Business Insight: This episode Venture Acceleration with guest Andrew Corbett

Welcome to Business Insight. I'm Peter Marks. My guest today is Andrew Corbett, PhD. He's a professor and director of the Venture Accelerator Program at Babson College. Andrew, pleasure to have you with us.

Ah, it's great to be here, Peter. Thanks for having me.

Why don't we start just— tell us what is a venture accelerator?

Sure. I think maybe some folks in your audience would be aware of what incubators are that incubate businesses. And for us, we use the term accelerator, and it's a little bit different. So the John E. and Alice Butler Accelerator, Venture Accelerator at Babson College, what it does essentially is it supports and advances students and student ventures throughout all phases of their business. So if they're students who are just starting, with some opportunity exploration, trying to figure out what they might want to do, all the way through exploring that business, building it, launching it, and growing it out.

And what are the types of paths that you see people going into entrepreneurship that might be helped by the Venture Accelerator?

Well, actually, it can be everything. You know, Babson College, of course, is a business school, but it has a strong liberal arts foundation, also a strong technical component. A lot of our early courses and programs have a strong IT technical component. So we'll have everything in there from tech plays, you know, these days you see a lot of students with some sort of technology app, internet, you know, web presence, to packaged consumer goods. Actually, just I think a couple of months ago, Food Wine magazine noted that Babson was one of the 5 most interesting campuses in the country for food. So there's a lot of packaged food goods as well, and everything in between.

In terms of the venture, I mean, can it be anything from somebody buys a company, a family business, um, in other words, how the ventures tend to come about?

Yeah, sure. Um, I think what we have a lot are students who are second-generation family businesses. We have a lot of that at Babson. Uh, so those students often come in looking to think about maybe not the traditional startup, but in some ways it's like, okay, here's what my family business does and we've got to move in a different direction, so what can I do? Of course, some of them are starting their own ventures, and then there are students who are trying to start their own thing with maybe a family member or an outside partner or someone else. It goes all across the board.

Now, you start out with some kind of an infrastructure to surround them. Can you talk a little about what the infrastructure is?

Yeah, sure, of course. So we have, we have a design, we have great, a great design that allows students to begin sort of exploring. And we have a bit of a pyramid design. And so what it is, students come in at the beginning and they may have an idea. They may just want to be an entrepreneur. Of course, we get a lot of that at Babson because of who we are. And so they're exploring. They're trying to figure out what it is they might want to do. They don't have a solid idea. They don't know what industry they're in, but they have some thoughts and they kick it around. And they'll move from there, and we have mentors and faculty guides that help them with that. And then once they get something—

Now let me stay for a sec, a little more with the explore. What's the process like? In terms of I have an idea, I'm a student and I have an idea, just what happens to me?

Yeah, I think a lot— sure, I think a lot of people would think to themselves, well, one thing, we're going to start to do some analysis of industries and do this. And that sort of information is helpful. You have to understand that. But what we want students to do is to take some action. The only way you can really figure out if you can begin to craft this idea is to get out and socialize the venture. So they're going to explore. I'm going to tell them, and all of our advisors on campus and that work in the accelerator are going to tell them, okay, you've got an idea, let's get out and talk to people. Have you got an idea for this maybe product or service? What might it be? Go and talk to people. It's the only way you can, you know, recognize whether or not you've got a space in there. So that's the kind of action we'll get them to go out and do. And we'll teach them how to interview properly so that they gain information. We'll teach them how to, you know, do some industry analysis, find out who their competitors are, find out who else might be out in the space. But it's all predicated on getting out there, taking some steps that aren't going to cost you any money at this point. It's just going to cost you time. Go out and figure out how you can shape and start to form this idea that you have.

How often among— at this stage, do people either drop their idea because they realize it's no good or make major changes in where they think they're going?

That would be all the time, Peter.

Right?

All the time. Nobody has a fully formed idea. Now what I like to do in my class and in some of the workshops in the accelerator, I sort of run from one side of the room. And I'll start over here and I'll go, OK, this is where you are today. OK, you're over here today. You've just got an idea. You don't know what it's going to be. And I'll go to the other side of the room. That's where you want to be. You know, in a couple of— 18 months, 24 months, 3 years, whatever. Your business is up and running. So the question is, how do we get you from here to there? We'll talk about that, but one of the things we bring most is your idea what it is here today is not going to be what it comes out on the other side. It just, you know, it's just not going to work like that. You have to iterate through and learn. Usually, very often, it's in the same space that they have a desire or an interest in, but it changes. They might be thinking they want a restaurant, they come out on the other side with a catering business or a food truck, you know, whatever. They think they're in this technical space space and that they're going to build some piece of hardware. They come out on the other side making software or they end up being a consulting business because they give this thing away free, right? It iterates and it moves and it changes all the time. And part of that is to get them to understand that right from the start.

How do you know when your idea both is a good idea and it's a good idea for you?

That's a great question because it has to be a good idea for you. I use the terminology back from, you know, Hopefully they understand when I start talking about English class and they talk about first-person and third-person opportunities. And of course, the first person is for me. There are many opportunities out there that I refer to as third-person opportunities. You'll see an opportunity, but it's not right for you. And so you've got to make that marriage of both. And how do you figure that out? Well, you figure that out because you're out talking to people, you're validating some assumptions that you have, and then you begin to hear and get the same feedback about what you're talking about. So you start to one person, they say, "Yeah, that's a good idea, but do it like this." Another saying, "That's a good idea, do it like this." And you begin to start to converge in a space. Then you get a sense that you have some traction and you're on the right path. But again, you can't be on that right path without getting out and talking to folks.

And how confident and excited do they feel, do they need to feel? In order to go to the next step, would you say?

Um, actually the first step— I'll get to that in a second— the first thing is how confident are they to get out and talk first. That's a tough one to get over, less so for our graduate students, but certainly for our undergraduates sometimes. They're a little nervous to get out and talk to people, but once they do it once, they feel much more confident about it. And then there is a tipping point of, okay, now I've got something do I really want to do it? Now can I really want to commit to it? Have I found some friends and colleagues, ambassadors that I can bring on to help me do this? Generally the answer is yes at Babson because again we've got— because of what we've been doing with entrepreneurship, you know, being the number one school in the world for entrepreneurship education, we've been doing it for so long we attract a certain type of individual from the top that comes in so they're ready to go.

So, okay, so we've got an idea, it's a good idea, it's good for you. Now you're on to the pursue stage of things. What's that like? What happens?

Yeah, so now it's probably— in some ways it's similar, but now you're getting out there and really you begin to build a business model. You've got an idea, but it's like, okay, how are you going to execute on this? How might it work? You know, am I going to sell something? Am I going to rent something? You know, what's the business model? What's the revenue model? What kind of depth do I need in all, all across, you know, my marketing, my product development? So it's a next stage and next level of beginning to build maybe now a prototype, beginning to build that first product or service offering that I'm going to bring. So now instead of just exploring where I might be iterating around and finding a space, now I found the space and now I'm going. I'm going deep and I'm going after it. It might still shift and change a bit, But I'm going right on it.

And at this stage, is it still one person or is it more than one person when they move to that?

Usually, actually, Peter, in most cases, it's usually more than one person from the start. I mean, I think that's one of the great myths that we have in the sort of US venturing culture is we have this myth that the singular person. This superwoman or superguy can do this. And you look at Mark Zuckerberg or Bill Gates in the past, or Oprah, somebody like that, and you think, wow, it's one per— but it's never one person. It's always a team. There's always someone else. You just cannot really do it alone. I mean, it's done, but it's rare. Those are the outliers.

So OK, so you've got this team. How do they come up with a business model and that type of thing? What do they do in terms of process?

Yeah, I think, you know, one of the— they're going to probably start— one of the first things to do is drill to them that they've got to know who their customer is, what that customer segment is. You know, there may be many potential customers for your product or service, and what you want to find out is, you know, your capabilities, your resources, and what you can bring to bear, which of those customer segments are right for you. Many times, as we know with technology, it's always disrupting the marketplace and the change. So it could be that today you're thinking, here's where I can generate some revenue and some profit and make a business. But a technological disruption changes things, and all of a sudden you're going to have to shift and change and go to a different customer set or change how you're going to generate revenue. So all of that's happening in that explore stage.

And how do you know, similar to the first stage, How do you know when you've done enough putting together all these things that you're ready for a launch?

Well, I think this is why I say that you need to socialize the venture. And the terms I like to use is I like to think that you should be networked up, down, and across your value chain. So all of your suppliers, your downstream customers, anybody who's in the middle, anybody who helps you, vendors. That's how you're validating your idea to begin with. You know, students are sometimes concerned to go out and talk to competitors or potential competitors. There's no other way to do it. So you get out into that space and you learn from all of them and you find where you're going to be, right? You find the space that's right for you. Over time, you begin to shape and develop that idea. So when do you know when to launch? Well, if you're doing all that work, I like to ask the students, say, you should be able to tell me and this particularly in sort of a B2B space. Who's your first customer going to be? Who are your first 5 customers going to be? In 3 years, who are your top 10 customers? And you should know that from going through that, you know, sort of explore and then pursue stage, because you are so networked in, you're so wired to know what's going on in your industry or what's about to become your industry, that you know that. And now it's time to, you know, launch and go. And a lot of times it's from those discussions, all of a sudden you just, you move naturally right into it. You're talking about something and an offering, and then it's time to go, okay, you're ready to buy.

Now, every launch is different. How do they go about figuring out how to launch?

Well, of course you're right, it depends on what type of product we have. If we're talking like earlier, some consumer packaged good or a restaurant, that's I think that's relatively, you know, restaurants, pretty well known what someone might do there. Packaged goods, technology products, something that you're actually physically putting in a box. Yeah, it's a little more complicated because you've got, you know, usually you're not— obviously these days you're not going to start your own manufacturing line or business. Very oftentimes with consumer food products, you're going to a kitchen that's certified, but you're doing it on your own. So small steps. I think that's important for all these. You're selling to a first small set of customers. It's almost like it's piloting in many ways. So you're up and running, and you're generating business, but you haven't scaled up to full business size. So from talking to people and exploring, you've got a sense, and you can start selling to a few people. And in those cases, you've got to do all that work yourself. 'cause you're not outsourcing that manufacturing of any type. So it's still early. But that gives you the confidence and gives you the sales to begin to start looking to grow and really build it out.

How does a business plan fit or not fit in this whole process?

That's a great question, 'cause there's always, Peter, always this continuing conversation actually between practitioners. And I was working with a panel of angel and VC investors just last night. So it's a question for practitioners and entrepreneurs. It's also a question for some of us who still do research in this area about what is the value, right, of a written business plan. And so you'll get answers across the board. I like to think of it as the value in business planning, right? So whether you write it down— like, you'll meet many old-school guys, right, older than you and I. I never wrote a business plan. They don't have to have one. I didn't have a business plan. Well, that's not true. They had a business plan right here. They knew exactly what they were doing. They figured it out as they went along. So a business plan can be very valuable. It depends on what type of person you are. I think the real idea, though, is business planning, that whatever's in that plan— your marketing, your operations, your finance— you've got to be going through it all. Whether you write it down and formally present it to people is a whole 'nother story. I think your plan for operations, your plan for financing and marketing, you've got to probably have that written down somewhere. Whether you cobble it together in this neat little package that you hand out of 40 pages, which generally no one's going to read, is another story. So what's important, I think, Peter, is a very, very tight executive summary, one-pager or short two-pager that you can hand to people, you know, and it doesn't have to be professional investors. It can be your aunt, your uncle, your family, you know, someone who might be giving you a little money to help you get started. But they're still going to want to see what you have. 2 pages, very tight. What are you doing? That's an important thing. And that's one of the things we'll do in workshops with students, how to get that tight, tight executive summary down.

I noticed in one of your charts that Dick Mandel is legal advisor. What kind of legal questions come up for the students in the course of going through the whole process?

Sure. That's a— that's a— Dick's a great guy, and he gives time over there, a couple hours a week, sits in our office, and he has open office hours just waiting for the students to come in. You can imagine that they're across the board. But the two most— I think Dick said to me once, maybe 80% or even more of the questions he gets, and you can imagine at this stage, are how do I incorporate? Do I want to be— S corp, a corporation, LLC, how am I going to incorporate and organize? And the other one is around intellectual property. You know, and what's interesting is on that one, the students often come in worrying about protecting their intellectual property. Now that's an important thing, but what we often find with them is what they have to be more important— more concerned about is making sure they're not infringing on someone else's intellectual property.— but those are the two big ones all the time, especially at this nascent early stage for the ventures.

Now this is all very new. I mean, is it— are there examples that you can give, or are we too early in the stage of the Venture Accelerator to describe any companies or ideas that have gone through part of it?

Oh no, I mean, we've got companies going, you know, all the time. And we've had, you know, over the past two years since we've shifted from our Old Design to the Accelerator, we've had a number of companies that are moving in successful. One of the ones I'm working most closely with now is one of our MBA students who's doing a business that he calls 88 Acres with his wife, who's actually a Harvard MBA. And he is deathly allergic to nuts. And I think it was one of their first dates or something, he almost died getting something bad.. And so they're creating a nut-free energy bar. It's based on seed and some other things. They won our recent beta challenge, which is our form of a business plan competition. We don't do a typical business plan as we just talked about before. And right now, 88 Acres is moving forward. They have, you know, got a food scientist on board with them. They've got 3 different recipes, they're making bars, they've done taste taste samples. They'll be moving it hopefully this summer into production. They're working with a co-packer in a nut-free facility, which is hard to find, by the way. There's only one in the country right now. And they'll be packaging, they'll be on the shelves hopefully of Whole Foods and some other places this summer, if not certainly this fall. So they're making great progress. You know, we've got— actually, there's, there's a group that's called Designed by Educators, and there's someone who's just come come into the accelerator, and what they do is they allow your smartphone to be changed into an optical scanner for teachers— no, not university people, but for high school and elementary school teachers— to easily scan homework. And this has gotten great— you know, they posted some things on Google, some things— just great response, because you could— as you can imagine, you know, teachers in our high schools and in our elementary schools, they want to spend their time teaching, but they need to be looking at progress every day. And these guys came up with a quick way using this technology, progress, check the grades, see where their students are, and move forward. So a lot, you know, so that goes, that sort of gets me from the tech space to the food space and everything in between. And there's, you know, there are clothing design businesses, there are different promotional businesses, all sorts of things. But yeah, there's a great activity, great activity.

And how about for the future? Do you see any difference in terms of how the accelerator will work down the road?

Well, you know, we're Babson, so we're never going to sit and be the status quo of what we're doing. We'll continue to look to see, just like, you know, we had a wonderful hatchery and a wonderful incubator on campus, but we wanted to change the focus of it. So will we? I'm sure. What will that be? In the future, I'm not sure exactly yet. We're really comfortable and confident with what we're doing now. We run a Summer Venture Program over the summer that you may have noticed in some of the notes that we have. And that's a 10-week intensive that's very competitive to get into. So instead of taking that internship or getting a job for the summer, students stay on campus. And they work for 10 weeks on building their business and building their business out. So I'm excited to, you know, kick around on campus this summer and peek in when I'm there to see what's going on with out as well.

Well, it'll be interesting to see how this evolves.

Yes.

So I think that pretty well wraps it up. I'd like to thank our guest, Dr. Andrew Corbett, PhD, PhD, from Babson College. For Business Insight, I'm Peter Marks. Thanks for joining us.