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Serial entrepreneur and creator of ICQ, Yossi Vardi, knows startups. In 1969, at the age of 26, he co-founded and was the first CEO of Tekem, one of the very first software houses in Israel, which would go on to become the largest software company at the time. Three decades later in 1996, he became the founding investor of Mirabilis, the creator of ICQ, the first Internet-wide Instant Messaging system which sold to AOL for 400 million dollars just 19 months after it launched. Since then, Vardi has helped build over 70 more tech companies in the software, energy, internet and mobile fields, to name a few, and has a firm grasp on the fluid startup ecology, and what it takes to be successful within it.
By Anna Cashman - Tuesday, 28 August 2012

Yossi Vardi shared his experience and knowledge on how to create a successful startup at Berlin’s first Campus Party, a week-long hackathon inviting experts in a range of tech fields.

The very first step to creating a successful startup, obviously enough, is acting on an idea. So why not a startup? What is holding budding entrepreneurs back from creating the next big thing? Something that we need to work on consistently, and which applies at every point of the startup journey, is overcoming the fear of failure; this, argues Vardi, is the most common reason why many will not take the first step to launch a startup. Losing face is always the biggest concern.

According to Vardi, then, the number one step to creating a successful startup is to deal with the prospect of failure. In addition to his incredible success, Vardi told the crowd, also came a string of failures, and after awhile the prospect of failing simply ceases to be a threat.

‘By the way,’ he segways, ‘I was groomed by my mother who, since (I was very young), always advocated to me that I was an idiot. She would say, why are all your cousins so smart and you are the only idiot in the family?’ So I grew up I knew that I‘m an idiot, everybody else knew that I was an idiot, so I had nothing to lose in order to go and try to do startups. I spent my lifetime trying to prove to her that I’m not an idiot, and I still trying to do it, even though she’s been dead for 15 years. And by the way she always explained to me why I was an idiot, and my cousins are not, and it’s because they are not contaminated with the genes of my father.’

He continued on a more serious note, highlighting that in societies where failure is considered to be an embarrassing mark on life’s scorecard, there are less entrepreneurs.

The second parameter to create a successful startup is the idea. Somewhat counterintuitively, however, Vardi believes that you need an idea to start with, but you needn’t be completely consumed by it. He cited the results of recent research by Startup Genome, a site created by three researchers from Berkeley and Stanford Universities. They looked into 10,000 startups and analyzed what elements combine to create a successful business. According to their research, the most successful startups are those which have ‘pivoted’ at least once, meaning that their original idea took a turn in a markedly different direction.

‘With the internet,’ Vardi adds, ‘(pivoting) is very simple; the internet is very flexible... HTML is very patient.’ Startup Genome suggests that up to two ‘pivots’ increases the likelihood of success, and for Vardi, if you’re going to change the idea anyhow, the execution of the idea that counts, rather than the idea itself. ‘The original idea will define the space you act in, not your end product,’ he said.

Given his stance on the importance of the initial idea, when Vardi does due diligence, he avoids two things, and advises young entrepreneurs to place little focus on them too.

First is business plans. ‘I don’t read (them),’ he said. ‘A business plan is like a sausage. Only people who don’t know how they’re being made are willing to eat them.’ Vardi therefore does not.

He will also not watch demos. ‘I see a young entrepreneur coming to my home with a laptop and I feel threatened,’ he said. ‘They spent the last 2 years devising 574 different features, and then until he tries to take me by the hand and explain feature by feature by feature by feature, he will not leave me alone. And believe me, I don’t understand two thirds of the words that this guy’s saying to me. So I sit in front of the demo, and the enthusiastic young guy and I have to demonstrate enthusiasm. Because if I don’t, he’ll say either (that I’m) stupid, because I didn’t understand, (or that) I’m conceited. And so in the beginning I used to fake orgasms. ‘Wonderful! Ahh, terrific!’ But after 3000 times of faking orgasms you get tired of it.’

Startups should rather focus on a clear, concise and attractive sales pitch.

A company blossoms only thanks to the people working in it. Referring again to the Startup Genome research, Vardi stressed the importance of three factors in a team: technology, followed by talent, then business know-how. Neglecting one of these three ingredients would decrease the likelihood of building a successful business from scratch.

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