P&Q: You’ve founded three companies and been an angel and advisor on nearly 20 more. What lessons have you learned from your practical experience in this area?
KU: I teach in entrepreneurship a simple model about what explains success. I call it the VIDE model (pronounced V-Day). It stands for Value is a function of three basic factors. First is the Idea itself. The second, D, is the Development: what you do with the idea. The third, E, is the Exogenous factors — the things that are outside your control.
With entrepreneurship, I like to make an analogy to mining for gold. If you’re trying to make money as a gold miner, then there are three things that matter. The first is the location of the mine — that’s the idea. The second is the development of that idea, which in this analogy would be your ability to efficiently extract the ore. The third, an exogenous factor in the case of gold mining might be the price of gold, which you have no control over but can determine your success or failure.
For entrepreneurs, the answer, of course, is that all three matter. There has to be gold in the ground — the idea has to be good. You have to be capable of extracting or be good at developing your idea. Third, you have to be lucky. The weather has to go your direction.
Let’s just start with D because it goes without saying that if you don’t have the skills and capabilities required to pursue the opportunity, it’s unlikely that you’ll be successful. That doesn’t necessarily mean that you have to be an expert in the domain that you’re entering. But you do have to possess the basic wherewithal to succeed as an entrepreneur. That would be qualities like having tenacity and problem-solving skills, being a good communicator, and having an appropriate level of realism about whether the data you’re receiving is promising or if you should pivot, adapt, quit, or keep at it. Any entrepreneur has to have those things. If you’re pursuing an opportunity where the I (Idea) is no good — an opportunity for which there are few potential customers or a pain point that isn’t real (or doesn’t really address the pain point) — it is going to be very hard to be successful no matter how skilled you are.
I think of these three factors as being multiplicative, not additive, meaning a great idea times great development times luck results in very high value.
P&Q: In the Wall Street Journal, you pushed against the notion that students should wait until graduation to start a business. What advice would you give to students who are launching or running a startup during school? How can they maximize what they learn in class and extracurriculars while building a business?
KU: I didn’t say they shouldn’t pursue an entrepreneurial opportunity while students. They should stay in school and graduate. I do think that school is a really good institutional environment in which to pursue an entrepreneurial venture. I’ll give you two main reasons.
The first is that, from a societal perspective and the perspective of yourself and your family, being in school is a highly legitimate activity. No one questions someone’s choice to be in school. So it really legitimizes a period of a couple of years where you’re free to explore without anyone pressuring or second-guessing your decision to pursue entrepreneurship. So if you have some questions or reservations about taking the leap and having that entrepreneurial endeavor on your resume, it really provides a very safe and convenient time to explore an entrepreneurial opportunity.
Reason two is that you are surrounded by amazing resources. At Penn, we almost have too many competitions and resources. Students really have to decide what to focus on and where to go for support. We have cash prizes, in-time mentoring, and loads of courses, workshops, and competitions all designed to shepherd you along and guide you into what needs to be done to pursue a venture.
So a school, on the one hand, is very legitimate and wholesome time in your life where you can explore. Secondly, it is extremely rich in the resources required to support entrepreneurship.
P&Q: You were the driving force behind Wharton launching a Semester on the San Francisco Campus in 2012. What have been the biggest gains for Wharton MBA students studying out there?
KU: We’ve had a campus and an executive MBA program in San Francisco for 16 years. We’ve only had the Semester in San Francisco for the last six years. If we look at the full-time students who’ve pursued the Semester in San Francisco, the primary motives people have is to better connect to the Bay Area ecosystem. People read about Silicon Valley and San Francisco, but being there Is different. The majority of students who participate in the semester in San Francisco have an eventual desire to either work in the Bay Area ecosystem or just somehow be connected through either venture capital or partnerships with players in Silicon Valley. For them to be on the ground there provides valuable opportunities to engage with the ecosystem before they decide where they’re going to end up on a full-time basis when they leave school.
What we find in the Bay Area is that most of the organizations that our students would like to work at do not go through the traditional mainstream recruiting channels. So it is very convenient for them to be on site in order to better engage with those companies. To give you an example: In our Semester in San Francisco program, more than one half of our students have part-time internships while they’re in school. That would simply be impossible in Philadelphia because we don’t have several thousand companies in the area operating in the tech sector. If a student is interested in engaging in the Bay Area ecosystem, being on location is important. By being on location, they can take advantage of great opportunities to engage with companies while they’re in school. That ultimately leads to employment.
P&Q: What industries do you your MBA entrepreneurs going into? Why are these industries great for startups?
KU: I would say that people are in all kinds of different industries. I have students who’ve gone into apparel, hardware, web-based services, food products, and financial services. It seems very diverse in terms of where they are going.
In the Bay Area, they do tend to be tech, either they rely on tech or they are tech-enabled. Let me make a distinction there. I have a former student who started a company called Knit Health, which provides a machine learning-based system for monitoring sleep. They have a video camera and machine vision to analyze a sleeping person. Their initial market is children and they can give some data on your child’s sleep from monitoring it. That company is a tech company, meaning the real fundamentals of the business relies on some pretty deep technology. That’s typical, for the sake of argument, of about half of the businesses in the Bay Area.
The other half are tech-enabled. An example of a tech-enabled company would probably be Full Harvest, which was founded by a Wharton MBA. What Full Harvest does is that matches farmers who have second quality produce with food manufacturers like juice producers who are just going to puree the produce anyway. So instead of paying first quality prices, producers are able to pay much lower prices. For farmers, instead of turning the second quality produce under, they are able to get some value from that. That is not a technology company, but their platform for matching farmers and manufacturers like food processors is tech-enabled. It uses a mobile and web-based platform that allows them to make this business work even though they are not really a tech company.