Published in the San Diego Union-Tribune, November 16, 2020
San Diego has more than 25 tech and biotech “incubators and accelerators.” How important are they in helping entrepreneurs, particularly women and founders of color from underserved communities, entrepreneurs who historically have faced more hurdles and barriers? The findings of Wharton professor Valentina Assenova, who researched incubators in Soweto, South Africa, are very relevant to answering these questions.
Soweto played a central role in the struggle against apartheid, and much of the “local economic activity there comes from small-scale entrepreneurs.” There is no lack of desire, but there are limiting factors in addition to lack of access of capital, according to Assenova. What she found was that the primary hurdle for the founders in Soweto was that they “often lacked the knowledge and skills” to improve their existing businesses, due to “social and educational disadvantages.”
This strikes me as core and central. You can only know what you can learn, and Assenova talks about “bounded rationality.” In her study, she concludes that people want to make good decisions, “but are constrained by their ability to do so.” Think about that. The key word there is ability, and ability is enhanced and improved and expanded primarily in an environment of education and support — aka the incubator with its mentors.
She goes on to explain the other hurdle is “limited resources.” This is one every entrepreneur knows deep in her gut. It is not simply the classic lament of not enough money. That is a false proposition. The subtle truth is they don’t have access to enough “been there done that” employees or mentors. There is only a limited time to experiment, and the founder has to get it mostly right initially, because there is usually not enough gas to go around the block again in a different direction.
This leads to the obvious conclusion that the more time spent thinking about the route is better than simply getting in the car and blasting ahead. It is usually only after meeting two roadblocks that the entrepreneur thinks about reaching out for guidance — after they have wasted gasoline, picked the wrong tires and loaded the GPS map upside down. That is the primary role for the mentor.
Time spent before turning the key is time well spent. I worked in Hollywood for 10 years. Here is a core principle. When the movie starts, you open the stopcock on the funnel and money starts pouring out, every hour, every day, every week, and when the director suddenly realizes that he needs to rewrite a scene, he goes over to turn off the funnel. But there is no off switch. The stopcock only has only one position and the money just keeps flowing without interruption.
A startup has similar economics. You have a monthly burn-rate that is fixed, and suddenly you realize you need to pivot and you need to build a different marketplace. And you need to lay off 30 percent of the employees. The movie funnel has these words on it, “In case of an emergency break glass.” That is code for the director gets canned, which is why the more time spent on the storyboard (not on the set) is the least expensive and the most valuable. The same is true for the lean startup model — talk to your customer, and then talk some more. Keep your hands off the keyboard for as long as possible.
In Soweto, Assenova found that when “entrepreneurs were assigned to high-ability mentors,” they were 25 percent more successful than the founders without those resources. And she found that “entrepreneurs who came in with less pre-entry knowledge” benefited the most. Fascinating. This is the tabula rasa syndrome. It is easier to teach someone to hit a golf ball who has never hit a golf ball. You don’t have to change bad habits. She also placed a high value on how incubators paired the right mentor with the right founder.
In the final analysis, Assenova says, “mentoring programs within incubators might be worthwhile activities for policymakers.” Whoa. You mean, what if mentoring and incubation became a budgeted item in the growth of our economy? What if those programs began to “close the gap for socially and educationally disadvantaged entrepreneurs”? Wow, imagine. Now that’s an idea worth incubating.
Rule No. 685
First, take your stance.