“We are all better off the more entrepreneurship there is in the world”
On Wednesday 17th January, we were joined by iconic Silicon Valley entrepreneur Reid Hoffman, co-founder of LinkedIn and EF Board member. Reid offered his perspective on the future of Europe and Asia’s tech ecosystem and considered why startups offer an important alternative career path for the world’s most ambitious people. Here’s a summary of what we learned:
- Silicon Valley is a mindset, not a location
In Silicon Valley, people aren’t afraid of failure. By removing the stigma of failure, entrepreneurs are allowed to try out new ideas and continuously learn and iterate on them.
Starting a company, according to Reid, is like ‘throwing yourself off a cliff and assembling a plane on the way down’. You probably won’t get it right the first, second or third time around. But you keep going. The key point is to learn from your failures. Try, learn, try again.
With new tech hubs emerging across the world, Reid suggested the need to de-risk the process of starting a company by creating a culture where failure is dealt with head-on and quickly. We must foster an ecosystem where sharing, swapping and learning from each other’s experiences is the norm.
At EF, risk-taking is deeply ingrained in our culture. Experimentation is widely encouraged because we fundamentally believe to create something original you have to try something new which means taking some measure of risk.
2) Be gritty
In entrepreneurship, grit is an ‘outlier’ skill or attribute that is essential for success. Grit is roughly a measure of an individual’s perseverance and passion to stick with and pursue a goal over a long period of time. It’s often cited as a key differentiating factor between successful and unsuccessful entrepreneurs. In short, lack of grit can kill your startup. This is very much what we have seen at Entrepreneur First.
It’s difficult to overstate the importance of grit. Many believe grit can be learned and is often linked to embracing failure, recognising it’s ok to fail as long as you don’t give up or quit. Staying persistent to a vision across different market cycles plays a crucial role in startup success. For Reid learning to have grit is ‘one of the most important lessons for entrepreneurs’.
3) It takes a network
You know you want to create a company, you know you want to create something big and you’re ready to build your startup now. Great. What next? How do you achieve that?
Reid suggested the need to take concrete steps to achieve that by reaching out to existing and new networks.
For Reid, Entrepreneur First’s network is a unique way to help entrepreneurs create a company. By bringing together a critical mass of talented outliers the programme offers you the opportunity to experiment with multiple different cofounders before finding the right match. And it works. We’ve built over 100 startups this way.
4) Be an “infinite learner”
If you were able to talk to your younger self, what advice would you give them? According to Reid, if you don’t have an answer you’re not learning.
Successful entrepreneurs feel the urgent need to constantly learn, invent and tackle problems.
How can you do this? Reid suggested taking a relatively short period of time, a week or a month and figure out what you haven’t learned. For Reid, Infinite Learning is practically a job requirement for scale entrepreneurs because ‘almost every scalable idea forces you to grapple with an emerging phenomenon. Everything around you is changing — your business, your market, your team — and you can’t turn to any one expert for help — because there are no permanent experts.’
5) Technical founders are also business model geeks
When looking at the great behemoths of Silicon Valley such a Google and Facebook, it’s widely known that their founders, Mark Zuckerberg and Larry Page, are technical. Often overlooked is the fact they are also business model geeks. This doesn’t mean they follow business school dogma or obvious opportunities to monetise. Instead, these founders think boldly and innovatively about different services and products to monetise, a term called ‘business model hacking’. Examples Reid mentioned were:
- Freemium models — providing a core service/product for free and then charging for additional services such as Google or LinkedIn
- Trojan horse — provide a cheaper/lower quality product than competitors but gain access to another valuable commodity such as user or distribution data such as Facebook
Roughly 80% of people who join EF have a technical background but throughout the programme, they learn key skills which help them create defensible and scalable business models.
6) Find out where you can break rules
In order to be able to move quickly and achieve scale, successful entrepreneurs often look for ways to break conventional wisdom. One example Reid used was in regard to unit economics. If you ask a Series A, B and even C founder in Silicon Valley their unit economics, more often than not they simply don’t know. Whilst MBA’s are taught the need to figure out unit economics before they scale, in Silicon Valley these rules are thrown out. Instead, it’s more important to achieve scale first.
Reid emphasised how entrepreneurs should think pretty seriously about which rules you can throw out, in order to get your larger scale-up round of financing. He emphasised the need to solve as a few and as important problems as possible and don’t try and solve them all at once.
Hoffman talked about the importance of OODA loops, a fighter pilot’s term that stands for Observe, Orient, Decide and Act. Just as the fighter pilots that have a faster OODA loop have a higher chance of survival, so do startup companies. “Individuals and organizations throughout the Valley talk about their OODA loop, their learning, the speed at which they are moving, etc. because they feel that that speed is critical,” said Hoffman.
As an entrepreneur, you need to be asking yourself, which rules can I throw out in order to go faster and reach scale?
7) Timing is vital
Before he built LinkedIn, Reid experimented with several business ideas which ultimately didn’t work out.
Reid’s first idea? A dating site called ‘SocialNet’ in 1997, essentially Facebook before Facebook.
Reid described SocialNet’s failure as one of the most important learning experiences in his career. That ‘failure’ subsequently led to LinkedIn. According to Reid, ‘If you’re not embarrassed of your first product, you’ve launched too late.’
8) Culture really matters
In order to effectively scale, Reid argues that a company needs to be very intentional about culture. All of the successful scale companies have a strong culture because it’s a necessary component for scaled growth. Reid suggested that a company’s leadership needs to codify its culture and make it explicitly known both internally and externally. When reflecting on his own career as an entrepreneur and investor, Reid said he wished he’d published something like The Netflix culture document when starting LinkedIn.
9) References are more important than interviews
Your first hires are critical to the success of your business. Reid suggested three ways to find the best candidate:
- Reach out to your network and ask them for the best person for any given job, not simply the best person for the job. When you have a candidate in mind, ask for 3–7 people to provide references
- People are hesitant about giving negative reviews. Ask them to rate this person from 1–10. Anything below 7 isn’t worth hiring. A good sign is If you get a selection of 8’s or 9’s
- Ask honest interview questions. Reid suggested asking questions such as: What did you most learn and what did you mess up? Here you’re looking for answers which show grit, resistance, adaptability and whether someone is a good collaborator
To view the whole discussion, click here
Lisa Wehden is Head of Special Projects at Entrepreneur First (EF.) EF runs full-time programmes that fund the most talented scientists, engineers, developers and industry experts to find a co-founder, then helps those teams grow their businesses and raise funding.
We currently run programmes in Berlin, Singapore and London, you can apply here or sign up below to get advice from the EF team on your startup journey.