The Multi-Dimensional Startup
Two engineers found a startup. Is something missing?
Earlier this week, I attended an Innovation Corps event at UC Berkeley Haas School of Business. This is a program funded by the National Science Foundation to train would-be entrepreneurs to commercialize science and technology innovations, with a curriculum based largely on Steve Blank’s Lean Startup principles.
I struck up a conversation with a team waiting to show their pitch for an energy storage startup. They were all engineers from a local research laboratory. They enjoyed the program, which encouraged them to get out of their laboratory to test their hypotheses on would-be customers. I asked how much exposure the program gave them to typical business school content, such as strategy, marketing, sales channels, leadership, organizational behavior, finance etc. Their answer: none – the program focused only on determining product/market fit as “everything else comes later”.
That may be true, but if as a result of the Lean Startup process you stumbled through several iterations toward an idea with great product/market fit, later = now! When it’s time to build a real company, filling in the business dimension becomes critical.
Engineering and Business Doesn’t Mix
The conversation reminded me of my time at Stanford Business School, attending full-time for a year as a Sloan Fellow back in 2011. Stanford Engineering and Stanford Business are located at opposite ends of the campus, and it seemed that there was little interaction between the two schools. In fact, Stanford Engineering was busy teaching its own curriculum on entrepreneurship, quite surprising when you consider that the Graduate School of Business (GSB) is a global leader on this topic. This may be a reflection of a common line of thinking in engineering circles – the business side of the startup equation is all “common sense” that can either be picked up from a quick seminar or learned on the job.
At the business school side of campus, we were busy constructing business models, scaling our operational plans, and building great-looking slide decks to present to would-be investors. The only problem? Our ideas were no good. The engineering side of our business was just looked at as a cost-center, a problem to solve with work-for-hires, certainly not a skillset worth a “founder slot”.
As a trained (BS/MS) electrical engineer attending the Stanford GSB, I could tell that my ideas were in demand. I was not talking about building (yet another) startup that delivers organic lettuce to the campus population, I had real product ideas that could disrupt markets! But as initial introductions were made with MBA students for would-be startup teams, I had to quickly dismiss their “work-for-hire” mentalities – I would be an equal partner in the venture, not a contractor.
Mutual Respect Needed
As I covered in a previous blog topic, mutual respect works wonders when corporates and startups are exchanging ideas. When considering the backgrounds of the founding team, a similar argument can be made - the best companies are formed when there is mutual respect for both the business side and the engineering side of the equation.
Engineers work best when they are on the cusp of finding a solution to an impossible problem – and when they see the respect from their business-oriented counterpart for performing these miracles.
The MBA works best figuring out how to create a profitable business from the technical innovations that are presented – and when they see their engineering partner accept their feedback, making a good idea into a marketable product.
More Dimensions = Higher Valuation
As a budding angel investor, I have seen my share of one-dimensional pitches. If the team is engineering-dominated, I’ll get really excited about the idea, but am puzzled how money will be made, or I’ll wonder how their drab-looking slides and first branding attempts will translate into an exciting consumer company.
If the idea is business-oriented, it will likely be a smooth and thoughtful pitch that promises the disruption of a large market – but the intellectual property (read: barriers to entry for would-be competitors) is missing or the startup will be described as a “land grab” opportunity.
The winning pitches are from multi-dimensional teams. Part of their founding team is composed of an engineer with deep expertise in the subject area (and the accompanying IP). The other part of the founding team has constructed a business and rollout model that can scale quickly - with profits.
There is another benefit to the multi-dimensional team – an easy division of tasks. People on the business side of the team are generally more outgoing – they love to meet investors and corporate scouts and easily make connections and never tire of presenting their pitch and hearing and adapting to feedback. The engineering side of the team can stay focused on moving the product development forward in parallel.
Steps in the Right Direction
Innovation Corps is a valuable program that teaches technical entrepreneurs the key principles in entrepreneurship – and it starts with getting out of the building to get feedback on their ideas. Stanford has recently created more opportunity to mix the two disciplines – for example, Stanford Ignite. And smart MBA students have always made a point to take a class over in the Engineering building – and vice versa.
These are steps in the right direction to break down the barriers between Engineering and Business disciplines. There are of course plenty of exceptions of multi-talented engineers creating “unicorn” companies, but for the rest of us mortals, creating a diverse, and multi-dimensional founding team is a wise choice that will attract investment capital and prepare it for future growth.
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