Timing is everything. Why not be entrepreneurial while in college?

Yesterday I interviewed an entrepreneur who graduated from Cornell with a Ph.D in Chemistry and went directly into a local startup.  When I asked him why he would choose this path (seemingly more risky than a corporate or academic track), he smiled and said “what better time would there be?”  I’ve heard that often—see our 800+ clips from entrepreneurs who started in college.

My conversation with the Ph.D graduate reminded me that even in demanding, rigorous academic settings such as Cornell, the entrepreneurial spirit is undaunted, finding its way to the surface.  Sometimes this results in a new startup company, other times expressing itself as an entrepreneurial adventure on campus.  Two examples come to mind.

blog18_image11. Entrepreneurial Campus Adventure.  Mac Bishop, an advisee of mine, started a very innovative student group with some others called fEEDBAK, with a stated goal “to provide apparel companies with targeted market research, strategic counsel, and creative design suggestions, while providing students with tangible industry experience and insight into the apparel production process. “ This is no trivial undertaking.  Read about their work with Pendleton Wool here.

The students in fEEDBAK went  through a complete simulation of running a small apparel brand – designing, producing, marketing, and selling a complete line.  That means working together as an effective team, being creative, and meeting all kinds of deadlines and milestones—all great experiences for budding entrepreneurs.

blog18_image22. Actual Companies run by students.  In 2008, Student Agencies and [email protected] collaborated to create eLab, Cornell’s Cornell’s “newest opportunity for “High Potential Entrepreneurs”…. a non-profit (501c3) entity whose mission is to provide business acceleration services to Cornell Undergraduate Entrepreneurs.  This is an exciting new accelerator for student entrepreneurs, and has aided various business concepts including, but not limited to:

  • Ancillare (tactical outsourcing  company)
  • Anjolie Ayurveda (I can personally vouch for their wonderful all natural, handmade Ayurvedic soaps from India)
  • Better Battery – (cheaper, longer lasting, more environmentally friendly laptop batteries.)

Should students consider entrepreurial activities in college?

As a college professor myself, I do warn students about mixing business with academics.  On the academic side, classes, homework, exams, projects and presentations have due dates that are not typically fungible.  On the business side, customers, suppliers, investors care only about executing the business processes in a timely way.  Thus, an inherent conflict is always there for student entrepreneurs.

Still, I can’t help wondering why we in academia cannot do a better job of taking advantage of the “learning moments” that are an outcome of the ups and downs these entrepreneurial students are having with their businesses.  It would be great to find a way to apply the tools of teaching to help surface the “lessons” students are learning and share them in a collaborative environment.  At the same time, the classroom environment/discipline could help the students reflect, analyze and generalize the lessons to broader principles.  And students could benefit from applying the frameworks and tools that come from a business education, while earning credit for work that helps to accelerate their businesses.

Hmm…how about a course called Experiential Entrepreneurship?  Might just have to ponder that.

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Entrepreneurs need Tacit Knowledge

Kirsten Barker, President of Prendismo,  recently gave a new twist to an old saying: explicit knowledge is knowing that a tomato is a fruit (scientifically speaking).  Tacit knowledge is knowing not to use that tomato in a fruit salad.

The tacit knowledge, the sort of insider wisdom gained from experience is often the most difficult to capture, but the most important thing to have.

In my conversations with entrepreneurs, I see this all the time.   Here are some examples:

Whenever an entrepreneur accepts capital in exchange for ownership in the company (e.g., through friends & family, angel or VC investing) the company must be valued to determine each player’s share of the business.

Explicit knowledge (and very useful) knowledge on valuation models can be found in an article by William H. Payne, Senior Program Consultant, Kauffman Foundation.  Payne goes through terms like “pre- and post-money valuation” and provides formulas that are used to determine vaue.

Tacit knowledge (also very useful!) is what it feels like to go through the process of valuation and how much of it is negotiation.    You can find tacit wisdom in this clip featuring Lance Stewart, co-founder of Emerald Biostructures, talking about the valuation process during the growth of his company.  He discusses the details that have to be worked out and also describes the feeling of going through what he calls “some nasty discussions about what you are worth.”

My favorite line?  In talking about the differing perceptions of what might be fair as viewed from each side, Scott says:  “….at the end of the day it comes down to whether you want to do this with these people or not.”



				

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Failure, American Style

I just returned from a visit to Europe, where I taught a short course at the MCI Management Center in Innsbruck, Austria (the photo shows the view I saw on my daily walk).   The class, on Entrepreneurial Leadership, was delivered to a room full of undergraduates from all over the world.blog16

After our many conversations about the cultural differences in entrepreneurship in the various nations represented (Germany, Austria, Mexico, France, Russia, Canada, Bulgaria, Sweden, Japan, to name a few), I came away for a new appreciation for how my own country views failure.

I played an eClips mini-video on failure one day and a heated discussion ensued about the consequences of failing in their various home countries.  The segment featuring Tom Szaky saying “I have had six businesses before this one, and all of them failed” evoked a question from one of the students:  “How could he face his family and friends?”

In many of the home countries of these students, failure results in financial ruin and public and private disgrace.  An interesting discussion by a European Commission explains some of these issues, including the need for change in both mindset and the law in order to encourage more business startups.  For a more in-depth analysis, see this detailed set of slides from a presentation made at Stanford by Ignacio de la Vega.

I was left with the question:  Are Americans really more resilient to failure and if so, why?   We do seem to have less punitive bankruptcy laws.  And the myth of the self-made man (or woman) persists.  The media presents many us with various “comeback stories” — public failures followed by redemption and return to the public life (see, for example, Bill Clinton or Tiger Woods).  However, I fear that such recoveries seem to depend on the relative wealth of the individuals and their ability to reconstruct a new persona.  What happens to the “regular guy” when his/her business fails?

The current crises, including the economic downturn, the floods, the ash cloud and the oil spill) will be a severe test of our resilience.  I worry about the many small businesses who will fail as a result of one or all of these events.  No bailout for them.  Just the sturdy American will to pick oneself up and start again.

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Why is it hard to lead an entrepreneurial venture? Part 3 of 3

The past few weeks, I addressed several dimensions of why it is particularly hard to lead in an entrepreneurial setting (as compared to a large corporate environment).  In this entry, I want to address the fact that as a new venture grows, each stage requires a different leadership style and talent.

Leadership has to flex to the stage of the startup

I recently read a great blog entry on this topic on Siftstar.com.  The blogger laid out the stages of growth of a startup venture based on a dinner conversation with a CEO.

The full list  he provides is quite good (resonates with my experience interviewing hundreds of entrepreneurs) and bears some discussion, but here are some interesting aspects of the evolution.

blog15image1

Are there individuals who can cross over from one stage to the next?  Not many.

Stage 1.   The personality type that fits the first stage is someone who enjoys the challenge of starting something new, is good at problem-solving in the absence of adequate resources resources, can sell something that is only in the concept stage as if it were created, and knows how to put on a happy smile even when the last angel investor just called to pull out of the round.  When the company is successful and things become more routine, they get bored.  Furthermore, they don’t have a lot patience with formalization of business processes.

Stage 2. In stage 2, you want a leader who is more detail-oriented, is able to shepherd the financial well-being of the firm and can execute on deadlines and really enjoys management work.  This type of person feels like puking if they have to promise things to customers that are only on the drawing table.  And they know that to deliver appropriately, that the resources in the company have to be adequate, so they are extremely uncomfortable with a tight cash flow.  However, the Stage 2 leader has the talent needed to build out and manage a larger team.blog15image2

Stretch or switch? The dilemma comes when a Stage 1 leader can’t see that Stage 2 has started and/or cannot stretch into the next stage.   This has widespread implications for the company. The business can stagnate in the absence of needed business processes.  Worse, it can lead to a power struggle within the leadership team.  Employees and management team members suffer when the transition is bumpy. If the leader doesn’t stretch to the challenge, the investors often replace him.  Change in leadership can be greeted with relief or with skepticism depending on how it is done.

Summing up this 3-part series.

Taking the three aspects of new companies together:

blog15image3

It is easy to see that leading a new venture is not for sissies.

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Why is it hard to lead an entrepreneurial venture? Part 2 of 3

Buckle your seatbelt.  Last week I wrote about how the entrepreneurial leader constantly operates out of his/her comfort zone.  This week I want to address what I would call the “erratic pulse” of entrepreneurial life.   The erratic nature of life is a result of a variety of influences.

Here’s a short list of things that create chaos for new and growing businesses:blog14image1

  • Technology
  • Industry trends
  • Consumer tastes
  • Regulatory environment
  • Economic health of the marketplace
  • Competition
  • Funding trends
  • Personal issues of management team, such as life events, health, economic status

Riding in a Lincoln Town Car vs. a Jeep. Do these things impact large companies as well?  Of course; Both small and large companies travel on similar roads.  But in a big company setting there is a way to absorb the shock, to reach into a deeper pocket, to shift resources and people around to adapt.  In entrepreneurial ventures, the ups and downs happen without any shock springs.

That means the entrepreneur, and his whole entrepreneurial team, has a bumpy ride.  One that in which failure is frequently encountered, according to Jay Walker, founder of Priceline.com.  According to him, “You’re not going to fail once. You’re going to fail a lot. In fact, you are going to do much more failing than succeeding!”

It’s hard to prepare and manage a team when change and failure are encountered so often.  Employees often have trouble dealing with the ups and downs, so the leader has give confidence to the team even when they might not be feeling so upbeat.

Look at it this way, if you knew you be travelling at high speed along a road full of potholes and speedbumps, which ride would you pick?



				

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Why is it hard to lead an entrepreneurial venture? Part 1 of 3

I have spent this week getting ready for a course I am planning to teach in Innsbruck, Austria, at the MCI MANAGEMENT CENTER INNSBRUCK. The topic is “Leadership in an Entrepreneurial Setting.”

blog13image1I started by asking myself the question, why is leadership any different for entrepreneurs?  Many corporate leaders navigate uncertain times and take their teams into settings involving risk, so is the entrepreneur so different?

After working on projects with large companies, I have to say that leadership in a startup context is quite different.  What I have observed is that in the case of big companies we work with, when problems arise, the leaders apply time and/or money.  Have to deal with a technology issue?  No problem – we’ll call our IT department.  Negotiating a contract? That will go to “legal.”  Expanding the scope of the project?  We’ll just pull a few more people from other projects onto our team.

In startups, leaders have to solve problems in a very different way, because you typically:

  1. Have very little cash.
  2. Have a lot of time pressure.

When you have no money, everyone on the team has to wear a lot of hats.  And most of them don’t fit very well.  For example, the startup management team (typically 2-3 people, perhaps not all fulltime) has to:

  1. Create a vision and mission.
  2. Make strategic decisions, operational decisions, tactical decisions.
  3. Create a brand and a marketing and PR campaign.
  4. Attend trade shows.blog13image2
  5. Do social networking to get visibility Raise money from investors.
  6. Work with attorneys on business, including contracts, funding documents, non-disclosures, employment agreements,
  7. Write grants.
  8. Deliver against the grant.
  9. Develop the product/service, including manufacturing, quality control
  10. Develop relationships in the supply chain.
  11. Put up a website and manage any IT aspects of the business.
  12. Manage part time staff.
  13. Monitor financial aspects of the business.
  14. Build and manage the Advisory Board.
  15. Create a supportive network to battle the isolation factor.
  16. Sell!!!

So part 1 of my answer to why it is hard to lead in an entrepreneurial context:  An entrepreneurial leader is almost always doing something that is out of his/her comfort zone. As Sandeep Kumar mentions, it is “intellectually stimulating and yet exhausting…… financially …..but  worth every moment!


One more item:  I asked another talented entrepreneur if she thought the above list was complete.  She said I should add: figure out how to maintain work life balance or add “divorce documents” on to the list of things to discuss with the attorney!

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Digital Stories – Just another way to manage (tacit) knowledge

blog12aI’ll admit it, I’m new to the area of Knowledge Management (KM).  During my sabbatic leave, I’ve been reading, books, articles, blogs and tweets about the field of Knowledge Management.  Phew!  It’s a big honking topic! I started trying to understand the scope of KM by examining the KMWorld’s list of “100 Companies that Matter in KM.”  I found the list of products and services of these companies to be so diverse as to be further confusing:  KM is document storage and retrieval, no it’s business intelligence, no, it’s legal services that search enterprise emails, but no, it’s really social networking….well, you get the picture.

Next I looked at the Wikipedia definition of KM:  “range of strategies and practices used in an organization to identify, create, represent, distribute, and enable adoption of insights and experiences.”  Now I was getting somewhere.

blog12bI have spent a dozen years, eliciting, taping, editing and serving up the insights and experiences of entrepreneurs and other business experts.  So eClips is all about KM for entrepreneurs. Most importantly, it enables me to take the one-to-one storytelling process that surfaces  tacit knowledge gained from experience and translate it to one-to-many.

The trick is to get entrepreneurs to reflect on what they have learned.  One of my favorite questions is “What has taken you by surprise?”  When answering that question, I often learn things that you will never see in an entrepreneurship textbook.  Here are three of my favorite examples of the tacit knowledge you can find in the eClips Collection:

Jessica Bibliowitz, President and CEO of National Financial Partners was surprised by human nature:



James McNair was surprised the difficulty of keeping teams together, even when successful:



Eric Young, Co-founder and General Partner, Canaan Partners, was surprised by how much hype impacts perceived value:



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It’s All About the People – Part 6. Student Teams and Real World Teams – Haunted by similar issues?

I just got back from the annual meeting of the National Consortium of Inventors and Innovators Alliance,  NCIIA .  This is my favorite professional meeting every year, because the participants are a wonderful mix of entrepreneurially-minded professors and student inventors (both grad and undergraduate).  Sessions are filled with crossovers between the languages of 1) science, engineering and technology and 2) business and entrepreneurship.  At times it is like listening to someone who speaks Portuguese talk with someone who speaks Spanish.  With effort, they can communicate, but there are some words that are just different!

image2I led a workshop called “Cash Flow is King – It’s all about the People” with Michael Lehman, Director of PantherlabWorks and Student Services at the University of Pittsburgh Institute for Entrepreneurial Excellence.  We were interested in talking with others about the challenges posed by working with students teams in teaching entrepreneurial courses and forming the “eTeams” that NCIIA supports with generous grants.   Here is the list of issues that we came up with when brainstorming:

Issues in Team formation:

  • Difficult to get enough diversity in:
    • Personality types
    • Skill sets
    • Perspectives, life experiences, philosophies
    • Majors

Issues that are logistical:

  • Scheduling issues for students with crowded schedules, responsibilities, activities
  • Differences across the university in terms of requirements, courseload, etc.
  • Working in virtual settings, across geographical boundaries

Issues related to the functioning of the team:

  • Once you get the diversity (see dimensions above), getting diverse teams to work through conflicts
  • Hard to find a member of the team willing to lead
  • Some team members are unable to be flexible when dealing with uncertainty and have a lack of tolerance for ambiguity
  • Differences motivation due to
    • Differences in entrepreneurial intention
    • Team members are at different life stages (Freshman vs. Senior vs. Grad)
  • “Best buddy” syndrome – the mistake of forming a team solely due to friendships
  • “Free rider” troubles – Getting team members to follow through and/or do their share of the work
  • Difficulty of establishing trust quickly enough in the semester
  • Creating good “rules of engagement.”
  • Getting team members to keep their senses of humor
  • “Facebook syndrome” – getting them to communicate more professionally

Issues related to working with/supporting teams

  • Deciding whether to mandate teams or allow them to form
  • Getting meaningful coaching
  • Difficulty in evaluating team participation
  • Making the transition from a student team to a real world team

The interesting thing to note is how many of the issues we identified as being problems for student teams also haunt real world teams.

image1After the conference I did an eClips interview with two real world entrepreneurs in a young startup I have been following for a few years.  The team just ejected the third member of the management team.  Why?  He was not aligned in terms of his motivation and life stage to carry his part of the burden.  After months of stress and anger over his free-riding and failure to follow through on his responsibilities, they mutually agreed to part ways. The three of them had been close friends since college, making the “divorce” painful, but miraculously, they emerged with the personal relationships intact.  That’s because from the beginning of their company, they created a constitution that laid out the values and rules of operation.

Others I’ve interviewed have not been so lucky.  I have heard about lost friendships, marriages, and even breaks between parents and children over team issues in entrepreneurial businesses.  I’m not including any videos today because, frankly, those emotional clips are typically not shared with the general public and I respect the privacy of my interviewees.  But I do want to broadcast the message nonetheless:   It’s all about the people.

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It’s All About the People – Part 5. Vendors and Suppliers – People Issues AND Cash Issues

Cash flow is a simple concept but it still seems to take many entrepreneurs by surprise when they start actually operating their businesses and experience negative cash flow for the first time.  The cash flow issues in a startup are more related to people issues than is reflected in a typical textbook discussion.

Simply put, gaps in cash happen when you have to pay suppliers at one point in time, but you don’t receive revenues from your customers until a later point in time.  Even if costs are less than revenues (so profit is positive) until the money collected catches up with the money that goes out, the entrepreneur will be in a cash flow crunch which must be covered by reserves or other funds.

Cash flow might seem to be purely a financial issue, but people issues are interwoven.  On the cost side, for example, if you can get favorable terms from a supplier, as Rosa Sugrañes managed when she started Iberia Tiles (see Sugrañes video) because of strong personal relationships, that can make a big difference.  On the other hand, when you are a new player, like Chris Wilkerson, was when he founded his company EquipSystems, you can find that your customers (in his case, hospitals) are slow to pay and you have little recourse because you need their business (see video – Wilkerson).

Can entrepreneurs play the same game, promising to “put the check in the mail” but actually delaying payment?  Yes, but doing so can really sour personal relationships.  My brother, a social media expert and marketing guru (see his informative blog In the Loop), recently wrote to me about a situation where he and others did work for an acquaintance who had started a company.  The entrepreneur contracted work with freelancers but didn’t pay them for months (some are still chasing down their payments).

In my brother’s words:

“Maybe this particular company will succeed …. But I wonder what legacy is left behind with the people who get stiffed along the way.  I’m thinking it might not really impede a company’s ability to survive since most people aren’t going to sue to get their money.

Or are they?

A question to ask is yourself is whether you really want to found your company by unfairly squeezing the cash flow of other small companies.  What relationships do you want to establish with the people around you? After all, in life these things have a way of coming around to bite you.  Alternatives to stringing along your small suppliers?  Raise adequate cash at the outset of your company, bargain for good payment terms, and control your costs.




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It’s All About the People – Part 4. Keeping Employees’ “Pulses” at the Right Pace

“Managing people is just one of those skills that you are either good at or you’re not.” That’s according to Aaron Rosenberg, founder of Sight Speed,  a startup that successfully exited through an acquisition by Logitech in 2008.  He goes on to admit that he is not good at handling employees because he likes to micromanage.   Listen to the clip to hear more.

What strikes me about his comment is how common it is among the hundreds of founders I have interviewed.  The majority don’t really like one aspect of the growth phase  of business, the part where you have to start adding and managing lots of employees.    My theory?  There is something about the founder mentality that doesn’t translate well into a management mindset.

After all, different skills are needed to found a company than are needed to manage a team really well.  The startup phase is all about flexibility, staying open to opportunities, turning on a dime to the dictates of the market, delivering the goods no matter how late you stay up (all night, in many cases).   Founders have to deal with, if not thrive on, a lot of adrenalin-based activity.  Well-managed growth is about putting systems in place, creating business processes, sort of ordering all the chaos that fueled the start of the business.

The problem is that employees cannot run at high speed all the time for long periods of time without burnout.  To be productive in the long term,  employees needs both a sense of urgency and periodic times when they are not running at a red hot speed. This phenomenon was studied by a previous colleague of mine, Theresa Welbourne, now a Research Professor at the Center for Effective Organizations, University of Southern California, Marshall School of Business .  Theresa came up with a way to measure and analyze the “pulse” of employees; development of her method led to the start of her company, eePulse,  focused on “optimizing the “energy” of everyone everywhere.”   And to optimize, managers need a careful balance between a sense of urgency and needed respite from highest levels of stress.

Entreprenuerial teams seem to have a capacity to run even on empty.  Nonetheless, sustained growth requires a different type of environment, one which can tolerate high performance individuals who will be there for the long haul.

Bottom line:  If founders 1) aren’t “naturals” at management and/or 2) are not motivated to learn how to manage people, and/or 3) don’t add someone on the team who is a good manager, it will hinder growth.

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