Personal Advice from A Silicon Valley VC Veteran

Professor John Glynn (http://bit.ly/JGlynn) sadly just retired after 20 years of teaching at GSB. I can't say how lucky I am to be in his last class taught at GSB. It's often unbelievable such a humble, nice gentleman who lectured us every Tuesday and Thursday morning is one of the oldest and most influential figures in the Silicon Valley. Above all, I learned a great deal of humility from Professor Glynn.

In his last class, Professor Glynn shared with us a number of personal wisdoms. I will share them in the next few blogs with you all:

Personal Advice (my favorite):
In an era of commercialism and rampant greed, you need to be reminded about the powers of idealism, community, diversity and self-respect.

1. Begin with an end in mind. Know where you are going to understand where you are now.

2. Accept responsibility for yourself. Put the monkey on your back. Obstacles to success are usually not external.

3. Embrace the unknown and distrust the known.

4. Understand then be understood. Listen to how others see things. Try to put yourself in the other person's shoes.

5. Focus on implementation. Organize and act around priorities.

6. Make commitments and live up to them. Do what you say you are going to do.

7. Never ask people to do something you would not do.

8. Continue to learn. "It's what you learn after you know it all that really counts." John Wooden

9. Obey the absolutes of right and wrong. Adhere to your principles even when it hurts to do so.

10. Develop some humility. Most entrepreneurs are long on ego and need more humility.

11. Don't take yourself too seriously. Learn to laugh at yourself.

12. Focus on the glass being half full and not half empty.

13. Play to win. Do not fear failure. Fear of failure is often worse than inertia. Take risks and embrace failure. There is no disgrace in failure if you have acted in a fair and honest manner.

14. Be aware of the shadow you cast.
a. Avoid the total focus on what is good for me.
b. Look at how your actions affect others.
c. Put your ego in place so people can communicate with you.
d. Show your commitment to your people and their importance to your organization. Create a sense of belonging.
e. Be genuine and natural with people and be honest and consistent in dealing with them.

15 Finally, get your priorities straight:
a. Family is #1
b. Wife or husband is #1. Spend time with them.
c. You need a balanced life. Take vacations and breaks to stay sharp.
d. Enjoy life before it is gone.
e. Give rather than take.
f. Do rather than talk.
g. Say it can be done rather than it's impossible.
h. Inspire others rather than discourage.
i. Light a candle rather than curse the darkness.
j. Do more than exist - LIVE.

Key Lessons Learned from Prof. Mark Leslie on Enterprise Sales and Leadership

Mark Leslie (http://bit.ly/MLeslie) is one of my favorite professors here at GSB. It's my fortune to sit in his class and learn the knowledge he accumulated from leading and growing technology companies for the past 30+ years!

I particularly enjoyed our last day of the enterprise sales class I took given by him and Mark Stevens (partner at Sequoia Capital).

Mark shared the following key lessons:
First, he shared the virtuous cycle below about building a strong company and the value of good sales management:
(1) Set goals realistically. Set the quota at a level that allows 70% of the organization achieve 100% or more of the quota. Allowing people to succeed build confidence and a virtuous cycle of success. Positive reinforcements are most effective.
(2) When sales overachieves, company has enough end of quarter or end of year business to avoid discount pressure or channel stuff.
(3) The company can exceed profit expectations.
(4) As a public company, high stock prices build the public reputation of the company.
(5) As a result, you create an environment where you can attract the best and brightest.
(6) You also have money to acquire new products, enter new markets, build strategic partnerships, and leverage industry trends.

This comes back to the importance of forecasting and setting achievable goals. Typically, he used to set a team's overall goal as less than 80% of the sum of individual quotas, as a rule of thumb. Another tip he shared was that while you tie most sales' people's compensation directly to their revenues, you should tie the VP of sales' compensation to the company's overall goal to avoid conflicts of interests. He/she should think more like a CEO.

Second, he warned that inertias exist in a company's revenue plan. You cannot expect to change things and expect a 180 degree change over night.

Third, it's important to inspire people to be heroic and to not rest on your own laurels. NEVER, NEVER read your own press clips. Remember where you come from.

Fourth, set each of the operating function's expenses at a proportional share of the revenue dollar.

Fifth, build trust with your VP of sales to avoid gaming. Realistically ask for the "highest number you're certain you can make. Anything less will inhibit our investment in the future of the business."

Finally, the most important thing for a leader is to create a "high-trust" environment above the mission of "self". Talk to people in the frontline and filter out the BS. Never shoot the messenger and provide as much transparency as possible in the organization. Ask yourself "is there any good reason why people shouldn't know this?"

A quote he shared at the end was very inspiring for me, especially as I'm pursuing an entrepreneurial path:

"Regret for the things we did can be tempered by time; it is regret for the things we did not do that is inconsolable. - Sidney J. Harris (1917-1986)"

Professor Aaker's Research on Happiness

Professor Aaker at Stanford GSB has been known for research of happiness. She found that pursuit of happiness alone is often an endless act that can evaporate quickly. You are happy on average for only three days after a promotion. However, she suggests us to chase effectiveness and meaningfulness which will result in a deeper sense of happiness in the long term.

I also love the 8 weird principles she showed us based on research done over 10+ years:
(1) Time shift: First how many hours of deep, hard thinking do you get done each day? In corporations, there are often too many meetings and not enough deep, hard thinking. Another interesting finding is that the most productive time is often between noon and 3pm within corporations. They are the most creative at 3pm-6pm. She suggests that we try to block out time to do deep, hard thinking - and to think creatively. Also spending time with Others brings happiness, unsurprisingly!
(2) Work on projects you LOVE (not like): It releases happiness in your brain! People become more effective when the brain releases endorphines! Most corporate professionals can't think of such happy moments at work. SAD! She suggests that we think hard on creating projects that the employees LOVE! Interestingly the two top frustrations at work are: too many projects and too many EMAILS! :) (that's why our Mokini project is important).
Research has found that people often anticipate pleasure before vacations but the pleasure quickly gets overwhelmed by workload as soon as they return from vacation. According to the research, you just keep "planning the trips" but do not actually take them, to just enjoy the endorphines and not suffer from the post-vacation stress.
Also, stop complaining! Research shows that complaints produce more disutility than utility. Even when you want to provide negative feedback, try to use a "sandwich", say "yes, and..." or "I'm curious..." (rather than "I'm confused").
(3) Reframe expectations: An example: http://bit.ly/LouisCK10 People take technology for granted today and forget about the very recent past. Lowering expectations brings happiness.
(4) Create a reward system: Rewards make people happy. Try to create rewards, even small ones. Make unhappy or stressful things feel better by creating "emotional buffering", such as chocolate chips, candles, flowers, runs, beverages!
(5) Carve out clear areas of incompetence: Claim areas of incompetence! Admit it. It improves your life and work tremendously.
(6) Cultivate emotion contagion
(7) Create sticky memories: the "who" and "what" are important. Research (in the US) has also found that morning and night memories are stickier, as well as Christmas - the most memorable holiday.
A few tips:
"Perceived" free time is important!
Social skills: Typically there are 8 close committed relationships. family, close friends, siblings, partners, etc.
Dancing: makes people happy!
Volunteering: People who report time and money report greater well-being!
Being Part of SOmething Bigger
Not money! you just need enough money to live happily. Research also found that spending money on your friends and people you care actually makes you happier.
(8) Improve sense of humor!

She also discussed the "Six Selves Model": friends, parent, partner, work, community/spirituality, and health, which are the foundations of personal happiness. Try to allocate time over these different areas. Although you can be very busy, identify "temporal sweetspots". Allocate quality attention to each spot, even if it's temporal. She further suggested listing favorite traditions to build habits. Brand those traditions, like "Hot Tub Nights".

Let it go - Learning at Stanford GSB as an entrepreneur

While there's no HBS type of competition, make no mistake. Stanford GSB does not have the highest GMAT average score among admits for no reason. People are competitive here, just in a slightly different way. Everyone is used to being the first in one or many things and is extremely talented. Like many business school students, they are also extremely conscious of their personal brands in this community.
Students would eat ramen at home and splurge on lavish Vegas trips and world tours. They would flock to everything that helps boost their personal status while flaking at everything else. Like any social environments, gossips, hookups, and competition for attention are eternal topics. It's a hedonist heaven like most business schools, just with better weather!
So why did I learn the opposite - to be myself, to let go, and to really not care what others think - in such an environment? Why did I not work on building a popular, cool, fashionable, cute, lovely, sexy, sporty, or some special image? It's too tiring to live for anyone else.
More importantly, I realized this when I decided to embark on the highly risky career path called "entrepreneurship". I had to get ready to work extremely hard, to live on a budget very different from my PE or hedge fund classmates, and to be ready to completely fail. If I care too much about my image or status, I simply won't even get started down this path because I can't be ready to fail.
Herd mentality is huge at business schools, less so at GSB but still quite prevalent. People often opt for the safe career choices and it can be difficult to go against the majority. when everyone has a fat offer in hand, I admit it can be stressful to continue to toil away at bootstrapping your startup with much uncertainty. I learned to completely forget where I come from - a prestigious business school, in order to not become a slave to my degree but free myself from comparison with anyone else.
Entrepreneurship is an extremely hard but joyful adventure to stretch your capabilities beyond imagination. People do so because they want to CREATE and they yearn FREEDOM, not because of money (at least not for me). As our professor and seasoned entrepreneur Audrey MacLean put it well: Entrepreneurship is an extreme sport. You are constantly hanging on the cliff with one finger gripping the rock and the abyss on the other end.

Talk by Greg, founder of Odwalla - How to innovate in consumer beverages?

GREG STELTENPOHL, Founder of ODWALLA and ADINA FOR LIFE, came to talk about the consumer beverage industry.

He talked about importance of hiring a strong local sales team to get beverages into the shelves. It's the biggest challenge for beverage startups. He didn't see any impact from social media and still believes in the offline sales/channel strategy. Funding and scale are important for beverage startups. Relationships with Walmart etc. are important but not necessary at the beginning. Odwalla didn't initially have a relationship with Walmart.

Personally, he's interested in developing regional brands and developing innovative beverages with good nutrition ingredients. Odwalla was a Northern Californian brand when it started.

Greg recommended avoiding venture capitalists because he's had misaligned interests with his investors in the past. He had a longer term vision for the Odwalla brand than his investors. He strongly advises entrepreneurs to "professionalize" themselves and build a strong team. He suggested looking into co-op structures for entrepreneurs seeking alternative investment sources. Another source is the supplier network - offering equity to your suppliers or distributors. Finally, he suggested that you can just go more slowly and develop a stronger brand.

Just hiring experiences doesn't always work. Need people who can adapt fast.

Fair Trade is not as big a cost factor compared to Certified Organic ingredients. When he built the Adina brand, he wanted to give a mainstream appeal, a light taste, and use progressive ingredients. Meanwhile, he keeps branding simple (let the monkey talk) than to overly promote all the progressive components.

On packaging, either follow a leader or be so innovative that you build your own image. following a leader is more cost effective.

By the way, Adina has done a great job with social marketing on its site:
http://www.adinaworld.com/# Check out all the twitter feeds, flickr, facebook, and other integrations on Adina's website, even though the founder claims that social media is not a sales influencer.

Peter Thiel Speaking in Class

It was one of my highlights at Stanford GSB! Peter Thiel, the legendary founder of Paypal and famed venture investor (Founders Fund) came to speak at my class "Entrepreneurship and Venture Capital" taught by Professor and Venture Capitalist John Glynn.

The Paypal Mafia is known for its streak of impressive successes in the silicon valley. Last summer, I also enjoyed reading the book "the Paypal Wars" by Eric Jackson, one of the early employees at Paypal.

I've jogged down some of my key learnings from Peter's talk, as well as some of my thoughts.

With Founders Fund as the case in point, we discussed problems facing the venture capital industry today:

1) Too much VC money is chasing a limited number of good ideas.

2) While fund sizes grew, costs to start up a company have significantly come down due to better technology infrastructures. There are also more veteran entrepreneurs why rely less on VCs.

3) VCs' interests are likely less aligned with the entrepreneurs' given the large management fee VCs generate from the large fund sizes.

4) VCs often take too many board seats and have limited time to bring real value to each portfolio company. They also have very limited time to respond to new deals.

5) There are fewer liquidity events, making exits hard.

6) Many venture capitalists are professional investment managers who do not have hands-on entrepreneurial experiences and cannot relate well with entrepreneurs.

Founders Fund, founded by Peter Thiel and a few Paypal co-founders, made a few changes accordingly: a smaller fund size ($100-250M), a team of seasoned serial entrepreneurs, an opportunity for entrepreneurs to partially cash out as their companies grow through the Series FF stocks, and the investors' own direct involvements as entrepreneurs outside of Founders Fund.

Peter discussed Founders Fund's approaches:

1) Contrarian: he used SpaceX as an example. Few other VCs would have thought about investing in a rocket company!

2) Partnership with Entrepreneurs: Will not fire original founders. No need for a board seat.

3) Not Constrained by Structures: He discussed his willingness to invest $500K in Facebook and get a <10%>

4) invest in people who are really smart, sectors that are not too crowded, and think hard about why it is a great company and why others do not see it.

I particularly liked a few perspectives he shared:

1) He would invest in "terminal technologies" - technologies that marked the end of an era - such as Google, after which search technologies only experienced incremental improvements rather than breakthroughs.

2) There are two types of business: monopoly and commodity. Google and Microsoft are both monopolies. it's VERY HARD, in Peter's opinion, to unseat a monopoly. In that sense, Google and Microsoft's efforts at "mutual destruction" (Chrome OS and Bing Search) may be just a waste of shareholders' money. I've long thought that if I were at Microsoft, I would not continue to sink money in the direct search battle against Google. Try something else! For example, Microsoft is better at enterprises. Use its know-how and customer base to build a more robust suite of cloud services. For God's sake, move Microsoft Office online and make it 10x better than Google Docs!

3) When asked where he sees opportunities in 2010, he refers to certain hard technology areas which need improvements, ranging from space technology to genomics.

Given Peter's track record at building an all-star team, I couldn't help but ask him about his secret sauce at discovering superstars. Here's his feedback:

driven, motivated, individually talented, teams that work well together

He also suggested a rule of thumb: what's the CEO's salary. If it's above $150K, it'll most likely fail.

Finally, when asked again why the Paypal team was so strong, Peter said that Paypal was a "difficult success". This made the Paypal team special, compared to people from other successes that almost came to easily, from Microsoft to Google.

An Inspiration from Listening to Jessica Jackley's Talk - Education Microloans

Jessica Jackley came to give a talk in a class last Friday. It's hard to believe that a young lady who looks just like my peer has done something so impressive - Kiva has facilitated over $100 million microloans since its founding four years ago. Hearing her story is further inspiring. She started so small, just by writing stories of entrepreneurs in developing worlds who need some small amounts of lending to start their businesses, and sending those stories back to friends and sharing them on a website. It all started there. The human one-to-one touch is what really made Kiva special. Traditional lending syndicates multiple borrowers, and in doing so, disconnects the human touch between the lenders and the borrowers. Kiva allows one to build a direct connection with the person he/she is helping and it's not charity - the lender only gives up a small amount of interest income.

I've always kept a list of interesting ideas, and one of them I spent some time on last summer was to build a "Kiva for Education" - allowing individuals to lend small amounts of money to help more people get access to education. The assumption is that education is the best investment you can make and potentially yields high ROI. Investing in a person and empowering that person to take on a more productive life should yield a positive outcome. However, education lending itself has several challenges: (1) education is a longer-term investment, especially if you want to invest in the younger children; (2) the field infrastructure is much less available than the wide network of MFI partners which help make Kiva scale so fast.

I'm still interested in that idea and hope to revisit at some point in the future.