LinkedIn co-founder and executive chairman Reid Hoffman has seen his social network for professionals go public, acquire 364 million users, establish offices in 30 countries, and reach a market cap of around $28 billion.
But before he started the billion-dollar company in 2002 — and even before he worked with fellow Silicon Valley power player Peter Thiel at PayPal — Hoffman founded his first company in 1997. Named SocialNet, it was an early social network that users could use to find dates or connect with friends.
The combination of being an inexperienced manager and having a product that Thiel once told Bloomberg was "years ahead of its time," compelled Hoffman to abandon SocialNet in 1999.
The failure, however, proved to be a valuable learning experience and a crash course in the basics of running a company.
Hire for flexibility.
Hoffman was under the impression that each role on his team needed a precise level of rigidity or flexibility, he told the Academy of Achievement. He used a hypothetical example of building a phone. He initially thought you would need to hire engineers with a very specific skillset to build it and then hire software developers with a variety of skillsets to allow them to explore different possibilities.
"So what I had done, because I had imagined this is the way you start a company, is I had drawn out an org chart and said we need people with five to 10 years experience doing this, this, and this," he told the Academy. "You need some of that in engineering and whatnot."
This turned out to be a terrible decision. He said that he learned to hire "generalists" at PayPal because companies evolve, and a perfectly structured team for its initial iteration will immediately fall apart as soon as something fundamentally changes or the company decides to pivot, reinventing itself entirely.
Therefore, when hiring, it's best to look for someone who can get a specific job done but is also versatile.
Have a plan to acquire customers from the outset.
Hoffman told the Academy he fell into a common new-entrepreneur trap with his first company. He thought, "Oh, I'll build a really good product, and we'll figure out the customer acquisition later."
It doesn't work that way, he learned. And it's not as simple as just throwing money at advertising. He realized that developing specific customer acquisition strategies was as important as developing a product.
That's why when Hoffman was the COO of PayPal he would go on walks with cofounder Thiel and Max Levchin to discuss plans for taking their online payment service viral before it launched, he said.
Move fast, and don't try to be perfect.
Hoffman told Business Insider that when he founded SocialNet, "I didn't realize some principles about how to run a consumer internet company. I thought we'd spend months under wraps and release the perfect product. I discovered it's most important to get your product above the noise so that people can encounter it."
He learned that you shouldn't seek "perfection" and should even embrace imperfection.
"If you're not embarrassed by your version one release, you released it too late," he said. "There are a very small number of complete product geniuses that can labor in the dark for years and kinda pull off the sheets and say 'ta-da!' and it's the right thing and everybody uses it."
Ben Casnocha has worked closely with Hoffman since 2010, spending two years as his chief of staff and coauthoring Hoffman's two books. In a blog post from January, Casnocha wrote that Hoffman also applied this concept of agility to people.
Casnocha writes that Hoffman told him, "In order to move fast, I expect you'll make some foot faults. I'm okay with an error rate of 10-20% ... if it means you can move fast."