Steve Blank Hails NYU Engineering Grads, Talks Building Businesses
Make the most of the days to come while ignoring a few rules along the way was some of the advice Steve Blank shared Monday in a commencement speech for this year’s graduates at NYU Tandon School of Engineering.
Known for his methodologies that helped drive the lean startup movement, Blank is a former serial entrepreneur who retired in 1999 from his last startup, E.piphany, just as it went public. He has since been a teacher and sage to other entrepreneurs.
After Blank’s speech at NYU, he spoke to Xconomy about the need for more innovators who look to higher purposes and the difference between building a business versus inflating valuation.
Xconomy: What were some of the thoughts you wanted to stir among the new graduates?
Steve Blank: You’re, on average, born with 27,000 days and you might want to be thinking about how you use them. Your career has about 14,000 days in it. We think they go one forever, but they’re actually quite limited. When you’re graduating, you never quite understand that the countdown clock has already started.
X: Are there particular ways innovators can make the most of their time?
SB: When I started the lean startup movement, everybody laughed. I got laughed at by academics; I got laughed at by venture capitalists. Corporations thought I had nothing to do with them, but I showed up a lot and ignored what the common wisdom was. I told the graduates they will hear a lot of that—you’ll go to work, people will tell you the rules, and tell you that you’re not qualified. Some of the rules will keep you alive, but most every other rule you hear about is probably wrong.
For 50 years, we were told that startups were nothing more than smaller versions of large companies. That everything a large company did, a startup ought to do. Turns out that was completely wrong. In hindsight, you wonder what we were thinking. We didn’t understand that large companies execute known business models and startups search for them. No one articulated that before.
Once you understood that, you understood we’d been building tools for large companies that we’d been trying to use for startups. That didn’t make any sense. The lean startup movement started because one person said this was not right.
While you want to avoid dogma, you want to learn from people who do want to teach you. If you’re in your 20s and 30s, if you’re lucky enough, you’ll find some great mentors. The real trick of mentorship that no one talks about is that mentorship is a two-way street. People will adopt you, so to speak, if they are getting something back. Not that you’re doing work for them, but fresh insights, fresh data, or different ways to think about at things. That’s why I got adopted by two very smart people in the computer business—Ben Wegbreit and Gordon Bell.
Now I mentor and while they are learning from me, I am kind of learning from them.
X: How else can they make the most of time?
SB: You’ve got to trust in serendipity. Forty years ago, I spent four years in the Air Force. When I hung up my uniform, I never thought much about the military. Last year, the Department of Defense asked me to come in and help them think about using lean startup methodologies to address a couple of problems.
At the same time, I ran into two retired Army colonels who were trying to do the same as civilians in Silicon Valley. We discovered that the government, particularly the Department of Defense, still operates like a 20th century organization while our adversaries like ISIS are operating at 21st century speed. Solving this problem will require new ways to think about how to organize, build, and deploy national security solutions.
I created a new class at Stanford called “Hacking for Defense.” We’re going to help students engage in national service solving problems to keep Americans safe at home and abroad.
X: Is it possible entrepreneurs might act too quickly, or even recklessly, as they try to make the most of their time?
SB: There’s a fine line between recklessness and passion, urgency and stupidity. Most people err on the side of complacency. The choice is would you like to have lived a life, having retired saying, “should have, could have, would have” or have lived a life where you tried a lot of stuff, screwed up, but moved the ball forward.
X: Are there other types of lessons and ideas you’d like to see introduced for young entrepreneurs?
SB: I’ve been approached by the Office of the Secretary of State to also do this for diplomacy and policy, so we’re probably going to start a class on hacking for diplomacy next year. Then the USAID (U.S. Agency for International Development) folks asked why we couldn’t do this for development and aid. Now you can imagine a series of “Hacking for” defense, diplomacy, and development that allows us to create a sense of nation service that hasn’t existed in this country for 50 years.
The more people who get engaged in government, the better the decisions are.
X: What else must happen to get government to embrace the innovation and thinking that comes out of the startup community?
SB: There are already islands of innovation inside the government who are raising their hands and saying, “We can’t keep going on like this,” and “the world has changed a lot around us.” While a company can afford to go bankrupt, we can’t let the country go this way. We need new kinds of thinking. Not just new ideas—new ways to think at speed. Our adversaries are not following Cold War playbooks that we got very good at executing.
X: So should we be looking at entrepreneurship differently? Should more folks try to pursue their ideas before they even become graduates?
SB: It’s not just commercial ideas, it’s this notion of service. There are some people who get this notion of something bigger than themselves early on. I think that’s what we’re missing; we used to know that was important. This is the pendulum swing.
X: How do you view the current entrepreneurship and innovation ecosystem?
SB: When I started as an entrepreneur, the way you got to the liquidity event was an initial public offering. Back then, no investment banker would talk to you if you didn’t have five profitable quarters of increasing revenue. It seems ludicrous now but that was the rule. Venture capitalists didn’t teach you to get to the liquidity event, they taught you how to build a company that grew its revenue and profits.
That’s not what it is anymore. The game now, mostly in tech, is that most of the deals are acquisitions and valuations are driven by hedge funds or corporate money at the later stages. VCs are making their internal rate of return look great by pumping up the rounds and flipping these things as fast as they can, regardless of whether there is a business there or not.
Not making judgement on it. but that doesn’t build companies. It builds valuations and liquidity. It doesn’t necessarily equate to a repeatable, scalable business.