clarity, there is no better place to start than Sequoia Capital’s Elements of Sustainable Companies.
It’s not new – these are the principles that have driven Sequoia’s investment strategies for decades. But today, with troubled financial markets beginning to spread cancer-like into Silicon Valley and venture capitalists starting to pull back from two plus years of carefree spending, startups have little wiggle room for error. This list is a beacon to help guide startups through their most common early mistakes.
We were reminded of the list recently when one of our interns, Bryan Scott, wrote an article talking about how important those ideas are to him. I informally polled some of my entrepreneur friends yesterday and today and was surprised at how few of them had read the list.
These principles are not for every new business, but they are certainly the key drivers of success for any startup looking for venture capital to drive growth. I’ve talked about some of these ideas in past posts, but nothing hits home quite as powerfully as a simple list, written by the venture firm that funded startups like Apple, Google, Yahoo, Cisco Systems, Oracle, PayPal and YouTube. Being able to put a check mark next to each item below certainly doesn’t ensure success. But ignoring them is a sure way to fail.
I consider this essential reading for any aspiring entrepreneur, along with The Man In The Arena.
Elements of Sustainable Companies
Start-ups with these characteristics often foretells the success of a business and the likelihood of it becoming a sustainable, enduring company. We like to partner with companies that have:
Clarity of Purpose
Summarize the company’s business on the back of a business card.
Large Markets
Address existing markets poised for rapid growth or change. A market on the path to a $1B potential allows for error and time for real margins to develop.
Rich Customers
Target customers who will move fast and pay a premium for a unique offering.
Focus
Customers will only buy a simple product with a singular value proposition.
Pain Killers
Pick the one thing that is of burning importance to the customer then delight them with a compelling solution.Think Differently
Constantly challenge conventional wisdom. Take the contrarian route. Create novel solutions. Outwit the competition.Team DNA
A company’s DNA is set in the first 90 days. All team members are the smartest or most clever in their domain. “A” level founders attract an “A” level team.Agility
Stealth and speed will usually help beat-out large companies.Frugality
Focus spending on what’s critical. Spend only on the priorities and maximize profitability.Inferno
Start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower.