Entrepreneur, author, educator, Steve Blank, changed how founders launch startups. Globally, entrepreneurs benefit from his customer development method which became the Lean Startup movement. Now Blank’s Lean LaunchPad class has become the standard for commercialization for federal research.
Part 3 of 4.
Please share a few key insights for startups that are expanding into the U.S. market.
If you’re looking to expand into the U.S. after you’ve built a business you’re already late. If you believe on day one that your business will be global, or at least EU and North America, you should be thinking that you may be born local, but your goal is to grow global.
And to do that, you need to be thinking about global markets from day one. Everything from the technology: is the software and hardware translatable into multiple languages? Are we thinking about regulatory issues in whatever country we’re going to be in? Have we started on day one thinking about the distinctions between the two markets?
It’s really easy to, particularly if you’re starting in Germany, think about German markets first, and then think about expanding globally later. That usually costs you about two or three times the amount of effort, versus if you had just run the thought experiment, that is, let’s spend a week planning what a global company looks like? What do we need to know? Who do we need to get to advise us about the differences between Germany and U.S. technology, marketing, sales, positioning, regulations, and branding? And build them from day one.
Americans make the same mistake. The U.S. local market is big enough for early sales, and then years later they go, let’s go to the EU, I guess it’s the same as the U.S. Obviously it’s not, the French markets are different from Germans, and are different from the UK, etc. It amounts to an enormous waste of time and energy.
The advice I’m trying to give everybody is that before you say, “Let’s go write code and start selling in Germany.” No, spend a week and figure out what it’s going to take to be a global company two years from now. What should we invest in today? Either people or talent or technology that will allow us to seamlessly do this when it’s time to get bigger.
You’re considered one of Silicon Valley’s godfathers, who would be Silicon Valley’s godmother?
Well, I was lucky enough to be mentored by one of them who unfortunately passed away way too early. A woman named Kathryn Gould was one of the earliest women VCs. There were others, but Kathryn was one of the five first women venture capitalists.
I’ve got to tell you a very funny Kathryn story, which I never appreciated until decades later. I knew Kathryn as a recruiter and a VC, and then she was on my board, and then became a good friend. When Kathryn was a venture capitalist, she was honored as woman VC of the year, and she would always turn these awards down.
This is back in the ‘80s and ‘90s. I remember this exact conversation. “Kathryn, why do you turn these awards down?” And she looked at me in a great Kathryn way. She said, “Steve, I don’t want to be known as the best woman VC, I want to be known as the best VC.”
And of course, nowadays, you’d go, why, of course! She brought up just a different perspective to almost everything we did then. Silicon Valley, certainly in the 20th century, was a high testosterone macho guy thing. Kathryn was as tough, as smart as the guys, but she just had a different sensibility. I think that always made our conversations much more productive.
What did Kathryn say that stayed with you?
Kathryn was a really interesting mix. She had a degree in physics from the University of Chicago, eventually was on their board of trustees. But during the early part of her career, she was a recruiter. And so she could read people and personalities. She invested in people as much as she invested in markets and tech, even though she understood markets in fact, as well as most of the tech people.
Actually, it’s funny you ask what she said that’s stayed with me. After seeing a ton of entrepreneurs late in my career, you finally get some perspective about people’s personalities. I finally noticed that a disproportionate number of Silicon Valley founders come from dysfunctional families. They grew up in chaos and uncertainty and whatever, and their skills were just survival skills. The few that did survive were able to just shut down everything that wasn’t necessary for survival. And just focused on those few things that were. That was also true for people who came from villages in India and China and made that long trek in both distance and career, and also have that kind of skill set.
I had never seen that correlation between dysfunctional family dynamics and founders written anywhere. That environment was really the cruelest, but most effective training ground for successful founders. And so, one day I’m having a casual conversation with Kathryn. I said, Kathryn, did you ever notice…and I went through the story. She looked at me with this cold stare and said, “Steve, why do you think I invested in you?” Then she said, “Did you ever look at the rest of my portfolio? They’re all like you.”
As my board member, she almost fired me in my next to last company, which was a disaster. Later on, we became friends. Our families would go on vacations together. The roles had kind of changed us as we both got later in our careers. I don’t have to tell you, but women in Silicon Valley had to be twice as smart, work twice as hard, etc. And so several of them became role models for me.
[Computer scientist] Adele Goldberg, [business leader, former CEO of Palm, Inc.] Donna Dubinsky, the VP of sales at Epiphany who then became the CEO, Karen Richardson all have that characteristic. I even married one of them. My wife was a Stanford MBA, much smarter than I am. I just happened to be maybe a little less risk averse, because I was I was too dumb to know it couldn’t be done.
I always thought, at least in my career, that if you hired a bunch of these women who were just not, back in the 20th century, appreciated, you actually got a force multiplier inside your organization. Certainly the bell curve was on the side of much smarter and harder working than just to compete in what was then a boys’ club.
Is it still a boys’ club?
I hate to admit…how many decades of experience I’ve had in the Valley. I’ll tell you when I first came out [to Silicon Valley], it was a white boys club with boat shoes. People would point to Vinod Khosla as the first Indian venture capitalist and then women, and then whatever.
Silicon Valley still isn’t a meritocracy. But the decades I’ve had have given me a perspective of how there have been massive changes in both ethnic and gender makeup. Obviously, it’s nowhere near the 50% it needs to be. We have a long way to go. It certainly doesn’t represent the demographic mix of the state of California, or the United States.
I’ll tell you another story on this, even one that was recently. I started my class at Stanford with Ann Miura-Ko who’s now a partner at Floodgate [seed-stage VC firm]. She was at first my teaching assistant and then my co-instructor. So I started teaching with a woman co-instructor.
But over a decade, I just brought in other venture capitalists, until we looked around and said all the instructors are male. The makeup of the class was like 20% women. That’s not the mix at Stanford. And so we added Mar Hershenson who is a great woman VC at Pear Ventures.
And Mar said, “Well, you’re using language that’s a real turnoff to women.” I said, I’m using the same language I’ve always used.” I remember Mar saying “perhaps that’s the problem!” So at Stanford, we now do explicit outreach to women and minorities for the class and changed the language we were using.
The excuse always used to be, the class (or startup, or VC firm) reflects the pipeline of talent, and we’re just representing the pipeline. Mar pointed out that might not be the case. It might be that you’re actually unconsciously setting up the language that says, this class isn’t for you. I’m proud to tell you that in all the classes I teach, the balance is pretty close to 50-50. It was a great experiment for me.
When people say it’s about the pipeline, there’s not enough women or people of color in the pipeline. I now go and say, “No, no, no, I think maybe you’re not making it attractive, and perhaps we have to make specific outreaches.” That was a personal example of having lived this.
What kind of language did you have to change to be more inclusive?
Well, if you think about innovation, entrepreneurship, and startups, it’s all speaking in the language of win, and kill, and lose. I’m not saying those exact words, but battles, and fights, rather than collaboration. The historic Silicon Valley boys’ club of startups all look like the Fight Club.
There is a thread that says that is one successful model of an entrepreneur. What I’ve learned over time is that it’s not the only successful model. But that was the model we tended to both invest in in the Valley, and then recruit for, and say implicitly, do you have what it takes? A Marine Corps phrase or whatever.
Women didn’t find that particularly attractive, well, you’re obviously not talking about me. And of course, once they get in the class, they perform better than the guys do, so. It was just getting them to believe that this was for them.
And of course, I’ve been trying to get Mar to write up what she’s done, which I can’t get her to do. Also, it’s just so obvious, but people building incubators and accelerators should think about this as well. Having a guy lead the women’s session is the wrong thing.
But also, trying to attract people of color without having someone of color leading those sessions. We went after the black students group, and the Latino students group, to get the right balance of the class. And surprise, people respond to people like them, where you lower the barrier of “this isn’t for me,” to at least see that maybe it is.
It goes back to Marian Edelman Wright’s, You can’t be what you can’t see, right?
Yeah, and this is also an age thing. I’m sure my kids go, “Duh, dad.” But to somebody who grew up in that all-boys white shoe culture in the Valley saying, it’s all about the pipeline. We just reflect what’s coming into us. Actually running the experiment, and within one semester, finding out well, that simply wasn’t true.
I was always more than happy to have a diverse mix of entrepreneurs. The assumptions that I had about what the cause was about not having that was just simply wrong. And that if you make even just a minimal effort, it doesn’t take a lot to change the mix.
I think entrepreneurship is better for it, culture is better for it, and society is obviously better for it, once we do that. That goes back to your questions about women and balance in the entrepreneurial pool. That it wouldn’t take much effort for VCs, incubators, and accelerators, to make those outreach efforts and you could dramatically change that balance.
The problem is, of course, in all countries, all this stuff is unregulated. It is up to the people running those organizations, to realize that they can make more money or for better outcomes. It will take time, but eventually, I think we’ll get there.
You have been part of Silicon Valley since the late ‘70s, what is the Valley going to look like in 2078?
If I knew that I’d be running a hedge fund! Well, you know this COVID changed the nature of what an innovation cluster is in Western democracies.
Though interestingly enough, not in China, where we still have people physically meeting in Northwest Beijing or Pearl River Valley, etc. We’re running a giant science experiment now, about what happens when your staff could be anywhere in the world, which gives you a bigger recruiting pool. And if you’re an investor your companies could be anywhere in the world.
But what happens when that physical interaction, where we could meet for lunch, isn’t as intense. For 1000s of years the nature of physical clusters. Where not only the core industry but also all the ancillary functions, in our case legal and finance, all sat in the same place.
Silicon Valley, Boston, and San Diego for life sciences were the original U.S. clusters for physical spaces. We’re running this experiment during COVID that says what happens when that’s no longer the primary reason they exist? I don’t know. What’s going to be interesting for all of us is the answer.
Silicon Valley and California have some specific issues about homelessness. Housing has become unaffordable. Now all of a sudden the largest companies, Google and Facebook are telling people, you don’t physically need to be here to work. Are these clusters going to disappear as a physical thing, become virtual, and compete with physical clusters in China?
Part 4 of 4: Steve Blank’s One Question for Elon Musk
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