“Tempering of entrepreneurship mystique” needed: Starbucks co-founder
News•Business• 26.09.2019 • Interview by Natalie A. Gerhardstein
Starbucks co-founder Zev Siegl (r.) with students at the Foster School of Business, University of Washington, in Seattle. Photo courtesy Zev Siegl
In the second part of our interview with Starbucks co-founder Zev Siegl, he discusses his experience of mentoring other entrepreneurs and why some feel like they’re hitting a brick wall.
NG: You coach entrepreneurs now. Are you continually learning in that process as well?
ZS: I learned this during a period in early 2000s, when I was working for a programme here in the States that offers first-rate coaching and consulting services to people who think they want to start a business…I worked with hundreds of people, it was an intense programme, and I learned a methodology that I really like and continue to use. I just ask questions. I don’t tell somebody, ‘I notice we keep talking about the product and you’ve never shown me a P&L statement forecast for how your business is going to make money.’ I would say, ‘Have you worked on your PL statement projection?’ And they’d say, no. I’d say, ‘You know there’s a possibility that your passion for this software that you’ve developed might not be profitable.’ If they don’t listen at that point, I would say, ‘There’s a possibility that [you could lose] the money that your family and friends have invested in your company and be a pariah among your friends.’ That usually gets their attention. But I would never say, ‘You’re going down the wrong road.’ If you do that, nobody listens.
Have you noticed anything through your coaching experience with entrepreneurs anything that keeps cropping up, be it a source of frustration or something else?
As part of my visit [to Santiago de Chile], I asked for a meeting with people who were below the venture capital level, people who were at really small companies and struggling. I sat in a circle with 20 people, and I [asked], ‘What are you really concerned about?’ One of the guys in the room said, ‘I can’t sleep at night, Mr Siegl,’ and I knew immediately from experience that his company was in trouble and he was worried sick… I’ve been there, had that experience, and it enabled me to really communicate with him and benefit the other people in the room, that getting into such a difficult situation that you can’t sleep at night is a reality that could happen to anyone, sometimes from external forces.
[There’s a] penetration of the mystique of entrepreneurship around the world--not just in your country and mine, it’s everywhere… There’s a lot to be said for contributing to a large organisation, that’s what most people do, and there’s certainly a lot to be said in the US for having health benefits and a paycheck. I think that it would be wise for there to be more tempering of the entrepreneurship mystique because it is not for everyone, and it frequently leads to a place that the entrepreneur didn’t intend to go. They sometimes have to close down, sell to a company they don’t like.
Do you see a big difference from country to country when it comes to the entrepreneurship ecosystem or risk aversion?
A lot of my presentations and business travel are in second-world countries… Every country I’ve been to looks to the US as the zenith of an entrepreneurship ecosystem and, in particular, Silicon Valley…
I’m most familiar with Mexico, and the restriction on entrepreneurship isn’t promising young entrepreneurs, it’s the investment community. Angel investors are quite conservative in Mexico. They’d rather invest in real estate and do well with it. I’ve talked to dozens of young entrepreneurs there, people trying to do startups outside of corporations and they keep saying [they’re] running into a brick wall. The investment community is ridiculous here. There aren’t enough of them, they don’t understand there’s risk involved or want to take risks. It’s really hard… Recently I’m working with a man who’s starting an online multi-user gaming company, and he’s had to reorient his company to the US. He’s in Mexico City, but he just can’t make it go there. The block seems to be not the coaching and support systems for entrepreneurs, it’s the investment community.
In some segments of the population of the US, embracing risk is seen as part of the American tradition. There was the westward movement in the US, which is totally romanticised, the whole idea of breaking out of established society, trying something new, I think that carries over to entrepreneurship. That wild west image carries over to entrepreneurship. It’s a recent phenomenon. I’d say in the 1970s there was no entrepreneurship community here in the US. By the 1980s, there was. And by the year 2000, Silicon Valley was famous. It’s a complete ecosystem with angel investors, VC funds, support systems, consultants--you name it, they’ve got it.
So, would you say there is a secret to success?
Research and good financial forecasting, because it instils a discipline of thinking about the business. Once entrepreneurs catch on they have to do this, their investors want them to do it… they start filling in more details, which normally means more expenses, begrudgingly they fill in more expenses, and then it turns out the company’s not profitable, then they increase sales, and if that doesn’t do it, they lower the cost of producing goods, then pretty soon it’s profitable enough to attract investors. And so they go into the meeting with the investors who say, you’ve jacked up the sales so high you can never achieve those numbers. That’s the classic cycle. Product-oriented, young man or woman embraces the discipline, finds out that their business isn’t really going to be that profitable, and then makes the leap and decreases the cost of the product, and increases the profit. So now it looks really good, and now reality sets in, that they’ve basically decided they can get 90% of the market for their company. Then it’s profitable.
Usually somewhere in that person’s mind, there is a company that will work, but the discipline of filling in the numbers and doing good forecasting, that discipline changes the idea somehow so it isn’t so dream-oriented, it’s reality-based.
I would say the strongest character element would be a sense of passion and devotion to the idea, but also one hand in reality.