Sunday, November 04, 2007

The plight of the serial entrepreneur

Below are profiles of two serial entrepreneurs, Avi Rubin and Max Levchin. These are guys who have succeeded before but are still at it, still tooling, still cranking, to the benefit of society. Avi Rubin, the older of the two at 44, seems to have had his share of successes and failures, coming close to bankruptcy with his latest startup before a serendipitous Google acquisition. It's a long and difficult road.

Why do it? Why risk failure every few years when you could take a cushy, secure job at a big company? I don't really know, but it is people like this who are disproportionately responsible for innovation in society.

When I was in college, a few of my friends were devotees of Ayn Rand. I dismissed this interest as sophomoric and her ideas as simplistic, but the more time I spend around startups and in technology the more I come around to her point of view...

Rand on Objectivism: "My philosophy, in essence, is the concept of man as a heroic being, with his own happiness as the moral purpose of his life, with productive achievement as his noblest activity, and reason as his only absolute."

Avi Rubin and the Google phone:
NYTimes: ...Mr. Rubin then became an entrepreneur in residence at a Silicon Valley venture firm and retreated for a few months to the Cayman Islands, where he began writing software and tried developing a digital camera. But he could not find a backer for the camera, so he returned to his original idea of creating a next-generation smart cellphone. Using a domain name that he had owned for several years,, he started a new business and assembled a small team of engineers and product planners. Their goal was to design a mobile hand-set platform open to any and all software designers.

Mr. Rubin spent all his savings on that project. He called his friend Mr. Perlman and told him he was broke.

“How soon do you need the money?” Mr. Perlman asked.

“Now!” was the answer.

Mr. Perlman went to the bank and withdrew $10,000 in $100 bills, brought them to Mr. Rubin’s office and set them in a stack on Mr. Rubin’s desk. Ultimately, he lent him a total of $100,000, which helped Android complete its business plan.

This time, venture capitalists loved the idea. So did Craig McCaw, the early cellular telecommunications pioneer who is now chairman of Clearwire, a wireless network operator. As Mr. Rubin was negotiating terms with Mr. McCaw, he sent an e-mail message to Mr. Page informing him of the potential partnership. Within weeks, Google acquired Android for an undisclosed sum. Mr. McCaw declined to comment on the sale. ...

Max Levchin, formerly of PayPal:

NYTimes: ...A few years ago, Mr. Levchin, one of the young princes of Silicon Valley, bought his first home, a 12-room Edwardian high atop a hill here, for $3.4 million. But Mr. Levchin, who made a fortune at age 27 selling PayPal, the online payment service he helped start in 1998, never moved in. He sold it two years later without having slept there for even one night.

Since then, Mr. Levchin has moved into his second home, a more expensive one found for him by Nellie Minkova, his girlfriend of eight years who has become his fiancĂ©e. But so consumed is he by work on his second company, an Internet start-up focused on sharing photos and videos, that the cartons that contain what Mr. Levchin described as “85 percent of my worldly possessions” are still stacked in his living room, five months after moving day.

Mr. Levchin, who is now 32, is typical of a new generation of junior titans in Silicon Valley who might be called the prematurely rich — techies worth tens of millions of dollars, sometimes more, at an age when many others are just starting to figure out what to do with their lives.

The Internet, a low-overhead medium with a global reach, has greatly accelerated the wealth creation phenomenon, producing a larger breed of multimillionaires even younger and richer than in the past.

They are happy to be wealthy, of course, but many of these baby-faced technology tycoons often seem indifferent to the buying power of their money, at least at this stage of their lives. Instead, nearly all of them have chosen to throw themselves back into a start-up, not so much because they want a spectacular new home or a personal jet — though many of them do — but because they are in a competition with themselves and one another.

“For most of us, doing it again means surpassing what we’ve done previously,” said Peter A. Thiel, Mr. Levchin’s partner at PayPal, who also has started a new business, a hedge fund called Clarium Capital. “And that can be a really high bar.”

Even among this jittery group of overachievers, Mr. Levchin stands out. In part that is because outdoing PayPal may be an all-but-impossible goal. Mr. Levchin acknowledges that he has already earned more money than he could ever spend. But he said he would not consider, the photo and video sharing site he founded in 2005 that is still in its start-up phase, a success unless it is ultimately worth, in real dollars, “at least $1.54 billion”— the price eBay paid for PayPal.

“Otherwise,” he asked rhetorically, “what have I learned?”

During his PayPal days, Mr. Levchin was so committed to seeing the company succeed that he often sacked out at the office in a sleeping bag he kept under his desk. Considering that he described his apartment during some of this time as “scary,” that had a certain logic. Cardboard boxes served as his living room furniture; a discarded computer desk was his dining room table.

These days, despite the phenomenal success of PayPal, which gave him the bulk of a fortune worth around $100 million, Mr. Levchin continues to work an average of 15 to 18 hours a day.

“We occasionally go out to eat, he sleeps a few hours, he works out,” Ms. Minkova said. “But other than that, Max works.”

Ms. Minkova half-joked that she might appreciate her occasional evenings out with Mr. Levchin more, if only he were not on his BlackBerry, answering e-mail messages and checking his Web site.

One friend, Dennis Fong, who sold a company to MTV Networks last year for $102 million (and is already at work on a new start-up), talks about the “weird growling sound” that Mr. Levchin tends to make when someone even mentions the name of his chief rival, RockYou.

And so committed is Mr. Levchin to seeing succeed that he keeps a blood-pressure monitor on his desk. “I don’t know what I would do if I couldn’t start companies,” he said. “I’d probably think about slitting my wrists.”

Wealthy at a Young Age

Maximillian Rafael Levchin was born and raised in Kiev, Ukraine, a Jew living under Soviet rule for 16 years. As the Soviet Union was crumbling, the family moved to the United States and settled in Chicago. But the worst year of his life, he said, was not when he was growing up but after eBay bought PayPal.

He thought he would spend the time after the sale “exploring my inner self.” Instead, he spent the better part of 12 months “feeling worthless and stupid” and baffled by what he might do with the remainder of his life. He felt too young to retire or downshift a gear or two — and too restless to become a philanthropist.

“I enjoy sitting on nice beaches and hanging out with my girlfriend and playing with my dog, but that’s three hours a day,” Mr. Levchin said. “What about the remaining 18 hours I’m awake?”

At first, free time was not much of a problem. Coming into a lot of money at a very young age, Mr. Levchin found himself forced to ponder things like irrevocable trusts and secondary beneficiaries. Several times a week, he would listen to the gentle hectoring of older, well-dressed men and women whom he playfully mimicked, employing a basso profondo, game-show announcer’s voice.

“Think of the kids you don’t have,” Mr. Levchin quoted them as saying. “Think of your unborn grandkids.”

As those obligations of his new wealth subsided, Mr. Levchin contemplated what he might do next. For a time, Mr. Levchin, a graduate of the University of Illinois at Urbana-Champaign, thought about returning to school and earning a doctorate. That is what his mother, a physicist, had always wanted him to do, and it seemed to suit his temperament.

But discussions with a friend who teaches computer science at Stanford convinced him that academia was not the life for him. “This friend said, ‘Don’t kid yourself, you’re going to start another company,’” Mr. Levchin said. “It was one of those things where as soon as he said it, I knew it was true.”

He thought, too, about becoming a venture capitalist or an angel investor, a well-paved path for generations of entrepreneurs before him. Sequoia Capital, one of Silicon Valley’s top venture firms, gave him a desk to use while he figured out his next step. The partners at Sequoia would regularly invite him to join pitch meetings, but that experience taught him that he was hardly suited to the more nurturing side of the profession.

“I took this perverse pleasure in seeing if I could make someone cry,” he said.

At Sequoia, Mr. Levchin met James Hong, another successful entrepreneur who today is one of his closest friends.

“We’d go out drinking, and Max’d talk about how miserable he was, and I’d talk about how miserable I was,” said Mr. Hong, who was 27 when he and a friend started HotOrNot, a Web site popular with the under-30 crowd.

Mr. Levchin added, “We were both pretty pathetic.”

While not nearly as rich as Mr. Levchin, Mr. Hong describes himself as well off enough so that work is optional. He was collecting more than $1 million a year from HotOrNot, a project he and his partner had created in seven days and which demanded little of his time.

“All of a sudden, you have the luxury — or the curse — of being able to ponder the meaning of life,” Mr. Hong said. “You ask yourself, ‘Why am I not happier given how lucky I’ve been?’”

Only later did Mr. Hong diagnose the real source of his angst: he was not doing much of anything. So like most of his peers, Mr. Hong decided to throw himself back into work, in his case refocusing on HotOrNot in the hopes of transforming the Web site into a larger business.

In Silicon Valley, said Robert I. Sutton, a professor of management science and engineering at Stanford and co-founder of the Stanford Technology Ventures Program, remaining relevant, if not also admired and respected, requires that an entrepreneur continue to speed along in the fast lane.

“In other parts of the country, things like a great estate are the symbols people most respect,” Mr. Sutton said. “But here, the greatest status symbol is a person’s ability,” he added, to “still bring out hot new companies” and show that you are “working on the hot new technologies.”


Anonymous said...

I'm sorry but if these workaholic and rather plainminded dweebs are the new Prometheans I don't think I'll be stocking up on charcoal for my Hibachi anytime soon. Let's see now, a new way to show my slides - how earthshattering! Or an electronic competitor to Visa and Mastercard? Golly gee, now that's imagination.

I think these guys are bright enough in their limited ways to make a successful website but they don't have much big picture type imagination.

Ritalin or Hashish would probably help the quality of their lives more than a successful new company providing a not very important service.

How about something truly useful such as implementing a payment system that can work profitably with transactions as low as a penny? Now that would change something for the better. Paypal is just warmed over porridge.

Steve Hsu said...

Their contributions may be minor in the scheme of things (whose aren't?), but they still took tremendous energy, determination and even luck to make real.

Without guys like this we wouldn't even get minor innovations at the pace we currently do!

Unknown said...

Progress is indeed due to innovators but not all innovators are "entrepreneurs" in that they are motivated by the possible big score. People like Stallman, Torvalds, and Berners-Lee have changed the world, but they didn't do it for the money - and in fact, what they did might be considered irrational by an entrepreneur. They had a need, and they had the capability and the will to fill that need - is that enough to be a Randian hero?

Steve Hsu said...

TC, you are right about the people you mentioned -- they made their contributions mainly out of idealism (perhaps a bit of egoism :-), without remuneration as the goal. This is true of most scientists and academics. However, the nitty gritty, devil in the details aspects of bringing a product to market are almost never undertaken by anyone other than an entrepreneur with profit as an incentive.

There is a rather large gap between an invention in the lab (or a tool used by other softeware developers) and a mass market product or service. It takes the outsize ambition and drive of the Randian hero to bridge this gap.

Anonymous said...

Steve, I was looking forward to hearing your talk on entrepreneurship at the Columbia conference! Change of plans?

Steve Hsu said...

GT, I was really looking forward to it as well!

My son got the flu, I got the flu, but was mostly recovered by the day I was supposed to fly to NYC. But then my wife seemed to be coming down with it and I decided to cancel the trip because it would have been really tough for her to handle our twins under those conditions!

How did the panel go? Again, I am really disappointed to have missed it!

Anonymous said...

It was really interesting - Michael Lefenfeld's presentation was especially good. Although people in the audience were mostly interested in the VC on the panel (despite all the entrepreneurs' warnings to stay away from VC money as long a possible) and protecting their creations/intellectual property from the grasping hands of their universities.

Steve Hsu said...


Wow, sounds like a good panel. It's too bad I missed out...

Anonymous said...

I dismissed this interest as sophomoric and her [Ayn Rand's] ideas as simplistic, ...

I think you had it right the first time.

Certainly it takes certain kinds of personalities to do what startups and technology companies do, but they operate in a societal matrix made up of many other sorts of people, to whom they sell their products and services.

One of the more insightful comments on Ayn Rand I've seen was by a reader reviewer on Amazon, not yet 30, who described his realization in his mid-20s that the actual appeal of Rand's writing to him had been that it provided an intellectual justification—a convenient set of excuses—for his being a narcissistic, arrogant jerk* (and he used the word "jerk").

(* Credit where credit is due: In this regard Rand practiced what she preached.)

Unknown said...


Interesting interview. passion is the driven factor for entrepreneurs. And the key to success.

I am trying to build an Entrepreneurs Investors community. Our idea is to bring to entrepreneurs advice that will help t hem in the growth process (without crawling and begging for help). They can post their needs. Most entrepreneurs are too isolated and just don’t know what to do. They also do not have all the financial resources to ask for advice. We will be honored if you can participate to our community.

I leave you the decision to publish the address of the website (

Thanks and good work!

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