5 Startup Lessons from Silicon Valley
Written by Eric Rosenberg // Also shared on Startups.co.
Silicon Valley is an HBO comedy about a Silicon Valley startup called Pied Piper. While this comedy show is a hilarious work of fiction, there are some very real business lessons startups and hopeful entrepreneurs can learn while watching. Here are a few important lessons star characters Richard, Erlich, and the rest of the gang have learned the hard way while building their new company.
DON’T GROW TOO FAST
Each time it seems like Richard and team have figured out the financing of the company, something happens that leads to growing the Pied Piper team. While hiring new employees for a business can make sense, growing for the wrong reasons can lead to terrible financial problems.
To grow the right way, only hire when there is a specific role with a specific business need to fill. Hiring a big team of marketing staff and salespeople may see smart until you notice your burn rate has skyrocketed and you hardly have enough cash to continue regular operations.
UNDERSTAND THE LEGAL ISSUES SURROUNDING YOUR BUSINESS
A major plot line takes us through the journey of figuring out who owns the intellectual property, or IP, developed by the Pied Piper team. At the beginning of the show, CEO Richard is employed by fictional tech giant Hooli, loosely modeled after Google. Hooli alleges that Pied Piper technology actually belongs to Hooli and files a lawsuit to take control of the IP.
I won’t spoil what happens, but this is another important lesson for entrepreneurs looking to build their company as a side hustle. Never work on your own personal projects on work time or a work computer, even outside of work hours. While odds are it would never come up, you don’t want to lose your job or your business after an avoidable use of employer property for your own work.
RAISING CAPITAL MEANS LESS CONTROL
A capital infusion can help a business grow much faster in some cases, but taking money from investors also means giving up equity. Every time you give up equity or a board seat, you lose a little control over your company. In Richard’s case, it has meant some serious problems and unpredictability.
If you bring investors into your startup, make sure you understand exactly what that means and understand how the contracts are written. Whoever controls the majority of the stock has the most influence in the event of a dispute, and whoever controls the most votes on the board controls the future of the company. If you lose control, you can even be fired as CEO of your own company. It has happened to Steve Jobs, among others, and it can happen to you if you’re not careful about raising funds.
FOCUS ON YOUR CORE COMPETENCIES
At one point in the show, Pied Piper developers are forced to work on a non-core product. While it was the best version of that product available, it was not the core product for Pied Piper and was a big distraction from the core product and path to success.
Many entrepreneurs are filled with business ideas and jump to pursue shiny new ideas while losing focus on the most important product. If you have a business that is good at something, don’t lose focus and put too much effort into ancillary offerings if you need to keep your resources focused elsewhere.
DON’T WASTE YOUR FUNDS ON STUPID PUBLICITY
Erlich Bachman, the first funder to put money into Pied Piper, brings a great comedic presence to the show. However, his business ideas prove to be less than stellar. In the name of publicizing himself and Pied Piper, Bachman blows through millions of dollars and nearly brings the entire company down with him.
If something seems a bit too extravagant, it probably is. Don’t “pull an Erlich” and waste a bunch of money on something that will lead to little, if any, payoff.
LEARN FROM MISTAKES TO MAKE GOOD BUSINESS DECISIONS
If there is one unifying theme in Silicon Valley, it is that all mistakes are not permanent. One big misstep does have the chance of destroying a company, but business executives make mistakes all the time and find a way to recover.
If you have a big issue with your startup, don’t take it personally and don’t let it derail your greater vision. If you stick to it for the long run, you can create your own path to success.
Every day we share the TL;DR version of everything interesting happening in the startup world in the Startups Daily Newsletter. Sign up here to get future issues.
Got an interesting story? Awesome. Send it our way!
If you dig our stuff, please hit that little ♥ to spread the word.
