The episode with two epiphanies 🙂 about innovation & startups. Who could ask for more!
This episode was recorded on April 22nd, 2020
VC Bill Reichert
This conversation is with Bill Reichert. Bill is co-founder and managing director of Garage Technology Ventures in Palo Alto, California, a seed and early stage venture fund in Silicon Valley. He is also a partner at Pegasus Tech Ventures, a global venture capital firm with its headquarters in Silicon Valley. And he is the Chief Evangelist for the Startup World Cup, one of the biggest and richest global startup competitions, with regional competitions around the world and a $1 million grand prize. Previously he has founded several software companies, and started the Churchill Club in Silicon Valley. Bill is a professional, very sharp mind, compassionate with a long term focus and the ability to look beyond the day to day to see potential in ideas. He is a sought-after speaker around the world and generally a great guy.
Follow Bill Reichert on
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The transcript was created using otter.ai and is slightly manually edited. It will contain some errors. Click to open transcript.
Bill Reichert 0:00
God we never did check our family trees to see if somewhere somehow, somewhere back in history, we must be related I assume.
Klaus Reichert 0:16
This is the 2.5, a podcast that connects innovators and helps them grow through meaningful conversations. My name is Klaus. I’m an innovation coach in Barton Burton back in the southwest of Germany. Today’s conversation is with Bill Reichert. Bill is the CO Founder and Managing Director of garage technology ventures in Palo Alto, California, a seed and early stage venture fund in Silicon Valley. He’s also a partner at Pegasus tech ventures, a global venture capital firm, with its headquarters in Silicon Valley, and he’s the chief evangelist for the startup world cup. One of the biggest and richest global startup competitions with regional competitions around the world and the $1 million grand prize previously has founded several software companies and started the Churchill club in Silicon Valley. Bill is a professional, a very sharp mind compassionate with a long term focus and the ability to look beyond the day to day to see potential in ideas. He’s a sought after speaker around the world and generally a great guy. Welcome Bill.
Bill Reichert 1:36
Wow, who wrote that? So that was great. That was that was very, very kind Klaus I very much appreciate it. And I’m you know, delighted to be connected with you here today. Youthere know, my namesake there over in Germany. Soo, great to bridge the, to bridge the world and connect our ecosystems. Thank you for having me on.
Klaus Reichert 1:58
Thank you, Bill for being part of this conversation, I mean, you travel around the world all the time you, you do speaking engagements, also in Asia, sometimes in Germany. So, so you’re used to being around other cultures.
Bill Reichert 2:15
That’s fair, though I got it, unfortunately, admit that I’m not traveling a lot right now. We’re all you know, locked down sheltering in place. But hopefully I’ll get back out there. But yeah, it is one of my great joys in life, that I get the opportunity to bounce all over the globe and meet entrepreneurs and investors in all of these different ecosystems. And, you know, compare and contrast the different styles and the different cultures for innovation and entrepreneurship.
Klaus Reichert 2:45
Which is a field that you have been working for many, many years. And, I mean, you work with people with big ideas, but they are at the beginning of the journey themselves. So basically, you’re you’re investing in the earth. You are investing in them. And basically you are an adventurer and explorer. And kind of that looks like you like to live on the edge. You like that excitement?
Bill Reichert 3:12
Well, you know, it’s it’s a little unfair to suggest that the investors are the ones living on the edge. I mean, so having been an entrepreneur, I, I can tell you, I, you know, you’re a lot closer to the edge as an entrepreneur than you are as an investor. But one of the great things about, you know, what I get to do now is I get to be involved in all sorts of different innovations that are going on all over the planet. So, you know, one of the tough things about being an entrepreneur is you have to be just totally intensively focused on that thing that you are building right now. You know, it’s sort of year after year. It’s a very intense experience. The great thing now in terms of being an investor of venture capitalists, is I spend my days talking to these incredibly smart, articulate, passionate, visionary, innovative people and get to hear all of these amazing ideas and dreams and visions. And, you know, unfortunately, we have to politely decline, you know, 99% of them. But, but I get to jump in and be part of these visions that that feel very aligned with our investment strategy and have the potential to make a dent in the universe. So, I mean, it’s, it’s a wonderful, wonderful opportunity, I think, to be able to do what I get to do.
Klaus Reichert 4:50
I can feel that a lot. The podcast is such a possibility for me to do something like that. And you I get the feeling that you you will really like to work with people with technologies, new stuff. Stuff that is in the beginning new ideas that have a lot of potential in the future and your work is real people business, I think. Absolutely,
Bill Reichert 5:15
Yeah. Yeah. I mean, it’s a, you know, it’s a people business in many different ways. I mean, generally, you know, you think of people business in the sense of, you know, doing deals and you know, getting transactions executed between investors and entrepreneurs and working with entrepreneurs. But it’s at people business in an even broader sense, because you’re involved in building teams and helping entrepreneurs figure out what type of team do I want to build and how do I attract the right people, and it’s a people business in terms of getting customers. And you know, a lot of entrepreneurs have great visions for products and technologies, but a lot of us are not naturally salespeople. In order to build a successful company, you have to be a salesperson. And that’s another people skill. Right? And so there’s, it’s, it’s it’s people every way. Or you look, though, you know, interestingly sort of growing up in, you know, in my adult professional life in Silicon Valley, Silicon Valley is all about technology, right? It’s all about engineering and technology and the next big thing. But what gets lost in all the excitement over technology is how central people are to making any of that happening in terms of building the product, building the company, finding customers scaling a company. It all depends on people. So yeah, if you don’t pay attention to the people part, it doesn’t matter how good the technology part is. And so that’s a much broader aspect of why you have to pay attention to the people selling When you’re talking about innovation and entrepreneurship,
Klaus Reichert 7:03
As a VC fund, you’re investing money in funders, ah founders, in people. And it’s not just a transaction. Yes, it’s a big transaction is very important. But oftentimes that results in something that is like a us versus them mentality. And sometimes I get the feeling that you don’t see these things that way that you using your experience as a founder yourself. And think of us in terms of them and us in one bolt or in one moving into one direction and supporting them not just investing.
Bill Reichert 7:47
Yeah, yeah. And I you know, I think and that’s, that’s, that’s a part of the reason why so many there’s so many good ideas out there, but we don’t invest in them because It’s not just about the idea, you’ve got to be aligned with the team, you’ve got to be aligned with the founders and the entrepreneurs. And so yeah, we would never want to invest in a company where we feel adversarial with the founders, where we somehow think that our money can bend the founders to our will. That’s never going to be a good outcome between an investor and an entrepreneur. So you want to make sure from day one, that you are aligned with the founders, and that you were, you know, working in the same direction, not in any sort of adversarial way or in any way that you want to change the founders after you invest in them. Now, of course, it does happen, it does happen, that, you know, things do change. So this is, you know, it’s one of the The misconceptions that entrepreneurs have about investors about, you know, these big bad venture capitalists, that that, that VCs want to control the entrepreneur, they want to run the company, they want to replace the entrepreneur. That’s absolutely not true. You know, VCs do not want to run the company. And VCs do not want to replace the founding team. Because that is that is almost certainly going to create a a loss of value if you have to replace the team. So you know, we’re only going to invest in companies where we believe that the team is the right team to execute on the vision that we are believing in. But again, every once in a while, you know, things change, and for a variety of reasons, the team and the ability to scale don’t quite fit anymore, and you have to make some changes. Sometimes it’s because the team just doesn’t grow with the company or they just don’t have the experience to grow the company. And other times the company has to pivot has to go in a different direction. And the skills match and the mindset match aren’t there anymore. So it is true that every once in a while you have to adjust the team. And that’s, you know, that’s always a tough process. What we what we hope to have happen in almost every case, is that we have that discussion early, and that we manage that transition in a way that is best for everyone, rather than it turning into a crisis. But what you hear, you know, the stories you hear tend to be the stories of crises, not the stories of well managed transitions. So there’s a lot of you know, there’s a lot of law out there about battles between VCs and founders. You know, there’s also plenty of stories out there about battles between founders and founders. So you know, back to the point, it’s a people game. You know, you want to be constantly checking to make sure everyone is aligned. And when things get out of alignment, you want to respond quickly. You want to deal with it quickly. If there’s a if there’s a misalignment on the team, or between the team and the investors. You want to deal with it proactively and try to manage the transition, rather than waiting and hoping that maybe it’ll work its way out. I you know, I learned this long ago, I was on the other side of this discussion when I was an entrepreneur, and things were not going quite right. And you know, are one of our VCs, a very, very prominent VC here in Silicon Valley, was shaking his head and said, You know, we always wait too long before we address these issues. And I’ve carried that with me, you know, the rest of my career in terms of recommending to entrepreneurs and my colleagues, as investors. If you ever see a situation where it looks like things are getting out of alignment, deal with it, over, communicate over respond, don’t ignore and hope that it’ll get better.
Klaus Reichert 12:28
That means that you have sort of a change in roles also. You’re moving from kind of from from investor into that coaching role in a consultant role in a way.
Bill Reichert 12:42
Yeah, it’s I think, coaching is the best model for it. In the sense that, you know, the the best athletes on the planet, have coaches. Right. So it’s interesting, I got into a battle With a VC. And on this topic, where I told an audience of entrepreneurs, I said, you know, one of the things we look for in an entrepreneurial team is coachability. And my colleague, another VC, you know, she was saying, Bill, that’s a contradiction, because what you want is a team who has no doubt whatsoever that they are absolutely right, and that they’re going to take this, you know, to the heavens. And I said, No, no, no, it’s not a contradiction, to be highly confident, and to be willing to listen. So that is that’s, that’s an ideal sort of mindset. That you are confident, and you are, you know, you have a team of people whom you all you all trust and you are highly confident that you’re going down the right path. And at the same time, you are willing to take in outside information as much as possible. Listen to your customers, listen to your, you know, team, listen to your vendors, listen to your investors, and continuously tweak to make sure that you’re on the right path. But, you know, my my colleague, the other VC who said, Bill, this is a contradiction, you know, coachability implies that they are imperfect and not confident. I’m saying no, no, no, no, every Olympic athlete has a coach, you know, the highest performing people on the planet. Also have coaches, because you can always do better. And you have to have a mindset of being willing to listen and willing to adjust because you can never get everything right the first time. So that’s the balance between high confidence and coachability.
Klaus Reichert 15:00
I see what you mean. I mean, every great sports team has a coach. By the way, Bill Campbell,
Bill Reichert 15:10
Ah, exact prime prime example. Right. So had you met Bill Campbell. I mean, he’s unfortunately he has passed away. I don’t know if you’ve ever met him though, if you had ever met him
Klaus Reichert 15:19
Unfortunately, not only via the book about bill, which is kind of a great role model from my own work. So so it helps me a lot to to, to do my work.
Bill Reichert 15:33
Yeah. Yeah, it’s, um, you know, and it applied to him as well. I mean, it’s really hard. When you’ve had How shall I say it? A lot of experience. Okay. Um, you know, fortunately, this is a podcast and not a video. But I’ve had a lot of experience so. So, you know, it is, it is it’s a it’s a challenge for investors. To make sure that their experience is actually applicable in this new situation. So it’s, you know, it is human nature, it’s human nature, that whenever you sort of come across a situation that reminds you of a prior situation in your life, you’re going to tend to sort of overmatch the two experiences and and there’s going to be a tendency to say, ah, when I came across this before, this is what worked, and this is what didn’t work, and try to convince, you know, the entrepreneur or the team, you know, this is what you should do in this situation. So, you know, generally, having that experience is going to be helpful in shaping a decision about what to do now, but frequently, we will fall into the trap of thinking we know the right answer. And so, you know, one of the problems of being You know, a high achiever. And I, you know, having this, this desire to be right is sometimes as the investor coach, you might have the tendency to assert with too much force, that this specific thing is the right answer. And so I constantly find myself trying to monitor my own speech, to keep it at the level of coaching rather than directing. And so, you know, we we can offer advice to an entrepreneur based on our experience, and hopefully, hopefully, we can explain why that advice or why that recommendation seems to make sense in this context. But, but I have I you know, I’m sure I’m guilty of it myself. I’ve seen Plenty of VCs, who would you know, in a board meeting, they would say, you know, back in the day when, you know, I was with, you know, I, you know, the, you know, the Dave and Bill at Hewlett Packard or I was with Larry and Sergei at Google or I was with whatever, you know, back in the day, when we came across this, this is what we did, and this is the right answer. And because of this, you know, asymmetry in situation between, you know, entrepreneur and investor, because, you know, the board has the ability to fire the CEO, there is this imbalance and so there’s this, you know, struggle or challenge of how do you handle an investor who is asserting something with high confidence that you as an entrepreneur, think is wrong.
Klaus Reichert 19:00
So you have to become the coach. It’s a kind of always switching role and the baton is passed along, depending on the context and the situation.
Bill Reichert 19:10
A good entrepreneur knows how to push back, or how to sort of unpack the recommendations of his or her board. So, you know, entrepreneurs are gonna have this experience all the time of the board, having ideas. And, you know, because the board is your boss, you’ve got this sort of tricky situation between saying, you know, that’s the stupidest thing I’ve ever heard. Which, you know, you really do not want to say out loud to your board, right.
Klaus Reichert 19:52
My grand.., my granddaughter told me about this great app she has seen. We should do, you should do it the same way.
Bill Reichert 20:00
Exactly right or at the other extreme, just saluting and saying yes, whatever you say, I will do that, and I will march off the edge of the cliff because my board told me, that was the thing I should do. So, you know, really good entrepreneurs, they know how to engage. They’re bored, they know how to engage their investors, their coaches, and you know, sort of unpack recommendations and ideas to try to make sure there is a fit in this particular circumstance, or there’s a variation that makes the most sense now. So it is a you know, it’s a very delicate balance the relationship between the entrepreneurs and the investors. And, you know, I think your example, Bill Campbell, you know, liked to be sort of the entrepreneur coach more so than a board member. Because that, that’s a That’s a more that’s a more pure relationship. So, you know, coaches, coaches, you know, sort of continue to coach you know, at the, at the will of the of the athlete generally right. As opposed to a board member, you know, has a different power relationship with the with the entrepreneur. So, yeah.
Klaus Reichert 21:28
And also different level of experience. But it’s it’s the ability to use that experience in the current situation in the current context for the best and not just just blast it out. And and I think that’s, that’s it right now. Okay. So there’s a difference also in the knowledge that people have in the experience that people have, and what I see with you is that you, you do a lot that the you level, that playing field in a way because you offer that many speeches, you have online resources. versus downloads that help entrepreneurs to learn to do their best to do something good that they haven’t done before, say, preparing a pitch presentation or something like that. I mean, just because they can do the pitch right at the first time, doesn’t mean that the idea doesn’t hold the big opportunities of the future. And so I think that’s really great. You’re doing the work with the Kauffman Foundation, for example. And and you’re supporting entrepreneurs a lot. And I think that also makes your work much easier in a way. So So who is profiting more from that work? He You are the entrepreneurs probably you both.
Bill Reichert 22:45
And, you know, I haven’t actually heard it frame that way. Um, you know, I profit in the sense that, you know, I just, I love working with entrepreneurs, and I love you know, this sort of process. of thrashing through these challenges of how do I frame my value proposition in a way that is compelling for my customers, as well as for investors, you know, and so that’s, that’s a, you know, it’s a really interesting problem when you take an engineer who’s got a technology, who thinks the technology is really cool, but there’s a huge bridge, you know, to get from a cool technology to a scalable business. And, and so ultimately, if I can help more entrepreneurs cross that bridge, and if at the same time, I happen to be an investor in that company, then it’s a win win, right?
Klaus Reichert 23:42
I think so too.
Bill Reichert 23:44
That’s why you know, that’s why I do it. I mean, I hope it’s beneficial to everybody I touch and I hope at the end of the day, it winds up something that helps me as well.
Klaus Reichert 23:56
I mean, you say in your LinkedIn bio Something like I’m an entrepreneur. I’m a venture capitalist. I’m a mentor, author, speaker, board member, whatever, blah, blah, blah, and general enthusiasts not always in that order. And I love to work with great entrepreneurs to build great companies. And normally with everybody else, I would say, No, I don’t believe this with you. I don’t think this is the usual BS. It’s just very, very different. You are an entrepreneur yourself. Now as a as a VC because it’s a it’s an entrepreneur, it’s a company’s a business yourself, but you you have that entrepreneur, a gene also in yourself, which I think is really cool with you with your background in software companies and stuff.
Bill Reichert 24:45
Well, thank you. Yes. Yeah, I’ve I some times to the embarrassment of my family. I an enthusiast sometimes, you know, My wife and daughter sort of think, you know, calm down dad. But, but yes, generally I have I, you know, I am a I guess I don’t say that in that in the LinkedIn but I’m, I am I am deeply curious. And I just, I just love sort of understanding things and tinkering and trying to figure out how to make things work. So I wasn’t actually trained as an engineer. And I sometimes regret that I didn’t, you know, head down that path, but what I like, you know, and I’m actually very happy I’m on the path I’m on, which is, you know, this, this idea of, of working with people to get things to work. And it’s just, you know, it’s, it’s just such a fascinating, fascinating thing, to you know, have the opportunity to do this with your life.
Klaus Reichert 26:05
Thank you for mentioning giving me that hint earlier on. You were talking about hair. And I was wondering. To me, it feels like you are in the very right place now and for quite some time. And I was wondering, what’s it like to be the young one around with the lifelong build up experience showing the gray hair?
Bill Reichert 26:33
Oh what? So I’m sorry, what’s it like to be? I’m sorry. So could you could you reframe that question? I’m not exactly sure what you’re what you’re what you’re asking.
Klaus Reichert 26:44
Okay. What’s it like to be the the young one, the young person that has a lifelong experience built up over over years and shows the gray hair obviously being The more experienced version of a person in the room, but still being possibly the younger person, then the young person sitting across the table.
Bill Reichert 27:12
So, yeah, what you’re saying, and you know, I have been accused of this. I mean, one way of putting it is that is that I am at some level young at heart. And that right, enthusiasm tends to be more associated with younger people rather than with older people. You know, there are no boundaries there, which, again, my family always reminds me of, but I, I, I tend to enjoy, you know, stirring things up. I have colleagues who prefer to button things down. And you know, and maybe there are times and then of course, there are times, there are times when it’s more appropriate. to, you know, if the idiom works to button things down to sort of stabilize and solidify things, and there are other times when it’s appropriate to stir things up, and to sort of explore, are we really doing it the best way we can be doing it? Is there a different way to do this? You know, how can we re engineer this process, this company, this team, this, whatever it is, right? So there is a balance. And so I need partners in you know, in terms of, you know, the venture capital world. I’m very aware of the fact that I need to have colleagues who complement my particular approach to things and, and so, that’s true for entrepreneurs. It’s true for investors. You as an entrepreneur, you never want to have one investor Because, you know, I’ve I’ve, and as an entrepreneur, you never want to be a sole entrepreneur. I mean, I am deeply and fervently of the belief that two brains are always better than one brain. Now, I’m not sure that three brains are always better than two brains. But so you know, so there’s an interesting challenge, right? But, but I want entrepreneurs to have co founders. And I, as an investor, I want to have a co investor to balance me out and ideally someone who’s got, you know, complimentary sort of skills and experiences and mindsets to what I bring to the table. And that way you have the sort of the richest combination of experience and mindset for building a successful company. Yeah, I know you wanted to go down a different path.
Klaus Reichert 30:05
I was genuienly, I was honestly, curious. And I did I didn’t want to go any path at all. I’m just speechless, right?
Bill Reichert 30:22
Yeah. Oh, okay. No, I will I will tell you a story that you can edit out when I was. So this is you know and as, as everybody you know sort of gets older and sort of crosses from being considered young to be can being considered to being, you know, older. we all we all sort of have this feeling But wait, wait, wait. I still feel like I felt when I was 25. And it’s, you know it. There’s this huge cognitive dissonance in the way you sort of see yourself In the world versus the way the world sees you, but it happens that when I was 20, when I turned 25, on my 25th birthday, on my 25th birthday, I was with a group of friends. And I was bemoaning the fact that I was getting old. So I remember this, you know, back, you know, back then the your sense of, of time was such that 30 was like really old, right? That was when you’re turning when you when you’re 24 turning 25 you’re thinking, Oh, crap, you know, things are things are moving along. But in any case, so I was I was my 25th birthday. I was bemoaning the fact that I was getting old, and one of my friends said, Bill, you don’t have to worry about getting old as long as you stay immature. Okay, all right. No, I didn’t. I didn’t intend to pattern my life on that but it In any case, but that’s just a side story you will you will cut out.
Klaus Reichert 32:06
So do you want me to cut it out? Or shall I leave it in?
Bill Reichert 32:10
The you know, you decide, you decide. So as long as my wife does not hear it, that’s okay.
Klaus Reichert 32:16
Not sure if I can make sure of that. But we create some special filter that filters out the episode just for her.
Bill Reichert 32:26
Klaus Reichert 32:29
You said two brains are better than one brain. And he will look you enjoy or you’re looking at yourself to have partners to do your work. You look for partners or to founders, at least in in a company in a startup. And I always have to think of like as special theory I have about Edison and Westinghouse. Because I both had basically the same amount of patterns in their ecosphere. Let’s put it that way. The thing is Edison had this lab that he financed, and he had people working for them. Lots of inventions and things were created by people in the lab, who would never mentioned and all the patents are in his name basically. And Westinghouse, he had say only half of the patents and Edison in his name, but he had the he supported lots of people in his ecosphere, in his companies to do the work, to to be creative to do something special and also get the recognition by being named in the patent So, so that’s a completely different approach to that to brain type of thing. And I kind of prefer the Westinghouse method, although it’s not as often mentioned as the Edison method.
Bill Reichert 34:18
Now, you you bring up a topic that is that is very, very tough, you know, especially here in the valley because, you know, we talk about the ideal entrepreneur as this, you know, every person who is is visionary and yet gives credit to other people and is a good person and listens and, you know, we have these, these, this sort of a icon of sort of the good entrepreneur, and then you go, but wait, Bill, what about, you know, what about Steve Jobs? You know, he was kind of an asshole. And what about Larry Ellison, I mean, he’s kind of an asshole. And what about, you know, all of these counter examples that don’t seem to fit this ideal type that VCs talk about, you know, on stage. And and so there is this there is this sort of challenge in the industry around, you know, there’s even a book called, you know, the no asshole rule. I don’t know if you’ve come across this book. And, and, you know, people generally would say, I’d rather work for George Westinghouse than for Thomas Edison. You know, because Thomas Edison was, was a really tough arrogant, apparently, you know, guy to work with, right?
Klaus Reichert 35:43
Have you met him?
Bill Reichert 35:45
Yeah, right. Thanks. I’m not that old. But hey, but so we have all these counter examples. And so it is absolutely clear that there is no one archetype for the perfect entrepreneur. But you know what, you know from, you know, you look at a Steve Jobs or you look at a Mark Zuckerberg or you look at a Larry Ellison or you, you know, you, you pick these, these sort of very high profile, tough personalities. And, you know, you drill down and you find out that they did have a team that they depended upon to make it happen. And I, you know, so as hard as it was to work with and for Steve Jobs, there was this balance between, you know, the, the toughness of being of working with Steve Jobs and the honor of, you know, having that experience and so there were enough people who could see, you know, sort of beyond his tough exterior exterior into his brilliance and Take a certain amount of gratification from that opportunity. But I, you know, it’s the the, the reality is as an investor, you have to be very, very careful that you do not impose your own preference for a personality type on, you know, entrepreneurial teams, because you’re going to then Miss, you’re going to miss some teams that can be extraordinarily successful. So, I mean, that’s now, every VC rationalizes that, you know, the deals they missed. You know, there are as many good deals that are, that are teams that are, you know, teams that match their sort of ideal, as there are teams with people that are you know, sort have less than pleasant to work with. But, but, you know, it’s, it’s why I tell I tell entrepreneurs and investors you know, it’s he being an investor in a company is not like getting married. I mean it is there is a, you know, this common phrase, this trope in the industry that, that when an entrepreneur and investor get together, it’s like getting married. Well, it’s not really it’s not really. And so I do think it is it’s much more like an elite athlete getting together with an experienced coach. And, and so you can have personal differences in terms of personal style, you know, characteristic differences, you know, sort of off the field. That’s okay. But as long as there’s alignment on the field, You know, that’s, that’s what’s key is that alignment on the field. And so that’s what you want to keep in mind when you’re an investor or an entrepreneur, trying to decide who do I pair up with when in creating this company. So the, the, you know, the, the other side of this for entrepreneurs building a team. So there’s a tendency for entrepreneurs when they build a team to hire people like themselves, right? That’s, that’s a human tendency that I’m building this company, and I want to, you know, pull together all my buddies, and you know, and work with my buddies, what could be better, you know, we played ping pong, we give each other back rubs, we sing Kumbaya, we’re building a great team, right? And, you know, that’s, that’s It’s possible you can pull that off. It’s possible, but it’s pretty unlikely. You know, what you really want to do is pull together a diverse group of people with different experiences, different skills, and even somewhat different mindsets.
Klaus Reichert 0:17
That are complimentary to each other.
Bill Reichert 0:20
Exactly. Exactly. So that you have this, this rich pool of experiences and ideas and points of view to draw from. But, you know, you have to have some force that holds it together, right? So the problem with high diversity is, it’s easy for a a team of competitor, a team of you know, different mindsets. It’s easy for that to blow up unless you have a force that holds it together. You know, it’s sort of like atomic physics, right? So, you know, how do you keep all those protons together in the nucleus? I mean, they should be repelling, right? So there’s some force and that force has got to be some combination of a shared vision and a shared culture, a shared set of values. So that so that, you know, and this was this was my epiphany, I should say. So okay, here’s an epiphany. This is a good thing for a podcast you want you want every podcast should have an epiphany, right? So here was my epiphany. My epiphany was when I was an entrepreneur. I thought that that, you know, the, the environment of the company should be one of sort of peaceful, progressive progress, right? That we were all aligned. We’re all working hard. We’re all in agreement and we’re all you know, looking toward that. vision of the future. And when we would get together and we would have discussions, and they would devolve into arguments, and people would start, you know, sort of yelling at each other, I thought, oh my god, something’s wrong. This is dysfunctional. Because you know, we’re supposed to be aligned, and yet we’re arguing, that can’t be good. And I so, so you know, you want to try to calm down. Come on, guys, you know, that we’re all on the same team here. Right. And, and then when I became an investor, you know, we spent a lot of time trying to figure out what makes a high performing team. And what you’ll notice is when you poke around and you look at high performing teams, there’s a lot of conflict and high performing teams. I mean, that was what we discovered here in the valley. That you look at Intel, you look at Apple, you look at, you know, a whole bunch of the semiconductor companies and the software companies. In the technology companies, Cisco and HP, there’s a surprising amount of conflict. I thought, Wait a second, what am I misunderstanding? I guess, you know, that’s just sort of the exception, not the rule. But the Epiphany I had was no, it’s the rule. It’s not the exception. The rule is, you want a team that battles it out, to try to figure out the best solution for any given problem. You want a team of diverse perspectives, and sort of high confidence and high intelligence. And if you have a team like that, what’s going to happen? You’re going to have differences of opinion. And if you have differences of opinion, it’s not going to be easy to settle them. You know, people are going to fight for what they think is right because they believe in you know, the success of the company and they want the same As a company, so you know, you want that energy in your company. So high performing teams tend to have a lot of conflict. But they also tend to figure out how to how to get the most out of that conflict, to create something constructive from the conflict. In other words, filter out the best ideas filter out the best ways to proceed. And then, you know, the hardest part is to get everybody to say, okay, we’ve thrashed this all out, everybody’s been heard. So, we’ve got to agree on what we’re going to do next. We cannot disagree on what we’re going to do next, after having had this battle. So, you, you know you want this culture. That is one that you listen to all these points of view, you get disagreement around the table, you’ve thrash it out, but then you’ve got to Sign up for what we’re going to do next. You know, you’ve got to get commitment that everybody’s going to try to make this a success. And so if if you find people on the team who are undercutting that commitment, who are trying to sabotage, you know, a decision you’ve made, then that’s unacceptable. You know, your point of view was heard, you made your case. We listened to you, you know, we included that in our consideration. But we decided to do this and not that. So you’ve got to sign up. You know, if you’re not going to sign up, then get out. But you cannot have people who are sabotaging you know, the decisions that you make as a team. So you can have a lot of conflict, if it is constructive conflict, that gets sort of the best ideas on the table and thrashes out a process for proceeding down the path that’s most likely to succeed. But you’ve got to have a culture That says, we should have the shared goal of getting to this outcome. And to get to that outcome, we’ve got to work together. And so you’ve got to commit to the decisions of the team. So that’s a very hard cultural balance to strike. But that was my epiphany, that conflict can be good. But there’s good conflict and there is bad conflict, when people start to call other people names, you know, when you have this personal antagonism, as opposed to this intellectual antagonism, then you can have a problem in the organization. So you as a founder, and everybody on the team has got to monitor conflict to make sure that it stays at the level of ideas and not at the level of persons and, you know, create that culture that says, You and I had a big disagreement about You know who our target market should be for this next product. And it turns out that we’re heading down the path that you suggested, I get that that’s fine. You know, I really want it to work. And, you know, let’s just monitor and see how it goes. But you’ve got to have that, you know, that culture in your organization. And it’s really it is up to the founders to make sure they model that culture. And so, founders disagree. Sometimes founders disagree in front of the rest of the team, and they’ve got to show how they resolve those disagreements and turn that into a model for the rest of the company.
Klaus Reichert 7:41
How do you imagine this happening with Bill Hewlett and Dave Packard?
Bill Reichert 7:48
So I mean, it’s. Yeah, it’s an interesting question. I don’t know enough about their individual personalities. You know, I was very fortunate to have met them both way back in the day when I first came to the valley. And they were the icons of entrepreneurship in the valley, you know, back in the day. So I have no doubt they had different skills and different personalities. I don’t I don’t have a deep insight into how they resolve their differences. But I do have to say that it was you know, sort of a side story on on Hewlett Packard the deal. So they made a big deal there was you know, a book written called the HP way. And sort of the big theme of the HP way was management by walking around. And that part of that theme was everybody he lit. Everybody worked in open cubes, right? And so there was this intention, intention of having a very flat organization where, you know, so that we we are all peers working together to achieve this vision for this company. You know, sort of by the time I came around, if you went into the HP headquarter building, you know, you saw this sea of tubes, right. And then as you walked toward the, the offices where bill and Dave were, what you did, what you discovered is that, oh, all of a sudden, the carpet got plusher and all of a sudden, the walls and the cubes got higher. And so you wind up in the Central Executive part of Hewlett Packard, the cubes had 10 foot walls. You know, they were 50 you know, 50 foot cubes. I mean, it was they It was not equal at all, and they had, you know, their assistant In walnut desks, you know planted out in front of their cubes. And you certainly could not saunter into their office and say, you know, I got a problem. I’m wondering if you can help me work this out. I have no doubt that way back in the beginning shortly after they left their garage, right. Garage
Klaus Reichert 10:19
What a great name!
Bill Reichert 10:21
for an entrepreneurial organization, right. So shortly after they moved out of the garage, you know, I’m sure everything was very flat and everybody was had the same you know, the same kind of desk. Yeah, the in order to scale a company though. You know, this is this was sort of another one of my epiphany is, is that boy, two epiphanies in one podcast, how about that right? Another one of my epiphany is, is that you know, we have all of this knowledge and wisdom and coaching around what it takes to start up a startup. Right. So there’s sort of all of these ideas around being lean and scrappy and adjusting. And, you know, we now call it product market fit and customer development, there are all these names associated with it. But the idea of starting a startup has always been, you don’t really know what’s gonna work. So you got to try a whole bunch of things and poke around and talk to a lot of people and experiment. And so we have all this lore about starting up a startup, but what what we’ve sort of lost is that you have to stop doing startup things in order to scale up. So you know, it’s, it’s not just, you know, you knew need to do additional things or new things, you actually have to stop doing some things and start doing things frequently that are contrary to your sort of ideal of what entrepreneurship is all about. So in order to scale up, you actually have to implement processes. You know, and, and the idea of, of formalizing processes is, is not just antithetical to a lot of entrepreneur, you know, seat of the pants kind of attitude. But it is actually a skill that a lot of people just don’t have. And so how do you formalize a process? Once you figure it out, you know what the right steps are? that’s a that’s a skill that that is not natural to a lot of entrepreneurs, but you’ve got to do that. Otherwise, otherwise, you can’t scale. You know, and you’ve got to figure out how to go from, you know, a team of people, all in the same room, all playing ping pong, all sitting around the same table, to you know, a team where a whole bunch of people you don’t see every day, but they’ve got to execute this for this company. So You know, as, as the team gets bigger, the way in which you, you recruit and train and communicate and, and, you know, make decisions has to change, because you’re not sitting around the same table. So you’ve got to put in place, you know, these other processes that you know, change the way you’re doing things and most entrepreneurs again, they, you know, they sort of want to keep that family feel that team feel that you know, sort of buddy feel. And you can have, you can have a nice company culture. But if you try to keep, if the founders try to keep sort of an umbrella around everything that’s going on in the company, they will bottleneck the performance of the company. So you’ve got to push things out to the edge. You’ve got to stop doing things together and push them out to the edge. And that’s again It’s not obvious how you do that. It’s not a it’s not a natural skill set. But it’s different than when you were starting up. And so. So being a scale up, you know, scaling your company requires that you stopped doing what you did as a startup and start doing different things. It’s got to be very intentional. And it requires skills that a lot of entrepreneurs didn’t know they needed or don’t have.
Klaus Reichert 14:29
It requires different skills than starting the whole thing. Is this the place the time where it’s might be good to switch the team or add new people to the team that are experienced in these areas.
Bill Reichert 14:45
So yeah, almost, you know, and this is, this is where you start having problems with the founding team, because frequently they don’t make that transition easily. So generally, the founding team lives loves being involved with everything. And you know, and the founding team, everybody is accountable together for everything. So when things go wrong in the early days, you know, it’s all eight of you who are responsible. And that’s kind of nice, right? But you know, as a team of eight, you can get a lot of things done together. And you know, each person has different skills, but still, you’re kind of doing everything together. When you expand out to 80, then, you know, you can’t be involved in everything and you have to specialize around specific skills. And so and so you need to start bringing in people who are more specialized, where that’s where their contribution is, whereas at the very beginning, you’ve got to have people who are capable of wearing multiple hats, right, so the founding team has a tendency to wear multiple hats. And they have a tendency to like wearing multiple hats, you know, so and but then then as you expand, some of those people have got to filter, you know, have got to focus down into wearing one hat. And you know, doing that job in a focused, effective, efficient way. And sometimes they don’t like that, you know, sometimes they, they sort of miss the, hey, we were all in it together. And now I’m just doing this. So sometimes that’s a transition that does not come naturally. And so you’ve got to watch that carefully. And then as you add people, one of the other mistakes a lot of a lot of a lot of founders make is, is their assumption is that in order to scale, I need people who can do specific jobs that I know what they should do. And so there’s a tendency to Want to hire worker bees? Right? I don’t need another founder. I just need worker bees. And the mindset is that a worker bee is an employee, the worker bee is a follower. Right? So we have this concept of leadership. That is that leaders are people who have a bunch of followers. Right? So actually, Peter Drucker, Peter Drucker actually defines a leader. He defines a leader as a person who has followers and his intent and his intent in that framing was you cannot make yourself a leader just by calling yourself a leader. If nobody follows you, you’re not a leader. So his intent was to tell managers that that in order to exist in order to be considered a leader, they’ve got to get people who are willing to follow them, rather than following them because they’re obligated to follow Right. So, but but I redefine leadership. You know, that’s leadership in a sort of corporate architecture, managerial sense, in an entrepreneurial sense. Leadership means taking responsibility for your domain and executing your domain, you know, as as the leader of that domain. And so what we emphasize to entrepreneurs is, you don’t want to hire followers. You want to hire leaders. You want to hire people who can execute at the edge. Because if the only people who can make decisions are at the center of the company, then again, you’re going to bottleneck your ability to scale. So you know, and then so what I like to do with entrepreneurial groups is ask them, I’ll ask you, you know, so what are the characteristics of a leader?
Bill Reichert 19:03
Right. So you know, and then the audience always, you know, you have about 30 different adjectives, right or nouns, right? Yeah. So there is no tight definition of what is a leader, as leaders, you know, they’re there. They’re visionaries, and they set agendas, and they delegate, and they give credit, and they have integrity, and they, they have enthusiasm. And, you know, they, they, they organize teams and their discipline, then they’re responsible and they’re accountable and right, you have all these words that define, you know, what you want to have in a leader. And you take that list of 32 words, and you say, Well, why wouldn’t you want everyone you hire, to exhibit these traits. Of course, you want everyone you hire to exhibit these traits, and so hire a team of leaders. leaders don’t hire a team of followers. Because if you just hire followers, you’re not going to be able to scale. So the good news, the good news is for good founding teams who want to continue to have a leadership role. You can continue to have a leadership role as long as you also hire additional leaders, and you give them that authority and responsibility to also have a leadership role in their domain. And so that’s, I think, a different definition of leadership than what we’re used to in sort of hierarchical management structures. In entrepreneurial structures, you have a very different dynamic, where scaling depends upon being able to execute at the edge of the organization and not funnel everything into the center of the organization.
Klaus Reichert 21:00
That means that you have to have a strong will, strong back, lots of energy also, and, and a culture that supports also a sometimes wrong decision. But that was made in the context of time, location, whatever and seem to be right.
Bill Reichert 21:24
Absolutely right. And that’s a, that’s a that’s a big theme, particularly here in Silicon Valley. And it’s a big issue all around the planet, which is, if you’re going to scale a company, you know, the difference between a mature operating company and a growing entrepreneurial company, is that you haven’t figured everything out as you grow. And so, in order to grow, you have to try things. And in order to try things, you’ve got to give your time The flexibility to make mistakes. So, you know, what happens in sort of traditional hierarchical corporations is they hire a whole bunch of people into the bottom of the organization, right? And then they give them jobs. And the people who don’t make mistakes get promoted, the people who make mistakes get fired. And so you create this culture that in order to get promoted, you know, you just got to make sure you don’t make a mistake. And so as you build, you know, up the ladder of management, you wind up with this culture of, don’t make a mistake. And that’s why most corporations become calcified and incapable of innovation. Because there’s no culture that allows for experimentation and making mistakes. But when you’re scaling a company and you’re trying new, you know, you’re trying to penetrate new markets with new products and new customer segments and new geographies, of course you don’t have the answers. A priori, you don’t know you don’t have a process yet. You don’t have it down pat. So you’ve got to experiment. And if you don’t give your team the the right and the opportunity to try something and make a mistake and fix it, and then go try something else, then you’re never going to figure it out. And so this is probably one of the biggest issues between cultures around the planet is this, you know, this willingness to allow people to make mistakes, or this willingness to try things and make mistakes. Is is much different in most every other culture outside of Silicon Valley, actually.
Klaus Reichert 23:51
Plus it requires you to have different hats. I mean, what I just had to think of is we were talking about starting up having discussing big ideas, lots of opportunities, then adding funding to that creating teams that are able to work in a very flexible way in the very beginning, that are changing themselves in a way to scale up something as the organization and then we are talking of, say, a more mature company, if there is a beginning there is always the possibility for an end also. So, which is quite a natural thing, but actually you don’t want to end a company, you want to keep it alive, you want to sort of re innovate the whole thing over time and keep it alive and moving and possibly growing or changing or whatever the the big target is. So this requires to have actually different hats, in a way, because at one point, you have to scale the whole thing. And then then next point thing, you have to be the entrepreneur again, even as an employee that was hired for a completely different task. And I think that’s very important to sort of stimulate that entrepreneurial gene in a mature company. What that has become, that has become sort of a slow moving organization.
Bill Reichert 25:27
Yeah. And there’s now they’re, you know, there’s a lot of research now on mindsets, right. And, and again, I think, you know, it’s been happening all over the world, but particularly here in Silicon Valley. We give credit to a professor at Stanford by the name of Carol Dweck, who talks about the difference between a growth mindset and a fixed mindset. And, you know, a growth mindset is the mindset of someone who is open to new ideas who is willing to experiment Who is, is who is able to deal with uncertainty who is willing to make mistakes and correct themselves? a fixed mindset is someone who just wants the world to be the way the world is now, don’t change anything, just let me keep doing what I’m doing. So I don’t have to worry about change. Right. So, you know, that’s a little bit of an extreme framing. And people you know, when I when I talk about, you know, this need to develop a team of leaders in order to scale and execute at the edge. You know, people have two objections they come up to me with and they say, Bill, sometimes people, they just want to come to work, and get their job done, and earn a paycheck and go home. And I say, yeah, you know, in every organization, there are jobs that have become fixed processes, where you do need people To manage these fixed processes and, and maybe there are people who have that mindset, who really, you know, their job, their, their, their, their need is to have a paycheck to take care of their family, not to sort of have a vision to change the world, right? So that’s okay. You want to make sure that they’re aligned with the vision of the company, that they’re aligned with wanting, you know, to be part of this culture. But you don’t have to have everyone in a highly dynamic, highly uncertain role, where they’re sort of trying to reinvent the way things are being done at the edge. So that’s, that’s fair. You know, you have a you have sort of ranges of, of mindset that you can accommodate. And then, you know, the other you know, the other objection is, but wait a second bill. You know, you you don’t Wanna you don’t want everything to be changing all the time? Sometimes, you know, you just need to sort of crank it out. And that’s, you know, and that’s roughly true. That’s what robots are for. That’s what software is for. Right? I mean, so. So what you want to do in an organization is wherever possible, if you’ve got a repeatable task, you don’t want a human to do it, you want technology to do it. So you know, try, you know, try as much as possible to automate these repeatable tasks that you know that you need to get done. And, you know, that’s what you know, big old corporations are trying to do, you know, from from the inside, is they’re trying to take all of this repeatable stuff they’re doing and automate it. You know, which is all you know all about AI and the factory of the future and, you know, robotic process automation. And the job of the future, right? So, it is it is true that you need to have some stable processes executed on a repeatable basis. But you want to hire people who know how to automate those processes rather than hiring people to execute those processes, because humans are almost always going to be less perfect at executing repeatable processes than technology. Right. So, so, you know, that’s that really, you know, screams for the need for our workforce, to have this growth mindset, to train, you know, to train, you know, young people and older people, to to, you know, to have this willingness and skill, to deal with uncertainty, to experiment to try things, to actually question the standard way of doing things to think About innovating their jobs to think about innovating, you know, some aspect of the company that they’re part of. And I think that will benefit everyone. If we can do that.
Klaus Reichert 30:12
Bill, is there any upcoming technology trends that you see and that you want to share right now? Like, quantum computing or stuff like that?
Bill Reichert 30:24
Yeah. I mean, so it’s interesting. We, you know, we, in terms of the next big thing, it was in, you know, in the old days in the valley, it felt like sort of the next big thing came in these sort of discrete waves, right, that, you know, we had, we had mainframe computers, and then we had mini computers, and then we had personal computers. And then we had IoT and we had telecommunication systems and then we had cell phones and then we had digital cell phones. And then we had smartphones. And, you know, we had connected computers. And then we had Ethernet wiring and networking. And then we had the internet and, you know, so, so sort of in, in all these different domains of technology, you seem to have these sort of staged serial innovations. What what has happened now is that the entire world has opened up to innovation. And so, you know, pretty much everything is trending. We have, you know, Ed Tech, and we have ag tech, and we have food tech, and we have reg tech, and we have thin tech. And we have you know, AR, and we have VR and we have xR, and we’ve got, you know, we’ve got autonomous everything and we have, you know, Internet of Everything. And we’ve got smart devices and we’ve got sensors, we mean, everything is open to innovation. So and that doesn’t even touch on In the life sciences, you know, we’ve with CRISPR and some of the other technologies in the life sciences, we have just everything opening up in terms of, of health tech and med tech and, you know, monitoring wellness as well as therapies and drugs and immune therapies and gene editing and biopharma. I mean, it’s amazing what is open to innovation. So, you know, my, my, my answer to this, what’s the next big thing type of question is everything is trending. It’s hard to find a sector of our world where there isn’t, you know, highly disruptive, or at least, you know, dramatic changes in the way things are being done. And sort of this COVID crisis is, you know, right there an example of boom, all of a sudden, we’re conducting everything You know, on these video conference tools, and so it’s, you know, good news that that we got the world wired, and we got the bandwidth up, and we got these video conferencing technologies up, you know, before the COVID crisis hit. Bad news is it’s still a crisis, unfortunately. So, you know, I’ve been spending a lot of time, I’ve been spending a lot of time looking at the future of computing. And it does seem as though we have had a, you know, we’re at an inflection point in the computing world. We, you know, we’ve gone through this whole architecture evolution, you know, sort of, from mainframe down to, you know, IoT, and then out to, you know, out to parallel processing and these massive supercomputers that are no longer sort of big central processing units, but rather sort of an A thousands or millions of parallel processors that represent the way we do supercomputing. Now. So what’s happened recently is on the on the hardware side, there’s been an explosion of innovation in the design and architecture of the hardware. So we have seen on the sort of classical computing front, we’re seeing this whole new chip types that are evolving, you know, we had the CPU and the risk, and then the GPU and the TPU. As as AI and the need to support artificial intelligence algorithms and deep neural networks. created that opportunity for a substantially new architecture for computing. But now with that, Big Data and other things that are coming along, we’re seeing the emergence of these new interesting architectures that are characterized by, you know, terms like data flow architectures, where companies like, you know, a company we’ve been looking at, called Sam but Nova is coming out with a new architecture for a chip that promises to be another order of magnitude leapfrog ahead of the GPU architecture or the TPU architecture for, you know, sort of massive data processing and artificial intelligence, you know, and then you go from there, you’ve got these analog architectures that are evolving. And then these neuromorphic architectures that are that are evolving, and then these photonic architectures that are developing and these quantum computing qubit architectures that are developed So you’ve got just a whole bunch of, of, you know, beyond the lab, beyond theory, commercial activity in new computing architectures that are going to hit us over the next three 510 years. And so it’s gonna be a pretty dramatic. It won’t be a revolution, but evolution of the whole computing fabric that I, you know, I think is just amazing and, and fascinating. So that’s, you know, that’s I, let me let me sort of answer the question with that, that, you know, keep your eye out for these evolving hardware architectures and what they will enable in software.
Klaus Reichert 36:53
Bill Reichert 36:55
Klaus Reichert 36:57
Thank you. Thank you very much for that sage advice for the other innovators. More than 5000 people like you on Twitter, I like you, too. Thank you very much for being part of the 2.5
Bill Reichert 37:11
Okay, Klaus, thank you so much. Great fun, always a pleasure. Best of luck to you, you know, stay healthy, stay safe.
Klaus Reichert 37:25
That was my conversation with Bill Reichert. In the show notes, you find a link to the episode on the 2pt5 website, where you’ll also find a list of links and a transcript of this conversation. I am very grateful to Bill for taking the time for this conversation in this difficult time. Thank you also to producer Immex for creating the music of this show. Creating this podcast is also an adventure for me. It is a labor of love, lots of work and great fun. Hosting and producing the podcast is broadening my own horizons and helps me to grow as an innovation coach. If you enjoy listening to these episodes, please show your support. Subscribe on your favorite podcast app and rate the show on podchaser.com or wherever you listen to podcasts. That way you help others to discover the show. And while you’re at it, please follow the podcast on social media and tell your friends. You find the links on the show’s website at the2.5.net My name is Klaus. The podcast is brought to you from Baden-Württemberg in the Southwest of Germany. Thank you for listening to the 2pt5 – conversations, connecting innovators
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