“Remember, you’re telling a story.” Appropriately, that’s where this one begins for me. I wrote those words down when Jessica Peltz said them to a roomful of people who arguably are some of the best storytellers in the world -- writers, artists, designers, strategists, media and account people -- who were hand-picked to participate in KBS+ Ventures’ Winter 2014-15 “Fellows” program, where over the course of a dozen sessions they would be trained in the best practices of becoming an entrepreneur and launching a startup.
Peltz, a long-time venture capitalist, startup incubator and entrepreneur mentor, joined KBS+ Ventures as its director last fall to oversee its strategy, manage its portfolio of equity investments, and help the rest of KBS+’s organization benefit from its connections to the VC and startup world, and the Fellows program is one of them.
The program was originally conceived, developed and taught by KBS+ Ventures founder and former chief digital media officer of The Media Kitchen Darren Herman and Ventures director Taylor Davidson, who have both moved on -- and this was the first run by Peltz and Josh Engroff, who succeeded Herman in both the Ventures and TMK, and they promised to shake things up and make the classes much more practical, real-world, and something the Fellows would be able to apply in their current jobs and ideally, their future ambitions.
I had written about the Fellows program several times in the past, but I asked Peltz and Engroff if I could enroll in their first one so I could write a first-person perspective story on it. Full disclosure: I told them I wanted to audit the classes, because I was also in the throes of an early-stage startup that I was bringing to market, and I wanted to learn as much as I could from them because I believed they had a unique understanding of both venture capital and media, and frankly, I couldn’t think of a better way to learn what I needed to know. What you are about to read are the highlights of what I learned, and some of the people who taught it to me -- not just Peltz and Engroff -- but a series of guest speakers ranging from VCs to startups, as well as the Fellows themselves, two dozen of the best and brightest young turks from a cross-section of disciplines and KBS+ companies who were divided into a half-dozen teams that each developed a venture to bring to market over the course of the semester.
The session in which Peltz gave her “you’re telling a story” speech was the first of two “demo” days at which the teams got to present their ventures to a group of startup founders, venture capitalists and industry executives. The teams were competing for four slots that would go on to pitch in the final demo day that would decide which one won, so there was a lot at stake for them. Think Shark Tank funding meets Madison Avenue pride.
As someone who writes for a living daily, let me tell you that Peltz’s advice is easier said than done, and the more important a story is to you, the harder it is to tell. That’s why this particular story is weeks late. It was so important to me that I wanted to tell it right and the result was weeks of anguishing, organizing, drafting, writing and rewriting -- a lot more than we normally do at MediaPost -- to get it right. I’m not sure this version actually will achieve it, but at some point, you just have to tell your story, as good or bad as it is, and put it out into the world for other people to judge. And that’s exactly what the six teams of Fellows were about to do: Put their stories out in front of a group of seasoned experts to rip apart, judge, and pick some winners and losers. Along they way, they would get some advice. Amazingly, most of it was simply what Peltz said to kick things off.
I decided to follow one of the startup experts -- Jeremy Levy, founder and CEO of Indicative -- around as he met with each team, listened to their pitches and gave them advice. Like the other startups who judged, advised or presented during the course of the Fellows semester, Levy’s Indicative is one of KBS+ Ventures’ portfolio companies, and Peltz and Engroff integrated them as much as possible to cross-pollinate their businesses with the Fellows, whose day jobs often involve working with startups to find innovative solutions for their clients’ businesses.
In each one of the Fellows teams Levy met with, he listened to their pitches, made some suggestions about their style, their area of focus, some technical details about their business models or their go-to-market strategy and even their fundraising approach, but mostly he focused on their story, reminding each one of them about what Peltz said to kick things off. In the back of my mind, I couldn’t help wonder if Levy wasn’t also somehow inspired by that idea -- the simplicity and essential truth with the way Peltz expressed it -- and wasn’t just letting it reverberate around his mind as he listened to and advised the teams.
In one session with a team developing a venture called “Breakfaster” -- a business that enables companies to provide fast, easy and nutritious breakfast meals to busy workers who might otherwise skip it -- Levy offered some technical advice, pointing out that the millions of dollars they were seeking to raise at this early stage wasn’t realistic and that would be a non-starter for most potential investors. He advised them to raise just enough money to develop what they needed to get to the next stage of their business -- a recurring theme that was echoed throughout the Fellows semester, that the main job of startups and their founders is to achieve “traction” points. Sometimes traction is raising funds. Sometimes it is a product innovation or breakthrough. Sometimes it is adding a key player to your team. All of them are important to a startup’s success, but not all of them happen equally, so the main point is to focus on the thing that is moving the startup forward. And that largely is the story the startups are telling: Why their business is working or will work based on achieving some traction.
Fundamentally, they are proof points designed to convince a key stakeholder -- usually an investor, but sometimes an advisor, a supplier, or another member of the team -- that this thing can work, and already is to some extent. It’s the spectrum between having an idea -- a founder’s so-called “vision” -- and making it real.
Much of what was taught during the ten Fellows classes had to do with refining and perfecting that narrative and taking the idea from concept to execution. Like most stories, almost everyone listening or telling it had some slight variations on the theme.
For Peltz and Engroff, much of the focus during the classes had to do with the foundation elements of a startup: the product, the market, and the team. Coming up with the right “product/market fit” is essential, they said, but having the right team to execute and manage it, was just as, and maybe even more important, they said.
The reason, explained Engroff during one class, was that it is possible -- indeed highly likely -- that a product could be modified to fit a marketplace, if it has the right team in place that can execute it. Conversely, he gave examples of a number of successful products that started out aimed at one market, but ended up successfully servicing a different market, because the team understood how to pivot.
The theme of iteration -- testing your idea and product execution, learning from the results, and adapting and repeating the process over and over again until it is either perfected or the team learns there is another path -- was the course’s mantra, and was embodied by all the literature, videos and extracurricular sessions that were required as part of the class, especially the book “Lean Startup.”
Engroff, a veteran of many startups from the earliest days of the digital revolution, drew from his own personal experiences many times. Once he even circulated his first startup document, a terse business rationale that was more than an inch thick and was passed around the Fellows’ roundtable like some ancient sacred scroll.
During that class, Engroff summarized the lean startup ethos that had shifted the world of startup innovation from the old “waterfall” approach -- releasing a product only after it was “perfected” and then watching as it either succeeded or failed in the actual marketplace, vs. the lean approach of constant iteration and innovation.
During the semester I struggled, as I did while covering previous Fellows semesters, to understand what the benefit was to KBS+ in expending the time and resources to the Fellows program, since it is almost all theoretical. No actual venture has been launched to date, and Engroff is proud to point out that there has been zero turnover from employees who have participated in the program, even though they theoretically were being trained to develop ideas that would lead them to strike out on their own and leave the organization.
In the end, I realized that was one of the points -- the so-called “ROI” for KBS+ -- that it simply makes the Fellows smarter, happier and more innovative people that end up loving their organization even more for investing the time and resources in them. It’s not entirely altruistic, because in addition to making its staff better people, Engroff believes it sends a powerful, if intangible, signal into the marketplace that KBS+, and its sister companies like The Media Kitchen, are a great place to work, because among other things, they invest in making you a better person. And in an industry whose greatest assets aren’t fixed things like machines or real estate, but the people who work with them, being a place people want to work is a pretty important thing.
Not all the experts who presented at the Fellows classes had such altruistic bents. When Brian Cohen, a serial entrepreneur, venture capitalist, author and chairman of New York Angels spoke to the class, he asked them if they knew what he did.
The Fellows gave standard replies such as, “you invest,” “you help startups,” etc., to which he said, “wrong, I exit.”
By “exit,” Cohen was referring to the term used to describe when a VC converts their equity investment into a return -- ideally a monetary one.
“Oo-oo, exit,” Cohen said to the class, sounding quite sexual and a bit lecherous when he intoned it. That’s what he said excited him about the business and gets him to invest in a startup. Not good ideas. Not product/market fits. Not even the team. It’s all about the exit, he said, and those other elements were just ways for him to understand if the potential for an exit is there, and how long it might take to get to it.
Cohen hammered this point home, because in the he said/she said world of venture funding, whatever story a startup founder thinks they’re telling, that is what a VC is hearing.
Cohen’s point may have been extreme, and during the course of the Fellows semester, Engroff and Pettz talked about other forms of returns on venture capital investment that were not so bottom line -- at least not in the capital return sense. They spoke of new venture models being built around so-called “impact” companies whose business models -- and returns to investors -- are tied to societal benefits that can be measured and reported alongside other quarterly metrics like earnings.
Before, during and after the Fellows program, I kept asking Engroff and Peltz if they could explain the turn on KBS+’s investment for the time, resources and energy they put into the Fellows program. They conceded much of it were intangibles that could be attributed to goodwill like esprit de corp, making their organization happier, and attracting better talent and clients to work with KBS+.
But they said there were real tangible benefits too, like training their organization to think better, smarter, faster -- and hopefully -- more iteratively and innovatively, like a startup. This in the end, I think, is the chief benefit of the Fellows program and why KBS+ has stuck with it, and whatever return it puts against it. Whether it was the seminal version developed by Herman and Davidson, or the more practical, real-world version refined by Engroff and Peltz, it is about creating a better organization. It is not, as Cohen might suggest, about the exit. It is about being in it for the long haul. About making a commitment and staying committed.
There were many innovative venture concepts developed during the course of the Fellows semester, especially the final four that made it to the
last demo day: Breakfaster (described above); Talktivity, a service helping people learn a new language by pairing them with professionals and mentors who could teach them and immersing them in
environments where they could practice them; PopOut, a dating service that enables people to meet significant others based on common interests generated from pop quizzes; and GearedUp, a sharing
economy platform that enables skiing and snowboard enthusiasts to rent high-end equipment for the day.
From my perspective, all of them were worth investing in, not just because of the ideas, but because of the teams that developed and might execute them. I identified GearedUp early on in the Fellows sessions as being a winner, and it did win the final competition. I liked it because it wasn’t just about pairing powder enthusiasts with equipment, but it was really about creating a new kind of “lean product experience” where people could constantly sample and learn what kind of equipment was actually best suited for them -- and suited best for particular conditions. It wasn’t about renting, convenience, etc., so much as it was about an opportunity to experience an outdoor sport with equipment you wouldn’t otherwise had an opportunity to experience. I am not a powder enthusiast, but I am a golfer and I told the team I believed the idea could be extended to any category where enthusiasts could have a different experience by using different equipment in different conditions.
Following their win, I asked the team what they got out of the experience, and whether they would actually try to bring GearedUp to market. They glanced sideways at each other, and I could see they had the bug, but I couldn’t figure out whether they had really connected as a team.
The teams participating in this semester’s Fellows program were put together randomly, and one of the things Engroff and Peltz said they would do differently in the future is allow the Fellows to create their own teams.That said, all of them learned by being thrown into proximity with others and had to find common threads to build their ideas and innovations from. The Breakfaster team all had similar experiences skipping meals due to the harried lifestyle of young urban professionals. The Talktivity team all had first-hand experiences of the frustrations associated with trying to learn a foreign language. All came together around these common themes, distilled them into a simple proposition that fit a logical market need. And all of them came up with a simple way of expressing it. They told a good story.