Episode 1 Neil Soni: Author, The Startup Goldmine
I first met Neil when he was a student at Carnegie Melon.
Neil has had and continues to have success both as a traditional and corporate entrepreneur. Most recently he wrote the book The Startup Gold Mine: How to Tap the Hidden Innovation Agendas of Large Companies to Fund and Grow Your Business. In this episode, we talk about Neil’s experience helping Estée Lauder scale up their innovation team as well as general lessons for corporate and traditional entrepreneurs.
There was a lot I enjoyed about our conversation and definitely want to have Neil back to continue the conversation. However, I wanted to highlight 3 of my big takeaways from our conversation.
- I love Neil’s concept of “innovation nets” to help corporate innovators with the top of funnel deal flow. (start listening at 9:56)
- I really enjoyed Neil’s perspective on how a centralized innovation group (like the one he worked at Estée Lauder) could partner with individual business units. (start listening at 18:23)
- I really enjoyed Neil’s perspective on thinking through career decisions. (start listening at 34:45)
You can learn more about Neil http://www.neilsoni.com/
Buy his book on Amazon: https://www.amazon.com/Startup-Gold-Mine-Innovation-Companies-ebook/dp/B07C622VRY
I also hope you’ll consider subscribing to Agile Giants if you haven’t already on:
Sean Ammirati: 00:09 Welcome to Agile Giants, Lessons From Corporate Innovators. I’m Sean Ammirati, your Host, Co-Founder and Director of the Carnegie Mellon Corporate Startup Lab, and Partner at the early stage venture capital firm, Birchmere Ventures. Each week, I’m going to sit down and talk to guests, who are experts at creating startups inside large corporations.
Sean Ammirati: 00:26 You see, I believe, fundamentally, a startup within a company is the same one inside of the proverbial garage. A group of entrepreneurs, trying to make the world a better place, using new ideas and inventions. However, some of those techniques and processes are certainly different between a quote-unquote “Traditional startup,” and a corporate one. This podcast is going to explore those similarities and differences.
Sean Ammirati: 00:54 This week, I sit down with Neil Soni. I’ve known Neil for a long time, as will be obvious when you listen to the interview. Neil was first a student I met at Carnegie Mellon. He’s gone onto have a great career, as both a traditional and corporate entrepreneur. And most recently, wrote the book The Startup Gold Mine: How to Tap the Hidden Innovation Agendas of Large Companies to Fund and Grow Your Business.
Sean Ammirati: 01:14 I think there’s a lot of lessons in the book and this interview, for both traditional and corporate entrepreneurs. I don’t necessarily agree with everything Neil says, and even reference at one point, bringing him back to have a debate in a future episode, which we’ll certainly have to do. But I think there’s a lot here, and hope you enjoy the episode.
Sean Ammirati: 01:39 All right, welcome to another episode of Agile Giants. Today I have a guy that I’ve known for almost 15 years now, a good friend of mine. I first met Neil when he was a college student at Carnegie Mellon getting a chemical engineering degree. And if that wasn’t a challenging enough thing, he was actually starting his first company at the same time, which ended up going on to work with LinkedIn, the Gates Foundation, did a bunch of interesting stuff.
Sean Ammirati: 02:05 Then he went on to run business development for one of our portfolio companies at my venture firm, and then more recently, have watched him do innovation inside Estée Lauder, in a role that he describes in a book, which we’ll get to, that he wrote as a kind of a startup refugee. So he describes people like himself, that went from a portfolio company to working in company.
Sean Ammirati: 02:25 And as I said, he wrote a book called The Startup Goldmine, which we’ll talk about in a minute, but has, I think, a ton of application, not just for startups, but also for folks like yourself, who are doing corporate innovation. So Neil Soni is joining me today.
Sean Ammirati: 02:40 Neil, thanks for coming on.
Neil Soni: 02:41 Yeah, thanks for inviting me, Sean. This is going to be a fun conversation.
Sean Ammirati: 02:45 Yeah, so as I mentioned, I want to start with your book and then go back to Estée Lauder, or at least use the lens of your experience at Estée Lauder to talk about some of the stuff. But this book, The Startup Goldmine, your foreword’s written by Brad Feld, and Brad makes a reference in the book that I thought, or in the foreword that I thought made a ton of sense. He wrote a book a lot of this audience is probably familiar with called Venture Deals, which walks through the element of term sheets and how entrepreneurs should look at it.
Sean Ammirati: 03:11 Your book sort of does the same things, but instead of how entrepreneurs should look at venture term sheets, it’s how entrepreneurs should look at corporate partnerships. And I think one thing that’s interesting here, and it sounds like you’ve had some interest from this, is although that was the target audience for your book, I know you’ve had a lot of interest from other groups, as well.
Sean Ammirati: 03:28 Maybe talk a little bit about the different people who have resonated with your book, and sort of how you worked with them, and we’ll jump into some specific questions.
Neil Soni: 03:35 Yeah, absolutely. So my inspiration actually for writing it was kind of what you alluded to in the little intro there, where when I was starting my first company and we were interacting with companies like LinkedIn, and even some of the foundations, and the LinkedIn intro was thanks you, obviously.
Neil Soni: 03:54 But I think even at that time, I was a college student, that was my first company. I had no idea how to navigate these relationships. So I really wrote the book for people who were kind of in those shoes, right, people who are … Had never worked in corporate, whether or not they were college students is kind of irrelevant, but people who just haven’t had that corporate experience to understand how are their potential corporate partners evaluating the deal, what are they excited about, what are they scared of, and just how to kind of think through these things in a way that you can create a successful win-win partnership, ideally.
Neil Soni: 04:30 And so that was the original kind of goal with the book, and the audience that I was writing it for, but what’s been really interesting, kind of since it came out in October, is the interest from all sorts of people in corporate, even I got interest from, I got an email actually earlier this week from someone who runs innovation at the US Postal Service.
Neil Soni: 04:52 So it’s been very interesting, just the kinds of groups that are either coming across the book, or someone’s telling them about it. And I think the reason it’s resonating, at least from a few of the conversations I’ve had, is people do recognize on the corporate side that they need to have these types of relationships with startups and with small organizations, in order to kind of keep pace with the pace of change that’s happening these days.
Sean Ammirati: 05:20 Yeah.
Neil Soni: 05:20 They need to have these kinds of programs, but what’s difficult is just like startups, we’re not closing these deals with corporate because they didn’t understand the other side. Corporate is also seeing that they don’t quite understand what startups are concerned about, and what motivates them, and so they’re losing deals in that sense, where they might lose out to another company. So if there’s competitors in the space, all competing to partner with the same startup, in certain types of partnerships, you can’t really do them with competitors of each other, right.
Sean Ammirati: 05:50 Sure.
Neil Soni: 05:50 So you would kind of only one company would get to do it, so they’re finding, “Oh, we’re behind our competitors,” that’s kind of one instance. The other case that I’ve heard a few times, and we experienced this at Estée Lauder, as well, was where the company that you’re trying to partner with, actually might go out of business if you don’t act fast enough, or they may pivot, all sorts of things can happen that you didn’t necessarily intend.
Neil Soni: 06:15 If you go too slow, or if you operate the wrong way, and so that’s been really interesting, is people have had these problems on the corporate side, too, and it’s been kind of, they’re getting some value out of the book because I frame everything for startups, and so by reading the book, they’re better able to understand what motivates a startup to do anything, whether partner with them, or to pivot, or anything like that.
Sean Ammirati: 06:30 Yeah, totally. And I’d say like having read the book now twice actually, I think that for the folks that I interact with on the corporate side, I would tell them to buy the book just for one chapter, even if they don’t read the whole thing.
Sean Ammirati: 06:49 You’ve got a chapter in there, which you called The Way Forward, and you talk about how large companies can better structure their back office, for success.
Sean Ammirati: 06:57 Which I think is … I don’t want to basically, they should buy your book if they want that advice, but I can’t recommend enough that chapter. I mean, so many of the companies that I interact with, they need this help. They don’t even, I think, know the way forward, and you give some really practical, helpful examples on that front. I think it’s good for how to partner with startups, also for what’s worth, wearing my CMU hat, a lot of those lessons I think could also be how to partner with academic labs.
Neil Soni: 07:25 Oh, yeah.
Sean Ammirati: 07:25 For what it’s worth, but so they should get that. What you don’t talk as much about in the book, but I thought would be a good complement to pull into this interview, is how should you think about finding and identifying the right startups to work with, right?
Sean Ammirati: 07:40 Because when you think about these innovation roles, part of it is having success with those that come into your deal flow, part of it is finding the right people in your deal flow, and I think under this whole umbrella of corporate innovation in this partner element, doing both those activities are really important. I think you and Chaz, who is your colleague at Estée Launder, and both of you guys from prior portfolio company stuff, you guys sort of inherently did this, but a lot of these innovation groups don’t have the same background you did.
Sean Ammirati: 08:12 So what are some things that a large corporate executive responsible for innovation could do to just do better on the top of the funnel, the deal flow challenge?
Neil Soni: 08:20 Yeah, I think, well even, and I’m sure other people in corporate innovation did it the same way, but the way Chaz and I kind of went about doing this at Estée Lauder, is we had many different groups that we were kind of reporting into.
Neil Soni: 08:34 We were sort of helping them solve problems externally, and what we did early on was and continuously, I mean this wasn’t just a one-time thing. It was a cadence that we developed, but just continuously just kind of checking in with those groups, and finding out what are the key problems that they’re having trouble solving through their current systems, whether it’s R&D, whether it’s existing partnerships, what are the things that aren’t working and that they need help solving? And obviously, that list morphs over time and changes, based on different things that they’re trying to solve.
Neil Soni: 09:05 So we kind of maintained a continuous sense of like, “What are we trying to solve for?” And then, of course, we kept our kind of imagination hat on, as well, because sometimes you come across a company that maybe there’s not an immediate need because nobody has thought of that in that industry yet, or nobody’s thought of that idea, in general. And you need to kind of have your mind open to all sorts of different things that are possible, so we had kind of like two running lists.
Neil Soni: 09:31 Like one list was maybe more incremental, which is problems that are already identified by people within the organization, so you’re just kind of searching for a solution to a problem. And then the other list would be kind of like out there-type of things, right. Where it might sparks something, or there might be some tech transfer that is possible. A lot of that was more on the academic side, I would say. In the second category.
Neil Soni: 09:56 But sometimes it was with other companies, as well. But I think from a scouting or a deal flow standpoint, I think there’s a lot of things you can do. I mean, I recently was talking to someone about this, but there’s this concept I’ve been kind of playing around with, and I don’t know if there’s a better term for this, but I just call it like innovation nets, right. When you put out these nets in different places, and you kind of, you have to set them up, and then hopefully, those nets catch something.
Neil Soni: 10:24 So I would say, we organized it in a few different ways. Like we would, so just like we had regular conversations with our stakeholders inside the company, we also set up these sort of nets outside of the company, where some of those were academic institutions. Actually with CMU we did a few things with Tech Transfer Group. At MIT, we did a few things with the Tech Transfer Group, Stanford.
Neil Soni: 10:47 So there were like a few academic institutions, where we had regular cadence around, where we kind of them aware of the things we were looking for, the kinds of things we were looking for, whether it’s startups or research-based things that professors were doing, and we would get inbound then through those individuals, who inside those organizations were incentivized to kind of find corporate partners, right.
Neil Soni: 11:12 So that’s kind of one way to do it. We did the same thing with a few accelerators, as well. I remember there were a couple of different deals that we had done with 500 startups companies, so we had and because Chaz had a relationship with 500 startups through Mom Trusted.
Sean Ammirati: 11:25 Right.
Neil Soni: 11:26 And so there was some cadence there, as well. Some regular cadence with them, as well as a few other accelerators, including like Alpha Lab. We had a couple, there was I think one company we did a deal with, Peacemaker Technologies. So they’re in the 3D printing space.
Neil Soni: 11:43 So we had that same kind of cadence with a few accelerators, venture groups, as well. So there were a few, one that comes to mind is Innovation Endeavors, which I think was Eric Schmidt’s venture group.
Sean Ammirati: 11:55 That’s right. That’s right, yep.
Neil Soni: 11:55 If I’m not mistaken.
Sean Ammirati: 11:56 Yep.
Neil Soni: 11:57 Yeah, yeah. So we did a few things with them, and with them, it was, again, I know I keep repeating this, but it’s kind of similar to what we were doing internally, where we would have regular kind of conversations with them, making them aware of like, “This is what we’re trying to solve, this is where we think we need to go, as a company.” And then, I would say the venture groups of all those groups, the venture groups probably did the best job of sort of curating that for us.
Neil Soni: 12:20 So there would be times where we’d spend a morning, let’s say, at Innovation Endeavor’s office, in New York, and they would have like five or six portfolio companies that specifically correlated with different requests that we’d made of Innovation Endeavors. So they would just, it would just all be in their office. And from a Estée Lauder standpoint, it was very convenient because we could have the stakeholders in the room because they were based in New York, as well, right.
Neil Soni: 12:46 So it was, we were able to get the companies and the sort of key decision makers in the room, at the same time, thanks to, I would say, the efforts of the venture group was pretty important there.
Sean Ammirati: 12:59 Yeah.
Neil Soni: 12:59 And then to their credit, they had someone on their team, whose entire job was [inaudible 00:13:05] for the portfolio companies.
Sean Ammirati: 13:07 Yeah, you’re seeing more and more venture firms add that kind of platform model where they do it. There are two kind of, I think, follow-up questions on that.
Sean Ammirati: 13:15 So you and Chaz, again, as you call them in the book Startup Refugees, people who had done startups and then gone to corporate. You had some pre-existing relationships that made that, some of those conversations easier, but other folks may not.
Sean Ammirati: 13:32 How you imagine they go about approaching accelerators, the education institutions, and the venture firms, but like what’s the approach if you don’t have the relationships that someone like you or Chaz does?
Neil Soni: 13:44 Yeah, and I think it also depends on the kind of company you’re emailing from or contacting them from, right.
Sean Ammirati: 13:49 Sure.
Neil Soni: 13:50 So I would say, having the Estée Lauder email was very helpful. You get responses from a lot of people when you email. I actually wish I still had that email, it’d make cold emailing so much easier. But, yeah, you can get in front of a lot of people with, like any sort of, if you’re talking Fortune 500 Company, that generally people have heard of, it’s actually shockingly easy.
Sean Ammirati: 14:14 Right, I think it’s both those things. So it’s a Fortune 500 email that’s a consumer brand, too.
Neil Soni: 14:19 Yes.
Sean Ammirati: 14:19 I think that helped.
Neil Soni: 14:20 Yes, exactly. That helps, as well. But I’m kind of joking around there, but I would say the biggest thing is that, especially if we’re talking let’s say, venture groups, accelerators, academic institutions, all of those groups are incentivized for their portfolio companies to succeed and to make money.
Neil Soni: 14:39 And of course, if you’re a venture group, or honestly, if somebody can close a deal like this at the accelerator stage, I mean, that’s even better. If you can get one of these kind of larger corporate-type of deals, or even just start building that relationship, that goes a long way to a potential acquisition, or getting to a profitable state, where you’re not necessarily fully relying on venture capital.
Neil Soni: 15:03 So I would say these groups are incentivized to make this happen. There’s things you can do to make it easy for them, which we can also get into, but I would say that in terms of approaching them, just like I mean, people really undervalue or underrate cold emails. People in the startup space, especially, I would say. And, Sean, I don’t know if you’ve had a different experience, but in my experience, are very sort of collaborative and open to talking.
Neil Soni: 15:31 Yeah, so I would say it’s not all that difficult, but there is a lot of hesitation, I think, with cold emailing, especially if somebody has come from a lifetime of corporate. I think maybe there’s more hesitation than is necessary. And just to put some color on that, I mean, there’s people I’ve interacted with in corporate who have told me that in companies, so this wasn’t true at Estée Lauder, but at some other companies, they weren’t allowed to email someone at a higher level than them directly.
Sean Ammirati: 16:01 Right.
Neil Soni: 16:01 So there are, if you come from a culture like that, it’s difficult to imagine that, “Oh, I can just email the CEO, or the partner at this venture firm, and they’ll respond.”
Sean Ammirati: 16:11 And you need to do, I mean, I think to me, it’s like you got to be bold, and you also got to do your research, right. Like you got to know who you’re targeting.
Neil Soni: 16:17 Oh, yeah.
Sean Ammirati: 16:17 It’s just like a sales process there.
Neil Soni: 16:20 It’s just like a sales process. I would say events are also underrated, that’s maybe like number two behind like cold emailing. I would say, if you go to a few events, and there’s increasing more and more of these that sort of try to put corporate and startup in the same room. That maybe a good way to jump start your network if you’re starting from scratch.
Sean Ammirati: 16:37 Agree. You talk about it in the book, but the Inside Outside Summit that Brian does is, I think, a particularly good version of those, for what it’s worth.
Neil Soni: 16:46 Yeah.
Sean Ammirati: 16:47 Cool, okay. Let me, one more thing on this process, and let’s go back to the internal conversations for a moment. So I was talking to someone who has a similar role to yours, the role you had at Estée Lauder, at a different company. And they were essentially run corporate group, who was trying to help different business units.
Sean Ammirati: 17:08 And they said, “When I would call up the business units and say like I’m here to help you out, it felt often on the other end like the IRS calling, saying hey, I’m going to help you out by looking at your taxes.”
Sean Ammirati: 17:17 And so I think there are things you can do credible when you show up to meet with the business units about their problems that they’re having. Any tips you might have for people, who are trying to do that?
Neil Soni: 17:34 Yeah, I would say, like keep very much in mind, and I’m sure if someone has spent a lot of time in corporate, this is probably second nature. But something that was a lesson that I had to learn, right, I think I remember early on and then I quickly learned my error. Where I went in, thinking that, “Oh, I can save them time and take work off of their plate,” right, by helping them with this, this, and that. And that didn’t go over so well.
Neil Soni: 18:00 That’s one of those, where people will smile and say, “Oh, that’s great,” and then like as soon as you leave, they’re like, “Someone’s got to get this kid out of here,” because like I, and this is something I didn’t realize at the time, but if you take work away from a group, it’s kind of like making, it makes them feel like, “Oh, we can get cut, or maybe there’s less of a reason now to keep us around,” and maybe they can just close this department if they can outsource all this work.
Neil Soni: 18:23 So that was a big one, is just thinking through, “What does each group actually care about? Or, what do your stakeholders actually care about? And what’s going to be threatening to them? And what do they stay up at night, worried about?” Like for example, I remember there were a couple things we needed, like IT to kind of implement, or to put into market.
Neil Soni: 18:44 And IT is something that a lot of companies have already outsourced, or it’s done overseas, or so Estée is not one of those companies, it’s the whole IT group is, most of the IT group. I can’t say the whole IT group. Most of it’s US-based, and I’m sure it’s not a cheap thing to run, but there’s advantages and disadvantages.
Neil Soni: 19:03 So I think there was something we were trying to implement that would have reduced like some of their workload, and I know I was pitching that as like one of the key features, which if you look at a company from a bird’s eye view, yeah, it’s probably a good thing, like overall if you can get the same work done at a better, or cheaper, right.
Sean Ammirati: 19:20 Sure.
Neil Soni: 19:20 Or you’d think that’s common sense. But if you need somebody to implement something, and you tell them, “Hey, we’re going to make your workload less, and therefore your department less important, is probably not the best pitch, right, to get them to-
Sean Ammirati: 19:34 Right, it might feel more like a bug than a feature to them, for sure.
Neil Soni: 19:38 Yeah, exactly. So it’s kind of, you have to marry the bird’s eye view of the company, of what’s good for the company with kind of the micro of what’s good for the person that you are trying to work with. Because that, the point you brought up, like the IRS telling you they’re going to help you by looking at your taxes. I mean, it’s exactly that. That’s the risk you run in a lot of conversations. And so I think that’s like one, is just thinking that through.
Neil Soni: 20:03 And then the second thing is just like genuinely being helpful, in even like little ways. So this is a very kind of local example, so it hopefully will translate. But in our role at Estée, both Chaz and I had this situation where we were working with a lot of different groups, and in a company that’s the size of Estée Lauder, many people have never interacted with these other groups. They stay in their own group. If you’re in R&D, you know all the R&D people, but you don’t necessarily know like the testing lab people, or you don’t necessarily know the brand people, or the marketing people.
Neil Soni: 20:35 So we would, very often, kind of play the role of connector, even though we had barely been at the company-
Sean Ammirati: 20:41 Yeah.
Neil Soni: 20:41 Just because, and you would find that people really would appreciate that because they didn’t even know like some of the functions that the company had internally. So kind of paying it forward in that sense, like showing your value ahead of time, just increases the trust. So if you help someone out in whatever way, you’re just so much more incredible later, when you need help-
Sean Ammirati: 21:02 Yeah, we’re, it’s funny. This connecting role of the sort of centralized innovation groups, I think, is actually an underappreciated benefit of what they do within the culture. So I think that’s smart. And then on the first point, I mean, you talk about empathy a lot in your book. But I think it’s really that same empathetic attitude, in terms of how you’re approaching these folks, as well.
Sean Ammirati: 21:24 I want to pivot just for a minute to another part of your book, and specifically, this trend that you touch on of large companies, opening up these labs, or open innovation, or external innovation, or all these different ways that they may be framed out. But you make a point in there, where you talk about the quote-unquote “Innovation gap between startups and big companies,” right.
Sean Ammirati: 21:52 And you make a statement, this is just ironic, but in the Kindle version, it’s actually at location marker 666, which I thought was humorous, but you make a point … No, I know-
Neil Soni: 22:05 That was not on purpose.
Sean Ammirati: 22:06 But as I was noting it on the Kindle and I looked at what the location was, I thought it was sort of ironic. But you make this point.
Sean Ammirati: 22:12 You say, “Look, the innovation gap between the two types of organizations, will remain as wide as it is today, until either the incentive structure is fixed in corporate, or B, large companies realize their shortcomings in their incentive structure to drive innovation internally, and create easier ways for their employees to solve problems, and launch new products.”
Sean Ammirati: 22:33 And so I guess I’m curious, I don’t disagree with those are things that need to change for these groups to be successful, you’ve been part of one those inside of Estée Lauder. Are you optimistic or pessimistic that this innovation gap is going to be closed?
Neil Soni: 22:52 So I think since I wrote the book, I’m going to say I’m pessimistic that it’s going to be closed, but I think it’s not necessarily a pessimistic statement.
Sean Ammirati: 23:00 Yeah, good. Yeah, yeah.
Neil Soni: 23:01 So I’ll just explain what I mean by that. So I don’t think it’s going to be closed, but I think companies, and it’s not even closed in the sense that I don’t think the disruptive, kind of new business model, those new things are going to be done necessarily internally, like internally from a full stack standpoint.
Neil Soni: 23:19 So meaning, the idea is generated internally, prototyping, customer development, growth, and scale up, all being done internally. I’ve very pessimistic that that will happen, right. But here’s the thing, I don’t actually think that needs to happen.
Neil Soni: 23:34 What I am optimistic about is that I think companies are better figuring out what they are good at, and what they can sort of farm out, or wait for a startup to kind of come up with, themselves. So like just a every simple example, or a very simple way of elaborating on that point, I guess, is there’s no reason … I’m not going to say there’s no reason. But there is, it’s hard for me to see why every, like every big, next big thing-
Sean Ammirati: 24:03 Sure.
Neil Soni: 24:03 I’m just going to use that as the sort of generic term for like the next concept in anyone’s given industry that’s going to take over. There’s very little reason I see why the customer development phase, and the idea generation, and all of that has to come internally.
Neil Soni: 24:18 It’s actually very cheap to go acquire a startup, relative to what it cost you to do those things internally. If you start adding up all the time, and all the personnel, and all the mistakes you’re going to make, there’s actually not, it’s not very expensive to go either acquire or invest in later, once it’s a little bit proven out.
Neil Soni: 24:35 I mean, just a very simple example, Sean, that I think you were, I think you’ve looked at in a lot of detail. I think the example was in your book even.
Sean Ammirati: 24:44 Sure.
Neil Soni: 24:45 Was the Instagram acquisition for Facebook, right. It’s like at the time, everybody looked at a billion dollars and said, “Wow, they’re out of their mind,” right. “They spent a billion dollars on a 20-person company,” but like that wasn’t expensive in hindsight. That was very cheap.
Sean Ammirati: 24:58 That was very cheap acquisition in hindsight, for sure.
Neil Soni: 25:00 It was cheap, and do you, like given Facebook’s DNA, I don’t think Facebook internally could have come up with Instagram. It just, I mean it was very different. Because everything was going to be looked at through the lens of Facebook because they weren’t a portfolio company before that.
Sean Ammirati: 25:14 Yeah, so here’s … Let me, I mean. We may need, this could be a fun future episode to beat this up a little bit. But here’s the challenge that I struggle with-
Neil Soni: 25:24 Sure, this will be fun.
Sean Ammirati: 25:24 Is I think that’s a very good example of an innovation that should be commercialized as a startup, and then brought into the fold, via buying or partnering if you’re a company like Facebook, responsible for that kind of innovation. But I think there are other areas of innovation that are hard to do as a traditional startup.
Neil Soni: 25:44 A 100%.
Sean Ammirati: 25:45 And so I feel like those, we have got to figure out a way to close the quote unquote “Innovation gap,” for those kinds of things because it’s really hard, if not, that innovation that the world needs is likely to not come from anywhere if not from-
Neil Soni: 26:04 So here’s one where I think you’re a 100% right. So like I would say there are things at, let’s say Estée Lauder, that the people who worked at the makeup counters in department stores, they had a lot of really good ideas. I mean, we had a couple little workshops with people like that, and because they’re frontline, right, they know a lot about the customer and what they’re asking.
Neil Soni: 26:24 And the company, I would say, was not great at incorporating and commercializing the ideas. Those are ideas that are not going to come from an external startup, most probably. Just because it requires like in-house knowledge to do that. So I think what I would hope more companies do, but I haven’t seen a lot of, there are a couple companies, I think, that do a job of this. Anheuser-Busch, I’ve seen doing more of this recently, where they’ve created platforms for the employees to work on these projects internally.
Neil Soni: 26:54 And I think that’s going to be huge because, to your point, yeah, there are lots of different types of innovation that can’t really be done through a traditional startup because you wouldn’t know what’s going on. Or, it’s way too niche, it only applies to like one company-
Sean Ammirati: 27:09 Or like the cost of entry, is just astronomical if you’re a new startup.
Neil Soni: 27:15 Yep.
Sean Ammirati: 27:15 And so I think like the world needs more innovation period, right, and certain types of that innovation actually, tech startups especially, like software communities, that kind of thing, we’ve actually gotten pretty good at giving people the processes to launch this. So it’s not surprising me that Instagram-
Neil Soni: 27:34 Yeah, definitely.
Sean Ammirati: 27:35 Like that’s actually not that surprising an outcome, when you think about the infrastructure around supporting mobile app entrepreneurs at the time Instagram was coming out, right. But if you’re in the chemical industry, or you’re in financial services, we don’t have, there is an unfair advantage to being an established company, who can help build this.
Sean Ammirati: 28:00 Now I think the gap you’re talking about is real, and until those things get fixed, it’s going to be really hard for those things to be commercialized, but I think that gap has to be [inaudible 00:28:10].
Neil Soni: 28:12 Well, this is why I like the Anheuser-Busch thing, because I mean, I think we haven’t talked about this in the episode, but- I’ve been working on it in the beer industry for like about a little over a year now, and beer, I found, through trial and error, is one of those industries, where there are a lot of entrenched advantages, just through the existing distribution networks, or the legal hurdles to get a new product into market, and there’s just a lot of advantages to being a existing company … Like an incumbent with a lot of market power.
Neil Soni: 28:42 And I think there’s a big advantage to what they’re doing internally, trying to empower their employees because I think they have found, there’s a lot of errors they’ve made over the years through the top-down approach. But this is kind of a way to marry kind of the bottom up, like let the best idea kind of emerge from the ecosystem that a traditional startup could bring to the table, but externally might not have the power to put into market, or at least to scale up effectively.
Neil Soni: 29:10 So there’s, and that’s just one example. I mean, I was thinking even as you were talking, like machinery or some of the more industrial-type of things it’s like, “How would you do that as an external startup?”
Sean Ammirati: 29:19 That’s right.
Neil Soni: 29:19 Unless it’s software.
Sean Ammirati: 29:21 Or, like you talk about in the book, Arden’s company, the 3D printing company, right. Like that’s-
Neil Soni: 29:27 Yeah.
Sean Ammirati: 29:27 That’s making hardware feel like software in a lot of ways. And so I think it works really well, but there are other opportunities that are more challenging.
Sean Ammirati: 29:36 So two more questions. The last one jumping off, the last of the questions jumping off from your book. So you make another point, I think, that’s really important as companies wrestle with this, which is the size of the opportunity that something needs to be to get on a company’s visibility, right. And so it needs, and the point is, it’s got to be really big up front. And sometimes it’s hard to size a market at the beginning.
Sean Ammirati: 30:07 What have you seen to help companies think through market sizing team, and how to think about those kinds of questions as they’re thinking about internal or external innovation?
Neil Soni: 30:20 So two ways. I would say one that’s pretty effective. It’s pretty effective, but it’s not necessarily accurate, okay. So let’s put it that way. This way is, it’s kind of like the worst case scenario for the incumbent, right. So if somebody has some product, and going back to the Facebook-Instagram example, that might be how they decided to think about it, is like, “Okay, this company today is obviously not worth a billion dollars,” or however much you want to put on a startup that you think is overpaid to get acquired for.
Neil Soni: 30:52 But if you think through kind of like long term, it’s like, “How could this go as badly as possible for us?” And then that’s one way, I mean, it’s not the total addressable market, but it is, “Can they eat our market?” Right, “Or, can they take our market away from us?” So that’s kind of one way. It’s almost like threat analysis, like how much are they a threat to us? So that’s kind of one.
Neil Soni: 31:14 The second one that I found that is kind of effective, is I would say the first one is probably the most effective to get people thinking out of the box a little bit. But the second one is if you can find, and this is specific to each individual company, but usually companies have had an example or two, where they launched a product that they didn’t think would be as big as it ended up becoming. And you kind of can use that as like a way to frame it.
Neil Soni: 31:38 So I know like with Estée Lauder, they’re a big example of that. They talk about all the time, and I think in the industry, this is talked about a lot because several of the large companies came up with this in-house, and then didn’t launch it, was the sort of hybridization of skincare and makeup. So now that’s a very common, I mean, in the last like 10 years, that’s like probably the best-selling products are hybrids. And now everybody does it, right.
Neil Soni: 32:03 But the funny thing is like people who’ve been at Estée Lauder for 30 years would tell you that, “Oh, 30 years ago, we had this,” and they think they’ve had it even before, because it’s not a genius idea, right. It’s like, “Oh, we make makeup, we make skincare.”
Sean Ammirati: 32:16 Right.
Neil Soni: 32:16 “What if we could combine them?” Right, but then it was never launched for different reasons. Like at one point, someone said, I know one of the reasons people brought up, was they said, “Oh, like who’s going to want both? Like it’s more special to have one of each.” So otherwise, it’s like a jack-of-all-trades product that isn’t good at either. That’s like one criticism.
Neil Soni: 32:33 The second one is, “It’s going to eat our own market, because then instead of buying two products, they’re going to buy one.” So there’s like all these reasons why they weren’t launched, and then it became like the biggest thing in the world. And I think [inaudible 00:32:44] is the one ended up launching it, and then everybody launched it because there wasn’t really an IP on that simple of an idea. They just starting combining their own makeup and skincare products.
Neil Soni: 32:53 So it was just, it’s a very good example of everybody internally would have heard of that example of, “Oh, well, we didn’t think hybrid products would be big, and look what they became,” right. So you kind can frame it that way, too. Because none of us can tell the future, right. And I think with startups, as a VC, you are obviously intimately familiar with this, but framing market sizes is nearly impossible. You just kind of need what the guardrails are.
Neil Soni: 33:19 Like with Mom Trusted, for example. Mom Trusted was never going to become Google, right. It’s just like, that’s the guardrail. Like we know it’s not going to be that big, but where is kind of like, in the best case scenarios, what’s the size Mom Trusted could get to? Right, and I think that probably the way you, I’m sure you think through opportunities, as well.
Sean Ammirati: 33:35 I think thinking through ranges versus precise numbers becomes really important.
Neil Soni: 33:40 Exactly.
Sean Ammirati: 33:41 Especially as you get to big numbers.
Neil Soni: 33:42 Yeah.
Sean Ammirati: 33:42 Because we’re just not good at dealing with big numbers, right.
Neil Soni: 33:45 That’s a 100% right.
Sean Ammirati: 33:49 And I think also, you’re reminding people in the industry, it’s important. I’ve done some stuff in the telecommunications space recently, and something that everybody’s focused on in that space is, they all remember McKinsey telling AT&T to get out of the cell phone business, even though they had invented it. [inaudible 00:34:07], at best this is a multimillion dollar market, and it turned out they were wrong by like about 13 billion.
Sean Ammirati: 34:16 But like those examples really are on peoples’ minds. So real quick, last question. I know we’re up against other stuff here, but real quick, last question for you is, go back to Neil Soni, the chemical engineering graduate, and someone who wants to have a career like yours, what piece of advice would you give them for going out there and having sort of the stellar career that you’ve had over the last decade or so?
Neil Soni: 34:45 I would say, the biggest thing is like definitely work on things you’re interested in because you’ll find that if you’re interested in it, it doesn’t necessarily feel as much like work. You just find yourself digging into it in a much deeper way. So I mean the example that I like to think about is that if somebody spends … I mean, let’s say we all spend, just to put numbers on it, let’s say we all spend 40 hours a week at work, right.
Neil Soni: 35:11 Let’s say, you just have to do that. But if you really enjoy something, you’ll find yourself kind of reading about it, or Googling it, or talking to people about it at other times, whether on the weekend or in the evenings, or whatever it is. You’ll find yourself doing it more than 40, so let’s say that ends up going up to 50 hours a week. And then you multiply that out by a few years, right. I mean, you’ve put in a lot more work than someone who’s just doing it as a job. And then that doesn’t even get into the quality of those hours, right, that are being spent.
Neil Soni: 35:41 So I just think if you work on things you’re interested in, one, it’s more fun. I mean, there’s no two ways around that. But the second thing is, you just get so much more out of it, and you get so much better at it than something, than if you’re just doing something because just for the sake of doing it, or just because you have to.
Neil Soni: 35:59 So I’d say that’s been the biggest thing, is just working on problems that interest me. I mean, even Mom Trusted, which when you first introduced me to them, I didn’t think I was that interested in helping people find childcare. But then, after kind of working with like Chaz, or speaking with Chaz, and learning a little bit more about the problem they were trying to solve, and how they were trying to solve it, you find like certain problems grab you, and that was one of them.
Neil Soni: 36:23 So yeah, that’s a big one, and then the second one is like working with good people. I know everybody says that, but you just learn, again, so much through working with good people, people who can teach you something. So that’s been, those are kind of the two big ones, I would say. I mean, I wouldn’t call it necessarily stellar career just yet, but to get to have an interesting career in something where you feel like you’re continuously learning and getting better, I mean, you can’t do that on your own, and so who you work with makes a huge difference.
Sean Ammirati: 36:54 Yeah, that’s awesome. That’s great advice, Neil. Well, thanks for joining me. I appreciate the time. Again, the book that Neil wrote is called The Startup Gold Mine: How to Tap the Hidden Innovation Agendas of Large Companies to Fund and Grow Your Business. Really written, again, for startups, but I think a lot of folks in this audience would get a ton out of it, as well. So go buy that on Amazon, or all the places that you buy books these days.
Sean Ammirati: 37:17 And Neil, thanks for the time today.
Neil Soni: 37:18 Yeah, thanks, Sean. This was fun, and maybe we can do that follow-up episode sometime.
Sean Ammirati: 37:22 Yeah, I would love that. All right. Thanks, man. Take care.
Neil Soni: 37:25 See you.
Sean Ammirati: 37:33 I hope you enjoyed this episode of Agile Giants. If so, consider sharing it with a friend. And if you think it’s worth five-stars, which I hope you do, please go to iTunes and rate it, so that others can find this content, as well.