[Music]
entrepreneurship is the best roller
coaster I have ever been on
it's crazy fast a little scary and
totally unpredictable when I was in
business school my classmate Jen and I
started an online dating site for busy
young professionals we had this unique
concept validation from customer
research and a solid business plan we
thought we were doing everything right
but apparently not because we had to
shut our doors starting a business was
so much harder than I had thought and
that's what millions of people in
Silicon Valley and across America are
finding to because half of all small
businesses will fail in the first five
years sixty-five percent in the first
ten we glorify startups that make it big
but what about the rest these startup
failure rates haven't improved in almost
two decades my failure made me wonder if
any of this is preventable if they're a
model we can use for small business
success in my career I've had the chance
to work with different business models
and approaches ranging from early-stage
startups to multi-billion dollar
companies and there is one group of
entrepreneurs that is consistently
successful but I discovered them in the
most unexpected place in Guatemala were
59% of the population lives below the
poverty line
threatened by everything from natural
disasters to gang violence yet despite
these odds more and more Guatemalans are
turning to entrepreneurship to create a
better life because developing countries
like Guatemala are home to a
microfinance approach called village
banking were unlike centralized banks
groups of local entrepreneurs joined
together to access the loans and the
support that they need to start their
businesses now most of you have probably
heard of Muhammad Yunus who pioneered
the village banking concept with Grameen
Bank it was so successful that in 2006
he won the Nobel Peace Prize for it I
wanted to see it for myself
so that same year I traveled to South
America with another village bank called
finca international so I could see
for myself so I could meet with these
entrepreneurs and visit with their
businesses village banking works because
it proactively addresses the three
primary reasons our small businesses are
failing first they provide a built in
team of experienced advisors upfront
next they're constantly responding to
customer feedback and finally they have
a relentless focus on cashflow so let's
start by talking about that built in
team because 23% of our small businesses
will fail because they don't have that
right team in place in Ecuador I met a
farmer named Miguel who used his finca
loan to purchase a new irrigation system
but in village banking you can't
actually access that loan without
agreeing to join a support network of 10
to 20 other entrepreneurs so every week
Miguel and the other members of his
village bank would get together at their
local schoolhouse to work on their
businesses together to trade advice even
share a few laughs one of the other
members of the village bank was a farmer
too and he was more experienced so he
had kind of taken Miguel on as an
apprentice was helping him understand
how to rotate crops and where he could
get the most money for his produce with
that help
Miguel's profits and his confidence grew
but just as any small business owner
knows just when you finally think that
things are going well and smoothly it's
exactly when you're thrown a curve ball
and in Miguel's case a drought nearly
threatens his farms production but when
that happened he wasn't left to deal
with it alone the other members of the
village bank will rallied around him
helped him overcome challenges and were
there urging him on to celebrate those
everyday victories I met with dozens of
entrepreneurs like Miguel during my
finca visits to Guatemala and later to
Ecuador teamwork is the backbone of
these village banks now here's where it
gets interesting in the US if you wanted
a small business loan you'd usually have
to put up collateral but in developing
countries a lot of these entrepreneurs
don't have collateral so at finca they
actually Coe guarantee each other's
loans so they all have skin in the game
and a vested interest in each other's
success but they're not
bound together by money they're
connected by a sense of community
because they're often neighbors part of
the same church in some cases they're
quite literally family and just like in
sports
it's these cohesive teams that do better
at finca 85% of first time bars will go
on to expand their business now in the
US deals from shark tank and venture
capital firms usually come with
experienced advisors but they're just 1%
of our businesses 73 percent are
one-person shops
what if our successful business advisors
and entrepreneurs were able to pitch in
to help them - now the next thing that
village banks do really well is to
constantly respond to customer feedback
a study of 101 failed startups showed
that 42% had failed because there
weren't enough customers that wanted or
needed their product as a marketer this
one makes me cringe in Guatemala City I
met a woman named Elena who wanted to
sell more of her homemade tasty
empanadas now if you and I had an
empanada food truck there's a good
chance we would over engineer this
problem we might take a few weeks to
send around a survey or deploy some sort
of a sales optimization model maybe we'd
crowdsource flavor suggestions on social
media do you want to know what Elena did
she talked to her customers and the next
day she sold 10 more empanadas and while
we were busy gathering the data to
launch this awesome new flavor
Elena's empanada sales would have lapped
us a hundred times over but she didn't
stop there she kept talking to her
customers and asking members of her
village bank for feedback so she kept
improving call it what you want
rapid prototyping common sense hustle it
works a lot of our small businesses will
do some sort of customer research up
front but then it's off to the races we
get so caught up in building and running
our businesses that sometimes we stop
collecting and acting on customer
feedback because when you're a busy
building you're not making any money so
when you finally have that product in
hand there's a strong temptation to
start advertising even though another
round of cost
her feedback would have told you to
rebuild one of my favorite cautionary
tales comes from the makers of Cheetos
either they didn't ask enough customers
upfront or they didn't test again
post-production but in 2005 someone
greenlit the launch of Cheetos lip balm
unsurprisingly
that product flopped customer's needs
are constantly changing village banking
reminds us that the best way to make
money is to keep responding but perhaps
the most important thing that we can
take from the village banking model is
how to manage our cash flow because this
is by a landslide it's a number one
reason our small businesses are failing
82% will experience cashflow problems
now village banking understands that for
startups to stay up they have to
generate profits consistently so that's
why the number one goal of these village
banks is to get all of their members to
positive cash flow as quickly as
possible
now they usually do this by requiring a
weekly loan repayment meeting so every
week the entrepreneurs have to come in
and pay down their debt and document how
much of their loan is still outstanding
and so that way this process forces them
to understand how their business is
cashflow Ed's and flows and if anybody's
struggling or if a member misses one of
their weekly loan repayments then the
other members can pitch in and help
provide support early on
now I had a chance to sit in on some of
these weekly loan repayment meetings and
I kind of just expected everyone to go
around in a circle and provide a quick
update on their business but instead the
entrepreneur's started reaching into
their pockets and pulling out their cash
quite literally paying down their debt
in our cashless society most of us will
never touch the money we make but here
are these entrepreneurs holding their
hard-earned income in their hands this
is one place where micromanaging
actually works
stinka entrepreneurs have a ninety-eight
percent loan repayment look I'm not
asking for our entrepreneurs to delete
venmo and start hauling around our cash
but what if we had a cash flow officer
honor
teams from day one someone who could
help us understand what's coming in what
needs to go out and when someone who
could help us flag potential issues
before they even arise this one hits
home because it's exactly why my online
dating site failed when Jen and I
launched it felt like we had won the
lottery hundreds of customers were
joining our site daily customers were
taking the time to email us and thanking
us for starting a site like ours but
when people join an online dating site
they want options lots of them
and we didn't anticipate how quickly our
members would go through their matches
and needs new ones we just couldn't
scale fast enough the cost of online
advertising were so expensive we could
barely afford to cover our costs let
alone afford to take a salary this is
about the time that our startups go from
struggling to failure because when you
can't afford to pay your business bills
or your personal ones you have to figure
it out quickly borrow more money or like
in our case cut your losses and close
shop and that's really stressful
especially if you've maxed your credit
cards or taken out a second mortgage or
borrowed from friends and family to get
your business off the ground my business
failed but my husband has a solo
business now and the stakes feel even
higher because we have two little ones
at home village banking isn't perfectly
applicable but it's helping us build a
stronger foundation my husband has a
group of small business owners that are
helping him get started and are there to
answer any questions he talks to all of
its customers REITs every online review
so we can keep improving and he's
invested in a cash flow management
system so my message is this there is a
model we can use for small business
success but ultimately it's gonna take
more than our countries determine
entrepreneurs to improve our startup
failure rates from what I have learned
it takes a village thank you
[Applause]