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>> Silicon Valley is synonymous
with entrepreneurship.
Many of the world's most innovative products, services and ideas can trace
their origins back to the former fruit orchards between San Francisco and
San Jose, California.
But what makes for successful entrepreneurship?
Today, I hope to find out.
Hello, I'm Matt Abrahams, and
I teach Strategic Communication at Stanford Graduate School of Business.
Welcome to Think Fast, Talk Smart, The Podcast.
I am super excited today to chat with Stefanos Xenios.
Stefanos is the investment group of Santa Barbara, Professor of Entrepreneurship and
Professor of operations Information and Technology at the GSB.
He is also the faculty director of the Center for Entrepreneurial Studies and
the main architect of the wildly popular Startup Garage.
Welcome, Stefanos, thanks for being here.
>> It's great to be here, Matt.
>> Thanks, let's go ahead and get started.
If there is one person who really knows entrepreneurship, it's you.
When you reflect on all that you know and have experienced about entrepreneurship
and innovation, can you identify for us what are some key drivers of success?
>> What I like to tell my students to take Startup Garage,
is a venture, a new venture is a sort of hypothesis.
You don't know whether hypotheses are going to be correct or not.
So as an entrepreneur, you need to be comfortable formulating those hypotheses,
and your curiosity, and
your ability as an entrepreneur to pay attention to the marketplace and
to who may be your ultimate customers, can help you formulate those hypothesis.
But then, you want to subject those hypotheses to test to experiments.
And you want to pay close attention to what you hear and
what you learn from those experiments, and be comfortable to accept if
some of the hypotheses that you have formulated are incorrect.
And be willing to change them and adapt based on what you're learning.
So this come forth with the uncertainty that comes with those hypotheses,
the willingness to test the hypothesis.
The willingness to test the hypothesis, the willingness to learn from the data and
adapt are critical factors that drive the success of new ventures.
>> So somebody who's highly risk averse is not going to do very well in
an entrepreneurial setting it sounds like?
>> Yes, but I don't want your audience to live with
the impression that entrepreneurs jump off cliffs.
Good entrepreneurs pay attention to how they manage their own risk,
their own personal risk.
And my students who end up launching successful ventures,
they spend quite some time thinking of their own runway.
There is a case that we teach in one of our courses, the Center for
Entrepreneurial studies.
That's one of the course that I teach, but
that's the course I'm very familiar with, it's called formation of new ventures.
And there is a case about four GSB alums who started a venture.
And the case talks a lot about how much time they have spent for
each of them to get comfortable with how much risk they were willing to take.
And then organize their venture in their virtual
exploration stage around the team's collective risk.
So entrepreneurs are comfortable with risk, but
entrepreneurs do what great investors do, they find ways to manage that risk.
Because at the end of the day,
entrepreneurs will go to investors to ask for funding, and those investors
are going to be looking at the entrepreneurs for ways to manage the risk.
So it's part of the equation.
>> Interesting.
>> Comfort with the risk, but also comfortable with mitigating the risk.
>> That's really interesting, I had not really thought about the introspection
required of an entrepreneur, and it sounds like that's a key part.
So thank you for sharing that.
Any advice and guidance on how to avoid common pitfalls you've seen in
innovators in entrepreneurs?
>> Make sure that you develop the product that your customers want,
not the product that you want.
>> [LAUGH] >> That's a very common mistake.
That doesn't mean that you may not have insights, there may be also an overlap
between the product that you want or the product that your customers want.
But the key driver at the end of the day is going to be, and
it has to be your customer.
So that's pitfall number one.
>> Right.
>> Pitfall number two, learn to mitigate and manage your entrepreneurial optimists.
>> [LAUGH] >> Entrepreneurs are optimist.
>> Right.
>> I like to tell my students, in my history, my experience, one out of
four ventures coming out of Startup Garage are successful in raising funding.
Pretty much every student I have to the class comes to me and says,
we are going to be one out of four, it's impossible.
It's good to serve to your adventure,
to some level of skepticism because most entrepreneurs lack the skepticism gene.
>> [LAUGH] So it sounds like really reflecting personally but also getting
feedback are critical elements to avoiding some of these pitfalls.
>> Yes.
>> One of the things I know you yourself have done as well as you coach and
teach your students to do is how to work in teams.
Do you have any best practices for
the communication that needs to happen in entrepreneurial teams?
>> That's a great question, so we have our teams very early on,
spend time reflecting on their goals, their values and
the norms that they will develop as a team.
We have them, have a discussion very early on,
what are we going to do when we face disagreement?
How are we going to resolve that?
What is going to be our approach, what are going to be our principles?
And we give them some guidance throughout the quarter,
we like to tell them, do not debate test.
And then we talk about the nuts and bolts, who's going to be in charge of meetings?
Who's going to be running meetings?
Who's going to play the broader team coordination work?
And part of the teamwork is dating,
dating each other to see whether you can work well together.
Developing the communication rhythm of how you will communicate with
each other in the team.
And how you will manage difficult conversations, and
how to be respectful with each other.
But also how to help each other grow as part of the team, that is part of
the foundation that we provide for our teams as they go through Startup Garage.
>> Stefanos, I've now figured out the secret to your success and
why Startup Garage is so popular.
It's really a dating service in disguise, I see.
No I totally respect and understand what you're saying.
So it is the thoughtfulness and preemptive work that you do by having
people really think about how they want to work together.
What are some things that they will do when they run into tension and friction?.
And by doing that, on top of doing some reflection and review,
that 360 review you talked about, really can help prepare them.
That's excellent, and even if they don't launch a venture,
the insight they gain into themselves and how they team is incredibly valuable.
I'd like to move on to the next question.
When people think of entrepreneurs in communication,
they almost invariably think of the pitch.
And you in fact mentioned that earlier that the pitch is the culmination of
the two quarters students spend with you.
Do you have advice for what must haves should be in a good pitch?
And how important is a pitch deck versus the pitch and the story itself?
>> They're great questions, so you need a good hook, and
a hook that comes out is authentic.
You have to find a way to draw your audience in the conversation.
What I pay attention to when I hear my students share their hook is,
does it resonate emotionally with them?
Do I feel that they're connected, if they're coming out as storytellers?
The best storytellers out there was they draw you in, where you want to know more.
So we spend a lot of time with our teams figuring out
what is a good hook?sometimes the cook may be the market for
this is immense, in other cases it may be the story of a customer.
Sometimes it's the story of the entrepreneurs themselves that
motivated them to get to that hook, to get to that venture.
But you need those effective hooks.
Then beyond that, it's really important for this story to logically make sense.
The different pieces need to logically fit together.
You want to avoid big jumps of logic,
because those are scaring investors and are scaring potential employees.
So think of your logic, does the hook connect to your market opportunity?
Does it connect to your product?
Does it connect to your whole business model?
If not, where is the disconnect?
You need to think about the economics of the business.
Will this business be viable?
Under what conditions?
And so you want to bring this into your presentation, into your pitch.
You also need to cover how much funding do you need and
what are you going to do with that funding.
And again, things need to be logically consistent,
you need to go back to your hook.
What are you telling you with that hook?
And what are you going to demonstrate with the funding that you're going to get?
Now the pitch versus the slide deck.
We have our teams develop a slide decks, we spend a lot of time guiding them,
how much to put on the slide deck and how much to have as an appendix.
By the time as teams get to the final pitch, they know a lot,
and they want to cram a lot or their slide deck.
We put a lot of emphasis on making sure that every slide
has one key point, and it focuses on that key point.
So for example, we have a team spent a lot of time thinking about unit economics, and
they develop spreadsheets and
very elaborate spreadsheets to understand the unit economics of the business.
At the end of the day, you want to have a slider your unit economics, but
that slide has to focus on two numbers.
What is the lifetime value of your customer and
what is the customer acquisition cost?
And of course, you have to be ready to defend those numbers, but
you don't need to put all those on the slides.
You have to be ready to defend them when the investors ask you.
>> I think the way you answered that question gives insight
to what I was fishing for when I asked the question,
which is it's really story first, pitch deck second.
A lot of people in my experience spend so much time on the slides and
they don't think about the compelling hook.
They don't think of the answers to the questions you've identified, and
I think that puts them at a severe disadvantage.
So get that story first, and that can really help.
>> Yes, you need to figure out your story, you need to figure hack of your story,
and then build a presentation around it.
So to ask the next question, I would like to invite Darius Teeter,
the host of the GSBs Grit, and growth podcast, Darius?
>> Stefanus, I'm curious if you have any guidance, or advice for
international entrepreneurs, and innovators,
particularly those who are trying to start a business in emerging markets.
In all your years of teaching, have you seen some common themes or
challenges that they face which are distinct and different from the typical
challenges an aspiring entrepreneur might face, for example, here in Silicon Valley?
>> Thanks for the question, so
my answer again is going to be painted through the lessons of Startup Garage.
Because all the entrepreneurs that they had go through Startup Garage than they
started ventures in developing countries.
The first challenge that they had to address is,
how do we talk to our customers remotely.
And what they all had in common was extreme resourcefulness in finding
ways to tap into amazing customer network on the ground.
The other thing that I have seen teams in developing economies
do is do bootstrapping much more than teams is Silicon Valley.
Figuring out how to do things and drive things organically.
That was critical to their success, that was critical to getting their
market adoption, that was critical in creating a viral adoption system.
Anything that you can do to make your venture go viral.
If having word of mouth effect can really help,
especially these environments in developing economies.
Where the resources available to entrepreneurs to build their venture tend
to be much more limited than the resources that are available for
entrepreneurs here in Silicon Valley >> Thank you Darius for
asking that question, and I encourage everybody tuning in to Think Fast,
Talk Smart to listen to Grit and Growth.
It's got a lot of valuable information that can help you be better at business,
and n your personal life.
And Stefano, thank you for that insightful answer.
Before we end, I'd like to ask you the same three questions
I ask everyone who joins me, are you up for that?
>> Yes.
>> All right, here we go, question one.
If you were to capture the best communication advice you ever received as
a five to seven word presentation slide title, what would that title be?
>> Tell them what you're going to tell them,
tell them, tell them what you told them.
>> [LAUGH] Okay, I'm going to give you a little more than the five to seven words,
but that's so important, it's about setting expectations, isn't it?
It's about helping people understand, and you tell them and
then you tell them what you told them.
A lot of people when I say that think it's so formulaic, but
the reality is it works well, doesn't it?
>> It does work really well, yeah, I'm sorry, I forgot how to count.
>> [LAUGH] No, no, no, every word you say is precious and important to us.
So, question number two, who is a communicator that you admire, and why?
>> One of my professors from graduate school,
probably nobody's going to know who he is, his name is Sandy Barnett.
He was teaching statistics.
He had an amazing way of distilling complex concepts into their essence,
in communicating them very effectively.
>> What are the first three ingredients that go into
a successful communication recipe?
>> You really need to understand your audience.
That's the first successful ingredient.
The second one is you need to understand what you're trying to tell them.
And the third one is you need to mix those two
ingredients in a way that they create a story.
So how do you match what is the story that you want to tell,
we've got your communicator needs to hear it can understand and bring that together.
>> So, beautifully put, and we have heard similar advice on other episodes, but
you articulated it so clearly.
Thank you Stefanos, your passion for and your insights into entrepreneurship and
innovation are incredibly helpful and useful.
And the specific steps and ideas and
best practices can help all of us as we consider the new ventures in our life.
And a quick shout out again to Darius Teeter for stopping by and
joining us for our conversation.
Thank you again, Stefanos.
>> Thank you Matt, it's been a pleasure.
[MUSIC]
>> Thanks for joining us for another episode of Think Fast,
Talk Smart, The Podcast.
Produced by Stanford University's Graduate School of Business.
For more information and episodes, visit gsb.stanford.edu.
>> Hi, Matt Abraham is here.
Before we get started, I invite you to explore on-demand online
courses from Stanford Graduate School of Business.
These classes offer same day access to self paced content on
a variety of topics relevant to your business challenges in context,
including one offered by today's guest,
Stefanos Zenios, entitled, Disrupt Your Business.
Visit http//stanfordondemand.com to register today.