Ten Entrepreneurship Rules for Building Massive Companies

Last week I gave a talk at South by Southwest, and in it I shared my top ten rules for entrepreneurship. They are borne from my experiences starting companies and partnering with great entrepreneurs in Silicon Valley as an angel and a venture capitalist. I hope they prove to be useful to you. If you are an entrepreneur and have other rules you live by and want to share with others, please post your thoughts in the comments field.

Rule #1: Look for disruptive change.
If you’re about to start on a new venture, ask yourself: What is becoming possible or necessary that wasn’t possible before? Is a new product or service able to take over an existing market or create a new market? When I co-founded LinkedIn the tech industry was in a deep depression. I looked at all the opportunities created by the Internet and had the idea that eventually everyone would need a professional profile online. The disruption was that people were able to directly reach the best candidates rather than hoping for responses from a listing in the paper or an ad on a Web site.

Rule #2: Aim big.
Regardless of whether a start-up is targeting a big idea or a small one, it will still require the same amount of blood, sweat and tears—so aim big! What is “big?” It is a new product or service that creates or dominates a significant market.

Rule #3: Build a network to magnify your company.
People tend to think that behind every great start-up is a single entrepreneur with a whiz-bang idea. The reality is great companies are built by a number of people with talent who are surrounded by amplifying networks. The most successful entrepreneurs bring in advisors, investors, collaborators and early customer relationships.

Rule #4: Plan for good luck and bad luck.
You should always assume you will have both good luck and bad luck with your new company. Good luck is not as simple as “it worked out.” Rather, this is when you discover a great opportunity and can quickly shift to go after it. Bad luck is what happens when your first idea doesn’t work. It doesn’t mean failure; it means you need to pursue plan B.

Rule #5: Maintain flexible persistence.
Very often entrepreneurs are given conflicting advice: “Be persistent! Stay committed to your vision!” or “Pivot on key data! Know when to change!” The challenge is to follow them both, but know which advice is most appropriate for which situation. You must know how to maintain flexible persistence.

Rule #6: Launch early enough that you are embarrassed by your first product release.
With my first startup, Socialnet.com, it took us nine months to launch the first product. That was a disastrous mistake. We wanted to have all the detailed functionality right away, including social controls to people could decide to connect or not with the people in their networks. We wanted everyone to “Ooh” and “Aaah” about how terrific the product was. We wasted a bunch of time and it put us months behind on more important problems that needed to be solved, such as how to get our product in the hands of millions of people. From that I learned, if you are not embarrassed by your first release, you’ve launched too late!

Rule #7: Aspire, but don’t drink your own Kool-Aid.
Target excellence, but be very careful about blind trust or belief in your theories. It is important to launch as early as you can in order to learn how your customers use your product or service. It is equally important to identify metrics that tell you if your aspirations and vision are on target. You should also get feedback from your network in order to iterate or pivot on the target, the product and/or the service. In other words, maintain your aspiration but always look for good perspective on how you are doing. It is very easy for creative innovators to get caught up in their own story rather than learning where they should be headed.

Rule #8: Having a great product is important but having great product distribution is more important.
I meet a lot of entrepreneurs who think the best product is the most important thing and that the best product should always win. What a lot of people fail to realize is that without great distribution, the product dies. How will you get your product in the hands of millions or hundreds of millions of people?

Rule #9: Pay close attention to culture and hires from the very beginning.
Your first hires set your culture, so make them good ones. These first people hire the next people and so on. The old wisdom was that you needed people with a decade more of experience in your start-up. The things a smart person learned a decade ago won’t help you now – you’re doing things that have never been done before, and the world and the competitive landscape are changing at hyper speeds. What you really need are people who can learn fast.

Rule #10: Rules of entrepreneurship are guidelines, not laws of nature.
Do not pay too much attention to rules set by other people. Entrepreneurs are inventors. They are successful when they make something work for the very first time. Sometimes in order to make something work, you will drive over the guardrail of one of these rules. Entrepreneurs sometimes just make new rules.

-Reid

Reid Hoffman is Co-Founder and Chairman at LinkedIn and a partner at Greylock Partners. He is a member of the founding team at PayPal and has been an angel investor and adviser to dozens of organizations including Facebook, Zynga, Flickr and Last.FM. He currently serves on the boards of LinkedIn, Zynga, Shopkick, Kiva.org and Mozilla. His complete profile can be found at www.linkedin.com/in/reidhoffman.

 

 

 

About greylockvc
Greylock partners with entrepreneurs to help them build market-leading businesses. Over the past 45 years our partner companies have made 150 public offerings and more than 100 of our companies have achieved profitable M&A events. Greylock-backed companies include Constant Contact (NasdaqGS:CTCT), Data Domain (EMC), DoubleClick (Google), Farecast (Microsoft), LinkedIn (NYSE:LNKD), Pandora (NYSE:P), Red Hat (NYSE:RHT), RightNow Technologies (NasdaqGS:RNOW), Success Factors (Nasdaq:SFSF) and Zipcar (NasdaqGS: ZIP). We continue to invest in companies that define new markets, including Airbnb, Apptio, Cloudera, Facebook, Groupon, Imperva, One Kings Lane, Palo Alto Networks, Redfin, Shopkick and Workday.

144 Responses to Ten Entrepreneurship Rules for Building Massive Companies

  1. Ram says:

    Your rules are truly enlightening to start-up entrepreneurs. My favorite rules are at # 2, 3, 6, 8 & 9 in your article. I found many entrepreneurs who raised their start-ups with closed mindset. They are more enamored with their idea being put into action than the action being supported by rules or direction. Among the notable omits, marketing is the first one. Many think about marketing measures once the produce is in the warehouse. Unable to push the product to market, they go drained without working capital. We know what the end result could be! Thanks for the very right inputs. Ram, http://blog.epmworld.in Twitter: @epmworld_hyd

    • ilyas afsoh says:

      The Aim Big & Plan Good Luck & Bad LUCK
      its My favourit Rules

    • Colin L Beadon says:

      How boring. Give me a bough leaning out over a river, a pretty face, a book of verse and a sunny day.
      Life is far to beautiful to be hell bent up in an office, trying to find another way to destroy the Earth.

    • Mal says:

      Linked In is a fantastic idea, but it has a MAJOR FLAW! If your activity level is higher than normal, Linked IN suspends your account and you are sunk. I paid for the mid tear version @ about $50 a month and depend on the site on a regular basis. My activity is for b to b activity and each activity occurs after I have researched the person I am linking with or the person linking to me. I tried to reach some type of customer service, but could only leave an email. It’s been 5 plus hours and no response. As business professional realize the value of the site, there will be a significant increase in suspended accounts; a key issue for Linked IN unless they resolve the issue ASAP!

  2. Tyler Baird says:

    I feel that many entrepreneurs have tunnel vision around their products and fail to see the moves (good and bad) by the other companies in their space. Thanks for the great insights and advice.

    The community is coming.

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  6. Kara Fleming says:

    How does an entrepreneur from downunder in NZ, with a technology idea to occupy a space on the net that is currently unoccupied , connect with someone like you who can act as an advisor?

    Kara

  7. Kara Fleming says:

    How does an entrepreneur from downunder in NZ, with a technology concept to occupy a space on the net that is currently unoccupied , connect with someone like you who can act as an advisor?

    Kara

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  9. gzino says:

    Good list – #6 and #8 really resonate. My list for entrepreneurs, from the opposite perspective, after leading a failed startup:

    #1: you don’t learn anything that your customers don’t teach you
    #2: system functionality is an oxymoron
    #3: kiss
    #4: forget about viral
    #5: plan B triggers
    #6: gut

    Full blog post here for the context and details

  10. Srini Kumar says:

    I’m an inventor. I am learning to be an entrepreneur. Thank god my app TINYVOX is selling fast at $20 a pop. Now what? Do I incorporate ? Do I get a lawyer ? I’ve just released it under my own name – what is going to happen now ? Why should I sell any of this goldmine to any angel ? Why should I submit to the humiliating pitch / demo grind when hip hop kids are discovering my app through their idols and it’s directly leading to money for me ? I look at the bay area and I see too much decadence, money substituting for solid ideas. I’ve got something special, and I want to make it a billion dollar business WITHOUT taking money if at all possible. Although I’d love to place ads in Rolling Stone right now to hit the Back To School rush. What should I do? Dog and pony show, or just hit the gas and try to make more sales the honest way (send out tapes)? Thanks !!!

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  16. Nick says:

    Straight to the point and great advice, especially the one about building your network. Thanks Reid

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  19. 5si says:

    We have seen many similar articles/books saying how to build great companies,
    but why 95% of startups fail with 1st 5 years and how to avoid them, that info would be helpful.

    • Katya Kean says:

      Books I wish I’d read before starting my business that I did eventually read (causing me to change my business around quite a bit):
      “The E-Myth Revisited” (I never read the original but I hear it was great)
      and
      “Before You Quit Your Job” by Robert Kiyosaki

      I hope that helps.

    • nandapriya says:

      I’ve read in “Rich Dad, Poor Dad” books that most businesses fail within the first 5 years due to lack of funding. If I remember his numbers correctly, he says 9 out of 10 fail due to this within the first five years. Out of the 1 that makes it, 9 out of 10 of those fail in the next 5 years due to exhaustion on the part of the owner, who usually has failed to turn it into a big enough business to have other people running it: in essence he/she remained what is referred to in “Rich Dad” philosophy as someone “self-employed,” rather than the owner of a true business (also according to the definition of a business within the teachings of “Rich Dad, Poor Dad.”)

    • amurphy59 says:

      95% is just a number … in my opinion the 5% success figure is the more amazing thing. Ultimately, I think that it is a lack of persistence that causes most of the 95% to ultimately quit in lieu of finding a successful way forward.

  20. There are a lot of great comments so far, and your rules of entreupreanurship are certainly, I’m sure, well lived. If you would oblige me I will encourage an addition to your list, something less outwardly strategic but can be fiercely productive in any case. Please follow this link to Simon Sinek at http://www.ted.com/talks/lang/eng/simon_sinek_how_great_leaders_inspire_action.html for a riveting persuasion on the power of your ‘WHY’. You will be moved.

  21. I think #6 is my favorite. It’s scary to launch a product that you know isn’t where you want it to be yet but it’s better to get some skin in the game. You can always improve.

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  23. Charlie says:

    Interesting article – is there any sort of quantitative rule of thumbs you use to determine whether a market is of significant size or not when you’re aiming big? Creating a $10M market sounds OK, a $100M market sounds better, and a $1B market sounds really good.

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  28. Spot on correct. Nice post.

  29. Great post Reid, thanks for the message

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  33. Great post Reid. I can’t emphasize #6 enough. We are competing in the daily deal “groupon” software space and are a leading vendor for media even though we bootstrapped to profitability and are competing with VC backed players. The key was we called advertisers and publishers and then made a list of only the core operational features needed by our clients. Everything else was put on a road map. We were able to launch a brand new product with 2 developers in 90 days and land clients immediately. Everything we thought we knew then was moved around and now a year later we are building our “nice to have” product because we have input from all the parties.

    My secondary supporting point is that cash flow management. We were able to get to profitability and a 16 person team on $500k over 2 years. I know this is rare, but our philosophy was if it doesn’t drive sales or get clients think twice. So we invested in sales people before more engineers, etc. This helped us get traction, client, and revenue quicker than many and in turn grow into a company. I think too many people think sexy products sell products. Sales people sell products in my opinion so think wisely about investment.

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  35. John Rorick says:

    Regarding #1, it was my understanding that Linkedin’s disruption was driven from the recruiting community downstream. Now of course you are the horse’s mouth but I think an edit to that bullet point might be about listening to your customers in order to identify a market for disruption.

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  42. Todd Talbert says:

    Good basic rules. Great point about distribution. I am involved with a new start up company and we have been working on getting the basics correct before we go big. We have been noticing that we just need to go. Sloppy success is better than perfect mediocrity.

  43. Thanks Reid, truly practical and valuable !

    I would add:

    Carefully choose your co-founders. Having a similar vision and general life aspirations is critical. It doesn’t matter if one is a developer and another is a business guy, what matters is the alignment to the company’s vision. Also, very importantly, from my experience – try avoiding business with friends, as the challenges of the new venture tend to be interpreted personally by the founders. This can happen when one of them acts as a CEO for example, and the decisions can be misinterpreted.

    Listen to your market and not. If you are building a new product that is truly innovative and disruptive, people don’t know about it, therefore a market research could not provide relevant results. This is pure visionary behavior and can be either a successful one, or a learning curve. On the other hand, a market research offers suggestive results in an established industry where customers know what they want and maybe a little more. A visionary behavior comes with the responsibility of educating the customers, therefore out of the box marketing combined with sales (distribution) are decisive for generating buzz.

    Looking forward for more insights Reid !

    Regards,

    Lucian

  44. Blender On says:

    Great article Reid and also great replies guys.

    I have to admit that in your article subject there is something that doesn’t match with an entrepreneur “mentality”, the word “rules”. An entrepreneur, in is essence, is a person that follows guts, not rules. We have an idea and we fight for it. Then, you have certain situations that you outlined very well.

    The market is full of creative people. Even those that are terrible at creating ideas they think they are the best. It is normal. Market doesn’t need creativity. Well, I know I am being an extremist on this one but you know what I mean. What market really needs is people implementing ideas. My Moleskine, for example, has more ideas than you can imagine. Some of which I truly believe could be huge hits in the market.

    As an entrepreneur, my biggest difficulty is in giving the next step. This is where my attention lies right now. I don’t want to create ideas. I know I will have them all the time. My attention is actually in implementing them.

    Reid, my #1 “rule” right now is simple: implement your ideas. An idea in a piece of papper is worthless. After implementing it it may worth something. Surround yourself with people to question you and to help you as alone you won’t achieve a tenth of what you could. This is my #1 “rule” right now. Everything else is part of the process to implement.

    Onde again, congrats on your article. Really helpful and insightful.

    Regards,

    Pedro

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  46. I found your rules to be very enlightening. I just started up my new business and any advice that I can get is appreciated. I believe that my service is the only one out there so I am shooting for the stars.
    Thank you so much for sharing.

  47. Lakia Gordon says:

    Thanks for the tips and advice.

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  51. kendal Ferguson says:

    Thanks for the tips, most of which I live by and practice in my business (building construction). Your advice on aiming big however is one I can truly appreciate and will keep in the fore-front of my thoughts.

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  53. Joshua says:

    I will use this advice in my own life thank you

    Joshua

  54. Kephra says:

    Excellent post, I have had many successes that were snow plowed by my sometimes idiotic failures, it’s very reaffirming to read this as I see a lot of what you’re saying in my newest business plan as well as some concepts that are very new to me. I really like the part about not focusing on old information and instead focusing on adaptation. Adapt and survive right? Also the bit about not making things 100% perfect, I waste so much time reworking everything, after reading this, I’m going to simply things and just get the damn product out. Thanks for this, I’ll be reading it a few more times over the next few days just to make sure it sinks in.

    • Amber says:

      I’m pretty sure it’s not about one’s advices or ideas to sink into you like laws, limits and/or rules. If you think how much information you can access through the Internet you’ll realize that’s so very little compared to your brain that retains every second of your life to make you walk on two legs without stumbling over a stone, that you can breath while you sleep… only if your brain fall asleep you’ll be falling down. But your brain chooses to prioritize some processes that you need. If you want to make it use other information then you may use some games/therapies that help you see that you are the door, that you’re not in front of any closed door. So be sure you get what you read, just that you don’t see it crossing in front of your eyes like lines on a display. :) Hope you are making a good product!

  55. Amber says:

    Thank you for sharing. He has very good points!

  56. Great teams make great products. It is amazing to see how critical it is to have you team in place from day one. Thanks for the insights!

  57. Thank’s, some ideas in this article are vere interesenting… So let’s do it!

  58. As a professional singer these practices even apply to me. Thanks for sharing. Maybe I should sign up for LinkedIn

    Great Post.

    Blessings,

    Ava
    xox

  59. Thank you for posting this article.
    Its definitely made me realize how much I’ve been holding back, and being a perfectionist on what I actually need more experience on.
    I’m very much grateful.

    -Elijahone Wheaton

  60. Point number 4 is so important, I think. Most people ignore the likelyhood of failure in business… rather than prepare for every eventuality- a lot of people want to bury their heads in the sand….

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  62. elvinarofael says:

    wow, thanks for the great advice! Do you mind checking out my blog and leaving your feedback!
    http://theyouniquethingsinlife.wordpress.com/

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  64. Thank you for this great post. Just in time – food for thought over the weekend, and some great tips to start practicing comes monday morning.

  65. Good advice! Straight to the point.

    Congratz on FP!

  66. Andrei says:

    I just run into your story… did not expect to much however actually I tottally agree with all your points..

    I would emphasis the people aspect indeed – that’s why someone from corporate/VC background is usually not well suited for anything entrepreneurship related.

    I would add point 11:
    Selecting your clients.. which is a big issue.. a lot f them might just not have money and would waste your time, some of them might have lots of money but they aren’t necessarily taking the best decisions for their shareholders.. (see Nokia as a recent example – how they can run a company into ground).

    Cheap and good does not work well – because people want either cheap and crap or good and expensive (or at lest expensive so they can claim they went with the low risk option :-) ) ).

    A few good clients to work well with is critical..

    At the end I would say 90% is luck .. however if someone is good he will succeed even if he doesnt have luck etc.. That was always the case ..
    No one likes disruptive things..

    Financing, hiring – same stuff – some people know how to recognize value the vast majority just want “proof” – just to be covered.. the 10 years experience you are talking about.. Getting their ass kissed to make sure teh other person is not a threat because he is smarter etc etc..

    Rue 12: Avoind going for financing is possible.. build a prototype first then go for angel investors and avoid vc’s at all costs as they usually have no clue about anything aother than convincing someone to give them money to invest.. so they are basically hust sales guys with no real world business experience .

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  69. phoenixark says:

    Dear Reid,

    my little publisher, phoenixarkpress.com, needs an ‘Angel’ like you, not necesarrily for cash, though nice, but fro spreading the word. I founded it, in a publishing maelstrom, to protect writers, artists and real cultural values. Could I write to you personally.

    David Clement-Davies
    dclementdavies@aol.com

  70. thor27 says:

    Check out my blog sometime.
    “Whatcha need Got you covered in Northwest Houston”

  71. Hey There!

    Really enjoyed the article. Motivated me to read something from such a well established entrepeneur! Encouraging to hear all that hard work pays off as well!

    Wishing you the best in your future endeavours and hopefuly il bump into you one day when my business takes off:)

    J

  72. Definitely don’t drink your own Kool-aid.

  73. Great article. Loved point 6.

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  75. Eeshan says:

    Great Post!
    Rules 1 to 9 were guidelines, but for me #10 was a rule!!
    You rule!!! :-)

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  77. Roda says:

    Hi,
    Just by being the person you are …I guess you have the authority to write the above.There are a few truths in there which I could latch on to as mistakes I may be making. You see I am a first time author and I want my book MasterMind to sell by the millions…but I have been pretty much creating the marketing channels all by my self. While a lot of folks may consider that hara kiri I wanted to go the old fashioned way in letting the product speak for itself…..no hundreds of bonuses and no bought or cooked up testemonials. Just a good solid contemporary product and I have stood my ground on this though it has taken time and a lot of perseverance.You see I decided to partner with God as I trust in him the most and when he decides that my time for success is right …then no force on earth can stop it.
    I have rambled on but the point I wished to confer with you on was this…I have an old Linkedin a/c which for the life of me I am not able to access…neither have I been successful in changing the password to it. For all purposes its as firmly locked as Albabas cave …….and as I do not wish to open another account and would so like to access this one ….COULD YOU PL HELP WITH IT ? http://in.linkedin.com/rodalangrana15
    is the account I am referring to.
    My e-mail id is above…it would be nice if you could please get someone to sort it out…I have tried but did not succeed. Many thanks.

  78. Great Direct Post! “Poor people look for work rich people look for network.”-Robert Kiyosaki

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  81. abhishek says:

    nice article on entrepreneurship
    digital worx

  82. drownthatpuppy says:

    # 6 may work for digital start-ups but it can get you slaughtered in more traditional industries. Sometimes being first-to-market is nowhere near as good as being right-to-market. Like # 10 says make your own rules.

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  86. Really good advices…but you also need the right persons next to you that think in the same way….or at least similar way. I would like to create something new but sometimes people think to make profit too soon and in this way (my point of view of course) it’s impossible to start. Thanks for sharing
    Cheers

  87. Why wants to have a massive company?
    All that stress.
    I’ll rather sit next to a lake and read a book.

  88. Oscar Ayala says:

    Great article. I agree with most what is been said here.
    Hugs,

    Oscar Ayala
    Oayala Consulting – Cali Colombia

  89. zdsadadsasdasdasd says:

    All the magnificent hidden bases at ROBLOX are in spired at roblox

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  91. Ben Gebo says:

    Great, thanks for the tips!

  92. hearttypat says:

    oh i needed these! Thanks for sharing!

  93. LFA says:

    Great insight. !Gracias!

  94. Gian Ramos says:

    “Rule #9: Pay close attention to culture and hires from the very beginning.
    The things a smart person learned a decade ago won’t help you now – you’re doing things that have never been done before, and the world and the competitive landscape are changing at hyper speeds. What you really need are people who can learn fast.”

    I agree! I think this is what most companies fail to realize.
    Anywyay, this is a very good post :) Thanks for sharing! Will come back for more :)

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  96. Colin L Beadon says:

    Does the Earth really need any more massive energy swallowing companies mainly responsible for global warming ,energy depletion , and general pollution ?

  97. I’ve read in “Rich Dad, Poor Dad” books that most businesses fail within the first 5 years due to lack of funding. If I remember his numbers correctly, he says 9 out of 10 fail due to this within the first five years. Out of the 1 that makes it, 9 out of 10 of those fail in the next 5 years due to exhaustion on the part of the owner, who usually has failed to turn it into a big enough business to have other people running it: in essence he/she remained what is referred to in “Rich Dad” philosophy as someone “self-employed,” rather than the owner of a true business (also according to the definition of a business within the teachings of “Rich Dad, Poor Dad.”)

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  105. Hannah says:

    Amazing how simple advice can make such an impact on how you go from day to day in life and in business. Thank you!

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  107. We have seen many similar articles/books saying how to build great companies,
    but why 95% of startups fail with 1st 5 years and how to avoid them, that info would be helpful.

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  109. Thanks for sharing content to read.I’m happy to read it.

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  111. Carey Ellis says:

    thank you for this rules …very useful ,,..

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  117. Ten Entrepreneurship Rules for Building Massive Companies – from founder of LinkedIn

  118. Keith Roser says:

    Great comments all round but one. Many people go in to business to express a skill. Ie. I like cooking so I will run a restaurant. There is only one reason to go in to business. TO MAKE MONEY. Money is not success. Become a success and the money will come.

  119. vic says:

    Thanks for the advice. Rule #4: Plan for good luck and bad luck—> the most important rule IMHO

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  126. Ibitayo says:

    Very nice work, and valuable info. Thank U

  127. I think you are great and I learned a lot.I want to conquer,be the best at what I am doing,help! says:

    I like what I am reading

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