Entrepreneurs are Everywhere Show No. 42: Sunny Shah and Curt Haselton

We as researchers go in with a bias – that obviously these guys want our technology – but that is not the case for a lot of customers. What you think about your technology is great, but at the end of the day you’re not the one buying it.

It was intimidating from day one. I am good with doing research and doing experiments but talking to customers is not my forte.

Scientific research it is hypothesis-driven. You’re just guessing and then trying to prove it true or false. This whole commercialization side of things is not that much different

For scientific researchers who want to commercialize their technology, doing a startup first pulls them out of their comfort zone. But then the Lean Startup’s scientific method of validating their business idea quickly has them feeling right at home.

What it’s like to go from the comfort of the lab bench to the chaos of a startup was the focus of the guests on today’s Entrepreneurs are Everywhere radio show.

The show follows the journeys of founders who share what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries and more. The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs and lows that pushed them forward.

sunny-shah

Sunny Shah

Joining me in the Stanford University studio were

curt-haselton

Curt Haselton

Listen to my full interviews with Sunny and Curt by downloading them from SoundCloud here and here.

(And download any of the past shows here.)

Clips from their interviews are below.

Sunny Shah is an Assistant Director for the ESTEEM Graduate Program at the University of Notre Dame.  In addition he conducts research with Dr. Hsueh Chia Chang in Chemical Engineering. Sunny received his Ph.D. from University of California, Davis in Biomedical Engineering. For his doctoral work, his research focused on liver tissue engineering and stem cell differentiation.

Sunny’s startup idea emerged from a diagnostic tool he’d developed in his lab to detect pathogens. He thought it might have an application in the food service industry and so leapt at the chance to join the National Science Foundation Innovation Corps.

He was initially overwhelmed:

It was intimidating from day one. I was out of my comfort zone. I am good with doing research and doing experiments but here there are these four teaching faculty trying to infuse into us to find the need and then see if your problem fits the need.

The only way to do that is by going out and talking to the customers who would eventually buy this. We’re used to just talking to scientists, but here they were asking us in six weeks to do a 100 interviews. Not on the phone, not over Skype but in-person interviews with potential customers.

I’ve never talked to people at food processing plants and meat processing plants.

On our flight back from the workshop, I was trying to come up with excuses to drop out of the program. I thought, ‘This is not something I signed up for. I’m interested in the commercialization side but this fast-paced talking to the customers is not my forte.’

But we stuck with it. We found people to talk to through Google searches. We went to the USDA list and found whatever meat processing plants they inspect and food processing plants they inspect, and went from there. 

If you can’t hear the clip, click here

Once he found customers, he had to speak with them. Here’s what he did, and why he had a change of heart about I-Corps that marked a career pivot for him:

I started not even cold calling; it was cold showing up. There were a couple streets, the meat district of Chicago, and I just started knocking on doors.

I was afraid these guys weren’t going to understand what I was doing but it turned out that once you get in the door and start talking to them about how they do testing for pathogens right now, that’s when you saw them open up.

That’s when I realized that this is something I can do because even though it is uncomfortable for me, they are very interested in talking, they just want a sounding board and that’s what I wanted to be. 

 

If you can’t hear the clip, click here

I realized the importance of talking to customers, listening and learning from them. The more you talk to them you start seeing how painful it was for them.  

They said, ‘We currently have detection techniques that take two days and while we wait for the results we have to store the food.’  What that meant was that until the test results came back the food can’t ship and that’s lost revenue for them. In talking about how expensive the costs of that two-day delay are for them we could start seeing that maybe our research could help these people.  

For me, it was seeing not just what goes on the bench in our lab but there is some sort of real-world application for it.

And to hear it from these people who are not scientists, that was kind of cool.

If you can’t hear the clip, click here

Curt Hazleton is a leader in structural earthquake engineering, focusing on building code development, building collapse safety assessments, and earthquake damage loss estimation. He’s a co-founder and CEO of HB Risk, and a Professor and Department Chair in Civil Engineering at California State University, Chico. He received his Ph.D. in Structural Engineering from Stanford University in 2006. Among his awards, Curt received the 2013 Shah Family Innovation Prize from the Earthquake Engineering Research Institute, honoring an individual under the age of 35 for creativity, innovation and an entrepreneurial spirit in earthquake risk mitigation and management.

Like Sunny, Curt participated in the NSF I-Corps and quickly learned how illuminating customer interviews could be:

We were extremely surprised that by simply getting out of the building and using the customer discovery process you can go and interview people and they’ll tell you exactly what they need and what you can build for them and how much they’ll pay for it.  

If you can’t hear the clip, click here

In doing customer discovery, Curt and his co-founder started out with one customer in mind, but quickly found a more lucrative option:

We initially started with the structural engineers as our target market because that’s what we knew. That’s where we saw the initial need.

As we went through that it’s been verified that there is a market there and they’re interested, but we’ve also seen there’s another market that we call the risk-pricing market. Those are the people insuring the buildings and underwriting the mortgages for the buildings.

They care more. Engineers care about the design of the building, absolutely, but they’re not the ones with the money on the line.

If you can’t hear the clip, click here

Along the way, they met both skeptics and visionaries:

The difference between early adopters and mainstream people was very interesting, especially in the emerging market on the structural engineering side.

The early adopters would see the vision that we see. I was told by one of them it doesn’t even make sense that not everybody is adopting this right away today, because in five years everyone’s going to be doing it.

Then I’d go to people that I would characterize mainstream and they’d say, “Well, it doesn’t meet a need that we have right now.”

We had to take both pieces of feedback and realize it was an emerging market and not everyone would see the vision.

Since then, a few of those skeptic mainstream people have actually come back to us for licenses once they’ve had clients that want this done for them.

If you can’t hear the clip, click here

Ultimately, Sunny and his co-founders killed their startup idea

We decided as a team that there was no match between what we’d learned in customer interviews about where the need was and what we were providing.

We decided we shouldn’t pursue this market.

It was tough at first but when you think about it, we saved time and money. That was the whole point of the exercise.

If you can’t hear the clip, click here

Today he teaches his students at Notre Dame how to use Lean Startup principles. He tells them:

Scientific research it is hypothesis-driven. You’re just guessing and then trying to prove it true or false. This whole commercialization side of things is not that much different. It’s a scientific method.

What you think about your technology is great, but at the end of the day you’re not the one who will be buying this, it will be the customers who will be buying this. The only way to know what they want is to get out of the building and talk to them.

If you can’t hear the clip, click here

Curt said the pace of startup life surprised him

I made more progress in the startup in the first four months than I did in the first four years as an academic chair.  

That doesn’t mean we didn’t make progress in the department. We made a lot. It’s just a different nature. The startup pace has been a lot of fun.

If you can’t hear the clip, click here

Here’s his advice for other academics with tech ideas they’d like to commercialize:

Most researchers come at it with, “I have a product that I really love and I think someone should buy it from me,” and don’t come at it from, “There’s a need in the industry somewhere and I can create something to fill that need.”  

Getting as quickly away from that first approach as possible would be my first recommendation, because in the Innovation Corps process we clearly saw that.  

Most people said, “I have this great technology. I’ve never been out of my lab. I think someone will want to buy it from me,” but the commercial side of it wasn’t there.

You need to get at, “Does anyone care? Does anyone want to buy it?” as quickly as possible.

If you can’t hear the clip, click here

Listen to my full interviews with Sunny and Curt by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Coming up next on the blog: Tina Fitch, co-founder and CEO of Hobnob; and Alice Brooks, co-founder and CEO Roominate

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111 to hear these upcoming guests on Entrepreneurs are Everywhere:

 Want to be a guest on the show? Entrepreneurship stretches from Main Street to Silicon Valley, from startups to big companies. Send an email to terri@kandsranch.com describing your entrepreneurial journey.

Working Hard is not the same as working smart

Measuring how hard your team is working by counting the number of hours they work or what time they get in and leave is how amateurs run companies. The number of hours worked is not the same as how effective they (and you) are.time clock


I had been invited by Rahul, one of my students from long ago, to stop in and see how his startup was doing.  Actually startup would be a misnomer as Rahul had built a great company, now over $50M in annual revenue with hundreds of employees.

We were scheduled for dinner, but Rahul invited me over in the afternoon to sit in on a few of his staff meetings, get some product demos, admire the furniture and the café, and get a feel of the company.

Before we left for dinner I asked about the company culture and the transition from a startup to a company. We talked about how he was on-boarding new employees, managing scale by writing operations manuals for each job function, and publishing company and department mission and intent (he said he got the idea from reading my blog posts on mission and the one on innovation culture). It was all impressive – until we got on the subject of how hard his employees worked. His response reminded me what an idiot I had been for most of my career – “Our team knows this isn’t a 9-5 company. We stay as long as it takes to get the job done.” I looked a bit dumbfounded, which I think he took for impressed, because he continued, “most days when I leave at 7 pm my employees are still hard at work. They stay all hours of the night and we often have staff meetings on Saturdays.”

I cringed. Not because he was dumb but because for most of my career I was equally clueless about what was really happening. I had required the same pointless effort from my teams.

Our dinner was scheduled for 7:15 around the corner so we headed out at 7, announcing to his staff he was off to dinner. As soon as we got outside his building and into the full parking lot I asked Rahul if he could call the restaurant and tell them we were going to be late. I said, “Let’s just wait across the street from your company’s parking lot and watch the front door. I want to show you something I painfully learned way too late in my career.” He knew me well enough to patiently stand there.  At 7:05, nothing happened. “What am I supposed to be seeing?” he asked. “Just wait,” I replied, hoping I was right. At 7:10 still no movement at the front door. By now he was getting annoyed, and just as he was about to say, “let’s go to dinner” the front door of the company opened – and a first trickle of employees left. I asked, “Are these your VPs and senior managers?” He nodded looking surprised and kept watching.  Then after another 10-minute pause, a stream of employees poured out of the building like ants emptying the nest. Rahul’s jaw dropped and then tightened. Within a half-hour the parking lot was empty.

There wasn’t much conversation as we walked to dinner. After a few drinks he asked, “What the heck just happened?”

21st-Century Work Measured by 20th-Century Custom and Cultural Norms
In the 20th century we measured work done by the number of hours each employee logged. On an assembly line each employee was doing the same thing, so productivity simply equaled hours worked. Employees proved they were at work by using time cards to measure attendance. (Even today the U.S. government still measures its most creative people with a time-management system in 15-minute increments.)

Even as white collar (non-hourly) jobs proliferated, men (and the majority of workforce management was men) equated hours with output. This was perpetuated by managers and CEOs who had no other norms and never considered that managing this way was actually less effective than the alternatives.

I pointed out to Rahul that what he was watching was that his entire company had bought into the “culture of working late” – but not because they had work to do, or it was making them more competitive or generating more revenue, but because the CEO said it was what mattered. Every evening the VPs were waiting for the CEO to leave, and then when the VPs left everyone else would go home. Long hours don’t necessarily mean success. There are times when all-nighters are necessary (early days of a startup, on a project deadline) but good management is knowing when it is needed and when it is just theater.

Rahul’s response was one I expected, “This is what we did in investment banking at my first job in my 20s. And my boss rewarded me for my “hard work.” Sleeping at my desk was something to be proud of.”

I completely understood; I learned the same thing from my boss.

Productivity
The rest of the dinner conversation revolved around, if not hours worked what should he be measuring, when is it appropriate to ask people to work late, burnout, and the true measures of productivity.

Lessons Learned

  • Define the output you want for the company getting input from each department/division
    • Use Mission and Intent to create those definitions and the appropriate metrics for measuring them
    • Publish and communicate widely
    • Provide immediate feedback for course correction
  • Define the output you want for each department
    • Define mission and intent for the department
    • Create the appropriate metrics for each employee to match mission
    • Measure and document output at appropriate intervals (daily, weekly, monthly, etc.)
    • Publish and communicate widely
    • Provide immediate feedback for course correction
  • Ensure that the system does not create unintended consequences

The National Geospatial Intelligence Agency Goes Lean

We tend to associate the government with words like bureaucracy rather than lean innovation. But smart people within government agencies are working to change the culture and embrace new ways of doing things. The National Geospatial Intelligence Agency (NGA) is a great example.NGA

The NGA, an organization within the U.S. Department of Defense, delivers geospatial intelligence (satellite imagery video, and other sensor data) to policymakers, warfighters, intelligence professionals and first responders.

A team from their Enterprise Innovation Office has joined us at NYU as observers at our 5-day Lean LaunchPad class, while another team is in Silicon Valley with the Hacking for Defense team learning how to turn their hard problems into partnerships with commercial companies that lead to deployed solutions.


The Innovation Insurgency
Over the last year the National Geospatial Intelligence Agency (NGA) has become part of the “Innovation Insurgency” inside the U.S. Department of Defense by adopting Lean Methodology inside their agency.

In July the NGA hosted the inaugural 2016 Intelligence Community Innovation Conference with attendees from across the Department of Defense and public sector. At the conference Vice Chairman of the Joint Chiefs of Staff Air Force Gen. Paul Selva said, “Implementing innovation [in the government and large organizations] is like a turning battleship, you may have an upset crew with cooks having to clean up spilled food and sailors falling out of beds but that ship can turn with effort. The end result is often that change can happen but it is going to come at the cost of disruption and difficulty.”

The good news for the country is that the leadership of the National Geospatial Intelligence Agency has decided to turn the ship now.

To connect to innovation centers outside the agency, their research group has set up “NGA Outpost Valley” (NOV), an innovation outpost in Silicon Valley. The NOV is building an ecosystem of innovative companies around NGA’s hard problems to rapidly deploy solutions to solve them.

To promote innovation inside the NGA, they’ve staffed an Enterprise Innovation Office (EIO) to coach, educate and advise the entire agency, from core leadership to the operational edges, with methods and concepts of validated learning through rapid experimentation and customer development.

The NGA has adopted Lean Innovation methods to make this happen. The process starts by collecting agency-wide ideas and/or customer problems, collecting a group insight, and sorts which problems are important enough to pursue. The innovation process uses the Value Proposition canvas, customer development and the Mission Model Canvas to validate hypotheses and deliver minimum viable products. This process allows the agency to rapidly deliver projects at speed.

NGA Lean Innovation

To help start this innovation program the NGA’s Enterprise Innovation Office has had their innovation teams go through the already established Innovation-Corps classes at the National Security Agency (NSA), and they’re about to stand up their own Innovation-Corps curriculum inside the NGA. (The Innovation-Corps (I-Corps for short) Program is the Lean Innovation class I developed at Stanford and teach there and at Berkeley, Columbia and NYU. It was first adopted by the National Science Foundation and is now offered at 54 universities, and starting last year taught in all research agencies and the DOD.)

This past week a team from the NGA’s Enterprise Innovation Office observed the 5-day Lean LaunchPad class I’m teaching at NYU.  Their goal is to integrate these techniques into their own Lean innovation processes. From their comments and critiques of the students, they’re more then ready to teach it themselves.

At the same time the NGA Outpost Valley team was in Silicon Valley going through a Hacking for Defense workshop (we call a “sprint.”) Their goal was to translate one of their problems into a language that commercial companies in the valley could understand and solve, then to figure out how to get the product built and deployedLike other parts of the Department of Defense (the Joint Improvised Threat Defeat Agency (JIDA) and the Defense Innovation unit Experimental (DIUX),)  NGA’s Outpost Valley team is using a Hacking for Defense sprint to build a scalable process for recruiting industry and other partners to get solutions to real problems deployed at speed.

Putting lean principles into NGA’s acquisition practices
As part of the Department of Defense, the NGA acquires technology and information systems through the traditional DOD’s acquisition system – which has been described as the antitheses of rapid customer discovery and agile practices. The current acquisition system seldom validates whether a promised capability actually works until after the government is locked into a multiyear contract, and fixing those problems later often means cost overruns, late delivery, and under performance.  And as any startup will tell you, the traditional government acquisition processes create disincentives for startups to participate in the DOD Market. Few startups know where and how to find opportunities to sell to the DOD, they seldom have the resources or expertise to navigate DOD bureaucratic procurement requirements, and the 12 plus months it takes the government to enter into a contract makes it cost prohibitive for startups.

NGA researchA year ago Sue Gordon, the deputy director of the NGA, sent out an agency-wide memo that said in part, “…we must build speed and flexibility (agility) into our acquisition processes to respond to those evolutions. It is our job to acquire the technologies, data and services that NGA and the NSG need to execute our mission in the most effective, efficient and timely manner possible …”

In addition to NGA’s internal Lean Innovation process and innovation outpost in Silicon Valley, they are starting to use open innovation and crowdsourcing to attract commercial developers to tackle geospatial intelligence problems.

This week the NGA posted its first major open Challenge  – The NGA Disparate Data Challenge– on Challenge.gov, the U.S. government’s open innovation and crowdsourcing competition. Government agencies like the NGA can use the site to post challenges and award prizes to citizens who  find the best solutions. Putting a challenge on a crowdsourcing platform is a groundbreaking activity for the agency and opens the possibility for a number of benefits. 

  • Presenting a problem instead of a set of requirements to startups leaves the window open to uncover unknown solutions and insights
  • Setting up the challenge in two stages hopefully gets startups to participate while learning about the NGA and its technical needs
  • Asking for working solutions offers the potential for minimal viable acquisition to quickly validate who can solve the problem prior to committing large sums of taxpayer funds
  • Finding solutions at speed by shrinking the timeline for determining the viability of a solution without the need for executing any large scale contract.

The NGA Disparate Data Challenge has two stages.

  • Stage 1: teams have to demonstrate access and retrieval to analyze NGA provided datasets. (This data is a proxy for the difficulties associated with accessing and using NGA’s real classified data.)  Up to 15 teams who can do this can win $10,000.  And the winners get to go Stage 2.
  • Stage 2: the teams demo their solutions and other features they’ve added against a new data set live to an NGA panel of judges, in hackathon style competition. First place will take an additional $25,000; second $15,000; and third $10,000 with an opportunity to be part of a competitive pool for a future pilot contract with NGA.

NGA’s challenge is its first attempt to attract startups that otherwise would not do business with the agency. It’s likely that the prize amounts ($10-$25K) may be off by at least one order of magnitude to get a startup to take their eye off the commercial market. Curating a crowd and persuading them to work together because the work meets their value proposition is hard work that takes incubation not just prizes. However, this is a learning opportunity and a great beginning for the Department of Defense.

Challenges in Embracing Innovation in Government Agencies
Innovation in large organizations are fraught with challenges including; building an innovation pipeline without screwing up current product development, educating senior leadership and (at times intransigent) middle management about the difference between innovation and execution, encouraging hands-on customer development, establishing links between department and functional silos that don’t talk to each other (and often competing for resources), turning innovative prototypes and minimum viable products into deliverable products to customers, etc.

Government agencies have all these challenges and more. Government agencies have more stringent policies and procedures, federally regulated oversight and compliance rules, and line-item budgets for access to funding. In secure locations, IT security can hinder the simplest process while a lack of access to a physical collaboration space and access to data, all set up additional barriers to innovation.

The NGA has embraced promising moves to bring lean methods to the way they innovate internally and acquire technology. But what we’ve seen in other agencies in the Department of Defense is that unless the innovation process is run by, coached and scaled by innovators who have been in the DOD and understand these rules (and have the clearances), using off-the-shelf commercial lean innovation techniques in government agencies is likely to create demos for senior management but few fully deployed products. (The National Security Agency has pioneered getting this process right with the I-Corps@NSA.)

Lessons Learned

  • Lean Innovation teams are starting up at the National Geospatial Intelligence Agency (NGA)
    • NGA has an Innovation Outpost in Silicon Valley working on it’s first hacking for Defense Sprint 
    • NGA is experimenting with open innovation with its first problem on Challenge.gov
  • The goal of Lean in government agencies should mean deployment not demos
    • In order to successfully deliver products with speed and urgency, this requires coaches and instructors who have been the customer: warfighters, analysts, operators, etc.
    • It will take innovation built from the inside as well as acquisition from the outside to make it happen

Entrepreneurs are Everywhere Show No. 40: Stan Gloss and Matt Armstead

A lot of people, especially in the Midwest, will spend their time thinking too small. They’re a creature of their habit and habitat, in looking at potential investors and market opportunities.

If you see a need or problem and you think you can solve it, you don’t want that destiny to belong to someone else.

You have to disprove the naysayers. You sometimes get a chip on your shoulder and say, “You know what? I’ll show you.

 Thinking big, destiny and naysayers — three things in the life of a startup founder.

Why founders need to be their own boss and how they capitalize on business opportunities were the focus of the guests on today’s Entrepreneurs are Everywhere radio show.

The show follows the journeys of founders who share what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries and more. The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs and lows that pushed them forward.

Stan Gloss

Stan Gloss

Joining me in the Stanford University studio were

  • Stan Gloss, co-founder of BioTeam, consultants that design computer systems for life sciences companies
  • Matt Armstead, a serial entrepreneur and co-founder of Lumos Innovation, which helps Ohio-area founders launch their startup ideas
Matt Armstead

Matt Armstead

Listen to my full interviews with Stan and Matt by downloading them from SoundCloud here and here.

(And download any of the past shows here.)

Clips from their interviews are below.

Stan Gloss co-founded BioTeam following his tenure in business development with AVAKI Corporation, a pioneer in global grid software solutions. Previously, at Blackstone Computing, a computing and IT consulting company for scientists, Gloss led the sales initiative that launched the company in the life sciences market. Prior to working at Blackstone, Gloss was a department chairman and faculty member at Quinnipiac University. 

Leaving the corporate world to do a startup was a leap of faith Stan welcomed:

The previous jobs that I had in big corporations were almost like being in school again. There’s all that structure and all these things that really didn’t play to my strengths.

By being an entrepreneur I have the freedom to build things and do things that play to my strengths.

If you can’t hear the clip, click here

Stan was an account manager at Blackstone Computing when the company was reorganized under a new CEO. Though they’d never done a startup before, Stan and some of his co-workers saw an opportunity in the leadership change. Together, they started down a new path:

Eventually we saw the writing on the wall with the new company and four of us decided to go off on our own and continue doing the consulting piece of what we did. 

We were already entrepreneurial. We just took a leap of faith and said, “We can get all the clients that we had in the consulting company, and we can go out and get more of them together. Look at how good we did here. Let’s just go do that.”

If you can’t hear the clip, click here

Starting the company was a little scary, but it helped that Stan was surrounded by domain experts and recognized his personal strengths, he says:

Everything was new every day. I didn’t even know that area, so I used to sit at meetings and not understand the science. I really didn’t understand high-performance computing either.  

But I knew how to make meetings productive, I knew how to facilitate meetings, and I was smart enough to put our domain expert in the room with the domain expert from the customer.

I used to sit there and just let them talk — and then collect the order at the end.

If you can’t hear the clip, click here

Stan adds that being dyslexic gives him an edge as a founder because from an early age he had to develop skills that turn out to be critical when building a startup:

Every day in school was a day of fear, uncertainty and doubt. You never knew if you were going to get called to the board, you were going to have to stand up and read, all of these things that are very challenging for kids like me with dyslexia. School became was just day-in and day-out hard to do.

You learn to become comfortable with being uncomfortable. You learn to outwork everybody.

You also learn to negotiate. You say, “Hey listen, you’re good at math. I’m good at English. I’ll do your homework if you do mine.” Or you negotiate with the teacher.

And you face people telling you, “No, you’re not going to go to college, no you’re not going to be doing this, no you’re not going to be doing that.” You have to disprove the naysayers. You sometimes get a little chip on your shoulder and say, “You know what? I’ll show you.”

If you can’t hear the clip, click here

Having now done several startups, Matt has learned to keep his eye on a singular aim: The goal is to get customers, not to raise money:

There are a lot of people that are just chasing dollars, trying to get a VC to fund them, and they’ll give up 40 percent of their company in the first round just to get some major amount of money.

I learned that you can actually do things very inexpensively. You can bootstrap it. You can build a Minimum Viable Product. You can learn from your customers.

If you can’t hear the clip, click here

He learned, too, that building a company outside a major startup ecosystem like Silicon Valley doesn’t have to limit a founder’s horizons:

A lot of people, especially in the Midwest, will spend their time thinking too small. They’re a creature of their habit and habitat, in looking at potential investors and market opportunities.

They have to think outside of their own back yard, get really active and make trips out to San Francisco or to New York to build some very important relationships.

If you can’t hear the clip, click here

Matt’s advice for other entrepreneurs included this recommendation about finding co-founders:

I’ve talked to a lot of startup and entrepreneurs that need to find a technical co-founder. They’re just looking for the first person that can code, the first person that fits that capability that they’re looking for.

That’s a mistake. You really have to date a little bit. You have to build a relationship with a prospective co-founder. These are the people you’re working 24/7 with.

If you can’t hear the clip, click here

Listen to my full interviews with Stan and Matt by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere: Chris Schroeder, Internet/media CEO, venture investor and author of “Startup Rising: The Entrepreneurial Revolution Remaking the Middle East” and Andy Cunningham, founder and CEO of Cunningham Collective.

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Want to be a guest on the show? Entrepreneurship stretches from Main Street to Silicon Valley, from startups to big companies. Send an email to terri@kandsranch.com describing your entrepreneurial journey.

Clusters, Class, Culture and Unfair Advantages

Talent Is Universal; Opportunity Is Not.” –Nicholas Kristof

I just finished reading J.D. Vance’s excellent book Hillbilly Elegy, and had that funny feeling when you find the story arc of someone else’s life eerily paralleling yours.hillbilly elegy

Vance’s book and the story of my own life suggest that there is an archetypal journey (a pattern of human nature) that describes the flight from a dysfunctional family and the escape from the constraints of cluster, class and culture.

Here’s how my story unfolded.


Limited Horizons
I grew up in New York in a single-parent household that teetered on the bottom end of lower middle-class in what today we’d call “working class.”

In my neighborhood, successful entrepreneurship meant small businesses entrepreneurs. Before my parents divorced they had owned a small grocery store. One neighbor owned the corner drug store, and another had a furniture store, though most of our neighbors were simply employees with 9-5 jobs in retail and construction. No one I knew had a white-collar job let alone were executives. (Eating out meant a slice of pizza or as a treat, a deli. I wouldn’t eat in a real restaurant until I went to college. I would then discover that this thing called “salad” was ordered before the main course.)

No one I knew had ever started a company (other than a small business). None of the relatives of my parents’ generation had gone to college. The highest aspirations immigrant parents had for their children in my social class were: doctor, lawyer or an accountant – and to drive a Cadillac and live in a house in the suburbs.

Graduating high school our collective aspirations weren’t much higher. Our overworked guidance counselors were adept at slotting most kids on the bottom of the deck into potential blue-collar jobs. In my graduating class of 1,000 students, the “smart kids” wanted to be teachers. A few even aspired to be writers, poets or scientists. The guidance counselors steered them into good state schools.

I was pretty much on my own in high school, which was a huge improvement over the previous 5 years. (Having interludes of normalcy by visiting my aunt’s house a few miles away was one of my havens of sanity and stability. Watching her family having dinner together or listening to them describe their weekend outings or vacations, I remember thinking how weird their family was. It would take me a long time to realize that this is what normal families do together.) My mother was rarely home and never asked about or looked at my homework. I signed (forged) all my report cards. My final grades in my senior year classes were four “mercy” 65’s (the minimum passing grade) and one 98. Most of my classmates who opted for college went to the local colleges or New York State University schools. (The Vietnam War was raging, but going to college gave you a draft deferment.)

Interestingly, none of us believed our possibilities were limited, yet in hindsight our first barrier was that knowledge was local – constrained by our culture and cluster. (Forty years later when the Internet has made knowledge global, we’ve run into the second barrier – just knowing about things is not the great equalizer we expected. We’ve rediscovered that career choices are referential and experiential. Just because you read about it does not mean you know how to apply it to your own life. We still tend to gravitate to careers we’re exposed to in local clusters, and bound by our class and culture.)

In short, even though it was 15 miles into midtown Manhattan, our horizons were limited, and mine, perhaps even more limited. (I would visit my first museum in Manhattan only years later when I returned to New York with my girlfriend showing me around as a tourist.)

The notion of having an idea and building a company was unimaginable. We weren’t dumber than the kids who eventually would populate Silicon Valley, but our career trajectories had been flattened by the limited knowledge and expectations of our cluster, class and culture.

(A cluster is a concentration of interconnected businesses in a specific field in one city or region. Silicon Valley is an innovation cluster that makes hardware, software, biotech and semiconductors. Detroit is an automotive cluster, Hollywood an entertainment cluster, New York City for media and financial services, etc. Class is short for “social class” and refers to wealth, but also to education and social status. Culture is the shared beliefs of others around you. Culture has a strong correlation with class but also is influenced by ethnicity, religion, region, etc.)

Fly Away
Unlike my peers with stable families who stayed in New York, my untenable home life provided the escape velocity for me to leave New York. I wanted to get as far away from it as I could. However, filling out a college application was a mystery to me — What were the right colleges to apply to and how should I answer the questions on the application?  Somehow I figured out how to apply to school in Michigan. (Pre-infinite information on the Internet about colleges, I picked Michigan because I saw them play football on TV, but I ended up applying to the wrong school in Michigan – my first time around I ended up in Michigan State not the University of Michigan. Lucky for me as I never would have been accepted. After the Air Force I found the right Michigan.)

But once I made it to college I was lost. I had none of the discipline, study skills and preparation I needed. After one semester, I dropped out when my girlfriend said, “Some of us actually want to be here and are working hard to learn something,” and I realized she was right. I had no idea why I was in school. Some small voice in the back of my head said that to survive I needed some sort of structure in my life, and had to learn some marketable skills.

In the middle of a Michigan winter, I stuck out my thumb and hitchhiked to Miami, the warmest place I could think of. I had no idea what would be at the end of the highway. But that day I began a pattern that I still follow—stick out your thumb and see where the road takes you.

I managed to find a job at the Miami International Airport loading racehorses onto cargo planes. I didn’t like the horses, but the airplanes caught my interest. A technician took me under his wing and gave me my first tutorial on electronics, radar and navigation. I was hooked. For the first time in my life, I found something I was passionate about. And the irony is that if I hadn’t dropped out, I would never have found this passion…the one that began my career. If I hadn’t discovered something I truly loved to do, I might be driving a cab at the Miami airport.

While college had been someone else’s dream, learning electronics became mine.

So I enlisted in the Air Force during the Vietnam War to learn how to repair electronics. I didn’t tell my family I had enlisted (I told them I was going camping) figuring that if I couldn’t make it through basic training, no one would know. (It turns out my unconscious search for a stable, structured environment is a common theme among many military recruits.)

After nine months in electronics school, when most everyone else was being sent overseas to a war zone, I was assigned to one of the cushiest bases in the Air Force, right outside of Miami.

My first week on the base our shop chief announced: “We’re looking for some volunteers to go to Thailand.” I still remember the laughter and comments from my fellow airmen: “You got to be kidding, leave Miami for a war in Southeast Asia?” Others wisely remembered the first rule in the military: never volunteer for anything. Listening to them, I realized they were right. Not volunteering was the sane path of safety, certainty and comfort. So I stepped forward, raised my hand—and I said, “I’ll go.”f-105g wild weasel

I was going to see where the road would take me. Volunteering for the unknown, which meant leaving the security of what I knew would continually change my life. People talk about getting lucky breaks in their careers. I’m living proof that the “lucky breaks” theory is simply wrong. You get to make your own luck. 80% of success in your career will come from just showing up. The world is run by those who show up…not those who wait to be asked.

For four years I worked within a “cluster” of like-minded individuals (the Air Force) who shared the same mission. More importantly, as an electronics technician, I was now hanging out with a crowd of pretty smart guys (the military was then all guys) repairing complex electronics and microwave systems. basic training
We tutored each other, read books together, went on adventures together and learned together. And while most of us came from totally different backgrounds (I never knew you put salt of watermelon, that Spam was food or muffuletta was a sandwich), as far as the military was concerned, we were all the same “class” – enlisted men – denoted by the rank on our sleeves. And what I didn’t realize at the time is that I was being mentored some of the senior enlisted guys a decade or two older than me. I’m not sure it was a conscious effort on their part, (I know it wasn’t on mine) but what people don’t realize is that mentorship is a two-way street. While I was learning from them – and their years of experience and expertise – what I was giving back to them was equally important. I was bringing fresh insights to their data. This pattern of mentorship would continue and profoundly impact my career in Silicon Valley.f-105g wild weasel

So here I was 19, my first days of adulthood, in the middle of a confusing and unpredictable war zone learning how to repair electronics as fast as I could. It was everything life could throw at you at one time with minimum direction and almost no rules. (Service in the military is a life and death lottery. While we were living the good life in Thailand, the Army and Marines were pounding the jungle every day in Vietnam. Some of them saw death up close. 58,000 didn’t come back – their average age was 22.)steve in Thailand 2 ARL-46

A few years of this sifted and sorted us in a way that foreshadowed our future career paths. It turned out that the skills I had learned growing up in order to survive in constant disorder turned out to be what I needed to excel in this environment: comfort in working in chaos and uncertainty (heck, that was how I woke up every day), pattern recognition (if you couldn’t see it coming before others, you were screwed) and the ability to shut down external distractions and relentlessly focus on a single problem (staying sane in my home life.)  While I might have refined these skills in a different environment, the sink-or-swim daily exigencies of the Vietnam War honed them to a fine point.

These would be the identical skills I would need to succeed in Silicon Valley. Though I would pay the cost of having learned them for the rest of my life.

While the paths of our lives would radically diverge, for the first time I had a sense of a cluster, class and culture where it felt like I belonged. The Air Force turned out to be the first melting pot I would encounter (Silicon Valley the next) where individuals from different classes and culture had the opportunity to share a common goal and move beyond the environment they grew up in (foreshadowing Silicon Valley startup culture.)

When I came back from Southeast Asia, I was assigned to a Strategic Air Command base with nuclear armed B-52s in Michigan where the Calvin Ball rules of a war zone — “do what you need to do to get the job done” — no longer applied. It was now, “follow the rules exactly” – not something I was really good at. Realizing that this wasn’t the long-term profession for me, I left after my four years were up, having learned electronics and gained awareness of a larger world and career paths.

Silicon Valley
I now found myself back in school in Michigan, and my girlfriend who first told me to leave as an undergraduate was now my wife working on her Ph.D. Within a year I would drop out again (a divorce, and an extreme lack of interest in theory and more desire for practice – more payback for learning survival versus social skills). It would be the last time I would spend on a college campus as a student. It would take 25 years to return to a campus — this time teaching at Berkeley, Stanford, NYU and Columbia.

I found a job in Ann Arbor working as a field engineer. Decades later, I realized that the broadband network company where I worked, installing high-speed process control networks in automobile assembly plants and steel mills (before Ethernet existed), was one of the few pioneering startups in Ann Arbor. It would turn out to be the first of many bridges to somewhere else.

One day the company sent me and an engineer across the country, to a city none of us had ever heard of – San Jose, California – to install a process control system in a Ford Assembly plant. (We were so clueless about where San Jose was that at first the company admin got me tickets to San Jose Puerto Rico.)

Getting off the plane and into our rental car headed to our motel we tuned the radio to the local music station and a commercial came on blaring, “scientists, engineers, technicians, Intel is hiring…” We almost drove off the road. Did we just hear this right? Someone is advertising electronics jobs on the radio?  And then the music came back on like this was just another ad. WTF?

To put our reaction in context, in Ann Arbor there really wasn’t much of an electronics cluster (a few machine vision companies), so for amusement each week a few of us would scour the local newspaper for electronics job listings to see if other companies were paying any better than ours. It was a good week when we would find one or two listings.  What kind of place were we in that advertised for engineers on the radio?

After we checked into our motel, I bought the Sunday edition of the local newspaper – the San Jose Mercury News. I was a bit confused why this newspaper was thicker than the Sunday New York Times. In our room, as my roommate grabbed the shower first, I turned on the TV and started flipping through the paper. First section – normal news, second section – normal sports, third section – normal arts/entertainment, fourth section –  classified ads and more classified ads and more classified ads and more classified ads. In fact, there were 48 pages of classified ads (I counted them several times) and almost all of them were for scientists, engineers, technicians, and tech support – woah.

Just as I was trying to process what I was seeing in the newspaper, thinking this couldn’t be real, the TV program switched to an ad and snapped my head right out of the newspaper with an earsplitting – “Engineers, looking for a better job? Four-Phase Systems is hiring…”

I leapt off the bed, banged on the bathroom door, dragged my roommate out of the shower, and with a towel wrapped around him we both stared at the TV and caught the last few seconds of the TV commercial. There would be several more during our stay. We spent that evening reading every one of the 48 pages of job listings.

The next day, working at the Ford assembly plant, I kept wondering, “Where the hell was I?  How come none us had ever heard of this place?”  (The answer was that Silicon Valley at the time was primarily building military weapons systems, semiconductors and test equipment, all business-to-business sales with no products aimed at consumers.)

After our work in San Jose was done, the engineer who came out with me flew back home. (For decades I couldn’t understand why. All he said was, “My parents are in Michigan.”)  With nothing holding me to any place, I stayed, started interviewing and got my first job in the Valley.

My horizons of cluster, class and culture were about to expand once again. I felt like I was in on a secret no one else had yet understood. In phone calls to my friends back in Ann Arbor I tried to explain what was happening here, but to be fair even I didn’t understand we were standing at ground zero of inventing the future. Here was an environment where what you could accomplish meant more than who you knew. Technologists were running companies, as no serious MBAs would go near these places, and investors were company builders, teaching founders how to grow revenue and profit. While I would struggle for years accepting help from others (in my previous life it always came with strings) those who succeeded paid it forward by sharing what they had learned with new arrivals like me.

Endlessly curious, I drank from the firehose of opportunity that was the valley. I went from startups in military intelligence to microprocessors to supercomputers to video games to enterprise software. I was always learning. There were times I worried that my boss might find out how much I loved my job…and if he did, he might make me pay to work there. To be honest, I would have gladly done so.  While I earned a good salary, I got up and went to work every day not because of the pay, but because I loved what I did.

As an entrepreneur in my 20s and 30s, I was lucky to have four extraordinary mentors, each brilliant in his own field and each a decade or two older than me. For the next four decades I would work for them, be mentored by them, co-found companies with them and get funded by them.

In Silicon Valley in the 1970s, I had come pretty far from someone who had puzzled through how to fill out a college application. Though the imprints of how I grew up would always be with me, (many detrimental) through intuition, curiosity and luck, I had started to move beyond the cluster, class and culture of my youth.

——

In reading Hillbilly Elegy I realized that my story is not just my story, it’s a recurring archetypal journey about lucky individuals — those whose brain chemistry is wired for resilience and tenacity and who manage to flee from a dysfunctional family and escape from the constraints of cluster, class and culture. They come out of this with a compulsive, relentless and tenacious drive to succeed.  And they channel all this into whatever activity they can find outside of their home – sports, business, or …entrepreneurship.

Lessons Learned

  • Your local environment – cluster, class and culture – shape your initial trajectory
    • Some people who don’t have the advantages of  cluster, class and culture growing up will seek them out
  • It takes a lot of escape velocity to break out

Entrepreneurs are Everywhere Show No. 39: Jeremy Johnson and Michael Eidsaune

The existence of a problem doesn’t mean there’s a solution to that problem. Wanting to create impact is great. But to do it, you need to actually have a sustainable business model.

I don’t recommend anyone become an entrepreneur. It’s too hard. It’s too painful. Starting a business is too risky. There are better ways to make a living. Yet I can’t imagine doing anything else.

One mistake was trying to build out too much tech too quickly. We thought that the tech was going to be the solution, that if we added more features, it would solve the problem. We were wrong.

Identifying a problem doesn’t mean you’ve automatically created a business.

And building a startup is not for the faint of heart.

The tools and temperament needed to get from startup idea to startup success were the focus of the guests on today’s Entrepreneurs are Everywhere radio show.

The show follows the journeys of founders who share what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries and more. The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs and lows that pushed them forward.

Jeremy Johnson

Jeremy Johnson

Joining me in the Stanford University studio were

  • Jeremy Johnson, founder of Andela, which embeds talented software engineers on the African continent into top engineering organizations worldwide
  • Michael Eidsaune, co-founder of Carely, a software platform that facilitates communication among families caring for sick or elderly relatives
Michael Eidsaune

Michael Eidsaune

Listen to my full interviews with Jeremy and Michael by downloading them from SoundCloud here and here.

(And download any of the past shows here.)

Clips from their interviews are below.


Jeremy Johnson is an education innovator. Prior to founding Andela, he co-founded 2U, an education technology startup that went public in 2014. 
Outside of Andela, Jeremy serves on the board of the Young Entrepreneur Council and the education non-profit PENCIL and co-authored a book Education & Skills 2.0: New Targets & Innovative Approaches.

Before founding 2U, Jeremy developed Zinch, intended to be a virtual guidance counselor to help low-income students navigate the college application process. He explains why it didn’t get off the ground:

It was a great idea, but a terrible company. 

It turns out the existence of a problem doesn’t mean there’s a scalable or profitable way to solve that problem — or at least at the time.

The goal was to help low-income students better understand the college application process.

For the past 30 years great colleges have approached recruitment by creating a list of names from the PSATs and then sending out glossy brochures. Often they don’t think about it through the lens of what is the best way to spend or allocate resources to try to get better students. So while Zinch was trying to create an offering that would support low-income students that wasn’t where the majority of college recruitment dollars were being spent. So it was tough. We couldn’t charge the low-income students we were looking to help enough to keep the business going.

In the end we learned that wanting to create impact is great. But to be able to do it, you need to actually have a model that sustains it.

If you can’t hear the clip, click here.

The effort was a good learning experience, he says:

The beauty of trying things when you’re 21 and have no idea what you’re doing is that you get the chance to make a lot of mistakes really quickly and learn from them.

One mistake we made was trying to build out too much tech too quickly and thinking that the tech was going to be the solution, that if we added more features, it would solve the problem. We were wrong.

We thought, ‘Why don’t we think through all of the different potential users that might use a system and how they might want to interact with it?’

We tried to boil the ocean in the most literal sense.

If you can’t hear the clip, click here

Prior to founding Carely, Michael Eidsaune earned his MBA in finance and spent several years in investment management, eventually earning his level 1 CFA certification. He also worked for a time as a contract negotiator for the US Air Force.

The idea for Carely was sparked by personal family experience. Michael started the company with his father-in-law, working on it part-time, while he worked with the Air Force.

Since its founding four years ago, Carely has seen ups and downs. Michael’s vision and passion have gotten him through it:

I don’t recommend anyone do this. It’s too hard. It’s too painful. Starting a business is too risky. There are better ways to make a living that are much safer.

And yet, while I would never recommend anybody do this, I can’t imagine doing anything else.

If you can’t hear the clip, click here 

An experienced team made all the difference to 2U finding success, Jeremy said:

We had a phenomenal early group of people that were brought together to try to address the problem.

You might look at it and say, “In some ways, that team is overkill for an early-stage company. These people are overqualified for what they’re doing.”

But it turns out that when you’re growing really quickly, having folks who have been through it a couple times before is really useful in the early days, even to make sure that you’re able to really grow effectively while maintaining culture. 

If you can’t hear the clip, click here

Andela selects and trains world-class tech talent from Africa and matches them with U.S. companies. Here’s how Jeremy came up with the idea for Andela, and why he decided to create the company even though he was still working on 2U at the time:

A good friend invited me to Nairobi to give a talk for the MasterCard foundation on the state of online education around the world. That kicked off this long conversation about how you might try to leverage this evolution of education technology to create scalable impact in places where tuition couldn’t be the driver of growth.

At the same time, I’d gotten to know a young Nigerian serial entrepreneur who had become sort of a friend and mentee, and was building something similar to 2U but focused on Africa. Through those two experiences I became more and more familiar with the continent. As I was thinking through the notion of what would become Andela, my initial thinking was, “We’ve just gone public. We’ve got a lot of work to do. This is not something I can spend time on. I could potentially fund it and put the team together, but I’m busy.”

At the same time I thought, “This should exist in the world.” We put a small team together, funded it initially, put a pilot together. We were looking for four students for the program, four developers in training, and we ended up getting 700 applicants in a week.

We got that down to six finalists. I went to Nigeria to meet that first cohort, interview them and try to pick four from the six. I realized after half a day of interviews that each one of them would’ve run circles around my classmates at Princeton. 

If you can’t hear the clip, click here

Jeremy dropped out of Princeton to become an entrepreneur. Here’s what he says about founders going to college:

You’re never going to convince someone to work with you because you have a degree.

You’re never going to come up with a different strategy for how you approach the world. You’re never going to raise funding or bring in different teams by virtue of your degree.

A college degree is great if you’re looking to get hired. But if your goal is to be an entrepreneur then it’s a little bit different and folks care a little less about it. 

If you can’t hear the clip, click here

Carely was built to foster communication among family members with sick or elderly relatives in a nursing home, assisted living residence or hospice care.  

At first Michael and his co-founder thought they’d be selling to individual users, but after talking with service providers, they realized there was a bigger opportunity:

I took our prototype – a PowerPoint presentation — out and sat down with several CEOs of a hospice organization, a nursing home, home-care company and said, “Hey, this is something we think we would use as a family. Tell me why it won’t work.”  

In doing that, we learned that the problem was more applicable than just our family — that lots of people were dealing with this idea of miscommunication and frustration wrapped around care giving.

We realized that there was a value proposition there for the actual industry. The providers of care actually liked the product and would pay for it because when a family’s not doing a good job communicating with each other around their loved one, it’s often the facility or the care provider that has to step in and play middleman to those conversations.

If you can’t hear the clip, click here

A pivotal meeting with nurses at Hospice of Dayton in Ohio helped them figure out what features to build:

It was a bit like leading sheep to wolves, and became one of our biggest learning moments.

The reality is nurses don’t have a lot of extra free time to learn a new system and to try something new. They wanted something that would help improve the lives of their clients’ families. They loved that part of the company. But they didn’t want to have to learn a new system and learn a new task and add something to their to-do list at the end of the day.

So we just said, “OK, if you guys don’t want that piece of it, we’ll leave it out.”

At this time, we hadn’t even built the product yet. We hadn’t invested any money into development, so we just didn’t develop that piece.

If we’d built the product first, however, we would have wasted months and thousands of dollars.

This is a perfect example of why it’s important to talk to customers. For the first six months we spent only a couple of hundred bucks.

If you can’t hear the clip, click here

Somewhere along the line, however, Michael and his co-founder stopped listening to customers. Here’s what happened:

We got the product out; we got paying customers.

We thought we figured it out. We assumed we had product-market fit and all we had to do was keep selling.

The problem was had the wrong business model at the time. Our revenue model was wrong.

We were charging a really high up-front annual fee to these providers and the end result of that was a pretty long sales cycle. It involved lots of face-to-face selling and it wasn’t enabling us to scale the product very quickly.

It took about 2 months to realize we needed a new pricing strategy, from, an average $5,000 to $10,000 a year per provider to about a $99 a month provider fee.

We tested the new strategy with several customers in the pipeline and it took our sales cycle from about 60 days to 1 week. Plus, it enabled us to scale much more quickly with much less effort.

But by then we were so far along our original path. My co-founder didn’t quite agree with the change of direction because it was going to involve us taking on some outside capitol.

I made the tough decision to go against what he wanted to do and it led to us kind of breaking up the company at the time.

If you can’t hear the clip, click here

Listen to my full interviews with Jeremy and Michael by downloading them from SoundCloud here and here (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere: Stan Gloss, co-founder of BioTeam; and Matt Armstead, co-founder of Lumos Innovation.

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Want to be a guest on the show? Entrepreneurship stretches from Main Street to Silicon Valley, from startups to big companies. Send an email to terri@kandsranch.com describing your entrepreneurial journey.

Hacking for Defense in 2 minutes

Hacking for Defense in 2 minutes.

If you can’t see the video click here

Hacking for Defense class here

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