Every year at Altos we see thousands of investment proposals and meet hundreds of entrepreneurs. We basically boil them down to two types: companies that start from the head and companies that start from the heart.
“Start-from-the-head” companies are started by business types, often MBAs, who are motivated primarily by their interest in starting and running a company of some sort. These companies often come in with slick presentations, fancy financial models and detailed business plans. They talk about things like addressable market, segmentation, channels. “Start-from-the-heart” companies are usually started by engineers and tinkerers who have a burning personal passion for solving a problem that they have struggled with – sometimes for years. What they lack in formal plans they make up for in working products, paying customers and real passion.
We have a strong preference for the latter type of company.
That is not to say that MBAs don’t build great companies, but it comes down to a question of motivation. We have found over time that the most enduring and successful companies are the ones created out of a founder’s deep personal conviction around solving a very specific problem. And they’re usually the most fun to work with.
Sometimes these ideas arise from a personal passion. David Baszucki is the founder of an online building world called Roblox. After successfully selling his first startup, Dave chose to build a company that was near and dear to his own passion as a tinkerer (I’ve personally experienced his homemade ziplines and potato cannons). Dave also wanted to build something cool and constructive for his four creative kids. Roblox is now one of the most trafficked kids websites in the entire country.
Jeremiah Grossman was just a teenage computer enthusiast when he hacked Yahoo! and caught the attention of David Filo, who hired him within weeks. Jer eventually left to start Whitehat Security, the world’s foremost web application monitoring company. He’s one of many fortunate founders who’ve turned their hobbies into great companies.
Many huge companies have been started as personal projects or academic inquiries. Sun Microsystems was born after graduate student Andy Bechtolsheim cobbled together the Sun-1 as his personal CAD workstation. Larry Page was fascinated by the mathematical structure of Web links when he wrote his Stanford dissertation and created BackRub, which later became Google. Mark Zuckerberg’s predecessor to Facebook was Facemash, a Hot-or-Not site he hacked while drunk in his dorm one night. I’m pretty sure neither Larry nor Mark were planning to become online advertising companies when they started off.
And sometimes these ideas literally start at the kitchen table. Challenged by getting our young kids to eat their veggies, my wife Jennifer began playing a dinner game with them – points for eating colourful vegetables and fruits. She eventually created a set of index cards and which turned into a card game that helps kids have fun eating a colourful, healthy plate of food. Fast forward a few months and Crunch a Color has won a “Top 100” toy award, sold out its first production run in a week and been picked up by retailers across North America.
My wife never set out to build a business, but she – like so many founders who start from the heart – might actually end up having a pretty good one.