By: Mike Kirkup
Edited by: Russell Silver
Q: Is entrepreneurship an art or a science?
A: It’s definitely a mix of both; it’s not one or the other. It’s not a science to the extent that it’s not formulaic. You can’t pick it up, run with it, and expect it to be repeatable. It’s more of an art because the environment is changing, and you’re building a bunch of things in that dynamic space. To me, it’s much more of an artisanal craft in the sense of each sub area is extremely specific, so you need to spend a lot of time learning that domain, and figuring out how to successfully build a company in that space.
Q: Why is learning at Velocity more effective than the traditional textbook and exam method that schools are typically so fond of?
A: Entrepreneurship isn’t just a recipe that you can apply--you have to take into account a whole bunch of different factors to build a company. There are process elements that can guide it, but nothing you can 100% read in a book. For example, it’s impossible to build a company without being able to manage people. You can read all the management books that you want, but it will never teach you how to properly manage people. There are so many elements that come together to form your own style and version of doing that particular task. Running a start up is so hard and risky because it is the combination of so many of those little elements.
Q: Do you think the incubator setting shelters startups from the real world?
A: I think that it shelters the startups a bit, but it’s beneficial. You’re going through something you’ve never done before, and its hard, so doing that with other people and feeling that you’re not alone is huge. If we can give you motivation, drive, and support while you’re building a business, it can be a great help. And with a community, you don’t necessarily even have to learn the lessons yourself; you can share lessons with each other by learning from what others groups in the incubator have gone through. As a result, teams end up going through the process faster and with greater effectiveness.
You don’t go and participate in the Olympics in your first 5 minutes of learning a new sport. You would look at somebody, see how phenomenal they are, and be discouraged from any further pursuit. Here, at Velocity, you have support and people legitimately care that you are trying. As you progress, you are held at a higher and higher level of accountability until you are holding yourself there. It is only later in the program that companies begin to notice they aren’t being guided as much, and that is simply because only then are they ready to be let go to a greater extent.
Q: Do you believe in a look before you leap mentality, or dip your toe?
A: It heavily depends on your stage of life. If you’re a student at university or college, JUST GO. Don’t look, don’t dip toes, just go. You can’t screw it up! The worst thing that happens is it fails. But you’re already in school, so you’re learning anyways and this is just helping the experience. There’s no good reason to stop, wait, be tentative, look, or everything else.
But as you go through life, that becomes harder and harder to do. One day you may decide, “hey, I hate being at my big corporate job and I’m going to start a start up”. But you now have a mortgage, kids, wife, and all kinds of other real responsibilities. Your personal burn rate is much higher.
When you’re a student and you decide you’re going to do something, you have an inside edge in that age group which gives you a large competitive advantage. As you get older, that relationship changes. The other side is you carry baggage in the sense that you know too much in certain stages. For example, if you were in insurance for 20 years and wanted to try to think of a new creative solution to help the industry, you would run into extreme difficulty. You don’t know how to think of insurance in any way aside from what you have learned after 20 years in the business. Resultantly, the most successful ventures often come from people from outside of the area because they aren’t held back by the traditional beliefs in how things have always been done.
Q: What skills do you believe to be most important to bringing a product to market.
It’s impossible to answer that as a general question, because we break the process down into a number of different steps. First is building a team. This is a challenge because if you don’t know what you’re building, you don’t know what you need. We strongly encourage people to build companies on relationships. People who have know each other for a while, whether it be childhood friends or room mates freshman year, have been through things together and have an immense amount of trust without needing to work for it or prove it. If you’re going into an opportunity with a stranger, you won’t have the same depth of a relationship. Only once you gather the right people can you begin to figure out what you really want to work on.
Next comes customer discovery and interviewing them to discover problems to solve, followed by building a prototype as quickly and cost-effectively as possible. This could be a quick 3D printed product or even a bare-bones version of an app. Then they go back to the same customers (and new ones), validate that the prototype has legs in solving a problem, then move forward and turn it into a real product, launch it, and acquire real customers.
The skill set needed in each of these things is totally different. One of the hardest parts of being a founder is that you have to be prepared to fire yourself from whatever job you are currently doing. This is why it is common to see founders not always wanting to remain the CEO, just like Reid Hoffman at LinkedIn. From a human nature perspective, this is a surprisingly awful experience if you think about it. Usually you have a lot of jobs at the start, and you eventually feel like you just figured out what you’re doing. Then you need to hire someone to do it to properly scale, and can no longer do the thing you’re finally good at, so you find something new to be good at. Then when you’re good at that new task, you need to fire yourself again to continue scaling! If you don’t do it properly, you stay in between your past and future role. You end up jumping in, making a mess, and overall creating more pain than solutions.
The number 1 issue we have in velocity is teaching people how to manage other people. Part of the reason is you’re learning your own style! Coding, for example, is very factual based—managing is entirely about the other person, and very hard. Luckily we have a lot of mentors and a large support community to help each company along the way. Intensity has been rising as time moves on as the stakes keep rising. This is because companies are growing larger and faster than ever before, everybody is just trying to keep up.
Q: At what point do you believe a pivot or change in direction to be necessary?
A: Something must change when your customers are telling you that it’s not working. There are big pivots and little pivots, and a lot of people struggle with that. A little pivot is something as minor as changing the colour of a button from blue to green, while a big pivot is, “hey—we’re not selling to the right people”.
These big pivots occur when the market is not responding well to your product. It could be product issues, the needs of the consumer, or platitudes, which have proven to be one of the biggest risks for startups. A lot of people will say “that sounds interesting”, but they really don’t care. They are just trying to be polite and save face. You instinctually want to hear compliments like that because they deceive you into believing you are on the right track, but it’s a trap. It’s even worse when it gets circular. “Bob would love this product!”, but then Bob tells you the first person would really love it. Making sure you actually understand people’s intentions and being critical of your own ideas is huge and really hard—especially because your product is never perfect. It’s never done.
Q: How do you gauge market interest with such an early stage company?
A: Velocity is an open program across pretty much any market in the world, so it’s impossible for us to be experts in every space and know if the entrepreneurs apply are correct in all of their research. But we can determine whether or not you know your market. We question if you know your customers, market, sandbox, competitors, and a bunch of other areas that you wouldn’t be able to skirt around. The people who really know their stuff will refute, add context, and show clearly that they understand the market and that’s important. If they haven’t done that research or work, then they’re not ready yet. It’s not just admissions—we manage them over the entire course of the program in tandem, so we want to know we have great candidates from the start.
Q: How involved do you typically get with the companies? 1 (like a distant advisor) to 10 (practically a team mate).
A: It’s more complicated than that because we have three main areas: hardware, software, and life sciences. Each area has their own designated mentors, who are professionals and are there full time to help them at about a 4/10. They are pretty active, but respond to how much help the group needs at the time. If they really need help, the mentor will be a lot more active, whereas if they don’t then he or she will move closer to an advisor role in the interim.
My primary involvement is more around the early phases of starting and setting up (especially around IP), and then when they’re getting ready to fund raise. We at Velocity have spent time building a great network of investors that trust us. We only bring them companies when we believe they are ready, and we only introduce companies to sources of capital that we trust and perceive to be giving a solid deal. It makes us a trusted party to both sides, and thus gives us a great system. It’s also not a batch—companies go when they are ready. So my primary role is to really help manage that. I’m at least a 4 or 5 out of 10 around that time; making intros, managing the pitch, combing their financials, and doing anything else I can do to help. Once they get through that stage, they don’t need us as much and “graduate” to a certain extent. We have helped in the creation of over 120 companies—60 of which are still in incubation.
Q: How do you feel about working in Waterloo vs. a place like Silicon Valley, which is highly regarded as a tech hub on a global scale.
A: Outside of Waterloo people from our program tend to go to Toronto, then the Bay area. There are pros and cons to relocation—it’s never just a single factor. There are actually a lot of reasons why would you build a company in Waterloo. It is a very tight startup community. Everyone knows everyone. You can get feedback from somebody quickly, and everyone is within 1 degree of separation. Things happen tight and quick. It’s also a really pay it forward community with a ton of talent. Almost all clusters for high tech are around zones well known for publishing and producing talent, and UWaterloo is famous for this.
We had several bitcoin companies here. They tried hard to build a community, but the braintrust for that particular business was primarily in the Bay area, so they ultimately moved down there to be with those people. You must recognize what your region is really good at. Hardware as a whole is great in Waterloo—we make amazing engineers and products in waterloo.
Q: How do you get partners to take a startup seriously?
A: The biggest tip is finding the right person to talk to. There is so much wasted time for partnerships talking to people who can’t help you. Make sure you talk to the right person! When you’re going to talk to large companies, make sure you really truly understand their problem inside and out, and can speak in their language. For example, if you were to approach Apple with a cloud-based service, they wouldn’t be interested as it’s not what they focus on. Whereas if you took the same product to Google, that’s their thing—they would expect you to be an absolute expert and know any and everything on the topic.
Large companies are actually nervous they won’t be able to innovate at a rate that can keep up with the market. They’re scared about the speed things are moving, and startups have that as an advantage. The economies of scale that the large companies have/held are less useful now, which is changing the power of startups. A website no longer needs to have huge server systems in house, as they can easily rent space from Amazon. This has resulted in partners want to hang around startups.
Q: What do you expect in terms of success horizons?
A: People can stay in the program for up to 2 years. This is a really long time line, in part for the sheltering we do for them. The program is free of charge, so we get the best companies applying, which leads to a more competitive selection process, which leads to only the best companies getting accepted. This attracts all the people who want to be around the best companies, and gives us a really high talent group and environment. For example, at one point we had 7 different companies that had funding from Y-Combinator in our space. We like to keep companies longer than what would traditionally occur, because it drives more desire to be there and helps build the community and learning.
Want to hear more?
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Monday, August 24th at 3PM Central (4PM Eastern, 1PM Pacific).
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