Important for startups to build a network of people, says author-entrepreneur Chris Yeh

Investor, professor, entrepreneur, mentor, and author Chris Yeh was in India recently to talk about his book ‘Blitzscaling’, which he co-authored with Reid Hoffman. Chris also co-authored another best-seller ‘The Alliance: Managing Talent in the Networked Age,’ with Reid Hoffman and Ben Casnocha in 2014.

Chris writes about a broad range of topics, with special focus on entrepreneurship and startups. He believes that today an entrepreneur should focus on speed versus efficiency. Although this method is very risky, but if successful, the startup goes on to hold a dominant position in the market like Tesla, Netflix, Google, Amazon, and Facebook.

In an interaction with YourStory, Chris shares his insights on why Airbnb and Tesla are dominant companies today, why it is important for founders to be surrounded with good people, and the importance of building networks.

Chris was accompanied by Mohanjit Jolly, the co-founder of the Iron Pillar Fund. Both investors believe that entrepreneurship is going to change India forever. Edited excerpts from the Interview:

YourStory (YS): Chris, how does one become a best-selling author?

Chris Yeh: As I was growing up, I used to read a lot of science fiction, mostly Isaac Asimov, who was so clear with his ideas and that’s how I was inspired to become a writer. When I was teaching at Stanford, I met so many startups that I realised that I needed to write. But, when I started writing, I realised how difficult the art of writing was.

In 2012, Reid Hoffmann and I decided to write about all our experiences, which led to us bringing out our two best-selling books. My first book Alliance was written in 2014, and it was about managers and employees. The second book Blitzscaling, which came out in 2018,was about how you build lasting and impactful companies, andtalks about scaling in an high risk environment.

YS: Why do you say no to efficiency and that speed comes first?

Chris: The world is changing and is highly connected today. It is a winner-take-all market, and it is easier for you to hold on to the market if you are in that position. We can see that in Amazon, Facebook, and Google.

You need to spend money and resources to be the leader in the winner-take-all market. There are risks associated with this model, but when you succeed, as in the case of these companies, you get world changing status.

The world is geared towards efficiency, revenues, and profitability. This is what I was taught at Harvard. But in today’s world, efficiency can curtail speed. You cannot adapt and change quickly when you are focused on efficiency. Speed is the key to capture different markets.

Let us take the case of Airbnb versus Rocket Internet (Wimdu).Wimdu was an Airbnb clone, and wanted Airbnb to buy them when they came to Europe. When Airbnb was coming to Europe, it was just a 40-member team compared to Wimdu, which had hired hundreds of people and had raised more than $100 million. Airbnb had two choices, either to buy that company or compete, and Airbnb decided to compete. As a travel company, you need to maintain the leadership position because travelers want to be on a single platform globally.

YS: How does it help founders surround themselves with good people while scaling?

Chris: The most important thing for a startup is to build a network of people. Marc Zuckerberg declined many acquisition offers because he was surrounded by good people like Sheryl Sandberg and Peter Thiel guiding him. Brian Chesky, the co-founder of Airbnb, had Reid Hoffmann and Paul Graham around him when he was scaling the business.

The reason founders make good decisions is because they learn from others. It is their ability to learn that makes them take decisions to build great companies.

When you are a small company, things are run personally. But when you run a large company, you have to become structured. This often becomes difficult for early employees as they will have to take appointments to meet team members. They feel they have built the company and they have ownership of the culture. But when the company grows,one has to change. They (employees) have to understand they need to change and adapt to situations.

YS: Why should founders use networks to build companies and not just focus on narratives?

Chris: It is important for founders to reach out to others, build a network of leaders, and have great mentors to build a successful company. The networks’ effects inherent in the business are also critical in order to build a lasting business.

But the job of the founder is hard, especially when they talk to VCs because VCs only care about you when you know how to scale a business. If you fail, they are not going to come back to you and say I am going to give you more money. And valuation is an external evaluation and not a validation of your work. This is not at all important, and founders should focus on building their business.

WeWork focused so much on building its valuation that it forgot to execute on the ground and build a sustainable competitive advantage. As a founder, if you are not executing a business, then you are just selling stories.

Take for example Elon Musk’s strategy as a classic network effects business. He built the expensive Roadster first and focused on building the product. The early market was clearly focused on the rich, and subsequently, with the launches of Model S, X and 3, he emphasised the network elements, the charging infrastructure, and the network of dealers, which were owned by the company instead of a network of people. This gave him an advantage over all other automobile companies because he could pivot his business faster than others.

YS: Do founders have to watch out for lack of product-market-fit and operational scalability?

Chris: Let us face that these two things – lack of product-market-fit and the inability to manage operations - can bring the startup down. You must remember that Facebook was not the first social networking platform, but it was Friendster. The company was huge and it was sold because it could not handle the technological scale. It was beaten by Myspace first and then Facebook beat everyone.

There was a time when Microsoft and IBM were very powerful. But now,with new markets opening up, it is a different set of leaders. This has led companies like Microsoft to reinvent themselves. Today, Microsoft is learning from companies like Amazon, Google, Facebook, and Netflix to stay ahead of the game.

YS: Mohanjit, tell us about meeting Chris, and your thoughts on India and the Iron Pillar fund.

Mohanjit Jolly: Chris and myself met while we were mentoring two platforms in the Valley - one was called the Women’s Startup Lab and another was the Unreasonable Group. We spent most of the time meeting outside of Silicon Valley, and now here we are, in India, to talk about Chris’ book.

Iron Pillar is a mid-stage technology fund for India. It is consumer centric and also invests in global SaaS built out of India.

I believe entrepreneurship is about mindset and humility, and these two things make a great entrepreneur. Humility is rooted in awareness and the entrepreneur must manage his network of mentors and VCs on his cap-table. As an entrepreneur, you need aspiration, and as you scale, you need to approach your company differently because you need to be structured.

Managing the team is one of the single-most important factors to run the company. You have to surround yourself with good people when you globally scale the business. When you go to the US and sell, young founders don’t know what works - whether it is feet on street or inside sales.However, there is enough expertise they can fall back upon in the USA.

Narratives have to be authentic and should not be unnatural to stay true to one’s values. Entrepreneurs have to create jobs and it is them who will make it happen in India. Upskilling and reskilling are going to happen in India too, and several mid-level managers have to reinvent themselves in the new era of technology. Indian companies need good mentors and investors, and that is the reason we have Chris here.

(Edited by Megha Reddy)