Early stage startups make the mistake of focusing on money
Jeff Abbott is an entrepreneur, ecosystem builder, startup advisor and author, and general partner at Global Scaling Academy and Wasabi Ventures Global. We had a conversation in Estonia as he was giving a talk in SEB bank about how a venture capitalist mindset can help boost innovation within a company.
Jeff, what does a venture capitalist mindset mean?
Thinking like a VC is nothing unusual once you understand more about how it works. A venture capital firm takes money from limited partners, puts it in a fund, and then strives to deliver a superior return across a portfolio of investments. At that level, there is not much difference in a VC or a corporate investor: both must manage a portfolio of investments and allocate resources across them. The corporates have traditionally done that across a series of internal opportunities, but are now getting more involved in the external venture space through spinouts, acquisitions and strategic investments, whereas VCs have always had to work hard to discover the most attractive external opportunities. Both have to develop a vision of the future, and an investment thesis, and get ahead of where technology trends and business model innovations are going in their chosen sectors.
The corporate investor, thinking traditionally, was likely limited to making single-digit to low double-digit returns and and that was considered successful. Most venture capitalists are looking for a minimum of 3x returns on average. This is very risky but potentially very rewarding asset class, which explains why corporations are now getting involved. The job of the venture capitalist or corporate ventures investor is to make good bets and provide the right guidance and connections along the way so that those investments return a superior value.
In Wasabi Ventures Global You run an incubator program called The Technology Commercialization Accelerator Program. Could you please describe how that program works?
The Technology Commercialization Accelerator Program is designed to try to build startups around promising technologies that have been developed by corporate, university or research laboratory inventors. When running a program, we try to bring together what we believe are the four critical elements necessary for this alchemy to work:
- Great technology developed by world-class research partners;
- Top talent with skills that are relevant for working with the featured technologies;
- Access to financing;
- A well-designed and run incubation experience built around experienced mentors.
We have worked with great partners like the US Air Force, US Navy, US Army, Qatar Science and Technology Park, and dozens of universities around the world. We have put a lot of energy into the development of an online curriculum and virtual process so that we are able to recruit top participants and continue to work with them effectively no matter where they live after the program ends, and are able to start working with more people to hear their ideas. We get directly involved and committed to the companies to add value through experience, methodology and our network of connections, anything we can do to help the startups succeed.
The CEO of Wanderu has mentioned “We loved the fast and painless process that Wasabi used for being one of our earliest investors.
It’s great to see Polina receiving such well deserved recognition, including recently being featured in Inc. Magazine. When Polina came to Wasabi Ventures, the first person she pitched to was my partner T.K. Initially, as he related the story to me, he didn’t like the idea and pushed back hard. She kept defending herself and coming back with well-supported answers to the point where he realized that he had given her every possible objection and she was handling herself very well under pressure. She gave confidence that she was a person was really going to make it happen for this project.
At Wasabi Ventures, we have a history of working with a far higher percentage of female founders than is normal in the industry, and also give our time to working with other organizations that support female founders. Startups really are a game of people. If you are a founder looking for investors, it is important to see eye to eye. Does the investor believe in you? Do you want to work with them? Do they add value above and beyond the money? It is a highly personal engagement, and it can be very painful if the investor doesn’t understand you and your business, doesn’t add value, doesn’t spend time, etc. The job of the entrepreneur is to filter out and avoid those kind of investors. Polina has done a great job of that, as she outlines in her Inc. Magazine interview, and we are glad we were able to provide early support to Wanderu.
What would be Your advice to startups that are looking for investors?
Early-stagers may think “I need to raise money to get my startup running.” Our perspective is that you really need to focus on building your business. If you focus on building your business, the money will be more likely find you. As soon as you raise money you start spending it. As soon as you have run out you immediately need more, whether or not you produced anything of value with the first raise. Focus on running your business and not thinking about how to spend money that you don’t have. Of course, at later stages there are exceptions once the business model is proven and you are in a winner take all market, where you have to raise ahead of the curve in order to become the first to reach scale.
You have said that there is so much more potential in humanity waiting to be unlocked if more people could have an experience like European Innovation Academy. In Wasabi Ventures you focus on advising early stage technology companies. Is technology really helping to scale humanity?
Think about the recording industry 20 years ago. All the power was in the hands of the recording company. If you were the band, you had to get to them. If they didn’t like you, you never got a contract and your music never got played. Today, thanks to technology, you can get up every day and play your songs on Youtube. If people like your music, they will find you, follow you, and listen. A record company, sitting there and watching, might say “wow, you got a million views. We’re gonna give you a record contract.” It has reduced the power of the recording studio and given more power to the artist (entrepreneur).
A program like European Innovation Academy is taking young people from all over the world, connecting them with one another, showing them that they can work together, and giving them the tools and mindset to believe that, if they have an idea, it is possible to change the world. Does technology help with that? Yes, absolutely. It is how we find people and how we engage with them in a scalable way. It’s what makes it possible for MIT to give away an undergraduate degree to someone anywhere in the world. It’s what allows the people who met in European Innovation Academy to stay in touch, remain friends, share information, and continue working on their startups after the program ends. It’s what creates networks and network science has shown us that the number one determinant of career success is the breadth and depth of one’s personal network, and the importance of being the connector, the boundary-crosser, between different network clusters. EIA is giving the young people who participate a tremendous head-start in developing a powerful, global network. Technology is absolutely driving and empowering all of this.
You have written and co-authored two books. When is the next one to be coming out?
The next book will be about startup globalization and it should be coming out in the next 2–3 years. Having worked with entrepreneurs from around the world on their starting and scaling, I’m hoping to share what I’ve learned about common challenges and share best practices with the next generation of startups scaling internationally.
Tell me more about Global Scaling Academy, your 2018 initiative.
Our program is designed to support companies and their founders who are committed to finding out if their business can not only be scaled, but blitzscaled. Reid Hoffman defined Blitzscaling as “what you do when you need to grow really, really quickly. It’s the science and art of rapidly building out a company to serve a large and usually global market, with the goal of becoming the first mover at scale.”
Fortunately for startup founders, the techniques of Blitzscaling can be taught anywhere in the world, and they work in any industry, including with corporate ventures and spinouts. Through programs under the guidance of Chris Yeh, co-author of “Blitzscaling” with Linkedin co-founder and Chairman Reid Hoffman, Global Scaling Academy works directly with founders to help them design business models for catalyzing blitz-scale growth, develop strategies for growth-hacking, hiring and managing at each stage at the company’s life cycle, and then pairs them with experienced scaling experts to support them in overcoming the challenges that they will face as they seek to blitz-scale growth their organizations.
We are really excited to start working with even more great founders from around the world who are seeking to scale their startups.