You can’t have a good “what” unless you have a good “why.” So if you’re not sure why you’re doing it, then the “what” (the company) will often be flawed.
— ADEO RESSI
If you are part of the startup community, it’s very unlikely that you haven’t heard about Adeo Ressi. He sold his first company—Total New York—to AOL before graduation. Eventually this first company growth so fast, that “it just was impossible for me to even consider finishing graduation.” he said. After that, Adeo started a second company, and a third one, and he hasn’t stopped since, even co-founding a space company with Elon Musk that eventually led to Space X.
In the end, he never went back to college to graduate, aligning himself with a long line of famous drop outs, from Steve Jobs, to Bill Gates, to Richard Branson. As he said, “That company became very, very successful very, very quickly. So, it just was impossible for me to even consider finishing graduation”.
When the startup community was hit by the crisis of 2008-2009, Adeo decided to start the Founder Institute, a pragmatic startup accelerator based on a simple philosophy: helping the economic recovery by lowering the high failure rate for startups. In his own words, “about 25,000 businesses were started every year by passionate and committed people. And north of 95% of them would fold or die.”
The program was indeed successful and soon the goal of the Founder Institute became to “globalize Silcon Valley”. Today the institute has a presence across 50 countries, from Vietnam to Columbia. This environment brings some curious consequences even outside the business. Last time I enjoyed a barbecue hosted by the Founder Institute in Palo Alto, I seat on a table with colleagues from France, the Philippines, Iceland and Afghanistan (yes, they have a team building a startup ecosystem over there).
I’ve a sort of conflict of interest in this interview. I’m a mentor of the Founder Institute myself, and part of Expansive Ventures, their investment syndicate. I had to find a formula for an impartial interview, that’s why in the interview you will not find any questions about the success of the Institute.
No matter my opinion, Adeo has been part of Silicon Valley since the mighty ‘90s, has started over 10 companies and a global community. I am sure you will get useful insights.
In this book, I had a chance to interview entrepreneurs and influencers from different countries, and they all brought their different angle. You on the other hand run the Founder Institute with a presence across 50 countries. You can give us an overview of the global trends better than anyone (and with “global trends” I mean politics, investments and/or startups – pick the one you prefer).
Well, I can sort of give you trends in each category, and that might be most useful.
So on the governmental side, governments around the world are becoming quite proactive about helping companies, some of which is good, some of which is bad, but at least they are trying, which overall is good.
So for example, France just launched a startup visa program similar to what Chile is doing. Similar things are happening in Canada.
Pretty much every credible government around the world is taking a variety of initiatives to improve the likelihood of startup success. We have just done some longitudinal studies of our graduates and learned that if a company achieves a great amount of success and progress in the first 11 months of existence, the likelihood of that company succeeding increases five-fold.
So if a government is providing a variety of resources and a variety of programs to help startups, that essentially is helping those startups achieve milestones faster. The data indicates that’s a good thing, though I do believe there is a variation in the quality of different programs. As I indicated, some programs are good, and some programs are less good, if you will.
In terms of the funding landscape, I think you’re seeing a massive proliferation in funding accelerators and company-builders. For the most part, there’s also been a bit of a consolidation happening as well, but the net result is that more and more of funding incubators and more and more company-builders that provide capital are popping up all around the world. That, too, is very beneficial because it’s very difficult to raise money at any stage. The angel and early-stage is the hardest of them all. Right?
So angel capital is the hardest amount or the hardest type of capital to raise. Series A is definitely also hard, but a lot easier than angel. Series B is, again, also hard, but a lot easier than a series A. So the proliferation of funding accelerators that have investors sort of locked in, in demo days and many different programs that almost act like they’re finishing school for a startup to get their product in good shape and start fundraising, the proliferation of these types of programs is ultimately beneficial for startups because it’s just increased the number of startups worldwide that are getting funding.
Probably on the company side, there you have a lot of mixed stuff going on. You have a lot of people entering startups that probably should not be doing so. Startups are sexy and cool right now, and that’s drawing greater and greater numbers of people to do startups.
But a lot of times, people who are entering the field of technology entrepreneurship, I call them “tourists”, want to come and see for themselves and feel the freezing cold temperature. Then once they do so, they’re like, “Oh, wow. That’s great,” and they go back to their day job.
I think that there’s a trend of an increasing number of tourists entering technology entrepreneurship. As a result, you’re seeing a lot of people leave the field very quickly, and that’s creating some challenges for everyone at every level in the ecosystem. Because everyone wants more stable entrepreneurs. Because more entrepreneurs means that there can be more funding accelerators. More entrepreneurs means that there can be more success stories and more capital available.
Well, this is a common phenomena everywhere. Many wannabe founders have a day job—and that’s perfectly fine—but some of them have no intention of quitting their job anytime soon. Their startup becomes a sort of side activity, and as a consequence, the percentage of failures becomes very high. This high percentage of failures discourages future serious potential entrepreneurs. Moreover, it becomes harder to find a good CTO and other professional figures
Part of the reason it’s very hard to find those people is because technology entrepreneurship, to date, has been not very sexy. So on one hand, making technology entrepreneurship sexy is good because more people will quit their jobs to do it, but the negative of that is there are also an increasing number of these tourists, which are here by day, gone by night.
Any entrepreneur that has achieved success in their life can tell you that you need to dream big and die trying, in order to succeed. It’s not something that you can just try on, like a suit in a mall. You need to really give it your all. You have to try with everything that you have. Otherwise, you’re going to fail.
So anyway, it’s not something you just try on and be like, “Oh, that was cool.” You really need to give it your all. So I think that’s one of the challenges for all the programs out there today, whether it be programs that try and inspire people, like Startup Weekend or the Startup Grind conference series, or programs like the Founder Institute that train people to launch businesses.
We have a duty to try and convey the seriousness of the task at hand, in order to ensure that the next generation of entrepreneurs are actually not tourists but, in fact, serious participants.
What area of tech and business do you think are going to be most interesting over the next 2-5 years?
Look. There’s stuff that everybody is talking about, but it’s not clear that they’re going be big. Then there are some things that people aren’t talking about, that are already big.
So for example, everyone’s talking about IOT (Internet of Things). That sounds great, and I do believe in IOT for sure, but the problem is people don’t go and buy new refrigerators every month. They buy them once every two years. People don’t go and buy new locks or lights every month.
So I definitely believe that there’s going be a big Internet of Things movement, but it’s going take a long, long, long, long time for that to come to fruition because the replacement of these devices have quite long timeframes.
I’ve lived in this house for six years. Not only have I not replaced any of my appliances, but I don’t foresee replacing them any time soon.
So it could be, in some cases, many, many years before an Internet of Things refrigerator comes along. By the way, Intel has been talking about the Internet of Things since as long as I can remember, certainly 2000-2002. I went to the Intel CEO’s summit at the time, and they were showing off the house of the future. It had basically all Internet-connected devices.
Definitely Internet of Things will be big. I’m just not sure about the timing.
Conversely, there are some businesses that are already very large, like basically all of finance. The truth of the matter is that this is a massive industry that has had little or no disruption happen to it, to date.
You still have a bank. You go to your bank and make deposits. You make withdrawals. The last large-scale innovative banking switch might have been PayPal. Now PayPal is sort of looking to spin out of eBay.
Banks and finance control a large area of our lives. So it’s already a multi-trillion-dollar-a-year business, covering everything from retirement planning to investing to everything in between. It’s supporting small businesses and loans, everything. It’s really had little or no innovation in a long time.
So you’re seeing a large number of startups go into what is classically referred to as Fintech (financial technology), and you’re seeing multi-billion-dollar companies get built in 24 months, but that’s because the entire financial services industry is in the trillions of dollars.
There is also a big interest from investors. I’m based in the financial area of London, and I can say that from the end of 2014, the investment in Fintech has gone through the roof. Probably at least half of the money raised for startups this year was raised in Fintech.
Well, you’re starting to see that. Exactly. So that’s because you have a number of companies around credit and other financial activities over in Europe that are growing at incredible speeds, making a lot of money doing so.
Basically banks have become so complacent, that they open themselves up to veracious external competition through zero-interest savings accounts. That’s ready for disruption, for sure. You’ve got very high fees on various types of transactions, whether it be moving money or lending money. They can do that because banks are a very small set of competitors that provide very limited service.
But we’re talking, still, about trillions of dollars in market size. So it’s just inevitable that there’s going to be a massive amount of disruption in Fintech.
I have one last question. Actually I have many questions for you, but we’ll chat another time. The last question is “What’s the one advice you would give to a young person that wants to enter the startup world?” or even better “What’s the one piece of advice you would give to your younger self?”
Look. I can actually, quite confidently, say that I did not have an easy entrepreneurial journey. Entrepreneurship is hard, so I’m not unique. Despite how hard it was for me, I was lucky that I basically had mostly success.
So what I would say is that the most important thing for a new entrepreneur— I wouldn’t say young, I would say new—is to understand that being an entrepreneur is a process of self-discovery.
If you can start that process in parallel or even before you start becoming an entrepreneur, that’s a good thing.
Essentially what you’re saying is, “Hey, I’m going to dedicate almost the entirety of my life’s energy to a certain vision that I have of the world.”
If you’re not clear of what your vision is, you’re going to mess up. So I like to say that you can’t have a good “what” unless you have a good “why.” So if you’re not sure why you’re doing it, then the “what” (the company) will often be flawed.
A lot of times, things that sound logical don’t necessarily mean that they are right. For example, I started a space business with Elon Musk that eventually became Space X. I started a video-gaming company that we sold to RealNetworks (A/N Game Trust exited in 2007].
Now I think space is totally cool, but just because I think space is totally cool doesn’t mean that space is what I want to do with my life’s energy. Just because I think video games are totally cool doesn’t mean that I should be running a video-gaming company.
Sometimes things that seem obvious are not. Everybody thinks space is amazing, and I’m excited to work with space. But what happens if once you start working in a the daily routine, you realize, “I really don’t like space”?
If you don’t like the “what”, you can still work hard until you succeed if there is a “why”. So it’s more a matter of why are you doing this? What’s your big vision of the world? What’s your big vision for your life, this process of self-discovery? When you go through this process of self-discovery, the business that you eventually pursue should align with your own vision of the world.
- The Founder Institute
- Space X
- Game Trust
- Real Networks