Stephen Sacca, SF ’90
Director, MIT Sloan Fellows Program
When Uber founder and CEO Travis Kalanick visited MIT Sloan recently, he shared a few key nuggets of advice with would-be entrepreneurs: understand who you are, know what you're good at, and come to terms with your weaknesses. And when you come up with your big idea, he added, it must mean more to you than just a great idea. You must believe it can change the world for the better.
For this issue of the MIT Sloan Fellows Newsletter, we reached out to alumni and faculty who are prominent in the entrepreneurial realm and asked them to offer their hard-won perspectives. Thinking of launching a business? This is a pretty good place to start.
Since the onset of the Great Recession, job creation and economic development have grown into a national—perhaps even global—obsession. Nearly every leader across the spectrum of government agencies, private enterprises, and nonprofits ranks the proliferation of well-paying, high-quality employment opportunities at or near the top of his or her agenda. Countless stimulus plans and policy initiatives have been proposed or launched in an effort to boost the number of successful enterprises.
Amidst this flurry of activity, however, we have yet to develop a durable consensus about how to ensure that high-growth businesses survive and thrive. "Entrepreneurship, by its nature, involves a high level of uncertainty and luck," says Scott Stern, David Sarnoff Professor of Management of Technology and cofounder and director of the Innovation Policy Working Group at the National Bureau of Economic Research. "But this doesn't mean that all you can do is come up with a great idea, work really hard, cross your fingers, and hope for the best."
Stern has spent the last decade deconstructing this challenge from two perspectives. In the classroom, he has developed a curriculum that provides innovation-oriented entrepreneurs with a robust set of tools to make strategic decisions in a disciplined and systematic way. Stern has written 15 cases in the last five years and has made all the course materials available free of charge on the Entrepreneurial Strategy class website.
"Graduate students typically come to my class with very clear underlying hypotheses about how they want to deliver value to the marketplace," Stern says. "Our goal in the course is to direct those visions into a framework of choices that result in successful launches and scaling." In the module on choosing an entrepreneurial strategy, for example, students work through the pros and cons of competing with established firms versus competing to partner with established firms.
"Engaging in disruptive competition with established players isn't your only option for launching a startup. You have to work through a set of choices about whom to compete with and how to compete that are specific to any given idea. Those choices, in turn, have implications for strategies related to intellectual property, disruption, value chains, and organizational architecture." This process, in Stern's experience, requires entrepreneurs to come to terms with the value they expect to create and the logic of how they will capture value on a sustainable basis. HubSpot, Joulez, and Greentown Labs are among many recent startups that have benefited directly from Stern's approach.
From the perspective of entrepreneurial ecosystems, Stern's work in the MIT Regional Entrepreneurship Accelerator Program (REAP) is helping regions around the world accelerate economic growth through innovation-driven entrepreneurship (IDE). During two-year engagements with REAP, partner regions form multidisciplinary teams to build and implement customized regional strategies that enhance their IDE ecosystems.
Each REAP partner assembles a team of five to seven influential regional players. The team must include representatives from five major stakeholder groups—government, corporate, academia, risk capital, and entrepreneurship—along with a "champion," a deeply committed leader with significant political and social capital. Recent champions include Donna Chisolm, Head of Business Innovation and Growth Sectors, Highlands & Islands Enterprise in Scotland and Javier Gutierrez Rumbao, Director of Technology Analysis, Government of Andalucía. Geographically, a typical region will contain anywhere from three to 10 million people.
"In our REAP partnerships, we apply similar data-driven frameworks to entire ecosystems that we use for individual enterprises," Stern explains. "We convene periodic action-learning workshops to identify key drivers of the IDE ecosystem and create a set of shared metrics for the policies and programs a region decides to implement. As each partnership progresses, the entire REAP community benefits from the lessons learned in that region."
The insights coming out of REAP and other entrepreneurship activities at MIT Sloan recently caught the attention of the national press and policymakers in Washington. Coverage of a policy paper by Stern and MIT Sloan colleagues Catherine Fazio, Jorge Guzman, and Fiona Murray in The Wall Street Journal, 538.com, The Atlantic, and Harvard Business Review led to a policy roundtable convened by President Obama's Office of Science and Technology Policy. Look for details of the paper and the subsequent policy discussions in an upcoming issue of the MIT Sloan Fellows Newsletter.
"What's your secret sauce," Jag Gill, SF '13, asks budding entrepreneurs. "What's unique in what you bring to the table? And what societal need are you meeting? A new business should never be a solution in search of a problem." Gill, founder and CEO of Sundar, a global apparel startup, created her business because no efficient platform existed to connect the apparel industry to suppliers and manufacturers. "A clever idea is neither practical nor executable if it doesn't solve an existing problem or fill a gap."
Serial entrepreneur Nadia Shalaby, PhD, SF '10, CEO of ITE Fund, agrees. "Understand the market for your product before you ever begin. Who needs what you are planning to provide? How will you reach them? Are there enough consumers to make your product or service viable?"
And being honest with yourself about your motivation, Shalaby believes, is as important as knowing your marketplace. "Why you are starting a business? Because it's fashionable? Because you're tired of working for others? Because you want to get rich quick?" Be aware of your true motivations, Shalaby says, and make sure they are not just temporary reactions to your present situation. She notes that having a higher purpose is often a more sustaining goal. "The entrepreneur who focuses on presenting a new and better solution to an existing problem feels a responsibility over and above his or her own gain. The passion and conviction that you are solving a problem can get you through the many peaks and troughs of entrepreneurship, but it's also smart business strategy and can lead to success in marketplace metrics."
Alan Yan, SF '07, founder of several successful enterprises, including AdChina, which was acquired by Alibaba in 2015, notes that new entrepreneurs often look to success stories like Apple or Facebook and believe that their biggest challenge will be to manage that success. "They don't have any idea about the complexity of the challenges that happen behind the scenes. The trouble is, if you're not emotionally invested in what you're doing, those challenges will be difficult and your decision-making may be skewed because you find yourself looking for the path of least resistance. Just following the money is rarely a prescription for success."
Gustavo Mamão, SF '11, concurs. Mamão, who just completed the sale of his Brazilian agribusiness startup to an American company, says that being personally connected to and driven by the mission of your organization is essential to maintaining the resilience you'll need to get you through the tough times. "If you are passionate about your vision, you will be able to stay the course and map your decisions to the right path for the company—even if it's not the short and easy path."
In the wild ride that is new enterprise, all five entrepreneurs believe that focus is as easy to lose as money. "Check your distractions at the door and stay focused on your vision," warns Mamão. "Entrepreneurship is a long and winding journey. You must continually keep your vision in mind and not get distracted by the shiny objects along the road. Remind yourself why you have launched the business and check each decision against that original vision."
Shalaby adds that setting milestones is a good way to stay focused. "Don't establish open-ended timelines. Set a tight but reasonable schedule for achieving each aspect of your business plan—exploration of concept, obtaining funding, making a certain number of sales. If you cannot meet those milestones, you're getting a reality check about the viability of your business."
Even success can cloud vision, Yan says. "Keep working toward your core mission. Keep your eyes on that prize. Very often when entrepreneurs experience initial success, they think they are invincible. In that flush of enthusiasm, they branch out in many different directions, following up on any attractive opportunity, losing sight of their key objectives and core mission. Remember," he cautions, "It's better to be a leader in one marketplace, than an idle dabbler in many."
Mamão notes that staying focused doesn't mean that you must never vary from your original course. "It's all about resilience. Be open to recognizing decision points that may alter your course but will give you a better shot at achieving your original vision."
Greentown Labs CEO Emily Reichert, PhD, SF '12, agrees that while it's vital never to lose sight of your vision, it's equally important to "be open to everything and everyone. Talk to people. Listen. Don't close yourself up with your vision. One of the most important traits of a successful entrepreneur is the tendency to keep an eye out for anything that can help realize that vision and grow the business."
Reichert believes that one important way to introduce fresh perspectives is to build a diverse team. "The strongest teams are those that represent multiple cultural and professional perspectives-technical, managerial, marketing. That way, all facets of your business are being addressed during the decision-making process."
Gill notes that many investors value CEOs who are outside the industry in which the enterprise operates. Gill herself came from a background in finance, although she had advised clients in the world of apparel and had exposure to the industry. "One thing that someone from outside the industry brings to the table is an impulse to ask why. They don't just accept the status quo because they haven't become comfortable with it. They are always asking, Why do we do things this way?' That reality check is exactly what a business needs to compete and stay healthy."
And while a homogeneous team is a stale team, Shalaby believes that nothing can sink a business as quickly as incompatibility among team members—especially between founders or senior executives. "No matter how valuable you think a particular teammate is in terms of his or her contribution to the enterprise, don't keep that person on if they're creating tension and preventing team cohesion. One of the foremost reasons that businesses fail is a bad relationship among the founders or other key company leaders."
Shalaby points to Google founders Larry Page and Sergey Brin. "They were a couple of PhD students at Stanford when they launched the business that would become Google. The two have maintained a strong, supportive relationship throughout their company's supersonic growth. Today, Google is one of the top ten companies in the world." She also points to Facebook as a lesson about compatible founders. "Mark Zuckerberg and his cofounder were rarely on the same page, so Zuckerberg bought him out, and he and the company thrived."
Shalaby adds that many cofounders and C-suite executives overlook early acrimony as a temporary stress attributable to growing pains. "Everything will be fine when we raise the money,' they think. They should think again and take a hard look at the relationship. Investors know to look for compatibility among founders when they are sizing up a business. Good chemistry can be tough to fake."
"Bottom line," says Gill, "is to always communicate to colleagues and investors with honesty and respect. Don't hide bad news. Be honest about what's going right as well as what's going wrong. To establish trust, it's essential to operate from a position of intellectual honesty. Also, everyone learns just as much from what goes wrong as from what goes right, so share authentically about the business with stakeholders. Your enterprise will be healthier for it."
One of the areas of tension that can arise between founders is a commitment to social responsibility. Mamão has always focused on businesses that prove that a company dedicated to a better world can also be very profitable, but he says it's an ethic the whole management team must get behind. "The extent to which a business embraces sustainability and environmental goals is something that should be decided among founders and investors in the earliest days of the enterprise."
Page and Brin, again, are good examples of founders sharing a social conscious. From the company's inception, the partners set in place Google's internal workplace slogan "Don't be evil." When the company was restructured under Alphabet in 2015, Page and Brin updated the motto to "Do the right thing," but both phrases reflect their shared sensibility.
As a side note, Mamão adds that if the founders do embrace social responsibility, they also should agree on a very specific set of criteria. "A business shouldn't be just transactional or just socially conscious—it must be a smart marriage of both. A socially conscious business must put business first or the enterprise will fail and the world will lose a company that was doing some good in the world."
Gil agrees. "We check every decision we make to be sure it strikes the right balance—is it socially responsible while still being viable from a business standpoint?" Her company Sundar even posts a code of conduct for vendors that specifies that suppliers must agree not to use child labor, for example, and to pay fair wages. And she chose the members of her team accordingly—all share her commitment to standards guiding the human side of enterprise.
Another aspect of the human side of enterprise that entrepreneurs must weigh against business interests is the issue of personal-professional balance. A startup can consume its founders, leaving no time or energy for a personal life.
"When you are passionate about your business, it can be difficult to turn it off. It's easy to lose track of other important aspects of your life," observes Gill. "It's essential to have personal rituals built into your day. The gym, family time, a regular dinner with a friend. I like to say that if your time isn't measured, it's not managed."
Yan agrees. "People are not machines. We are not digital action figures." Yan says he always makes sure to choose life over business. Businesses come and go, he says—and he should know, as he's built an enormously successful career as a serial entrepreneur. Family, however, is forever and his priorities always lie there. In fact, he made a decision to sell AdChina, in part, because a member of his family needed to move to California for health reasons. "I believe—and I have experienced this—that when you have the right balance between your personal and professional priorities, you function better in all areas of your life."
Reichert echoes Yan's comment that people are not machines. "We must lose the need to be or to appear perfect." And she lends another dimension to the idea of work-life balance. "I see my Greentown colleagues as a kind of family. I care about them. Embracing the human element can help everyone feel more invested and collaborative." She notes that a tight-knit, collaborative workplace makes it possible for everyone to take the time off they need because they know their colleagues are supportive and happy to cover for them.
Shalaby adds that having a mentor to rely on also relieves the stress of being at the helm of a growing enterprise. "It's tough, sometimes, to find someone you can talk to about issues that come up in the business—issues you might not want to discuss with colleagues or investors. An ideal mentor is one who knows you well, has more experience than you do in many of the challenges you'll face, and who can steady you when your world shakes. A mentor can bring a wise and calming perspective that is invaluable in times of turmoil or indecision. And if you are lucky enough to have such a mentor, make sure you take the time out to lean on him or her in times of need."
Interested in reading more about entrepreneurship? The winter issue of the MIT Sloan Fellows Newsletter will focus on entrepreneurial engines within governments. If you'd like to participate, reach out to Libby Dilling at email@example.com.
Jag Gill is founder and CEO of Sundar, which is building the world's largest platform connecting the apparel industry with suppliers and manufacturers globally. Gill founded Sundar after a decade-long banking career with Deutsche Bank and UBS, where she worked with India's leading industrialists and corporate families. Sundar was incubated at MIT and Techstars and is venture-backed by New Enterprise Associates and leading investors from the Bay Area, Hong Kong, and Bangalore. Jag is a 2016 New York City Economic Development Corporation Venture Fellow.
In his 12 years as an entrepreneur, Gustavo Mamão's goal has always been to develop businesses that contribute to the greater social and environmental good. Mamão has just completed the sale of his agribusiness startup to an American company. The startup developed a biological product that successfully replaced toxic chemicals used in agriculture. Mamão's new initiative Flourish guides entrepreneurs in the founding of mission-driven organizations. Passionate about mentorship, Mamão is involved in a local innovation institute designed to help entrepreneurs and venture capitalists transform scientific knowledge developed in Brazil into new businesses.
Emily Reichert sets the strategic direction for Greentown Labs, focusing on increasing the organization's impact on clean and energy efficient technology commercialization through entrepreneurship. She also directs the company's efforts to engage new corporate and foundation partners, expand recognition and education programs for clean technology entrepreneurs, leverage the efforts of the people and organizations within the community to build our clean energy future, and maintain greater Boston's competitiveness in clean technology. Prior to Greentown Labs, Reichert was director of business operations at the Warner Babcock Institute for Green Chemistry. She holds a PhD in physical chemistry.
Nadia Shalaby is a repeat entrepreneur and business executive, passionate about bringing technological innovation to market for positive impact and societal progress. Shalaby is also a technologist holding four issued US patents and one pending. Her career spans 20+ years of growing and founding companies. Shalaby has served on the board of several technology startups, as vice president of marketing and sales for Cooper Perkins, and as founder and CEO of Arctic Sand. She is the recipient of multiple national grants and awards from organizations such as NASA, the National Science Foundation, the US Department of Energy, DARPA, and the National Renewable Energy Lab.
Alan Yan is founder and chairman of WuKong Networks, an online real estate transaction services platform, and Four Seasons Financial Services, which provides online financial services for real estate transactions. Yan is also a cofounder and director of Lakeshore Capital Co., Ltd, a fund management company specialized in distressed asset investments. Previously, Yan was the founder and CEO of AdChina, a leading big data marketing technology platform, which was acquired by Alibaba Group in 2015.
We’re already at work on the next MIT Sloan Fellows Program Newsletter. Please drop us a line at firstname.lastname@example.org if you have ideas about themes and news items for future issues.
Stephen Sacca, Director
Libby Dilling, Marketing Associate
Marc O’Mansky, Associate Director
Michelle Pierce, Assistant Director
Wendy Scott-Kemp, Program Coordinator
Kay Merisier, Program Assistant
Cathryn Noyes, Admissions Associate
Stacey Lantz, Program Coordinator
Davin Schnappauf, Program Assistant II
Medina Altynbayeva, Program Coordinator
MIT Sloan is a registered trademark. All trademarks are the property of their respective owners.
© MIT Sloan. All rights reserved