How does any entrepreneur know the time is right to start a company? The answer is different for every individual. But when students ask me -- and my Babson College students ask me several times a week -- I tell them they should invest 10 years of experience before starting companies. It may be possible to get that experience by the time you're 21, if you've spent the previous decade developing a specific product -- sandals that you've designed -- or a key skill -- programming applications on a smartphone, for instance.
Otherwise, a young graduate should first identify a field that interests him or her, then work in its leading company for a decade before launching a new venture.
One of my students, for example, wants to import world-leading luxury brands to his home country. I told him to seek employment at one of the world's leading managers of such brands -- Paris-based LVMH would be a good choice.
The reasons for my suggested strategy are simple. First, experience will help young would-be entrepreneurs develop their skills and find out what they are really good at, compared to rivals. Second, it will help them develop a network of potential suppliers, employees, investors and customers.
Finally, it will let them see market opportunities that their employer is not tapping into, opportunities on which they might eventually base a new venture.
The strategy pays off. Here are the stories of two people whose delay in starting companies illustrates the value of getting good at a skill that will be critical to entrepreneurial success.
Michael Adler is a Finnish-born but American-raised entrepreneur who built success by first getting good at something before launching his company. His latest company, Fiksu -- which means "smart" in Finnish -- makes a tech platform for programmatic mobile app advertising.
Adler spent a long time getting good at building computer algorithms -- the source of Fiksu's success. He climbed the academic ladder for about a decade before starting his entrepreneurial career. He holds a BS in mathematics from MIT and a Ph.D. in theoretical computer science from the University of California-Berkeley. From there he became a tenured professor at the University of Massachusetts.
What’s unique about Adler is that he quit during the year of his tenure-ensuing sabbatical and started three companies, tapping into his love of algorithms based on theoretical computer science, which to him means “proving an algorithm will work, or providing evidence that it won’t.”
In October 2007, The Washington Post Company bought Adler's Wakefield, Mass.-based CourseAdvisor, an online lead generator serving the education industry, which he had co-founded in 2004. Adler was president, but says, "My real job was search engine marketing [SEM] algorithm optimization lead.” In March 2012, ADP bought Adler's next company, Autotegrity, a data analytics concern.
He then founded Fiksu in late 2008. As of August 2014, it had over $100 million in revenue.
Another example of a successful entrepreneur who first perfected his craft -- building operating systems --is Max Levchin. After emigrating to the United States from Ukraine, Levchin entered the University of Illinois-Urbana, where he earned his computer science degree.
Levchin had the urge to quit school and head out to Silicon Valley, but his family would have “murdered him” had he had not earned his bachelor’s degree. Still, he did stray a bit -- majoring in computer science instead of the categories math or physics that would have earned his family’s stamp of approval.
After graduation, Levchin trucked out to Palo Alto, where he spent four years -- "with a mattress down on the floor in the crappy apartment” of a close friend from college. That friend, Scott Banister, sold his latest company, IronPort, for $1 billion. Levchin started writing code "for fun.” But he says he hated the Web and alternately enjoyed building utilities for the Unix operating system.
With encouragement from Banister, Levchin got the entrepreneurial bug and started his first company in 1994. A large number of the companies he founded failed.
One that he did evolve into a big success was PayPal. Levchin had hired eight or nine people to develop security software for the Palm Pilot -- a so-called personal organizer. Through a mutual friend, Luke Nosek, Levchin met Peter Thiel. Levchin recruited two engineers from the University of Illinois, and Thiel recruited Ken Howery from Stanford.
The two formed Confinity to build software for an online payments service that ultimately became eBay’s primary payment mechanism. As they were working on this, another company in the online payments space, X.com, run by the current CEO of Tesla, Elon Musk, was located down the street. X.com approached Confinity and in 2000 the companies agreed on a “50/50 merger” to form PayPal, which eBay acquired for $1.5 billion in 2002.
Separately and distinctly, Adler and Levchin demonstrate the value of waiting until you know what you are doing before you start a company.
The good news is that both started early enough to tap into their ignorance about how much the odds were stacked against them, while they still had the energy and the drive to overcome those challenges.