Module Description:
IdeaLab Founder Bill Gross shares insights from his 40 years of experience founding startups, revealing key factors that drive startup outcomes (successes and failures).
Full Transcript:
- Welcome, everyone, to our "Ubiquity University" session on patterns of success versus failure with Idealab's Bill Gross. I'm excited to have him here today. Ubiquity Ventures is a seed stage venture capital firm investing in software beyond the screen. That means we back entrepreneurs that are focused on using smart hardware and machine learning to solve real world physical problems. In today's session, we're gonna spend time with someone who's a real veteran of the technology and entrepreneurial world. Bill, I'm really glad to have you on. It's been a pleasure working with you on many, many startups over the last, approaching a decade now. Let's dive right into sort of this idea of success versus failure. I'd be curious, with your tenure in the industry and around this ecosystem, what do you see that's different about startups these days versus even 20 years ago?
Well, thank you, Sunil, it's great to be here with you. I've been starting companies actually for 40 years now, ever since I graduated from college. So I'll give you a 40 year look, a 20 year look and a today look. When I first graduated from college, startups were really, really not common. And I remember having to take parents of people I was trying to recruit to dinner to convince them that I was not a pariah for hiring their son or daughter into a startup because the people graduating from Caltech were going to work at TRW or in aerospace, other companies, JPL, and to go work for a startup was very weird. Now, fast forward 20 years later, I had already done a bunch of startups in the '90s, and startups in the '90s were definitely becoming more commonplace because after Netscape went public, there was a huge .com boom and people were looking to take advantage of all the opportunities for the Internet. But still, there was a VC community that was much more narrow than it is today, and there was not a whole angel and other stage of investment opportunity like there is today. So when you fast forward to today, there are so many different sources of capital available, ranging from the earliest stage, friends and family, angel investing, pre-seed, seed. There's so many terms now even for all the ranges and stages of capital. And now, it's almost like going to a startup is the standard thing, and why are you going to a large company and not to a startup? So it's swapped completely from when I first started, when I graduated from college to today, that a startup is almost expected as a great experience for someone to have and at least something to try. And I think it's especially so in America, where if you fail at a startup, you're not scarred for life. There's no scarlet letter around failure. And, in fact, I even view if someone has a failure that they learn from, they have a lot more experience, and they're even more valuable to a subsequent startup if they paid attention to the reasons that they failed. If they failed and ignored all the reasons, then they're not a good person. If they failed and they learned from it, it's extremely valuable and that's a big change today.
So I want to go more into those patterns of success and failure. But before we do, I was hearing you talk about the increased number of resources and capital today. It sounds like you're saying it's easier to do a startup today. It's easier to succeed with a startup. Is that what you're saying?
Well, it's easier to form a startup, to get capitalized and to have a chance. It's still very hard to make a startup successful because of all the competition and all the way you have to time the market and all the other things to make a startup work are just as challenging as they ever were. But the chance to recruit people and to get the capital to have a chance, that is way better, way better than it ever been.
So let's dive a little bit more into these patterns of startup success and failure. You and I even wrote a blog post, I was looking back at it, three years ago, about forgetting the past, remembering the past the TLDR is, if you are too tied to lessons from the past, you won't try anything new because you think it's already been done. But talk to us a little bit over those 40 years about what separates the startups that succeed from the ones that fail.
Well, it's very important to have the timing right for your startup. By definition, if you're trying to do something new and bold, you are trying to push forward the status quo, and you're probably ahead of your time, but you don't wanna be too far ahead of your time. If you're too far ahead of your time, then people aren't quite ready yet for what you are trying to deliver to them. So the right things in the world need to be in place. The right pull needs to be in place to accept your idea. Now, that's very hard to measure, but you can look at it very carefully and see, are you describing something to people that they're not ready to accept yet? And I'll give an example. Uber was tried in many different forms in different times before GPS was available. Now, Uber didn't invent GPS, but Uber took advantage of the fact that so many people were now getting iPhones that had GPS on it, that the timing was right to make an offering where you could see where a car was and how it was approaching you. That was a breakthrough at that time. But again, it was Uber taking advantage of the timing, not Uber inventing or causing the timing to happen. So I really recommend to startups to look at the world and see, is everything in place for what you need? If you're way too early, that's almost just as bad as being way too late. So that's one factor of success for startups. Another important factor of success for startups, I say, is you really need to deliver a clear solution to a problem that people are having. And you need to be able to communicate that, and they need to be able to understand it. So coming up with a way to test, is the thing that you're offering really in demand? Is it being pulled by people and do you not have to push it on them? It's very, very hard and too expensive to push something on people. I would say that consumer products companies with very large advertising budgets can push something on people and shape the market to pull what they want. But startups can't afford that. Startups have to have something which the customer is just pulling from them very, very strongly. So what I think a startup needs to succeed is to either have that at the outset or to listen very carefully to the customer and adapt their offering till they get that. And that's sort of what pivoting or adapting to the market is, is launching your product in an MVP form and really paying attention to which parts of your product matter the most to customers, which parts of your product are missing that would matter most to your customers, and quickly adapting to deliver that. Because as a startup, the thing that you have going for you is adaptability and low inertia. You don't have a big budget. You don't have all the brand that the big company has. What you have is speed, speed of adaptation to what customers really want. So I would say startups succeed when they really take advantage of that core element that they have over a larger competitor.
So Bill, you were talking about listening to customers. Sometimes from entrepreneurs, I hear them say that customers don't necessarily know what they want. How do you factor that in when you think about success versus failure?
Well, Steve Jobs seamlessly said, "I don't wanna listen to customers. "I want to give them what I think they want." And he was a genius at that. I definitely think that there's a place for that in business. But Steve Jobs also listened intently to customers to figure out what he knew they want. He didn't ignore them. He also paid attention very heavily to what he wanted. And I think if you have a very clear need for something, I often say to entrepreneurs, "Look in the world "for the problem that you're trying to solve, "the problem that you feel." If you know the problem and you feel you have a way to solve that, and customers don't understand that yet, then that's still a great way to go forward and just figure out a way to communicate to them, so they understand how you're solving that problem for them. But it's very important to not have blinders on and only be thinking about the problem the way you think about it, and to see the way other people think about the problem. And that often happens. There's this great line from Mike Tyson, as a boxer, saying that, "Everybody has a plan "until they get punched in the face." Well, it's humorous to think that way, but I actually think that businesses get punched in the face, metaphorically, when they actually bring their product out to customers. And they need to go see how they're getting punched and how they're getting rejected and how the customer feels about it and then adapt to it. And that, I think, is what makes great startups great, startups that are always paying attention to the feedback from customers and not listening to all of it. Just because a customer says something, doesn't mean that you should listen to it, but including that in their thinking to figure out what's the best path. And again, it's hard. This is not easy stuff, but I do think it's what separates winners from losers, for sure, because there's a company out there that is doing that better. If there's a company out there that's doing that better than you, they have a big advantage. And I often think about the following thing. When I was starting companies in the '90s and I was making packaged good software, I had to make a product that I put on retail shelves. So I had to manufacture a product CD-ROMs, it was educational software, and get them through distributors and then onto Walmart shelves and onto Target shelves. And there was months between when I would make my product and it would get in customer's hands. When the internet came about, it was fantastic because you could make a product that could get in people's hands in seconds, not in months. I remember, at that time, Dell Computers was really taking off and winning the whole marketplace because they manufactured computers to order and they could make a computer in a week, whereas Compact, their computer sat on shelves for a quarter. So Compact had four turns on inventory, and Dell had 52 turns on inventory, and that allowed them to win. Well, I think of a startup today as not turns on inventory, how many turns on knowledge can you make per year? How fast can you take in new knowledge and adapt your company and your product to that new knowledge? And a company that has more turns on knowledge, that is paying attention to the world, paying attention to customers, and adapting that inside their company, that's who wins because speed in the world matters right now. When you have the whole planet as your reach and you have big behemoths as your competition, that's the one thing that a startup has that they can outdo. How do you beat a Google? Google has so many resources, has so much profit, has so many employees, hundreds of thousands of employees all over the world, and very smart people. But you can outdo them on speed. And we've actually seen that with OpenAI just recently, how OpenAI came out with something faster that Google wasn't ready to release. But that's even a example of a big company going against an even bigger company. But as a small startup, that's your weapon. And that's why I think listening to customers is so important, and the way you listen to them matters so much.
Well, Bill, I think we get along and enjoy building companies together because we both agree on that that core idea of listening to customers, and I think the nuance there, listening in high volume, but also not taking everything at face value sort of.
Exactly.
The delicate art of customer development. So thank you for doing this session here. Again, Ubiquity Ventures, seed stage venture capital firm. We'd love to hear from you. If you'd like to set up a meeting, we're a pitch.ubiquity.vc and I'm available at Sunil@ubiquity.vc. Thank you.