Scott Gerber: What Major Mistakes Are Young Entrepreneurs Making?
With mainstream media consistently glorifying the experiences of an entrepreneur, there have been many misconceptions of what its like running a startup. Serial entrepreneur Scott Gerber sets out to give us sobering thoughts.
As a young entrepreneur himself, Scott has achieved a lot of things at 29 many of us only dream of. He is the author of the book Never Get a “Real” Job, Founder of the Young Entrepreneurs Council (YEC) – an invite-only organization comprised of the world’s most successful business owners, and the Co-Founder of Gen Y Capital Partners. However, what is amazing about this is that Scott managed to accomplish all this without the help of his parents and successful mentors to aid him.
I recently had the pleasure of interview Scott over Skype about the biggest mistakes young entrepreneurs today are making, why focusing on creating a profitable business instead of creating something to sell will be more beneficial long-term, and his biggest weaknesses and how he overcame them.
Text format interview is below:
You have been a vocal champion for the Gen-Y entrepreneur. With the amount of companies that are starting up in silicon valley and the world what’s your opinion on the industry that’s shaping rapidly?
You know, I think that young people in general are the best suited to start any business because they have the least amount of responsibilities in the traditional life experience sense. And I’m a huge fan of it, obviously, and I cheerlead pretty regularly for youth entrepreneurship and do that through our Young Entrepreneur Council and a variety of other platforms that we have. I think that it’s one thing though to be sort of the “Rah Rah Cheerleader”; it’s another to be saying that it’s sustainable. And I think that we are moving towards a scenario now where the landscape of career is just changing in general. And I think it needs to be something that is self-sufficient and I think it can be. I think that it’s starting to just basically not just educate young people that entrepreneurship is a viable career path but also giving them a sense of what it really takes and what it really means beyond the tech-crunched headline; beyond being featured and in that stead the other thing; and really understanding what it means to start a business and run that business. It is now that we have to let them take hold so that you don’t just end up starting a business that gets “eaten” so to speak by this series At-tech. You know, “Crunch now” or a lot of the other things that are going to hold but they’re just moral proliferation of these kinds of businesses.
Do you think more and more young people are realizing that they don’t need a college degree to succeed in life?
You know, I would certainly say that I think college is not for everyone. I think it’s a personal choice, but I think it’s one that needs to be made with the right understanding of what that is going to mean for your life. If you’re going to be a doctor, if you’re going to be a lawyer, then yes I would highly suggest going to school. If you’re thinking about being an entrepreneur, I would question it at the very least. And the reason I say that is not because you don’t need a higher level of education or you don’t need a level of – frankly – social currency through relationship building, but today with debt and all the kinds of things that college decision comes with, if you’re going to be an entrepreneur, you might strap yourself to the point of leaving school to then have to get a job to pay your college loans. So you have to understand what the realities are, based on the decisions that you make.
What would you say are the biggest mistakes that young entrepreneurs are making?
Oh boy. I’ll just talk about the ones I made in the past. When I wrote the book, “Never Get a ‘Real’ Job” it’s basically about the life-changing experience that I had when I was a 21 year-old starting a business in college that I took in my junior year to be successful and my senior year bankrupted it and all the lessons learned along the way because I can identify with that exact question because I did it. I spent too much money. I tried to keep up with the “Joneses” if you will by flashing the cash, if you will, to try to impress clients when that’s not really what is necessary. I got too big office spaces when I shouldn’t have. So there’s a lot of things that you will learn that are hard lessons, one, that there’s no book, no guru, no nothing that can teach you other than life experiences. But what I also say is that I think there are some very specific traits that Gen Y as a whole suffer from – myself included.
[highlight color=”eg. yellow, black”]The first is… I’m not going to go down the whole “Entitlement” path but what I will speak on that is just say, we were brought up very differently than our parents and their parents, in the sense that our parents were the first generation that really strived to not just make a better life than they had for us but really went above and beyond what any generation has done to make it so we will never fall off the pedestal; to make it so we will never ever feel pain in some ways; never lets us experiment because that experimentation in theory was not along the path they had designed for us in their minds. Entrepreneurship wasn’t that – really in any stretch of the imagination – a career path of choice and certainly not considered a traditional path. If anything, it’s a renegade choice, if anything. And so I think because of that, the stink of failure has the stigma of, “Oh my, my poor baby is going to be hurt!” and sort of stuck with us. And so the problem is we lack support systems and we don’t know how to properly build those support systems because we think that just leads to confrontations.[/highlight]
I’m the first one to say that I didn’t have my parent’s support for many years about being an entrepreneur until we finally had this sort of coming together. And that hurt me personally and also hurt my business because I never felt like I could fall back and have a conversation that didn’t lead to, “Well why don’t you just go get a job?” And so I would first say, having the conversation – especially when you’re a young adult – you need the people around you to support you. You need them to understand to the best of your capabilities. So allow yourself to get pissed off but just frankly making sure that you’re having an open dialogue with them, so you can rely on them when times are hard – not necessarily for business advise but just for that infrastructure.
[highlight color=”eg. yellow, black”]I also think that we tend to be a generation that needs to also understand that face-to-face communication, not just social media, is not dead. I can’t tell you how many times I’ve spoken around the country or mentored young people around the country and they all say, “Oh what’s the best social media platforms? What’s the best…” and I just say, “The best social platform is what we’re doing right now. We’re communicating face-to-face. We’re talking to one another. We’re building solid relationships.” And I think people in this generation are somewhat losing that because they’re getting stuck behind something like this: Skype as an example, instead of meeting people. And while that can’t be said on all cases, the key is, building real relationship takes time; it takes energy; it takes real understanding; it takes trust. And that’s all build through human interaction.[/highlight]
So those are some of the key things that I think we can master and take some notes from the old school generation, we probably better for. But there’s no question that this generation is geared to be – and in my opinion is – the most entrepreneur generation in history. We just need to give them the right foundation so they can take that but also scaled to a point that makes sense, given lessons learned and hard one from previous generation as well. to
In a past interview you mentioned that you want to teach young entrepreneurs to create businesses that are capable of generating real revenue and income that grow overtime. Do you think that this notion of creating a business and exiting huge a few years later is unrealistic thinking? Lastly do you see a big trend in young entrepreneurs thinking like this?
Yes, and it kills me – emotionally and spiritually and everything in between. Look, at the end of the day, every business I’ve ever built has had cash flow. And so I certainly don’t want to disregard the tech industry because I understand that it’s a different business model. There are certainly some businesses that need mass scale and in order to get mass scale, they need an investment capital. In order to get an investment capital on the tech space versus, let’s say building a service business, it’s based on certain growth metrics versus target revenue metrics. So I understand that there are core differences between those business models. [highlight color=”eg. yellow, black”]What I will say is I need more than enough people that are 18-20-somethings that simply say, “I’ll figure out the money equation later.” And I think that’s the stupidest way to think about business because at the end of the day, less than probably 2% of people that start a business are ever going to see a dollar of real investment money. Something that’s going to allow them to live – I don’t want to say “comfortably” – but live in a way that they can at least pay their overhead, eat some food, and code or what-not in between.[/highlight]
[highlight color=”eg. yellow, black”]And I think building to this notion that you’re going to build to an MVP with the only goal is to get investment money I think is nonsense and you’re seeing what happens: the series’ A-crunches is very real right now. A lot of businesses this year and probably the next two to three years to come are not going to find that investment money because there is a mass consolidation of products and services that a) can get that kind of revenue and b) that have the sustainable growth necessary to build what ultimately a VC is going to want to be part of. So I think that when you’re thinking about businesses to start, you need to say to yourself, “If I am going to start this business tomorrow, how many months is it going to take until maybe, if I didn’t get investment money, can I actually pay my rent; can I actually for basic food; can I actually pay for basic needs?” If your answer is, “I don’t know” or “I don’t think that’s important”, I think you’re going to learn the hard way real quick that it is important.[/highlight]
As an angel investor, apart from having a great idea, what are the big factors that will compel you to want to invest in a company?
Execution and team. Hands down, execution and team. I don’t care about your idea, I really don’t. I’ve seen enough. I see every day, some of the most successful young entrepreneurs in the country that I am proud to be the leader of through YEC have shown me what they are working on. And they are the first ones to say, “Yeah, we hope it works out” but they know that they’ve built this massive infrastructure that can help them to execute on these ideas. So the fact is, there are a million and one great ideas. I’ve probably just in – what is it today? Monday? – you know, when this was recorded I’ve already been sent ten pitches today and I’m the first one to say, “Great, show me what that even means.” Like, “You have a great idea, now what?” So I think understanding execution is the first step; [highlight color=”eg. yellow, black”]with execution that means you’ve demonstrated not just that you have an MVP but that you’ve demonstrated the capability – again, this is my specifics – of demonstrating the path to revenue or that you are capable of generating revenue or you’re generating some revenue that now with more money, you can get that revenue to the next step by maybe bringing down your cost of client acquisition or creating a mechanism that allows you to shrink your cost exponentially. Whatever the case may be, understanding that you are not just another idea but you can actually get to a top revenue – that’s the first thing.[/highlight]
[highlight color=”eg. yellow, black”]Second thing is, Hidden Targeted Metrics. I never invest the first time I hear an idea and I could lose investments that way but frankly, I don’t care. I would rather be a part of the journey that helps an entrepreneur get to what I believe is enough of a belief system that they can actually really build a business. So even if it takes me four months to make a decision, but they are getting back to me every week saying, “Hey, this week I accomplished this; we moved the traffic to this website by 10% by doing this” I’m seeing growth and that’s proving to me that they can actually do what they say.[/highlight]
As you are saying, a lot of these gurus and even people like yourself, you have this persona of being a fearless leader to our geniuses at the craft that will stop at nothing to complete their goal. Everyone has a weakness or insecurity and what are yours? How have you overcame them to aid in your success?
I’m the first one to say that if I have to run my own company, I’ll be bankrupt. I’m not an operator – I’m not. And it took me many, many years to come to that conclusion because when you’re young and when you’re a pompous ass you think everything you do is magic. You sometimes don’t self-analyze yourself to the extent that you should; you realize you’re failing because of yourself. When I learned at a very young age, thankfully, was that there is a time for me to step aside and that’s when things actually have to get done. And it’s not because I’m not responsible or it’s not because I couldn’t do certain things. But I’m just… I’m not good at it. It’s not what I do. I can lead a company, I can set the strategy, I can set the vision, I’m a great vis-dev guy, I can speak – hopefully – articulately to people, but when it comes to getting stuff done… Okay I’ve signed this partnership with this company; a deal could be worth millions of dollars, I’m not the guy who’s going to go and task it out, oversee the process get it done. Because it’s a totally different skill set.
And so my biggest weakness is I can’t run a company. My second – and I’ll tell you how I solved both of this problems because it’s the same actual thing; the same solution – the second one is not only can I not run a company, but I probably for all stretch of the imagination should remove myself as much as possible from the day-to-day because otherwise I drive people around me crazy with the lack of focus. Because it’s one thing when you’re at the top, on the CEO position, you’re unfocused nature – let me say this right because if it’s misconstrued it’s not going to be appropriate for what I’m trying to say – [highlight color=”eg. yellow, black”]it’s important for CEOs to be as unfocused as they are focused. Because the second that you’re tunnel visioned, is the second you’re not thinking about what competition is doing, what innovation needs to occur, you’re thinking about six months and not six years, so there’s a level of you need to be sort of well-rounded to know when’s the time to get stuff done in this time period to hit those numbers. There’s a time you need to do that but you also need to be thinking about what’s the next area we’re going into. What a good CEO knows how to do is to maintain expectation with his team and only takes right people around him for best advice. So that when he decides or she decides to go and explore the unchartered territory, that she’s not having a conversation with the entire team about it and she’s not trying to get feedback and move people around. And that’s what a good operator does: they keep people focused on their task while the higher level of the company is really figuring out what are the moves, strategically.[/highlight]
What are some words of wisdom that you live by that you can give to our viewers and also is there anything you want to promote?
I would like to whore myself out… No, no.[laughs] So I would just say check out our Startup Web program, soon to be renamed Startup Collective. It’s a free mentorship program with YEC and every week you can talk to different YEC members with your business problems. There’s no fee associated with our live chats but that’s it: mystartupweb.com. Obviously checkout the “Never Get A ‘Real’ Job” book if you think that’s a good fit for you.
Then my advice is I think sort of saying what I said earlier which is, [highlight color=”eg. yellow, black”]just be afraid to never have been. I think you would be shocked how unbelievably fulfilling failure can be, when you can move your life in a way that you can learn and move, learn and move, learn and move versus sort of being afraid to do so because you think that the sort of system around you is the best way to build to that level of expertise or where you want to go in your career.[/highlight]
[highlight color=”eg. yellow, black”]Start now. Stop the bullshit. Don’t think for a second that if you just wait a little bit longer it’s going to get easier or you’ll have more experience, when the reality is that why the Zuckerbergs of the world move fast and break things is because that’s the way we innovate. That’s the way that as individuals we can move ourselves into such incredibly strong entrepreneurial direction that you never thought was possible but you just will figure it out. And I would advise everyone to think about at the end of the day what’s most important to you and just think of a way to start now.[/highlight]