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Of Grassroots and Revolutions - Kawasaki and Omidyar Advise Startups

25 April 2000 12:30
By Tornado Staff

TORNADO-INSIDER.COM's UpStart Europe conference opened Tuesday with keynotes from two people with a claim to having played a revolutionary role in the technology business.

First off was Pierre Omidyar, the French-born entrepreneur who founded eBay in the US. In a speech that concentrated on the success of his own company he spoke of the brutal forces of evolution that "selected out" weak business models on the Internet.

Omidyar contrasted the approach of his own company with Amazon and Yahoo, which also offer trading platforms. Omidyar said that while Amazon spent vast sums on marketing and Yahoo could offer its own auction its massive brand awareness, eBay had built itself through its interest in grass roots customers. Ebay looked to build on this community approach through a network of local sites.

Though US-based, the company is enjoying success in Europe, notably Germany. eBay, which is targeting the five largest Internet markets outside of the US, rather than opting for blanket coverage, currently has a greater sales volume through its German operation than all the other online trading companies have globally, Omidyar said.

Guy Kawasaki, ex-Apple evangelist and founder of Garage.com, used his 45 minutes to rattle out advice and anecdotes to an audience of around 1,000 entrepreneurs and investors. Opening with the admission that during his tenure Macintosh was "the biggest collection of ego-maniacs in history" he went on to describe how revolutionaries must, in the interest of speed - be prepared to release a less-than-perfect product - under the motto, "don't worry, be crappy" - but then must quickly improve the product with later releases. Kawasaki cited the first Macintosh released in 1984 as a personal example.

Networking and a voracious appetite for information were also necessary if a company is to succeed. Business development advice followed, with Kawasaki exhorting the audience to avoid over-cautious legal advice in favor of the maxim, "this is what we want to do - now keep me out of jail".

Startups pitching to VCs should ditch non-disclosure agreements, according to Kawasaki, as few will sign them. "They won't sign NDAs - at any one time there might be five companies doing the same thing, and they might be seeing three of them." In an environment with few unique ideas implementation was what counted, he added.

Kawasaki's take on the vexed question of valuation was straight forward, "Look for value not valuation". Kawasaki encouraged people to take funding from well connected sources and accept dilution rather than go for enormous valuations from advisers ill-equipped to take a venture to market, but was slightly wrong footed when he presented Omidyar as an example. Omidyar responded from from the wings with the assertion that he still personally owned "over 30 percent" of the trading giant.

Another tip was brevity. A first approach to a VC should be a one page e-mail, business plans should be no longer than 20 pages and Powerpoint presentation should be restricted to an absolute maximum of 12 slides.

While he said startups should take money when offered, rather than hold out for a higher valuation and risk being the victim of a change in investment fashion, he advised startups not to aim too high when drumming up money, for fear of an embarrassing shortfall.

"Ask for less than than you need...create the illusion of scarcity," said Kawasaki, and the investors that missed out the first time will come to you.





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