Observations from 2018’s mentoring sessions

All the year-end wrap-ups have inspired me to do a wrap-up of 2018 from the viewpoint of a mentor. Here’s a few observations:

  • Engineers continue to dominate the founders group – not surprising as MIT is a technology institute after all. However, I see relatively few Sloan business school students. Occasionally they are brought on to a startup team, but I see very few Sloan founders.
  • Many one and dones. I do a lot of first meetings and for a variety of reasons these would-be founders never schedule a second meeting. Some realize that their idea isn’t really venture-ready, others decide they aren’t cut out to be entrepreneurs. Perhaps a few decide that they don’t need mentoring or find it elsewhere.
  • The rate of new MIT-affiliated companies continues to rise. This data may be confidential, so I won’t share it here except to say that I’m doing more first meetings than ever.
  • Sales still gets short shrift with new ventures. Almost never do I see a sales person as a founder or co-founder. The founders I do see don’t put a lot of thought or effort into customer acquisition. Typical teams have CEO, COO, and VP of bus dev – no sales, marketing or finance executives! Perhaps as these companies grow they will realize the importance of sales, but early stage companies are virtually all product-driven.
  • A large number of startups are social impact ventures. I’ve even seen a few non-profits (501c3 companies) for the first time. It’s admirable that the vast majority of founders are not wannabees, nor focused on trying to get rich quick. To the contrary, most are working to make the world a better place – very inspiring for mentors.
  • Mentoring continues to be popular. Several new mentors this year and very few leave, usually because they are relocating.
  • Developing pitch decks is SOP for founders. Very rare to see a new venture without a deck. Unfortunately many fall into the same PowerPoint-driven trap of being text-heavy, bullet point-laden and better designed to be read than as an aid to presentations.
  • I catalyzed a new program for MIT VMS – pitch scrubs on demand. I don’t have any data on how popular this new service is, but I was pleased to see how quickly the idea was pursued.
  • Founders continue to ignore founder’s agreements. Deciding who gets how much equity is not a pleasant task in a startup. Obviously it’s a zero-sum game. However, mentors are very good about reminding founders of the necessity of forging a founder’s agreement early on to prevent problems or misunderstandings down the road.
  • Too many founders are fixated on raising money, not acquiring customers. Most will find that they are far from venture capital ready. The rule of thumb for VCs is that they  are looking for grand slam home runs – companies with a billion dollar market cap. That usually translates into yearly sales of $100 million or more and a hockey stick growth rate. I’d like to see more founders realize they have something to contribute but since they don’t fit the traditional VC model either licensing their tech to another company or selling it outright. Only a tiny percentage of startups reach unicorn status, just like very few baseball players make the major leagues. That shouldn’t discourage entrepreneurs.
  • The best source of financing continues to be customer revenue. I’ve been glad to see a few bootstrapped ventures. Generally the founder/CEO of these ventures has real sales ability to accompany their technical chops. A very rare combination!
  • This year saw a strong interest in incubators and accelerators. MassChallenge dominates the New England accelerator scene as it continues to grow in size and influence.
  • Mentoring has become SOP for startups, though many may look to their investors, their professors or other sources of mentoring than formal organizations.
  • Virtual mentoring continues to be a non-starter, as the very few instances I come across are aimed outside of the entrepreneurial world, mainly for students or minority groups. There seems to be no substitute for face to face mentoring sessions for founders.

While this has been a challenging year for me personally as I had to stop mentoring at the MIT Sandbox fund due to health problems it’s been a rewarding one psychically. Helping entrepreneurs succeed is fun as well as rewarding.

Boston continues to play second fiddle to New York and Silicon Valley. The local politicians refusal to do away with non-competes will continue to handicap us. Not that doing so would magically turn Boston into the hub of entrepreneurship, but it would result in more spin offs from existing companies, which is the life blood of new ventures.

A CEO’s history of mentoring

 

mentorOne of my interests is virtual mentoring. I have a Google alert set for the term, but I rarely get a result. However, today my alert returned the story on Inside Philanthropy by of Keith Krach, who is just  now stepping down as CEO of Docusign.  He’s a very successful serial entrepreneur, having started and sold two high tech firms before joining Docusign as CEO in 2012.

After he leaves Docusign he is planning on focusing on philanthropy, mentorship, and education. Mentors played a critical role in Keith’s career:

“I look at my career after General Motors. I came out and, my God, I just had so many great mentors,” Krach said. One of those mentors was John Chambers, the former CEO of Cisco Systems, the tech giant.

“He was saying, you know, ‘Keith, you can ask my any question, any question you like.’ Which I did,” Krach said. “And about a year into it, I said, ‘Why? Why are you doing this for me?’”

Krach said Chambers told him that when he first came out to California, another CEO had done the same for him. “And so he goes,” Krach says, “‘Keith, I don’t ask for anything in return. I just ask that you mentor the next guy and pay it forward.’”

Mentoring the “next guy” will be the focus of Krach’s second—or third, depending on who’s counting—act. In addition to his support of City Year, an organization dedicated to mentoring vulnerable kids, Krach plans to start the Virtual Mentor Network. He hopes to nurture the next generation of leaders through a free, online mentoring network that will connect young people with leaders in different fields.

The vast majority of mentors I’ve met and worked with have achieved a degree of success and believe it’s their turn to  “pay it forward.” What different about mentoring today from when Keith Krach transition from the automobile industry to the high industry is the formalization of the process via incubators, accelerators, and academic mentoring programs like MIT VMS, which has now created 87 sister programs around the world!

It appears that the Virtual Mentor Network has yet to launch, but Google will be keeping an eye out for me. In the meantime, I’m sure there will be plenty of stories of interest about the mentoring of high tech entrepreneurs and there’s something to be learned from all of them.

 

Do you have what it takes to build a unicorn?

unicorn

Sean Wise has an eye-opening article on Inc.com This Study of 195 Billion-Dollar Companies Found 6 Counterintuitive Truths About Building a Unicorn, After 15 months, 300 hours and 100 charts, here is what researchers discovered about creating billion-dollar startups.

I’m going to list the six success factors in building a unicorn, adding a few comments of my own about how these findings relate to both mentors and founders. What is not addressed in the article, which I think is important for the vast majority of entrepreneurs who don’t build unicorn companies, is are these same factors key to creating a valuable company, just not one valued at a billion dollars or more?

Ali Tamaseb, a founder turned venture capitalist at Data Collective VC, gathered data on 65 key factors from all 195 unicorn startups based in the U.S. His work included all startups since 2005 that have publicly reached a valuation of more than $1 billion. The least surprising finding is that almost 60 percent of billion-dollar startups were created by serial entrepreneurs. In fact, he found that 70 percent of billion-dollar founders were “superfounders,” or founders with at least one previous exit of more than $50 million.

1. Industry knowledge isn’t required.

Certainly this is contrary to the received wisdom. But just as interesting to us mentors is that 80% of founding CEOs in healthcare and pharma had direct experience in their target market. Mentoring groups often reflexively bring in additional mentors with direct industry experience once a startup emerges from the very initial stages of company formation. From the study’s findings, this is only necessary in two verticals, which are closely related, healthcare and pharma. Unfortunately, neither Sean Wise nor the researchers speculate on what it is about these two verticals that requires domain expertise. My guess is that both are heavily regulated industries – see my post about the fourth risk – and that domain expertise is needed to navigate the complexities of government regulation. You don’t learn that in business school nor by doing a startup in an unrelated vertical.

2. Technical CEOs aren’t necessarily more successful.

I heard a great quote from an MIT VMS mentor the other day: “It’s not the technology, its the psychology.” Meaning that the customer and their psychology is what is decisive about a venture’s success, not the novelty or even value of the technology. This does not fly well at MIT, otherwise known as the Massachusetts Institute of Technology. Virtually every founding team is either all engineers or engineering dominated. So again, this finding is very helpful to mentors as we help founders build their team. This finding that successful tech founders vs. business founders are a 50/50 split was also found to be true of the author’s VC fund, Ryerson Futures.

3. You don’t need to be capitally efficient.

I was trained by the many VCs involved in my four VC-backed startups to “stretch the dollar” – they demanded capital efficiency, but only to a degree. As one vc told me, “Steve you’re going to waste a million dollars in this venture, but I don’t know which million, and that’s ok.”  According to the study less than 45 percent of unicorns were capital efficient. This certainly jibes with my reading about vc-backed startups – vcs are willing to put hundreds of millions into companies they believe will ultimately scale and go IPO, like Uber. This doesn’t mean that mentors should tell founders to be profligate in their spending, but only reinforces the “Nail it, then scale it” maxim. The function of external capital is growth and scaling, not creating product/market fit.” So I would say you need to be capital efficient until you reach product/market fit, after which you can focus on adding fuel to your rocket to gain escape velocity.

4. It’s (usually) not OK to be a copycat.

It’s no surprise that more than 60 percent of unicorns had a very high level of differentiation compared to incumbent firms. The worst strategy is copying what another startup is doing, especially if that startup is well funded. As a mentor I do preach differentiation and I believe that is the received wisdom.

5. You don’t have to be first to market.

Being first to market was a popular catch phrase and strategy in the dot com boom. Since that time few people I know see it as a formula for success. However, what the study found is that the best markets for billion-dollar startups already have a number of large incumbents, and often the startup uses the inefficiencies of these incumbents as a point of disruption. This is really important! What it tells me is that the size of the market opportunity is very important, but being first to  that large market is not. In fact this finding jibes with my belief in the maxim “No competition, no market.” Founders need to concentrate on large market and should not be discouraged by the presence of large incumbents.

6. You don’t need to be part of an accelerator to be successful.

The most dominant success factor in billion dollar market cap companies is that 70 percent of the founders were co-called “super-founders” – founders who with at least one previous exit of more than $50 million. This isn’t surprising. So if you aren’t a super-founder you may well want to apply to an accelerator. See my post Should you join an incubator or accelerator?

This article and the study upon which it is based provides very useful information for both founders and those that mentor them, regardless of whether the intent of the founder is to build a billion dollar market cap company or not.

 

Everybody’s talking about gender, but no one’s talking about class

aston martin

As the father of two daughters, I’m glad to see greatly increased awareness of discrimination against women in the startup world and some progress in leveling the playing field. A lot of focus is on the fact that there are far fewer female founders and it is far harder for those founders to raise capital than it should be. Research is demonstrating that more diverse teams make better decisions than the typical mono-cultures found in the startup world of young white males as founders and middle-aged white males as investors.

But what I haven’t seen addressed, and frankly I have to admit to not thinking too much about, is the very small number of founders who come from lower socio-economic levels. It wasn’t until the end of The Boston Globe article An upper-class mindset doesn’t make you classy that that the reasons for this surfaced:

…,the predominant US upper-class view of rules is that they’re made to be broken. Just look at popular books about success, like Marcus Buckingham and Curt Coffman’s “First, Break All the Rules” and Angela Copeland’s “Breaking the Rules & Getting the Job.” If we want to succeed, these books tell us, we’ll need to cast aside established social norms and chart our own path. This is sage advice for people who have little threat, but clearly bad advice for the working class.

Though they tend to shun rules, the relative looseness of the upper class offers several strengths: they tend to be much more creative, entrepreneurial, and open-minded. The working class, meanwhile, struggle with diversity: they are more suspicious of people who are different from themselves, who appear to threaten their sense of social order.

In today’s digital economy, several attributes of cultural looseness reinforce upper-class advantages. Whereas those from tight groups understandably tend to view change as a threat, loose communities see mainly opportunity. They have the cultural reflexes — socialized from a very early age — to adapt to disruptive changes, and the autonomy and independence to chart their own course.

Unfortunately the article’s author, Michele Gelfand, a professor at the University of Maryland, and the author of “Rule Makers, Rule Breakers: How Tight and Loose Cultures Wire the World”  and Jesse Harrington, a research associate at Fors Marsh Group, don’t offer any solutions to this problem.

Their conclusion, We must recognize that it’s culture that we need to reckon with, not just our bank accounts is not actionable information

However, one of my VMS colleagues is a mentor at an accelerator called Smarter in the City. Their mission is to bring diversity to Boston’s tech landscape:

Our mission is to diversify Boston’s startup sector by providing support and resources for local minority-run ventures. Through our accelerator program, we draw investment to communities that have traditionally been left out of the high-tech startup scene.

Check out the stats on minorities in Boston on their home page, they are eye opening!

9.2% of tech industry employees are Latino and African American

0.2% of venture funding goes to black women

20% of firms are owned by minorities

$8 average net worth of African-Americans in Boston

Supporting incubators and accelerators in the lower socio-economic areas of high tech-centric cities like Boston is one way to attack the lack of diversity. But I think this problem needs to be addressed earlier in lives of potential founders. Why aren’t there classes in entrepreneurship in the Boston public schools? Clubs for budding student entrepreneurs? Business plan competitions in high schools? In other words, young people across the economic spectrum need support, training, and encouragement to explore creating their own businesses. Unfortunately our public schools are still stuck in the 19th century model of churning out compliant workers for industries’ assembly lines. But until there’s real change in the antediluvian public education system, investors who have made a lot of money betting on entrepreneurs who look like them should direct some of their massive profits to support organizations like Smarter in the City. I don’t see a single VC firm or angel group listed amongst the sponsors of Smarter in the City. Though kudos go to Microsoft as the sole tech sponsor.

 

 

 

 

What’s the difference between coaching, mentoring and teaching?

 

MCE-Basketball-coach

Unfortunately the term “mentor” for startups is getting like “organic” for food: once meaningful, but through both misuse and overuse becoming close to meaningless. I have a post from a video by entrepreneurial guru Steve Blank that very clearly describes how mentors differ from not only coaches and teachers but advisors as well.

Thus I was pleased to see the Inc. article Do You Need a Coach, Mentor, or Teacher? Finding the right source of counsel makes all the difference as Inc. has a lot of reach with SMBs and entrepreneurs.

Here’s their very brief but helpful clarification between a teacher, a coach, and a mentor.

  • teacher is someone who has studied a topic enough to be able to teach what she has learned to others.
  • mentor is someone who has experience in your industry creating success for herself and can show you the way.
  • coach is someone who can help you with the internal aspects of entrepreneurship, personal growth, setting goals, and facing fears and resistance.

Another difference worth noting is that taking a course or hiring a coach typically costs money, where as mentor is synonymous with “volunteer.” I’ve yet to see any one charge for mentoring. If you do that you are an advisor.

Another point mentioning is where in your entrepreneurial journey you should look for what type of help. Typical is taking a course related to entrepreneurship, as many of my MIT students do before they enter the startup world via MIT Sandbox or one of the Institute’s many other entrepreneurial programs. By entering a support system like Sandbox or The Venture Mentoring Service founders get access to mentors. It usually isn’t until a venture is further along that coaching comes into play. Mentors or often investors may recommend a coach, usually to help a technically-minded CEO improve their business skills. Years ago we used to call this “going to charm school.”

Another way of looking at these sources of support is that the further along your venture is the more your need for domain-specific mentoring, advising or coaching. Very early stage ventures can benefit from mentoring on the many general issues common to all startups: what type of business entity to form, founders’ agreements, building a team, creating pitch decks, prepping for business plan competitions, etc.

An important point for founding CEOs: you need to differentiate between support for your venture and support you may need as a first time CEO. This is similar to the legal counsel issue: while ventures always have legal counsel often founders or executives can benefit by having their own attorney.

Taking advantage of the right teachers, mentors, advisors and coaches can be as important to founders as the talent they recruit. As I’ve said many times, startups are learning machines and founders should seek out sources of learning wherever they can find them, including their own staff and colleagues at other startups or even at mature ventures.

 

Telementoring in healthcare

telementoring

An email alert I have for “chronic pain” generated a result for “telementoring.” Evidently that’s the term for virtual or remote mentoring that is used in medical care. However, unlike virtual mentoring or in fact any mentoring for entrepreneurs, the medical world takes a scientific approach. That translates into studying the efficacy of telementoring.

Telementoring is now regarded as a best practice in pain management and safe opioid prescribing according to the article Pain Management Telementoring May Cut Opioid Prescribing on the site Clinical Pain Advisor.

The researchers found that primary care clinicians participating in ECHO Pain (telementoring had greater percent declines than the comparison group in annual opioid prescriptions per patient (−23 versus −9 percent), average morphine milligram equivalents prescribed per patient/year (−28 versus −7 percent), days of coprescribed opioid and benzodiazepine per opioid user per year (−53 versus −1 percent), and number of opioid users (−20.2 versus −8 percent).

So what is telementoring, how does it benefit hospitals, and what does this have to do with mentoring of entrepreneurs?

And what problem is telementoring solving?

Today, experts estimate that all human medical knowledge doubles every 18 months. The pace of progress in surgical innovation is so fast that some surgeons have expressed serious concern about patient safety as technology diffuses throughout the real world without proper training.

Keeping your organization up with surgical innovation is imperative for growth, but surgical programs can be slow to adopt because surgeons are worried new technology may result in poor patient outcomes early in the adoption cycle. Because of these fears, some providers are seeking out telementoring.

An article Advisory.com provides some answers:

[telementoring] is procedural guidance of one professional by another from a distance using telecommunications, such as audio dialogue and video telestration (video tablet and pen). This valuable tool can help your surgeons and clinical teams feel comfortable adopting the latest procedures.

It’s clear that telementoring is a form of peer-to-peer education in the medical world. Surgeons are the early adopters. Telementoring reduces travel time and time away from work for the surgeon and provides expert counsel on the latest surgical procedures. Telemementoring has been embraced as a form of continuing education/training for surgeons.

The article concludes with this takeaway:

Telementoring should be on your radars as you think through how to boost adoption in your surgical service portfolio. While medical centers with access to advanced OR technology will likely lead the way, telementoring can reduce barriers to surgeon upskilling for all types of hospitals by lowering associated costs and improving surgeon comfort.

My takeaway is the telementoring could be used as a peer-to-peer training in domain specific areas critical to the success of a startup: how to get your venture investment ready; how to use social media to market your product; how to build your cap table and financial statements; and how to raise capital. Perhaps current in-person seminars for entrepreneurs could increase their reach and impact by adding telementoring. MIT Venture Mentoring Service has seminars in sales, marketing, and human resources.

However, telemarketing needs domain specific mentoring expertise and new and different guidelines for both mentors and mentees. Building up a network of telementoring experts seems like a natural extension of accelerators and incubators. This is especially true for market-specific incubators, such as focused on fintech and healthcare. A more rigorous program of both mentor selection for domain expertise and a more structured program of mentoring will differentiate telementoring from virtual mentoring.

Whatever the terminology, both mentors and founders can learn from how hospitasl and surgeons are participating in telementoring as an educational and research activity. Currently little research is done on the mentoring of entrepreneurs beyond a yearly customer satisfaction survey.  And founders may be even more hesitant than surgeons to participate in domain-specific educational virtual mentoring or telementoring be anxious about taking time away from running their startuip.

I will be adding “telementoring” to my Google Alerts list and studying up on how best practices in telementoring in the medical arena can be adopted or adapted for the virtual mentoring of entrepreneurs. In the field of virtual mentoring it appears that surgeons may be way ahead of entrepreneurs. Check out the article System for Telementoring with Augmented Reality and be sure to watch the video!

 

 

 

The pros and cons of virtual mentoring

mentor drawing

I’ve been interested in virtual mentoring for quite some time for a couple of reasons. For one, it’s the only way mentoring can scale. After all why constrain a mentor to their own locality when there are no doubt entrepreneurs across the country who could benefit from their mentoring? And, of course, it can be far more convenient for the mentor as you can  use your home office or anyplace with an internet connection. I have a Google alert for “virtual mentoring,” but it very rarely generates any results. However, today I found an article on virtual mentoring from the Harvard Business Review, an excellent source of the latest in business ideas and strategy.

While the focus of the article is on professional development for employees, as most mentoring is, there are still some points relevant to the mentoring of entrepreneurs.

The principle finding from the authors’ study conducted on employees of HCL Technologies was that mentors from varying domains can be of great benefit. HCL is a leading IT and software development outsourcing company based in India. HCL has over 103,000 employees, who are distributed globally across the firm’s own delivery centers and client sites.

Professors Bala Iyer and Wendy Murphy surveyed 1,200 HCL employees and analyzed their social networks and demographic data. They found that HCL’s knowledge management and collaboration tools improved individual productivity.

We found that employees who were connected to others via the KM and collaboration systems felt more highly engaged and productive than those who were not so well connected to mentors and were not active participants in the knowledge communities nurtured by the systems.

They found that the key to making productive use of mentors is asking interesting questions. And as is usual in business, reciprocity or paying it forward is a best practice: But be a good Netizen and remember to reciprocate: Answer others’ questions in a timely and helpful manner. 

While the HBS professors’ definition of mentor is much looser than mine – it seems to encompass anyone with domain knowledge to share – they do consider this to be the age of virtual mentors.

So why does one of the top mentoring organizations in the world – MITs’ Venture Mentoring Service – focus solely on face-to-face mentoring? Mainly because f2f is the highest bandwidth communication channel there is. In addition, by limiting mentors to MIT’s geographic area mentors can offer valuable local connections and even potential investors.  Another reason is that VMS uses a team mentoring approach. What I’ve found from the small number of virtual mentoring sessions I’ve conducted for the MIT Sandbox is that video conferencing works well for a one-on-one mentoring session, or even for one mentor to two founders. But the technology just isn’t suited for the multitude of interactions stemming from having a team of mentors interacting with a founding team. The non-verbal cues about when to speak and when to listen can get lost in a video session.

But non-verbal communication isn’t limited to knowing when to chime in. I find that if a founder is leaning back in their chair they probably aren’t nearly as engaged as when they lean in across the table. In fact, I’ve seen founders go from a lean back, disengaged posture to leaning in and eyes lighting up when I hit on a topic that resonated with them.

It’s also useful to observe the behavior of the other team members when one of them is talking. Are they all listening intently or staring at their phones? And while video conferencing apps like Zoom make it easy to view a presentation during a remote mentoring session doing so cuts into your view of the founding team.

So here are the takeaways on virtual mentoring:

  • It can enable founders to find mentors with expertise in different domains
  • It can be more convenient not just for mentors but for mentees as well
  • VM is not well suited to team or group mentoring – the aperture is too small
  • VM can be very useful in a large corporation, enabling staff to tap into expertise across the enterprise as well as outside it
  • VM can bring get staff into the habit of searching out and finding outside expertise which can be shared with their colleagues

So my search for instances of virtual mentoring of entrepreneurs will continue, but in the meantime there are lessons to be learned from mentoring that takes place in a large company like HCL. Perhaps I’ll contact the two authors of the HBS Review and try to convince them to study virtual mentoring of entrepreneurs.

Finally, perhaps I’m overly sensitive, but I find the authors’ illustration of a mentor to be less than flattering. This guy looks like a hermit who has just emerged from his cave. And he’s not looking happy about it!