Why Give Back? Reflections from delta v Board Members

At MIT delta v, the capstone educational accelerator for MIT students run by the Martin Trust Center for MIT Entrepreneurship, our board members are a very special part of the entrepreneurial mix. Each summer, the student teams work extremely hard to identify their beachhead market, build the right product, and secure initial customers as they form and grow their startup companies. On a daily basis, they receive mentorship and coaching from the Trust Center staff and the Entrepreneurs in Residence, but the rubber really meets the road when it’s time for the board of directors meetings. The board members bring in their real life, outside perspectives as the teams prepare to formally present their startups at the culmination of the program on Demo Day.

The delta v students live and breathe each detail of their startups every day, and interactions with their board members gives the students a chance to step back, look at the big picture, and convince others of their vision. They must rise to the challenge of communicating their business plan clearly and succinctly. There is a huge opportunity to learn from people on the board, who know a great deal about business fundamentals and have tremendous networks that can help an entrepreneur.

Our board members are incredible! Each of them is assigned to a startup team based on their industry interest, and they dedicate a minimum of 90 minutes per month during the summer to these meetings, not even counting preparation and follow up. The board’s specific role is to evaluate a team’s progress based upon rubrics and metrics focusing on customer and market understanding in month one, product development in month two, and the readiness of the business to launch in month three. In each meeting, the board evaluates how successful the team has been in meeting benchmarks and then awards the team an associated amount of equity-free funding. As a result, both the teams and the members of the board take these meetings very seriously.

But what’s in it for these volunteer board members?

Each of these people are highly successful, incredibly busy business executives, entrepreneurs, faculty, or domain experts. I’m sure each and every one could use a little extra downtime in their lives – especially over the summer – but instead they choose to engage with us at delta v. None do so passively; they come prepared and are tough graders for these student teams. Since delta v is an education accelerator, none of them have an equity stake in the companies they advise.

So why give back? I reached out and asked board members why they chose to do this. Their answers are truly amazing and inspiring.

Why have you chosen to give of your time, talent, and wisdom?

“Entrepreneurship requires a support network. It is almost impossible to do it alone. I have received so much support from the MIT ecosystem (that) I want to do whatever I can to help provide the same support for others in the community.” Adam Blake, entrepreneur and investor, Board Member for Viridis

“To me, the energy that radiates from the MIT community is like no other in the world. The ‘pay-it-forward’ mindset is so intrinsic to the culture at MIT; thus, I feel honored to be able to share anything I have learned so far, which might be helpful to others.” Amanda von Goetz, FERMATA Profiling,
Board Member for
Season Three

“My brain finds all this engaging. The board members and the structure help these [students] move along on their developmental path, which in turn contributes to the world’s ‘good’ business karma.”
Antoinette Russell, Eaton Vance, Board Member for
CaroCare

“I have received a lot of help and encouragement in my career to take on tasks that seemed impossible (sort of like starting a company!), and this is my way of paying it forward.” Chris Zannetos, Covered Security, Board Member for Quantifai

“All the time I invest in it is well spent, for it’s equally inspiring and enriching to hear new ideas, thought processes, and extract so much from all this talented and diverse melting pot.” Jerome Selva, IBM Watson Customer Engagement, Board Member for Quantifai

“Entrepreneurship matters! It drives our society forward and helps us solve the world’s greatest problems. Giving our time and sharing our experience is how we keep the startup fire alive.” Max Faingezicht. Entrepreneur, Board Member for Precavida

“Servant leadership is very important to me – it’s all about enriching the lives of others, building better organizations and ultimately creating a world that is more caring and equitable.” Rita B. Allen, Rita B. Allen Associates, Board Member for CaroCare

With all the worthy causes, why delta v?

“It’s always as much of a learning experience for me to be a part of a team on the ground floor of some amazing ventures. It’s also a wonderful opportunity to network with students in the program, as well as colleagues and business professionals/executives throughout different disciplines and industries within the Boston community.” – Rita B. Allen

 “delta v is the program that I wish existed when I was a student. I believe it epitomizes the ‘manus’ part of the MIT motto ‘mens et manus’ and serves as one of the most important mechanisms for enabling MIT technology and talent to create value for the world.” Adam Blake

“It is an incredible opportunity to connect and reconnect with out-of-this-world alumni from all corners of the MIT community, to problem solve alongside diverse minds, and to continue learning and growing through the experiences of others.” – Amanda von Goetz

“delta v is a driving force of the entrepreneurial ecosystem where you mix talent with motivation to go out and change the world.” Max Faingezicht

What is one thing that you can look back on during this summer’s program that makes you say, “This was worthwhile”?

“The common passion and conviction embodied by the participants – alumni, faculty, and board of directors – to seek ways to make the world a better place.” – Jérôme Selva

“The team I worked with is moving to India to start the company that they worked on. I’d like to think that we helped them to refine their approach over the summer and seeing the team follow through with real action is very gratifying.” – Adam Blake

“To be able to be a part of the launch and initial pilots of CaroCare, a new venture founded by two visionary young women.” – Rita B. Allen

 “I have found the teams to be tremendously open to feedback and re-assessing their assumptions; seeing them not just take our advice on face value, but really evaluating the feedback and exploring whether it should impact their plans. That makes it worthwhile.” – Chris Zannetos

“Seeing the progress of the teams is humbling. The amount of work that happens in just a few weeks gives us a glimpse of what is possible when we are focused and determined.” Max Faingezicht

“The team’s energy, their passion, their pure and unbridled excitement for what they do, is contagious in the best possible way. This is positive energy that reinvigorates and re-inspires you, which you can then take back with you into your own respective spheres.” – Amanda von Goetz

If you could share one piece of advice with students as they launch their startups, what would it be?

“You need to lead. Never forget that pivoting – and communicating the pivots – is an integral component of building.  You cannot build this on your own – you need those teammates – but you also need to lead.” – Antoinette Russell

 “Try to get as far as you can with as little capital as you can before scaling up.” – Adam Blake

“Get physically fit and work as hard as possible to stay that way. Being a founder is not an easy job, and it comes with a pretty hefty amount of stress. For that reason, it is really important that you stay as strong and healthy as possible. Get into ‘fighting shape,’ not just for yourself, but also for your team, and for all of the people who believe in you.” – Amanda von Goetz

“Be intellectually honest about your assumptions and challenge them constantly.” – Chris Zannetos

“Follow your passion, fuel your conviction, focus on outcomes to succeed together! The results will come!” – Jérôme Selva

“It’s always about people. Don’t get lost in the minutia and forget about your team, your customers, your partners, or your investors. In the end, people make up the journey, and that will determine the breadth of your impact.” Max Faingezicht

“Stay humble, honest, paranoid, and ALWAYS hustle.” – Rita B. Allen

One final note …

I’d like to give a big thank you to Martin Trust and his family; without him there would be no platform for delta v. Marty Trust passed away recently, and he will be fondly remembered by all of us at the center that bears his name. To learn more about Marty and his legacy, read this tribute by our Managing Director, Bill Aulet.

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MIT delta v 2019 Startups … and a Look Back at How Far We’ve Come!

MIT delta v Demo Day is TODAY, Friday, September 6 at 4:00 pm ET!

This is your chance to meet the next generation of world-changing startups …
If you’re on campus, join us at Kresge Auditorium; please register here. (Doors open at 3:30.) For everyone else, you can join us virtually by watching the Livestream link. You can also follow the Trust Center’s Twitter feed and the #MITdeltav hashtag.

A quick background … MIT delta v is MIT’s student venture accelerator providing a capstone educational opportunity for MIT student entrepreneurs who spend three months in the summer working in preparation to hit escape velocity and launch. Demo Day is the culmination of the program – the biggest day of the year for entrepreneurship on the MIT campus – so get ready to learn about the next wave of MIT startups that are ready to change the world!

Every summer we select the best of the teams that apply – students with an interesting idea or proof-of-concept – and we help them to create impactful, innovation-driven startups. For 2019, 17 teams worked full-time at the Martin Trust Center on MIT’s Cambridge campus, plus 7 teams that worked at the MIT NYC Startup Studio in New York City.

These teams were focused on:

  • Team building, organization development, and dynamics
  • Understanding their target market, customers, and users
  • Learning the mechanics of venture creation (company formation, legal, financial, raising money, and more)

This year’s delta v teams are listed below, with a brief description and the companies’ web sites. At Demo Day, each team will have an opportunity to launch their company to the world via a short intro video followed by a live presentation from the founders. (You can also see more in-depth overviews of the 2019 delta v teams on our website with each team’s Demo Day presentation shared on our website after the event.)

delta v startups – 2019 cohort

Abound
Early learning, without the screens https://aboundparenting.com/
Hardworkers
A digital community for working-class Americans hard-workers.com  
Ocular Technologies
Diagnostics at the speed of sight
www.ocular-tech.com  
Acoustic Wells
Intelligent IoT for the oil and gas market
www.acoustic-wells.com
Haystack Ag
Empowering a new generation of farmers www.haystackag.com
Precavida
One-stop shop healthcare platform with a personalized navigator www.precavida.com.br  
Alpaca Technology, Inc. Helping people find their homes www.rentalpaca.com  
Haystack Health Intelligent chronic disease management platform https://www.haystack.health/  

Quantifai
We scale low-touch customer success with machine learning www.quantif.ai
Atem Helping people breathe easy https://www.getatem.us/  

Insanirator
Solving urban sanitation, now https://www.insanirator.com/  
Season Three
Boots for Humans www.seasonthree.com  
auggi
Building AI technology for better gut health management www.auggi.ai  
Live Sports Markets Fantasy sports shouldn’t end when the game begins www.livesportsmarkets.com SirMixABot
Preferred drinks, preferred location https://www.sirmixabot.com/  
CaroCare
Personalized, on-demand care for new parents and their babies www.carocareco.com  
Lynx
Explore the city in a new way!
www.lynxsharing.com
Spatio Metrics
Enabling a future in which every building makes us healthier www.spatiometrics.com

Easel
Flexible Childcare, because life happens!
easel.care  

Mantle Biotech
Extreme biology, extreme impact http://mantlebiotech.com/  
TireTutor
Buying tires made easy https://tiretutor.co/    
Elemen Skin care so personalized that it evolves with you www.skinelemen.com   Nextiles Smart apparel for superior workout www.nextiles.tech    
Viridis
Enabling financial inclusion through affordable and scalable data solutions www.viridisrs.com  

As our 2019 teams have been preparing for Demo Day, I’ve been reflecting on my past five years as a leader of the program, and my current role as Executive Director of delta v. The program has evolved and changed during that time, and I believe it has gotten stronger each year.

My reflections on five years with delta v

My plan for the summer of 2015 was to take some time off, enjoy a little rest and relaxation, and figure out the next chapter of my life after serving as an IBM executive and completing my doctorate degree. I learned about MIT’s Martin Trust Center for MIT Entrepreneurship, which was a place where I could see ultimately merging two of my passions – education and entrepreneurship. That initial phone call from Bill Aulet, the Center’s Managing Director, meant my relaxing summer plans were ruined!

Bill talked to me about this accelerator program he had started and how he needed someone to run it for the summer. I had never met Bill, but his passion, energy, and approach to entrepreneurship was in sync with my experience, and his excitement was contagious – so I signed on for summer 2015.

Over the years, the program name has changed.

We’ve gone from the Beehive, to FSA, then GFSA, to delta v, a name that literally means a “change in velocity.” We believe delta v truly captures what happens to these students when they join us for MIT’s accelerator program. The venue for Demo Day at MIT has also changed as we keep growing and more people want to come and be the first to meet our teams!

We’ve experienced geographical expansion as well. After initially taking the Demo Day show on the road with invitation-only events in New York City and Silicon Valley/San Francisco, we’ve now completed the third successful year of the MIT NYC Startup Studio – a separate cohort run by Carly Chase. (Watch this NYC Startup Studio video for a quick overview.)

The teams are amazing, which has been a constant through the five years.  

Many teams from my first year (Sandymount, Woobo, Khethworks, Humon, Ori Systems, VS Particle, and Spyce) are still going strong and even growing by leaps and bounds. Each year we see delta v startups become successful; they gain funding, win awards, even get acquired.

Feedback from our students each year has helped shape the program along they way. They’ve let us know how they want to learn, what is valuable to them, and what is different from what they learn in their classes. The initial feedback was that delta v was too curriculum-based, and since MIT had a lot of entrepreneurship course work that students had previously taken, we pivoted and began bringing in outside subject matter expert speakers plus added the support of multiple Entrepreneurs-in-Residence (EIRs). The hands-on, experiential learning at delta v is what differentiates these successful startups.

Our board members are incredible.

The delta v teams are guided along the way by a mock board of directors. The board is made up of heavy hitters – business executives, entrepreneurs, faculty, and domain experts – who give generously of their time and talents. When I started in 2015, I reached into my community, particularly with The Boston Club and the Society of Women Engineers to increase the diversity and technical expertise on our boards.

We also familiarized the boards with our rubric, and the Disciplined Entrepreneurship vocabulary that is so central to our everyday discussions. Last year was the first where we added delta v alums to the board, allowing current teams to learn from their peers who had gone through the same process.

We’re constantly improving our storytelling.

The best startup idea in the world will fall flat if you can’t explain it effectively. Each year, we realize more and more how communication – within delta v, with the board members, and ultimately at launch – is just as essential as a team defining its target market or raising funds. This year we used more video, put a greater emphasis on storytelling for Demo Day, and introduced Entrepreneurship Confidence and Communication as part of our program.

We have fantastic stories to tell and inspiring businesses to launch. Tune in to Demo Day 2019!

Three Profiles of Cannabis Entrepreneurs

Over 35 million US citizens use marijuana every month, more than the number of Americans who smoke cigarettes, according to the Dennemeyer Group. Research shows that the number of cannabis users is growing at over 15% a year. Interestingly, since cannabis is still illegal at the federal level, the US Patent and Trademark Office must refuse all cannabis-related trademark applications, but that hasn’t stopped entrepreneurs.

As outlined in my previous blog post, there is a multi-billion dollar market for cannabis and CBD products, which opens up entrepreneurial opportunities in both the plant-touching and ancillary businesses. This post will look at profiles of three entrepreneurs working in cannabis-related start-ups and their views on the market space.

From helping growers, to distribution, to working with individual consumers, the cannabis market provides many opportunities.

AdaViv: Predictive Agriculture for Smarter Growing

Founded by an interdisciplinary team of MIT researchers and alumni, AdaViv emerged from MIT’s delta v accelerator.  Julian Ortiz, co-founder of AdaViv, explains how predictive agriculture can help cannabis growers to develop a competitive advantage: “We help producers grow smarter – from disease prevention to rapid experimentation, improving yields, and quality optimization.” 

The company uses computer vision and AI to uncover hidden plant biometrics, then translates this data into actionable insights for indoor and greenhouse growers. AdaViv aims to transform agriculture and deploy their technology to a variety of crops grown in controlled environments, though the founders initially are focusing on cannabis due to the high value in the crop, the level of quality control needed for the medical market, and the level of differentiation they can offer to growers. AdaViv has recently closed a $1 million funding round and has lined up initial customers. (See this video of AdaViv’s delta v Demo Day presentation.)

I Heart Jane: ECommerce Marketplace for More Efficient Distribution

Another cannabis company started out of MIT is Jane Technologies, Inc., a retail tech company that can be found online at IHeartJane.com. I Heart Jane is the cannabis industry’s only complete online marketplace where consumers can discover and order cannabis online. Founder Socrates Rosenfeld is a West Point grad and an Iraq War veteran. Suffering from PTSD after his return from combat, he realized the benefits of cannabis for symptoms such as sleeplessness and anxiety. After receiving his MBA from MIT, he founded the company with his brother using a business model similar to the Grubhub food delivery service. 

The company website states, “We believe in the cannabis industry’s ability to bring well-being, health, and love into this world, and it is our mission to bring confidence to the online cannabis shopping experience.”  Their online marketplace lets consumers shop for cannabis with the same ease and sophistication that they shop for everything else.

JBS Holistic Nutrition: Healing Alternatives for Consumers

The passage of the 2018 Farm Bill removes hemp (with less than 0.3% THC) from the Controlled Substances Act and propels hemp-derived CBD to be a potentially $22 billion market by 2022. While cannabis is still illegal in many states, CBD products are being embraced nationwide by both entrepreneurs and major retailers.

Joanne Burke-Sherman, owner of JBS Holistic Nutrition, works one-on-one with clients for health coaching and healing alternatives and offers CBD products. CBD, or cannabidiol, offers therapeutic benefits without the high. Clinical research on CBD includes preliminary studies of anxiety, cognition, movement disorders, and pain. Although CBD products are only one aspect of her business, she initially saw a lot of interest in CBD because everyone was curious. “I have seen many people supported in pain and anxiety,” said Burke-Sherman. “One client with addiction issues felt it truly helped and ‘saved his life.’  Others feel their joint pain is reduced and others say their anxiety is reduced.”

As the market gets more crowded and large chains start to carry CBD products, small entrepreneurs may be squeezed out. Burke-Sherman is concerned that most consumers will not know what to use. It is very similar to the existing nutritional supplement market – there is high-quality and low-quality. She would highly recommend going through a qualified person who has knowledge about the product in order to buy it.  Otherwise, a person should spend time doing research.  Some basic information is whether a product is organic (no pesticides and herbicides) and non-GMO.  Is there third-party testing?  What is tested? Consumers should check for solvents, heavy metals, or other harmful materials to make sure anything they use is safe.

Conclusion 

As the market opportunities continue to spark up, everyone from Gwyneth Paltrow to Jim Belushi to Jay-Z are getting involved in the blazing hot cannabis industry. But the hope is that there is plenty of green available for the less-famous entrepreneurs profiled here as well.

For more on the cannabis market, please read my last post, A Growing Market Sparks Up: Cannabis Opportunities for Entrepreneurs.

An abbreviated version of these posts was published in Xconomy, under the title, The Entrepreneurial Potential of Cannabis.

A Growing Market Sparks Up: Cannabis Opportunities for Entrepreneurs

Atop the pile of mail on my kitchen island, I see “CBD for everyday wellness” calling from the back cover of the Bed, Bath & Beyond circular. For only $29.99 (minus my $5-off coupon) I can enjoy pure, THC-free essential oils from SpaRoom that promise relaxation and well-being. From these essential oils for wellness, to prescription-based medical marijuana, to recreational pot, cannabis offers huge business potential and both startups and big businesses are drawn to the market opportunity.

Recreational marijuana is now legal here in Massachusetts and it seems that everywhere you look, people are excited to create business ventures around it. But, like any other business endeavor, research, planning, and discipline are essential – maybe even more so given the legal and regulatory issues involved with cannabis. Starting a “cannabusiness” can provide passionate “ganjapreneurs” a chance to get in on the ground floor of a burgeoning market, but it’s critical to jump in with your eyes wide open.

As of now, marijuana is fully legal in 10 US states plus Washington DC, and 33 states have a legal medical cannabis program (this map shows marijuana legality by state). From a business perspective, it’s tricky as some states allow medical marijuana, some allow only medical CBD oil, and in others it is still fully illegal. However, businesses are eager to participate in the cannabis industry at every level and many analysts believe that the US will fully legalize marijuana in the next several years, given that legislation such as the Marijuana Justice Bill to end the federal prohibition on marijuana has been introduced.

First, a bit about Cannabis Terminology … What’s What?

For the uninitiated, here’s a quick glossary of terms:

  • Cannabis, also known as marijuana, is a psychoactive drug from the Cannabis plant used for medical or recreational purposes. Cannabis can be used by smoking, vaporizing, within food, or as an extract. (There are a ton of slang names for cannabis too, including pot, weed, grass, reefer, ganja, bud, etc. In fact, media outlet Ganjapreneur has a whole terminology guide.)
  • Medical Cannabis (or medical marijuana) can refer to the use of cannabis and its cannabinoids to treat disease or improve symptoms; however, there is no single agreed-upon definition.
  • THC (tetrahydrocannabinol) is the principal psychoactive constituent of cannabis, the part that produces the high.
  • CBD (cannabidiol) is one of some 113 identified cannabinoids in cannabis plants; CBD accounts for up to 40% of the plant’s extract. If CBD oil contains only CBD as the active ingredient and not THC, it provides therapeutic benefits without the high. Clinical research on CBD includes preliminary studies of anxiety, cognition, movement disorders, and pain.
  • Hemp is a strain of the Cannabis sativa plant species that is grown specifically for the industrial uses of its derived products. In addition to cannabis, the hemp plant is used for food (hemp seeds and hemp seed oil) and its fiber.

What are the Real Benefits of Cannabis?

First let’s focus on CBD. In 2018, the World Health Organization published a report that showed there are no public health risks or abuse potential for cannabidiol, or CBD. As summarized in this Forbes article, the WHO team determined that CBD has “been demonstrated as an effective treatment for epilepsy” in adults, children, and even animals, and that there’s “preliminary evidence” that CBD could be useful in treating  Alzheimer’s disease, cancer, psychosis, Parkinson’s disease, and other serious conditions.

What about THC, then? According to the National Institute of Health’s website, THC can increase appetite and reduce nausea. THC may also decrease pain, inflammation (swelling and redness), and muscle control problems. Although marijuana is not FDA-approved, scientific study of the chemicals in marijuana has led to two FDA-approved medications in pill form, dronabinol and nabilone, used to treat nausea and boost appetite.

Some proponents feel that a combination is best and that CBD and THC work synergistically within the body’s endocannabinoid system in a way known as the entourage effect.

Opportunities from Every Angle

Due to increasing legalization, cannabis is a burgeoning industry and new business opportunities exist from almost every angle. Businesses can focus on the recreational or medicinal benefits – or both. At the same time, there are dozens of ancillary services that are needed to support the cannabis industry.

There’s so much more to the business than growing marijuana. Business News Daily categorizes opportunities as “plant-touching vs. ancillary businesses.” As the name suggests, plant-touching businesses handle the cannabis plant itself, either cultivating, distributing, processing, or selling it. Entrepreneurs should realize that these types of businesses face the strictest regulations and may need to navigate complicated licensing processes before they can get started. Also, as the business grows, big industry players will tend to dominate. In Canada, where recreational marijuana is legal throughout the country, the top four licensed producers are set to corner approximately 70% of the country’s regulated recreational market, says Marijuana Business Daily.

Ancillary businesses provide all the supporting functions for a cannabis business. These include data platforms, ag-tech companies, legal representation, compliance technology, point-of-sale systems, payment processors, digital marketers, event planning, public relations, software, accountants, and more. They are the same kinds of functions and services needed to support any other business in any other industry. Ancillary businesses are also the least risky kinds of cannabis-related businesses since cannabis regulations for businesses only apply to growers, processors, and sellers. Because ancillary marijuana businesses aren’t burdened with all the red tape and high taxes, they tend to have higher profits as well.

In a Boston Globe article, Jay Youmans, a founding member of the Massachusetts Cannabis Business Association, says, “We’re really trying to destigmatize this industry and [have] folks understand this is no different than any other industry. We create jobs. We hire local people. We’re regulated very heavily, and we take this job really seriously.” Youmans said the local [Massachusetts] cannabis industry is expected to rake in an estimated $1.5 billion in sales annually. At the industry’s full force, he expects there to be 20,000 jobs in or related to the market.

Nationally, CNBC reports that job creation is expected to grow as more states legalize marijuana. Manufacturers and distributors (both recreational and medicinal) saw a massive 44% gain in job creation in 2018, with 64,389 new positions, for a total of 211,000 jobs directly related to the industry and 296,000 in all related areas combined (according to industry site Leafly in a report it compiled with Whitney Economics). To put this into perspective, there are now more legal cannabis industry workers than dental hygienists in the United States. The Leafly report also shows $10.8 billion in legal cannabis sales in 2018. Interestingly, the U.S. Bureau of Labor Statistics does not count cannabis-related jobs in its figures because the substance is still considered a Schedule 1 narcotic at the federal level.

The Significance of Hemp Legalization on a National Level

For entrepreneurs that are looking at business opportunities on a national level, CBD products may be the way to go for now. Many big name retailers from CVS to Sephora to Neiman Marcus to Walgreens have either entered, or expressed an interest in entering, the CBD market. This interest in CBD has been propelled by changes in the Farm Bill.

In late 2018, President Trump signed the 2018 Farm Bill which removes hemp (with 0.3% THC or below) from the Controlled Substances Act. According to Hemp Industry Daily, this is the most significant change to American drug policy in five decades. Federal drug authorities will now have to treat hemp like any other agricultural commodity, such as wheat or potatoes, and hemp farmers will no longer face legal or regulatory burdens of it being classified as an illegal drug, such as difficulty getting crop insurance or barriers to obtaining loans.

The tide is turning. This Bloomberg article gives several examples of the shift, including a 10,000 acre farm in Yuma County, Arizona, that had originally grown organic spinach and lettuce and has now transitioned to hemp. According to the Brightfield Group, hemp legalization propels what was originally projected as a $2 billion market by 2022 into a $22 billion hemp-derived CBD market instead, which could double the projected market value of the entire cannabis industry.

At MIT, our student venture accelerator, delta v, provides a capstone educational opportunity for student entrepreneurs that prepares them to hit escape velocity and launch into the real world. We’ve had some entrepreneurs start to explore businesses in the cannabis market. In my next post, we’ll talk to one of those startups and get more entrepreneurial insights on the cannabis market.

Necessity vs. Innovation-Based Entrepreneurs

This article originally appeared in Xconomy.

What makes someone an entrepreneur? Most simply defined, an entrepreneur is a person who identifies a need and starts a business to fill that void. But others will argue that a “true” entrepreneur must come up with an innovative new product or service and then operates their business to sell and profit from that innovation.

Under the broader definition are those people who become entrepreneurs out of necessity – starting their own business after losing a job, to supplement their income, or to gain the flexibility to attend to other demands in their lives.

Take Joanne, for example. Joanne started her holistic health business about eight years ago. Although she doesn’t necessarily consider herself an entrepreneur, the necessity of a family member’s health situation created both a challenge and an opportunity that shifted her path of employment. As a graduate of Boston University with a degree in math, and Syracuse with an MBA, Joanne had been working as a technical engagement director managing large-scale database development projects.

However, she was also managing the special needs of a son at home with learning differences. She was hit with a layoff from her job about the same time that her son required more services. She was doing tons of research to help him in any way possible, including alternatives to mainstream treatment, and she started an unpaid e-mail service to friends and family sharing what she learned. The response was tremendous – several people told her that she had changed their lives and she should make a career out of it. She decided to take the plunge, pursued further education, and then started JBS Holistic Nutrition where she offers health coaching and healing alternatives. The nature of her business allows her to be flexible. She is currently working part-time, which enables her to manage the needs of her family and help take care of an ailing parent. She sees her business as an opportunity to help people change their lives for the better.

Joanne is someone I’d consider a necessity-based entrepreneur. Often, necessity is financially based, but pursuing a passion and work-life balance issues also play into necessity.

One of the first references to “necessity entrepreneurship” was in the Global Entrepreneurship Monitor (GEM) report in 2001. This third annual GEM assessment researched entrepreneurship in 29 countries. Respondents were asked to indicate whether they were starting and growing their business to take advantage of a unique market opportunity (opportunity entrepreneurship) or because it was the best option available (necessity entrepreneurship). At the time, the average opportunity entrepreneurship prevalence rate across the 29 GEM countries was about 6.5 percent, while the average for necessity entrepreneurship was 2.5 percent.

Interestingly, GEM’s most recent report for 2017-2018 looks at entrepreneurship through a few more complex lenses, but it states that most entrepreneurs around the world are opportunity-motivated. On average, three-quarters of global respondents stated that they had chosen to pursue an opportunity as a basis for their entrepreneurial motivations, with 83 percent of entrepreneurs in North America falling into this category. Women were more likely to start businesses out of necessity, compared to men, in all regions except in North America.

My guess is that necessity-based entrepreneurs may be somewhat under-represented in these numbers as they may not self-identify as entrepreneurs. Necessity-based entrepreneurs also may be less likely to respond to this type of survey.

Some of the early research on the topic discusses a push-pull analogy. “Push” (or necessity-based) entrepreneurs are those who may be faced with a job loss, dissatisfaction with their current positions, or lack of career opportunities. For these reasons – unrelated to their entrepreneurial characteristics – they are pushed to start a venture. “Pull” (or opportunity-based) entrepreneurs are those who initiate venture activity because of the attractiveness of the business idea and its personal implications. They may seek independence, increased earnings, and opportunities to carry out their own ideas.

A study out of Stanford on Opportunity versus Necessity Entrepreneurship explores the common and seemingly paradoxical finding that business creation increases in recessions. It looks at two distinct motivations, “opportunity” entrepreneurship and “necessity” entrepreneurship (with the simple definition of a necessity entrepreneur as initially unemployed before starting their business). The research found that opportunity entrepreneurship is generally pro-cyclical and necessity entrepreneurship is strongly counter-cyclical – that is, recessions drive necessity-based entrepreneurs to start their own businesses. Opportunity entrepreneurship was also found to be associated with more growth-oriented businesses.

I believe there are many profiles of the necessity-based entrepreneur, and it’s a segment of entrepreneurship that deserves more attention. Not every entrepreneur is the genius superstar with a new technology. Some forms of entrepreneurship are a bit humbler.

An example of this are gig economy entrepreneurs. These “gigs” are often short-term contracts or freelance work as opposed to (or in addition to) permanent jobs – think Uber and TaskRabbit. Although this is an emerging form of entrepreneurship, is it a positive experience for the entrepreneur (and the economy)? Or, is it a necessary side hustle some people need to survive?

Women and minority entrepreneurs are often necessity-based entrepreneurs. The startup rate for businesses created by both women and minorities exceeds the overall rate for new startups. The Minority 2018 Small Business Trends survey by Guidant Financial surveyed 2,600 business owners and aspiring entrepreneurs, and found that 45 percent of small business in the country were owned by minority ethnic groups and 26 percent were owned by women in 2018. What is driving these business owners, and are we measuring their contributions effectively?

While economic gain is certainly one component of necessity-based entrepreneurship, a broader definition includes entrepreneurs who are motivated by their belief that the traditional labor options available are insufficient to meet their non-economic needs and goals as well.

At MIT, we foster entrepreneurship through programs like our delta v student venture accelerator where our students are out to change the world with their innovations. But, entrepreneurship has many forms and there is no one right model or best way to measure success. Necessity-based entrepreneurs are shaping their own success in a way that works and should be included in the broader study of entrepreneurs.

This article was published in Xconomy on November 26, 2018.

A Discussion on French Entrepreneurship with John Chambers

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I recently had the unique opportunity to join selected MIT faculty, students, and staff to discuss the current business climate with John Chambers, the Executive Chairman of the Board and former CEO of Cisco Systems. He was the guest of honor at a recent MIT Leadership Center luncheon and it was pure luck that I ended up sitting next to him as our meal was served.

My question to John was: what he thinks we should be doing to educate entrepreneurs today (that is currently lacking). Although he didn’t answer that question directly, he did talk about the differences in East Coast and West Coast philosophies. The West vs. East innovation discussion is always a good one (see my blog on Massachusetts being ranked the most innovative state in America) and it was clear that John felt that in Silicon Valley, it is more important to be a founder/key engineer than is to be the CEO of a Fortune 100 company.

Paris conferenceWe then started discussing innovation in other countries, particularly France, in light of my upcoming keynote speech in Paris at the symposium on Entrepreneurial Research: Past, Present and Future. John remarked that the French entrepreneurial ecosystem is actually as large as Boston’s. I was a bit surprised, but also intrigued as I’ve been researching how the French approach entrepreneurship to prepare for my presentation.

Here are some of the highlights of my research I thought I’d share:

  • The French business environment has undergone radical change in recent years. Investment activity in French startups has been on a steady rise. Moreover, it is coming from all sides of French society – the government, the corporations, and the new wave of entrepreneurs. In addition, France has over 100 venture capitalists who invested more than $2 billion in 2016.
  • This activity has changed the general attitude among the younger generation towards entrepreneurship. Up until 2012, France’s best talent was driven to big firms. However, now more than 50% of young people between the ages of 18 and 24 want to start a business, and 1 in 3 of France’s 70,000 Ph.D. students also want to create their own business. At this moment, France has more than 50 startup accelerators, and more than 100 co-working spaces have opened their doors recently.
  • President Hollande’s socialist government has made fostering startups an economic priority with a cohesive policy that has included:
    • Tax incentives for new businesses
    • Government and public sector funding
    • Creation of Special Tech Programs on national and regional levels
    • New crowd-funding legislation
  • The weak point of French VCs is lack of sufficient capital for later-stage funding rounds, forcing many promising French startups to look abroad for their financing needs or get acquired by global multinationals.
  • According to French government, more than 550,000 startups are created each year. More than $2 billion was invested in French startups in 2016. Three startups raised more than $100M:
    • Sigfox (IoT ecosystem)
    • Deezer (Music streaming)
    • Devialet (Sound technology)
  • According to European Digital City Index (EDCI), Paris is the 5th best city for startups in Europe. According to the Compass 2015 Global Startup Ecosystem Ranking, Paris is the 11th best ecosystem for startups globally.
  • Brexit creates excellent opportunity for France to lure best tech startups from UK and transform itself into the #1 European and one of the leading global startup hubs.
  • The presidential elections that will be held in April and May 2017 should be carefully watched. The possible win of Mr. Macron could be a big boost for the French entrepreneurial ecosystem since his tenure as a Minister of Economy was huge boon for the French startup ecosystem.

As Americans we tend to critique French capitalism due to issues such as a high level of government intervention, inflexible labor laws, a fear of failure among entrepreneurs, and the lack of innovation.  However, all this is changing.

I look forward to my visit to Paris in the springtime and will share what I learn at the symposium.

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Chasing Unicorns or Planting Trees?

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unicorn12967178What does Entrepreneurial Success Look Like?  

In the business world, privately held companies valued at $1 billion or more are known as unicorns. Like unicorns, the billion-dollar startup was once only a myth. Now, all that has changed.

Fortune now publishes “The Unicorn List” that includes 174 unicorns. Uber tops the list, with Airbnb, Snapchat, and Pinterest also in the top 10. The Wall Street Journal also publishes a dynamic “Billion Dollar Startup Club” graphic that shows unicorns with their current value and region of origin – Uber’s current $68 billion valuation is by far the highest of the group.

Some rankings use just one criterion, such as venture capital funding to measure success. Although not necessarily the best measurement, it is an easy, publicly available figure, and there have certainly been unicorns that have failed. But, should valuation or the ability to raise money be the only measure of success?

What about the important success factors such as profitability, revenue, job creation, and even intangibles such as social good – giving back to the community or the world. The combination of these metrics provide a more holistic view to measure success.

MIT has been measuring entrepreneurial success for years, and our figures take into account job creation and revenues. According to our last update, companies founded by living MIT alumni have created 4.6 million jobs and generated nearly $2 trillion in annual revenues – that’s about the same as the GDP of the world’s 10th largest economy.

While the trajectory of the unicorns is impressive, a great number of unicorns aren’t profitable. Many startups and entrepreneurs have focused on “growth at all costs,” often operating at a loss to grab market share.  It’s not a surprise to learn that some unicorns are terrified when they have to think about profits for the first time.  (For more in-depth analysis, check out this blog post by well-known venture investor Bill Gurley.)

All of these issues are things that we think about deeply here at the Martin Trust Center for MIT Entrepreneurship. We certainly want the startups that we help launch to be successful, not just in venture capital raised or achieving unicorn status. More importantly, we want that success to be sustainable and we want the entrepreneurial skills that we impart to be deeply rooted.

Think about trees for a second. Yes, much less magical than unicorns, but a tree has deep roots, a solid foundation, and branches that grow over time. We believe that with the tools that we provide to our students: from the proven framework of courses; to state-of-the art facilities; to advisory services; to our own delta v student venture accelerator, we are planting the seeds to help that tree grow. Obviously, drive and passion are important characteristics of successful entrepreneurs, but we know that entrepreneurship can be taught with a systematic, disciplined approach.

In fact, learning solid entrepreneurial skills might be even more important than launching a successful first startup on your first shot.

How does MIT produce so many successful entrepreneurs? We believe it’s all about planting a tree, rather than chasing a unicorn.