It’s not easy to build a business from scratch in 54 hours, but that’s just what 80 individuals signed up to do this weekend in Hartford.
Before they got started they got a little advice and inspiration from startup guru Jeff Hoffman, who founded Priceline.com and several other businesses.
“It doesn’t matter where good ideas come from,” Hoffman said.
But in order to turn that good idea into a successful business you need infrastructure.
He told a story about how he had gone to Egypt and a young Egyptian man told him his idea, which was more poignant and brilliant than anything he had heard after days of meeting with Google, but he had to wonder if the young Egyptian had the community and infrastructure to implement it.
“I’ve been living and breathing this startup business forever. What I didn’t have is everything you have this weekend,” Hoffman said. “No support. No infrastructure. No one to judge the business.”
Regardless of the obstacles he’s faced, Hoffman seems to have the startup business down to what can be only be described as a mathematical equation. Between his technology-based startups, he said he invested in an independent film as a “breather.” The project cost $4 million to make and grossed $100 million. It was then, he said, that he knew he had a formula for success.
Hoffman said there are several principles to entrepreneurship.
The first is a sense of wonder.
He said he was asked to watch a 5-year-old for a day, and the child asked about everything on a trip to the car. The child asked how carpet and glass are made and then pointed to the metal between the drivers seat and the passenger seat in the back of the car.
“I don’t know. It doesn’t have a name,” Hoffman replied.
He said the child then asked him if it doesn’t have a name then how do they order more for the assembly line.
“If I walked through the world and retained the wonder of a 5-year-old, imagine what I would come up with,” Hoffman said. “What I realized is the smartest people in the room never stopped wondering about everything.”
And wondering is how Hoffman invented his first software company.
Hoffman was working in corporate America and doing a lot of airline travel for his job. He said that every time he called the airlines for a seat on the same flight, the price was different. One time is was $400, another time it was $318, and then it was $279. All for the same flight.
So he started asking questions and he was told it had something to do with “yield management.” He said that every night at 2 a.m. the airlines reassessed the number of seats and calculated how they could fill them.
He said he was doing some business with Exxon Mobil at the time and asked them how much they spend on airline travel every year. At the time he was told $40 million, so Hoffman said he could lower that cost by running his software program every night. All he asked for was a commission on the $5 million he ended up saving them. Soon he was managing the flights for 150 Fortune 500 companies.
Hoffman sold that company to American Express.
“This all came from me sitting down and wondering about something all the way through,” Hoffman said.
But Hoffman needs to practice his wondering.
He said every day he sits down for 20-minutes and navigates the Internet, scribbling notes about what seems like random events or trends. He said that when he does this, patterns start to form.
One day he read an article about distressed inventory. Another day he read about how there are 600,000 empty airline seats a year. Another day he read an article about perishable commodities. And yet another day he saw something about dynamic pricing and soft goods fulfillment.
All of those things converged at one point in time, and Priceline was born.
Hoffman said he remembers sharing his idea for Priceline to a Wall Street Journal reporter. He said the reporter laughed in his face and said it was a stupid idea and would never work.
That same reporter called Hoffman a year later to tell him his Internet startup was worth more money than all the major airlines combined. Hoffman asked the reporter if he remembered their previous conversation, and he said the reporter feigned ignorance.
Hoffman said he tried to explain to the reporter that Priceline wasn’t for the Wall Street Journal readers — it was for Kmart shoppers looking for the best bargain, the people who were willing to take a flight at 6 a.m. in the morning if it meant spending $150, instead of $700.
Hoffman said that knowing the end customer for the product or service you’re creating is important.
He said when they launched Priceline their marketing budget was so lean that they literally went to Kmarts and struck up conversations with shoppers to market the company.