LinkedIn: Risk and Entrepreneurship

Stanford University
Course Lectures
  • Hoffman believes that out of three kinds of investment strategies, sure bets, low-risk management and high risk investments, entrepreneurship is the third kind. This style of investment is called accurate contrarian theories where raising sufficient money might help in mitigating risks, but does not ensure success.

  • According to Hoffman, working as if you will succeed, getting to failure points and measuring them as early as possible, making a timely entry and exit into the market, taking controlled risks and finally, solving the easiest problems and not the most complex ones are some of the most fundamental principles of entrepreneurship.

  • Hoffman describes 3 key lessons he learned at his first company, SocialNet.1) Financing strategy should reflect one's financial capabilities. 2) Focusing on distribution is important. 3) Understanding that the entrepreneurial skill set is different from what is required to work for an established big company.

  • Hoffman believes that an entrepreneurial venture faces competition by either innovating against no competitors or bad competitors. If they are up against aggressive smart competitors, they have to be really sure of what they are doing. He elaborates on this by giving an example of 'Friendster' losing its first mover advantage to 'MySpace' due to its lack of marketing strategy.

  • Using LinkedIn as an example, Hoffman talks about the three main ideas which drive a successful social networking company. They are: Building a business profile, having a network for search and building an application on top of it. Such a concept not only helps employers to reference check prospective employees, but the other way as well.

  • Hoffman draws comparisons between a general manager and an entrepreneur by giving his own example of becoming a general manager before starting his company. He also talks about the difference between an entrepreneur who takes wild risks and a professional general manager who is paid to mitigate risks.