Healthcare Venture Capital

When The Sales Guys Run The Company…

In healthcare on October 31, 2011 at 9:46 pm

One of my favorite passages from Steve Jobs by Walter Isaacson is really worth thinking about. Jobs speaks candidly about his views of company building, management, and start-ups today:

I have my own theory about why decline happens at companies like IBM or Microsoft. The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important. The company starts valuing the great salesmen, because they’re the ones who can move the needle on revenues, not the product engineers and designers. So the salespeople end up running the company. John Akers at IBM was a smart, eloquent, fantastic salesperson, but he didn’t know anything about product. The same thing happened at Xerox. When the sales guys run the company, the product guys don’t matter so much, and a lot of them just turn off. It happened at Apple when Sculley came in, which was my fault, and it happened when Ballmer took over at Microsoft. Apple was lucky and it rebounded, but I don’t think anything will change at Microsoft as long as Ballmer is running it.

I hate it when people call themselves “entrepreneurs” when what they’re really trying to do is launch a startup and then sell or go public, so they can cash in and move on. They’re unwilling to do the work it takes to build a real company, which is the hardest work in business. That’s how you really make a contribution and add to the legacy of those who went before. You build a company that will still stand for something a generation or two from now. That’s what Walt Disney did, and Hewlett and Packard, and the people who built Intel. They created a company to last, not just to make money. That’s what I want Apple to be.

Steve Jobs (Kindle Locations 9752-9764). 

Jobs makes two critically important points here:

1. Product matters. Founders understand this better than anyone else.  Companies that lose their founders often lose their way. This is not an indictment of sales people – many of whom are wonderful people as much as it is an admission that founder-led businesses do best. That’s been shown time and time again – and I really believe it to be true. The best companies I have the pleasure of being involved with or observing have been the ones where the founders played a critical role from inception through product launch and growth.

2. Too many companies are being “built to flip” these days.  VCs have figured out this game as well.  There are very few VCs backing truly innovative big ideas these days – whether it’s in healthcare or tech.  With 10 year fund lives and a real paucity of returns for the past 10 years from most of tech venture as a whole, the sandbox that most VCs play in has become smaller and smaller.  The entrepreneurs get this too – why try to build a lasting company from some foundational science or cutting edge new technology when the challenges are so great and the VCs wont even bother investing?  It makes me wonder whether the Apples of tomorrow are actually getting started today or not?  This is why I am so excited about Peter Thiel’s Breakout Labs and some of the great companies that big thinking VC firms are backing these days.