Category: Entrepreneurship

Entrepreneurship is Natural Talent Plus Training

Category : Entrepreneurship
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Entrepreneurship is natural talent plus training. So is success in any other endeavor. People buy it in sports, art, music, foreign language and math, but those same people don’t believe its true in entrepreneurship. They’re wrong.

There’s a narrative that entrepreneurs are born, not made. This is true of the Elon Musk’s, the Lionel Messi of the entrepreneurship world. The entrepreneurs with the highest potential to change the world are born with immense talent, but they also train incredibly hard. These are the (mostly) guys who had lemonade stands, sold candy out of their lockers or cut lawns, etc.  If you want to be in the top 1% of entrepreneurs, you need to be born with the talent to do it and have the opportunity and training to take advantage of the talent.

But the narrative is completely false for the rest of entrepreneurs. If you’re in the top ~60% of natural entrepreneurial talent, with the right training and opportunity, you can be successful. Just like anyone in the top 60% of athletic ability can learn to play a sport competently. By training your entrepreneurship talent you can take control of your life and ditch being chained to a desk, slaving away for someone else.

I’ve seen it first hand teaching entrepreneurship classes at two universities. Between the ~40 entrepreneurs in the two classes I teach there are only two stereotypical entrepreneurs. The vast majority have already graduated and worked in big companies or are engineering students still in school. They are nearly all first time entrepreneurs who have interesting ideas and some entrepreneurial talent. But nearly all of them will fail without training. We’re giving them the tools they need to have a better chance at success, just like a soccer coach would train people who want to get better, or how you’d train yourself to get better at a foreign language.

We’re not alone. There’s tons of entrepreneurship classes that are having the same success we are. Many of them are doing it on a bigger scale. But still, the narrative persists. I am confident that if you’re in the top 60% of entrepreneurial talent and want to train hard, you can be a successful entrepreneur. It can be self training like starting a business on your own, but it can also be guided in a classroom or on the internet.

Entrepreneurs who mowed lawns, had lemonade stands or sold candy at school got a head start on their training compared to others. They had decent talent, but got started training earlier. That’s why many of the successful entrepreneurs fit the narrative. But it’s never too late to start. My class is proving it. Lean startup is proving it. Countless programs around the world are proving it.

We need to start to think about entrepreneurial skills as any other life skill: something we can learn and something that should be part of a well rounded human being. Once we break the narrative, we’ll unlock our society’s entrepreneurial potential and help more people break the chains of needing a job. They’ll be able to support themselves as their own bosses.

Rethinking Startup Chile 2.0

Category : Entrepreneurship, Startup Chile
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20120904-start-up-chile-logo
Startup Chile is one of the most innovative government programs I’ve ever seen. Chile’s government wanted to improve it’s entrepreneurial ecosystem, change the culture to support entreprenuership, create jobs and diversify the economy. Instead of investing in infrastructure like expensive research parks or picking a few companies to invest hundreds of millions of dollars, Start Chile gives entrepreneurs $40,000 grants, a visa and office space in exchange for coming to Chile to work on their business. Since 2010 more than 600 teams have come to Chile to develop their business. It’s an unquestioned success.

The culture has improved, Chile’s known for startups, many companies are having success and most of the money is being recycled into the Chilean economy. Entrepreneurs are staying, partnering with Chileans and continuing to find success. After being featured (for free) in every important media outline in the world, the worldwide perception has changed.

Before: Earthquakes, wine exports, fruit exports, rescuing miners. Now:  When I went to South By Southwest, everyone had heard of Startup Chile and talked about Chile as an innovative, startup friendly country.

When I first came to Chile in 2010 a typical conversation with a new Chilean acquaintance was:

Chilean: “Where do yo work?”
Me: “I have my own business.”
Chilean: Quizical look. “So you don’t have a job?”
Me: “No, I have my own business”
Chilean: Confused. “So you’re unemployed?”

Now people say, oh awesome, entrepreneurship, followed by “I have an idea for…” or “my boyfriend, sister, best friend has an idea for…” In 2010 girls I’d meet would turn up their nose at entrepreneurship, be worried and ashamed that they couldn’t explain what “an entrepreneur” did to their friends and parents. Now, while they still prefer someone who works in a big company, it’s at least cool to have your own business.

The program is working and other countries are starting to emulate Chile’s success. Brazil has launched the most credible alternative, but companies have to give up equity to private incubators. I believe Startup Chile could make a few changes to improve version 2.0, if they decide to do it and that other entities should being to copy the model. I doubt another country will be able to do it on a national level because of national politics, finances and beurocracy. That Chile was able to is almost a miracle and a huge credit to SUPs founders. But a state, city or even private foundation in a desirable country like the US, Canada, most of Europe, Australia, etc could iterate on the model and find success.

Creative, innovative, hard working people power our new tech driven economy, relying on an ever shrinking percentage of the population to grow the economy. Cities and countries should be competing to attract this top talent. And an iterated Startup Chile type program is one of the most cost effective policies that one can impliment. Here’s how I’d structure a Startup Chile 2.o, whether it’s on a country, state, city, or even private foundation level:

1. Give entrepreneurs equity free grants in exchange for moving to your city for 4-8 months. Grants can be between $20,000 and $80,000, depending on the incentive needed to get people to move. For example, Chicago is an incredibly livable city and might only need to pay $20,000, whereas Des Moines, IA might have to pay $60,000, and Gary, Indiana, $80,000.

2. Entrepreneurs apply online, but to be selected you must have an in person or skype interview. In person preferred, but skype will suffice. A skype interview would have weeded out many of the maringal Startup Chile entrepreneurs.

3. Judges should be successful entrepreneurs and investors. No academics, government officials or lay people.

4. Favor entrepreneurs with experience, judge on quality of entrepreneur (80%), less on the quality of the idea (20%).

5. Favor entrepreneurs who are attacking a need in the local market. The best Startup Chile companies attack the Latin American market or at least use it as a test market. These teams are more likely to stay after the program ends.

6. Never bring more than 20 teams per month.  SUP currently brings teams in groups of ~50 six times per year. That’s too much. Bring 20 every month to increase networking, camaraderie and even out entrepreneur demand for services.

7. Help with housing, social life and integrating with the city. You want entrepreneurs to stay. Make their lives easy. Don’t let them live in bad neighborhoods and help them with network.

8. Fund entrepreneurs in residence to act as mentors and search for ideas in the local market. Give entrepreneurs time and a bit of money and they’ll find a problem to solve. After I sold Entrustet, I would have loved to get paid a stipend to cover living expenses to come to Chile, mentor SUP particpants and look for ideas. Bring entrepreneurs to your city and watch them work.

9. Require weekly mentorship meetings with EIRs, local mentors and local team. This fosters relationships between the local staff, gets the entrepreneurs more plugged into the city and forces them to have some accountability.

10. You recieve 50% of the money up front. After half of the program, there’s a progress report. ~25% of teams recieve no further funding. They may stay in the program, but don’t get more money. The savings are used for follow on rounds for the top ~10% of companies or EIR ideas.

11. A strong demo day to force entrepreneurs to show what they’re doing publicly and give them press, connections and a taste of being in the spotlight.

12. A private weekly blog to track company progress. Mentors, peers and team can view, comment and give feedback.

13. Alumni tracking. The strongest accelerators (YC, Techstars, 500 Startups), have powerful alumni networks, analytics about previous companies. They know why they failed and succeeded. Use this data to show that the program is working, plus iterate on the model to improve entrepreneur selection.

I would love to see Madison or the state of Wisconsin be the first place in the US to iterate on the model. Whether the funding comes from the city, the state or even a private foundation, I think Madison could do something incredibly innovative for $750,000. That’s a drop in the bucket for the state budget, a bigger commitment for the city, but completely in reason for a private non profit.

I would bring 10 teams to Madison for four months (summer/fall of course) and give them an initial grant of $20,000, help finding office space, a place to live and connections to the local startups. After four months, I’d give the most successful ones a follow on round of $40,000 as a incentive to keep them in town. I’d also bring 5 entrepreneurs in residence to act as mentors and search for their own ideas. I’d hire a staff of 4 to manage the program, rent a small office and get going.

For $400,000 of grants, plus an office and four jobs, you could replicate Startup Chile in Madison. At least half of the $400,000 would likely be spent on local rent, hiring locals and at bars, restaurants and local service providers. For a total of $750,000 you’d immediately create four jobs and jumpstart your economy. After the first round, we could see if it was working. I bet it would be. And then we could iterate some more and expand.

Focus on people and your economy will grow.

I’m Teaching Entrepreneurship at Two Chilean Universities

Category : Entrepreneurship, Startup Chile
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I’m back in Chile teaching an entrepreneurship class this semester at Universidad Católica in Santiago and Universidad Católica del Norte in Antofagasta. The class, How to Build a Startup, is the latest iteration of the class that Enrique Fernández and six of our fellow pilot round Startup Chile entrepreneurs set out to create back in 2010 when we designed the entrepreneurship class we’d wished we’d had before we’d started our businesses. Our goal is to teach students by doing, not from a book.

Students come with an idea, or even a business they’ve already started working on, and we show them the tools and the frameworks they need to build a fully functional, tested, validated launched business by the end of the semester.

Enrique and I have been creating the material and getting ready for the past few weeks.  I’ve advised the class and mentored students in previous semesters, but this is the first time I’m actually teaching full time. My first class was this past Wednesday and I can already tell it’s going to be a really fun semester. I’m going to be writing a post each week about what we’re doing in the class and sharing our assignment in hopes that those who can’t attend the class can follow along here.

Your Internet Business Probably Isn’t A Startup

Category : Entrepreneurship
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We have a big problem: people think that just because their company uses technology or makes sales online that it makes their business a startup. They couldn’t be more wrong. 95% of online or technology business are small businesses. They’re lifestyle business. And there’s nothing wrong with that.

Unfortunately a cadre of investors, successful (and wannabe) tech startup entrepreneurs, Hollywood and the media have bastardized the words entrepreneur and lifestyle business. Entrepreneur now only refers to people working to become the next Facebook and lifestyle business is used as a pejorative by investors who know they can’t get their desired 10-50x returns. People dismissively say, “ Why bother with that, it’s just a lifestyle business?” And entrepreneurs start to think that if they want to start a business, they need to find a way to stretch their small business idea into the box of tech startups.

I see entrepreneurs make this mistake every week. They religiously believe that their small business that happens to use the Internet needs to raise $1m, grow rapidly and get acquired by a tech giant. In reality, they have a small business that could generate a decent profit each year. They could support themselves nicely, but they cling to the idea that they’re a startup. No! They’re a traditional small business that happens to use the Internet.

An entrepreneur is not synonymous with Internet tech startup entrepreneur. Entrepreneurs come in all shapes and sizes: everyone from Mark Zuckerburg to the guy selling tshirts on his college campus. It doesn’t mean taking big investments from well know VCs. It’s not rapid growth to try to take over the world. Being an entrepreneur is creating value and being responsible for the gains and losses.

We got into this mess for two reasons. First, entrepreneurs have been beatified by the press, Hollywood (The Social Network, Shark Tank) and politicians who have fostered a “job creating culture” around entrepreneurs who are now these superhuman people who do incredible things. Now when people think of entrepreneurs, they think of tech startups like Facebook, Twitter and Instagram: companies that took massive investment, grew rapidly and changed the world.

Second, VCs, angels and tech entrepreneurs have pejoratively demonized small business as a “lifestyle business” which makes these potential entrepreneurs feel unworthy unless they’re starting startups. Successful tech entrepreneurs and investors say things like “its hard enough to start a small business, why not aim big?” At best, it’s a confirmation bias because those are the companies that VCs, angles and serial tech entrepreneurs have seen succeed. At worst, it’s because VCs and angels have no interest in small businesses and lifestyle businesses because they’ll never generate the 10-50x returns that these investors need to make money on their funds.

The confluence of these trends means that entrepreneurs who have great small business ideas think that they need to fit into the tech startup box. Instead of growing like a small business, they try to raise money, get rapid growth and delude themselves that someone like Facebook will buy them for millions of dollars. They end up beating their heads against the wall and failing because they’re wasting their time on things a small business has no business doing and wasting their precious money on things a small business shouldn’t ever focus on.

I’ve been advising a small business that thinks it’s a startup over the past two years. They have a great idea, passion and over six figures in revenue each year. But among many other problems, they’ve always thought of themselves as a startup that should have massive growth. They’ve dreamed of an acquisition by a tech giant, raising money and taking out loans trying to achieve this massive growth. It’s been obvious since day one to everyone outside of the founding team that they’re in fact a small business, not a startup. A potentially very profitable small business, but a small business nonetheless.

But the founders won’t give up the startup dream. And they will fail and go bankrupt despite having a small business that should be generating a profit of $250,000 this year because of their inability to admit reality.

This is an extreme, but not isolated incident. I see it every week. As entrepreneurs, we need to stop perpetuating the myth that every business is a startup. We should be encouraging small business creation that happens to use the Internet. We should create more resources for these entrepreneurs to learn about how to grow. And these entrepreneurs should be accepted as the real entrepreneurs that they are. They need to know that they’re not the same as Facebook. They’re closer to a corner store. And that’s just fine.

The US needs small business. They create the vast majority of new jobs each year. And sustain millions of families each year. Internet small businesses are one of the most promising paths to success in our economy. But we need to get this problem under control.

To reiterate: just because your company uses technology or makes sales over the Internet does not make it a startup. There’s nothing wrong with that. Rock it. Embrace it. Earn your money. Live a great life. And stop trying to be something you’re not.