10 Keys to a Successful Business

#1: Raise prices

“The number-one theme that companies have when they really struggle is they are not charging enough for their product. It has become conventional wisdom in Silicon Valley that the way to succeed is to price your product as low as possible, under the theory that if it’s low-priced, everybody can buy it, and that’s how you get to volume,” he said.

“And we just see over and over and over again people failing with that, because they get into a problem called ‘too hungry to eat.’ They don’t charge enough for their product to be able to afford the sales and marketing required to actually get anybody to buy it. Is your product any good if people won’t pay more for it?”

#2: Don’t fetishize failure

“I’m old-fashioned. Where I come from, people like to succeed… When I was a founder, when I first started out, we didn’t have the word ‘pivot.’ We didn’t have a fancy word for it. We just called it a fuck-up.

“We do see companies that, literally, every time we meet them, they’ve pivoted. Every time, they’re off to something new, and it’s like watching a rabbit go through a maze or something. They’re never going to converge on anything because they’re never going to put the time into actually figuring it out and getting it right.”

#3: Apply the “nerds at night” test

“We call our test ‘What do the nerds do on nights and weekends?’ Their day job is Oracle, Salesforce.com, Adobe or Apple or Intel or one of these companies, or an insurance company, or a bank. Or they’re a student. Whatever. That’s fine. They go do whatever they need to do to make a living. The question is: What’s the hobby? What’s the thing at night or on the weekend? Then things get really interesting.”

#4: Stress test ideas with a “red team”

“Each of our GPs [general partners] has the ability to pull the trigger on a deal without a vote or without consensus. If the person closest to the deal has a very strong degree of positive commitment and enthusiasm about it, then we should do that investment, even if everybody else in the room thinks it’s the stupidest thing they’ve ever heard. However, you don’t get to do that completely on your own without stress-testing. If necessary, we create a ‘red team.’ We’ll formally create the countervailing force to argue the other side.”

To avoid the potential problem of newer hires getting battered more than senior folks, Marc and his founding partner, Ben Horowitz, make a point of smashing each other.

“Whenever [Ben] brings in a deal, I just beat the shit out of it. I might think it’s the best idea I’ve ever heard of, but I’ll just trash the crap out of it and try to get everybody else to pile on. And then, at the end of it, if he’s still pounding the table saying, ‘No, no, this is the thing…’ then we say we’re all in. We’re all behind you… It’s a ‘disagree and commit’ kind of culture. By the way, he does the same thing to me. It’s the torture test.”

So, where can you create a “red team” in your life to stress-test your most treasured beliefs?

#5: Always look forward

#6: “Strong views, loosely held.”

“Most people go through life and never develop strong views on things, or specifically go along and buy into the consensus. One of the things I think you want to look for as both a founder and as an investor is things that are out of consensus, something very much opposed to the conventional wisdom… Then, if you’re going to start a company around that, if you’re going to invest in that, you better have strong conviction because you’re making a very big bet of time or money or both. [But] what happens when the world changes? What happens when something else happens?”

That’s where “loosely held” comes in for you. People everywhere hate changing their minds, but you need to be able to adapt in light of new information. Many of my friends in this book will fight you tooth and nail over a topic, perhaps making dinner company nervously glance around, but as soon as you cite better information or a better logic, they’ll concede and say something like, “You’re totally right. I never thought about that.”

#7: Live by these two rules

“[Steve Martin] says the key to success is, ‘Be so good they can’t ignore you.’

Related Articles