Entrepreneurship is a choice. It is a career choice that offers flexibility, an independent lifestyle, and no dull moments. To be an entrepreneur you have to be a confident leader who is able to motivate people to come along with you. Importantly, you have to be willing to take risks and to fail with the grace to pick up the pieces and go on. In a free wheeling talk with MBA students at UT Austin during Spring of 2009, Brian Sharples (CEO of Homeaway) took us through his experiences as an entrepreneur. The talk was peppered with war stories and business lessons. Below are my notes from that talk
- First rule of entrepreneurship: Always promote your brand no matter how well the company is doing. During this particular talk, Brian did that by wearing his Homeaway.com cap and pointing it out to the crowd.
- Problems = Opportunities: Homeaway started with a personal pain point that Brian’s family faced while planning a holiday. His family was looking for vacation rentals (as opposed to hotels). At that time, there was not any consolidated site that allowed folks to book vacation rentals (unlike today where there is Homeaway and AirBnb) from owners. Thus was born the idea to build the Expedia of vacation rentals.On that same note, during the talk there was a question about frauds – the concern being that a con artist could take a few pictures from Architectural Digest, post them on the site, and collect money from an unsuspecting renter. The answer was simple and brilliant. Homeaway saw fraud as an opportunity. They built algorithms to detect fraudsters on the site. In addition, they extended an insurance program to users. These solutions helped differentiate Homeaway from the competition and it started to build its brand around trust and safety.
- Market research: Go talk to people before starting the business! After having the idea about “Expedia for vacation rentals” the co-founders of the company took 4 months to learn all about the industry (they talked to renters, owners, Expedia executives who might have thought about the idea, and people who ran websites). One of the findings from their market research was that homeowners who published on similar sites preferred to pay a one-time fixed fee as opposed to transactional fees to use the site. This was the model that Home away decided to pursue, which ultimately proved to be successful.
- Practice makes perfect: Just like with anything else, entrepreneurship is a craft that needs to be practiced and honed. In his book “Outliers,” Malcolm Gladwell drives home the concept of the “10,000 hour rule,” which says that one has to practice for 10,000 hours before mastering a field.Michael Dell and Bill Gates were true outliers in that their first companies were giant successes. A more practical approach would be to start small by joining a team that has experience building companies. If you join a small company, you are going to know about everything that is going on. Then take the time to climb the learning curve, building confidence along the way. You can aim to start a new venture in a few years.In Brian Sharples’ case, Homeaway was his fifth business – 1) sold oyster, wine, and beer from a boat at Martha’s Vineyard, 2) took photos of people sailing on big boats and selling them the photos, 3) built a weekend marketplace for used cars, 4) Intelliquest, and 5) Homeaway.
- Mistakes: Success leads to a lot of hubris, but it’s from the mistakes that people learn how to manage risks. The third business listed above (weekend market place for used cars) was a big failure. The deal lost $1M in one week. The concept was great at the time. Buyers and sellers could congregate at one location and complete the transaction over the weekend. The reason this business turned out to be a failure was because of a freak storm that hit Candlestick Park that particular weekend. It was a $1M lesson – but an important one for future success – to not spend money too fast, to diversify risk, and to be constantly mindful about what could go wrong with the business.
- Strategy: While running a company, one has to take the long view. Purposefully, Homeaway did not seek any publicity in the first few years after its inception (even after being a $100M revenue company). The company was building supply and demand by acquiring the best companies in the major markets stealthily. It did not want the word to spread on how profitable the vacation rental business could be and increase competition for itself. By the time the word spread, Homeaway had built a war chest of a business making it difficult for anyone else to compete.
- Team: Not one person has all the skills to make a company successful. In the case of Homeaway the timing was right for the creation of the business. They were able to get together a team of people who knew each other through the course of decades while having worked together on other companies and projects.