More startups die of indigestion than starvation, said Marguerite Gong Hancock, associate director of the Stanford Program on Regions of Innovation and Entrepreneurship.
Moderating a Stanford E-Week panel featuring several Silicon Valley venture capitalists at Stanford’s Graduate School of Business, Hancock advised young entrepreneurs to be mindful they not lose focus amidst the plentiful resources available in the Valley.
Another panelist, Cindy Padnos, who is founder and managing partner of Illuminate Ventures said that many companies fail due to what she termed “immature scaling.”
Ernst & Young Venture Capital Leader Jeff Grabow said he sees many young companies “being overwhelmed by opportunity.” As a result, he said, many aren’t hungry enough.
“It’s easy for an entrepreneur to say, ‘We have a huge market, and if we only get one percent of this $5 billion market, we cannot not be successful,’” Grabow said. He added that many entrepreneurs these days feel the market is more expansive than it is.
Many of the panelists warned would-be entrepreneurs against the misconception that the market will flock to any good product. Steve Bird, co-founder and general partner at Focus Ventures, called the market a bigger source of failure than bad company management. Both new products and better products are vulnerable to new and existing markets, Bird said. In new markets there is no competition.
“Sometimes having no competition is a bad thing because it means pioneering a new market all by yourself,” he said.
He also said that competing in an existing market is challenging because new businesses have to be a lot better than the competition in order to be successful.
John Montgomery, partner of Montgomery & Hansen, said the real challenge for entrepreneurs is cultivating effective company leadership. The greatest leaders, he said, are confident and humble enough to admit that they don’t know everything. Montgomery’s number one piece of advice: “surround yourself with mentors.”
During small group break-out sessions, Montgomery spoke about hidden neurologic dynamics of leadership. Each person in a group has a social nervous system that is constantly detecting who in the group will be the leader.
“Good leaders must understand the basic principles of consciousness,” Montgomery said. “If a leader knows how to not be reactive out of fear and instead turn to courage to react proactively, he or she sends a subtle signal to the organization that everything is okay.”
Montgomery advises entrepreneurs and said there is a correlation between the level of consciousness in leadership and the success of the startup.
Padnos added that it also takes a strong ego to be a successful entrepreneur, male or female. “I think it takes ego, vision, and belief in yourself—a whole combination of things to be strong enough to found a company,” she said.
With the right tool kit, Montgomery said entrepreneurs have the power to design businesses that optimize human strengths. He equated the ideal business to a team of rowers that have found their “collective flow state,” or the rhythm in which everyone is working together to be at their optimum productivity.