Advice to a Young Entrepreneur: The Way Ahead Interviews Established Entrepreneurs
Established entrepreneurs Ricardo B. Levy and Howard Rosen of Stanford University share advice on becoming a young entrepreneur.
Question: People often say that if you have an entrepreneurial idea you think is great, you need to follow your passion and your heart and go for it. Would you say this statement is true—or is it important to consider all the risk and financial factors and take it step by step?
RL: Passion for an idea is unquestionably an essential ingredient for entrepreneurial success. It creates the type of inner energy that makes it easier for you to overcome hurdles and convince others to join in the journey.
This does not mean disregard for being careful and thorough. On the contrary, it enables the right mind-set and attitude to tackle challenges diligently and systematically.
The question of risk is an interesting one. Certainly an assessment of risk is important as an entrepreneur examines how to make his or her idea a reality. However, it is not a question of whether or not to pursue the opportunity.
There is a moment when the entrepreneur’s passion reaches a point of no return and he or she simply has to follow through. Once that “tipping point” is reached, the question of personal risk is moot. Again, it does not mean carelessness in the pursuit of an idea; it just means that the pursuit will be relentless.
HR: Passion is definitely important and is one of the traits that differentiates entrepreneurs from others, but evaluating risk before you jump is very important. This is especially true in industries like oil and gas that typically require significant time and money to bring a new idea to market. Even though an entrepreneur has only so much passion, you do yourself a disservice if you don’t make an effort to judge whether or not you are investing your time and energy on something that will be important to customers. You also will need to convince others—investors, employees, and partners—to join you on the journey, and they usually won’t be persuaded based only on your passion.
Question: Great ideas don’t fall from trees and entrepreneurs are not just lucky people who have great ideas that pop into their heads. Is there an ideal environment in which entrepreneurs can create great ideas?
RL: There is definitely an ideal environment for entrepreneurship. It all starts with an attitude of curiosity and a thirst for finding better ways of doing things, which is why often such companies are spawned and grow around academic institutions. Universities foster a sense of inquisitiveness and a sense of alertness to problems that need to be solved. The academic environment makes it easier for the entrepreneur to engage others, to gather like-minded people who want to make a difference. And it creates a concentration of the support systems that make it easier for entrepreneurs to get started, such as access to capital, to mentorship, and to the necessary infrastructure—legal, accounting, and human. This is why there has been such a geographic concentration of entrepreneurial companies in areas like Route 28 in Boston and, of course, Silicon Valley in California.
HR: A great idea that gets transformed into a great business is generally something customers really need and as a result will pay for. As engineers, we often are familiar with great technology so the challenge is to figure out if there are customers who might be able to make use of the technology.
Alternatively, you can spend time with customers and really gain an understanding of their needs, that can then lead you to find a great solution to their needs.
Some great ideas have come from entrepreneurs solving a problem they have—that is, they are their own customer. However, it is helpful if you can prove there will be more than just one customer!
Question: How important is it to figure out what your goals and strategies are way before implementing a new idea venture?
RL: Almost by definition, a new venture is pushing new horizons, so there are a lot of unknowns. This makes it hard to be too “wise” about the elements of the business too soon.
Of course, it is important to think of strategy and goals, but this is a very iterative process and is part of flushing out the venture concept and identifying potential challenges and approaches. At best, at the beginning, the entrepreneur has some overarching concepts that frame the venture, with flexibility in the development of specific strategies and tactics as the ideas are tested and refined.
HR: It is typical, as you get to know your potential customers better and what your technology can do, that you will modify your idea or sometimes find yourself pursuing something very different from what you started with. Your goals and strategy therefore need to be flexible.
It is helpful to have some high-level goals so you can keep track of what you really want to be doing.
For example: Is there a specific industry you want to be working in, customer or technology type, business size or timeframe, or impact on society that is important to you?
Question: If you have a clear set of goals and a well-defined strategy, how would you go about executing this strategy and finding the necessary resources? An entrepreneur generally needs a team to develop the idea. What are the needed qualities of such a team?
RL: As your question implies, the first task of an entrepreneur is to engage others. It is critical early on to test the soundness of an idea: to confirm that it is novel, that it satisfies a need, and that it provides benefits not provided by others. This becomes an iterative process and will involve many people, including both those we engage to help us and those we want to benefit.
Even the very setting of goals and strategies becomes a team effort and is, in fact, a very effective way to fully engage the team and establish a commonality of purpose and synchronization of actions.
A good team understands the venture’s purpose and has very open communication about the challenges the purpose poses. This openness includes recognition of individual strengths and shortcomings and starts with the entrepreneurial leader.
To the extent that the entrepreneur has sufficient self-awareness to admit limitations, and finds people who will supplement and complement his or her capabilities, a venture has a good chance to succeed.
HR: The dictionary definition of an entrepreneur is “someone who pulls together the resources needed to start a business.” So, part of an entrepreneur’s passion is around finding a way—no matter what it takes or how many people say it won’t work—to assemble the required people, money, equipment, and facilities to make their idea a reality.
One point of confusion is that people often think the only entrepreneur in a company is the person with the idea. This isn’t true. Everyone who joins the effort early on is an entrepreneur—or should be—if they are going to be a strong member of the team. Being passionate is one key trait.
It also helps to have diversity on your team, in terms of technical and business experience as well as gender and ethnicity. There will be many problems to solve and hurdles to overcome so having a team that brings a range of approaches is beneficial. The team is a key criterion—oftentimes the number-one criterion.
Question: Experienced professionals often advise young professionals to build their network from the beginning of their career. Is surrounding yourself with a great network of professionals within your industry even more important for a young entrepreneur?
RL: Yes. A network is essential, especially since, in the early stages of a venture, resources (especially financial) are limited. We depend on finding the most talented people who can help us—whether full-time or part-time. Being directed to this talent by people we trust is invaluable. This trust factor is built every step of the way.
In my own experience, I credit many elements of my success to the legal, accounting, and technical resources I accessed early on. Many came from the network and goodwill I had developed over my academic and early professional career. (Here is a note to the fiscally conscious young entrepreneur: Do not compromise on the quality of external counsel because of cost: 10 minutes with a very expensive attorney is worth much more than 4 hours with a cheap one.)
The value of your network goes beyond just professional services.
I believe one of the entrepreneurial leader’s most important tasks is to build, early on, a very effective board of directors.
The best way to do this is through references from those you trust, such as your teachers and mentors.
HR: As with many things, it is often through knowing people—having a network—that you find the right ingredients for building the team you need for a new business. A strong network can also be the source of mentors, business/technical advice, and introductions to potential customers, partners, and investors. It takes time to build trust with people, so starting early in your career is helpful.
Question: Can anybody be an entrepreneur, given that the great idea is already there, or are there some people who were born to be entrepreneurs and business leaders?
RL: I believe everyone has the potential to be an entrepreneur, but not everyone has the desire or the inner strength to be an entrepreneurial leader. You need to have a particular attitude to be a successful entrepreneurial leader. For example, for the entrepreneurial leader, roadblocks and hurdles are challenges and opportunities, not negative events. Individuals who are discouraged by roadblocks would not make good entrepreneurs. To succeed as an entrepreneur, one requires an optimistic disposition, or the venture is doomed from the start.
Yet here is a caveat: You can be a very important participant in an entrepreneurial venture without necessarily being the ever-optimistic entrepreneurial leader. In fact, the best entrepreneurial leader will look for team members who can provide a good dose of realism and a careful examination of worst-case scenarios. The ability to engage such individuals to join in the adventure is one of an entrepreneurial leader’s leadership qualities.
HR: Anyone can be a strong contributor, an entrepreneur, in creating a new business. But there are some typical traits of entrepreneurs—passion, total commitment, comfort with ambiguity, trust—so you need to have a high sense of self-awareness. Are you really willing to let your startup consume you? If not, you may not ultimately enjoy or excel in an entrepreneurial environment.
There is also a difference between “leaders” and “managers.” You ultimately need both to be successful.
Question: What are the most important factors a young professional entrepreneur should consider before considering starting a new business?
RL: I am going to interpret the designation “young professional entrepreneur” as a YP who has made a choice to be involved in starting and building new ventures. So the first thing that is needed is passion about an idea or concept.
It should be recognized, however, that the idea does not have to initiate with the entrepreneur. It may come from others who have much greater domain expertise. When it comes from others, the entrepreneur needs to adopt the idea and fully internalize it.
The next steps are pretty clear: confirming the need, understanding the strengths and limitations of the approach, making sure the benefits are truly there and likely to be appreciated by customers, and, finally, having a good grasp of the competitive environment.
HR: If you have the passion, then it is useful to gain a sense of what the commercial potential is (the need), what some of the initial technical challenges may be for your solution (the approach), why your customers will want to buy (the benefits), and who your competitors are or will be. This last one is often overlooked by entrepreneurs. Just because there are competitors, it doesn’t mean you shouldn’t go forward but it does help you understand how your business will be differentiated and successful.
Question: Can you tell us about some success stories of young professionals you have helped in developing their own businesses?
RL: This is a very good question, and makes me realize the very point we have made in this interview several times: that the effort of an entrepreneur—especially in engineering- and science-based industries like oil and gas—is a full-time, long-term endeavor.
I have been engaged in this entrepreneurial adventure for over 3 decades, and my focus has been to do everything in my power to make our ventures successful. Ultimately, we formed three companies from the roots of our initial research and development effort, and one became very successful and was sold to a European conglomerate.
Along the way, we helped many companies in the chemical, petrochemical, and pharmaceutical industries with their technical and process development challenges, counting many big players in the industry as our customers and partners.
Hopefully, we also inspired others with our example of successful entrepreneurial growth.
The joy of teaching young people, which I am doing at Stanford University, is new for me and although I expect many of my students at Stanford to be strong entrepreneurial contributors, they are still at the formative stage. Ask me again several years from now.
HR: A chemical engineering student of mine actually dropped out of Stanford to start Theranos, Inc., a company that has developed new systems and chemistries for doing blood testing for clinical trials of new pharmaceuticals. They just announced a partnership with Walgreens to do point-of-care blood testing in pharmacies. The company is still private and over the past 10 years has grown to having over 500 employees.
Another group of four chemical engineering students decided to start a company to develop improved batteries for electric vehicles after they graduated with their BS degrees rather than go to graduate school. After a year, during which they found incubator lab space and a small amount of funding for experiments, they decided commercializing the technology was going to take too long and require too much money. The four went off to different graduate programs but, based on how much they learned about being entrepreneurs, I am confident they will be involved in successful new businesses in the future.
Question: In your opinion, are there any specific factors a young entrepreneur in the oil and gas/energy sector needs to consider?
RL: As opposed to our colleagues in the software industry, ours is an industry of long lead times, large capital investment, and strong dependence on intellectual property.
We need to recognize that our ventures will be long term and will require persistence, patience, and great focus both on the details of our ideas and on the quality of our results. It becomes a life-long adventure, one I have embraced with great joy because it has allowed me to be engaged with exciting teams for long periods of time and, perhaps most importantly, to attempt to make a difference in some of the most important needs of the world: energy and health care.
I therefore encourage young entrepreneurs to choose carefully what venture they will dedicate their lives to, make sure they are totally dedicated, and stay very flexible as they face the many ups and downs that are inevitable in a multiyear endeavor. My advice: Never give up, and never run out of cash!
HR: There is tremendous unmet need in the energy sector both in the more traditional areas like oil and gas and newer areas like solar, wind, fuel cells, and batteries, to name a few. A few specific challenges that exist are that creating new businesses in the energy industry often take many years and significant investment. There are also significant factors, such as oil prices, that are outside the entrepreneur’s control. In addition, there can be some inertia caused by the large capital investment already made in plants and equipment; on paper a new technology may look very cost competitive but when the infrastructure for the current technology is already in place and paid for, it can in fact be cheaper to use the current technology on an ongoing basis.
Overall, there is an opportunity to have a huge impact on society by starting new businesses in the energy field, so if you are up to the challenge, go for it!