When Groupon's Eric Lefkofsky turned down $6 billion from Google, he was both praised for his chutzpah and questioned for his judgment. Turns out Eric was right. Groupon is now a public company valued at $12 billion. When I spoke to Eric, he admitted that to be in today's business environment, "You sign up for some level of insanity."
Forget Facebook. Or Google. Or Apple.
When it comes to the shining stars of the business world, they are each the center of their own solar systems.
But Groupon, the world’s number one group buying site, is an example of an exceedingly successful business that started from humble beginnings.
Whether you believe such risky business moves are smart or indeed crazy, the fact is that successful company founders often identify those moments as important turning points that helped determine their ultimate success.
I spent years interviewing many company founders, each of whom started, grew, and sold their companies for $100 million or more, or took them public for $300 million or more. Based on these interviews, some of which became the material for my program How They Did It: Real-World Advice from Today’s Most Successful Entrepreneurs, here are 15 “crazy” business decisions that became the pivotal moment in an entrepreneur's success story.
Stand next to the big boys
Viresh Bhatia's InstallShield had a hundred competitors, most with similar technology. Unlike most techies, however, Viresh dreamed of advertising as a way to stand out from the crowd. But that wasn’t enough. His chutzpah moment? He and his partner, working out of a 10x10 room, sank their money into a colorful full-page ad they insisted had to run adjacent to Microsoft or IBM in PC Magazine. Customers assumed InstallShield was in the big leagues. Eventual sale price for Installshield: $78 million.
Don’t underestimate the power of an empty box
Don Mauer's medical device company, Empi, had a great idea for an electro-therapy pain-control device, a scientifically sound study run by a distinguished neurosurgeon, and a market literally in pain. What it didn't have was a backer or a prototype of the product. So Don made a wooden model of his concept, painted it, glued on some knobs, and pitched his idea to some investors. With that empty box, he raised half a million dollars, enough to get Empi started. He later sold the company for $161.4 million.
Have a titanium story
Dane Miller, founder of Biomet, believed that titanium was the safest metal on the planet for knee and hip replacement parts — far better than the industry standard, stainless steel. To prove his point, he asked a surgeon friend to insert a small piece of titanium into his own arm. Dane’s implant proved to be a powerful promotional tool, and a testament to his passion. These days, everyone uses titanium. And when he took Biomet private a couple of years ago, after having been a public company for 20 years, it was at an $11 billion valuation. So: what’s your titanium story?
Cancel something good to get to something great
Scott Jones had a profitable business called Boston Technology. But Scott had a bigger idea around a little-known technology called "voicemail." That fledgling segment of his business was losing money, while the other two segments were making money and growing nicely — but normally. His decision? Shut down the two profitable segments and bet on the one thing that wasn't proven yet. From that one risky move, Boston Technology generated 1,000 percent growth, created hundreds of millions in revenue and billions in valuation, and changed the way we use our phones. And no more busy signals anywhere on the planet!
Leave — and start again
David Becker saw his credit union clients lacking the software needed to utilize their new powers following the 1979 deregulation of the financial industry. After six months of research, he found a software product he loved and presented his plan to the League of Credit Unions’ board of directors. In the midst of discussions bogged down by indecisiveness, Becker stood up, whistled to get everyone's attention, and announced: "Ladies and gentlemen, let me solve this dilemma for you. I'm going to quit and do this myself." He thanked them for their time, invited them to be his customers someday, and walked out. Eventually, more than half of those board members became his customers. After selling that first company for $24 million, then selling a second company for $52 million, Becker went on to launch First Internet Bank, now at $500 million in assets, and he is recognized as a founding father of the Internet.
Launch is always a leap
A toe in the water approach usually, if not always, fails to produce spectacular results. Success is always a leap from the get-go: an act of faith. What I learned is that avoidance of failure is never, ever going to produce a home-run success. Take Jeff Aronin, for example. He left his job at an established company to start Ovation Pharmaceuticals on his own. He made the jump, even though he knew only one in a thousand drugs ever gets approved, and it’s a process that can take 10 years and cost $800 million. Even then, only 40 percent of all drugs ever make back the money that was invested in them. Jeff didn’t even have a drug in development when he started Ovation, but he figured out a way and eventually sold Ovation to Lundebeck for $900 million.
Your first idea is not always the big winner
Highly successful company founders tend to experiment and to listen intensely to customers. Their winning products and winning strategies — the thing that really worked for them — generally was not the first idea out of the gate. I think of Brian Sullivan, the inventor of the Pur water filter found in millions of homes. His first product was a desalinization pump selling to sailors and pleasure boaters. It wasn’t a mass market — just how he got his start.
You have to look again
The opportunities exploited and problems solved by successful entrepreneurs usually are issues that are visible to everyone. Even in highly specialized fields, hundreds or thousands of people missed what one founder saw, saw again, and saw a third time. The difference is that successful company founders started to investigate, resolve, decide, and act. Jim Dolan looked at a 107-year-old legal newspaper that most thought was going nowhere, and saw opportunity. He turned the fine print notices of bankruptcies in the back of the newspaper into an online database, and eventually sold it for $150 million. It all started from looking at a newspaper in a different way.
Boredom can be a blessing
Boredom is a blessing for champions. Some of the most inspired actions from entrepreneurs come from unplanned, uninvited downtime, sheer boredom, and idleness. Dave Becker, the founder of First Internet Bank got in a motorcycle accident and found himself laid up in bed for nine months. Dave was bored to tears and ended up buying a company. So beware of the entrepreneur stuck with a skiing injury, a power outage, or a meaningless vacation. Planned or unplanned solitude can lead to amazing discoveries for founders.
Success is never a solo act
Even so-called solo founders develop partners or key senior managers who prove to be vital to success. None of the companies started by these founders would have made the list without partnerships or very strong management teams. Many had the same philosophy as Andrew Carnegie, making sure to move key people from startup to startup to keep the engine going. Mahendra Vora talks about five hiring 25, who hire 125. Phil Soran, founder of Compellent, met in the basement to think up ideas with his neighbor. Time and time again success came from the formation of powerful teams and partnerships.
Attitude trumps skill
Many times we think that as soon as we get this next skill under our belts or as soon as we get the next degree, everything will fall into place. It turns out that’s not the key. The thing that is much more important is a burning desire to be in the game. Relentlessly look for an unmet need that you can fill. With passion many founders delegated or hired people to acquire the skills they needed.
Strike out more, not less
Think of Thomas Edison. We all know the story. I have no idea if it was 3,000 tries for the light bulb or 5,000 or 10,000. It doesn’t matter. The reality of it is we expect Edison to keep on trying because he is eventually going to succeed. And that’s exactly the way these founders were with their startups.
Look in the mirror more
Great company founders look at their efforts and learn to judge those efforts differently. I think for a lot of us, if we try something and it doesn’t work, we start thinking that it’s never going to work or someone won’t like what we’re doing. That is not a recipe for success. I think of Jim Dolan’s story: Before his success, he had failed a couple of times. On his own dime he hired an industrial psychologist to analyze his abilities so that the next time around he could know his strengths specifically. And he would know whom to hire and bring on as partners so that he could be stronger the next time around.
Iterate, execute, repeat
Champion founders keep dancing in the ring and never present a sitting target. The ability to champion an idea doesn’t mean an idea remains set in stone. Dick Costolo, founder of Feedburner and now CEO of Twitter, said that many young entrepreneurs form business models and then stick to them despite evidence that something needs to be changed. He likened his experience at Feedburner to an eye exam. “Better like this or this? A or B? B or C? Oh, C’s better than B; let’s do more C.” Successful founders continue to decide, adapt, act, adapt, reiterate, and execute again.
Let your customers co-create
We live in a new world. When I was younger in my career, there was a much more defined path as to how new products would launch and grow. Put out a new product, run some TV ads, and everything would be fine. Today, however, there is no guarantee that when you launch a product and take it to market it is going to work. In fact, these days you’ll find more suspicion of advertised products. People look to their peers who may be tweeting or blogging about a product. So bring your customers into the creation process. Get your product some of the way done and then push it out to your customers to let them be the co-creators.
I think I got their point. In business, chutzpah pays off. If you're passionate about your business idea, don't let obstacles of any size prevent you from taking a stand, pursuing your goal, or sticking to your vision.