Steve Blank in Waterloo Region: ‘I was blown away by the ecosystem here’ Anthony Reinhart September 24, 2015 Columns, Ecosystem, View from the ‘Loo In his earth-toned blazer, loose-fit khakis and boat shoes, Steve Blank looks every bit the professor that he is. Calm, genial and accommodating, Blank seems the antithesis of the brash Silicon Valley archetypes he so fully understands: the brash entrepreneur out to bend the world to his will; the voracious venture capitalist placing crazy bets on unproven ideas in pursuit of the big exit. Maybe that’s why so many people listen to what he has to say. That, and the fact that he knows what he’s talking about, because he’s been there. Since 1978, Blank has co-founded or been part of eight startups, to varying degrees of success and failure, in the Valley, where he lives on a ranch with his wife. Having retired from entrepreneurship in 1999, he turned to teaching it at various U.S. universities, among them Stanford; University of California, Berkeley; Columbia and NYU. Now in his early 60s, he is best known as the initiator of the Lean Startup movement, whose principles he mapped out in writings and taught to students, most notably Eric Ries, who wrote the bestselling book by the same name. Steve Blank makes a point during a conversation with Steve Woods of Google Canada at the Waterloo Innovation Summit, Sept. 18, 2015. (Communitech photo: Meghan Kreller) Last week, after having heard mythical stories about Waterloo in the Valley for years, Blank finally paid a visit. Over the course of an afternoon and evening, he spoke at the Waterloo Innovation Summit, toured the Communitech Hub and University of Waterloo Velocity Garage, gave a nationally televised interview, met with local entrepreneurs and judged pitches at Communitech Rev Centre Stage. In the midst of all that, he found 20 minutes to sit down for a follow-up interview (we first chatted in July), in a quiet room, where we talked about the killer instinct of successful entrepreneurs, the importance of giving back, the sorry state of risk capital in Canada and how government can help fix it, among other things. What follows is a lightly condensed transcript of our conversation. Q – Once you arrived in Waterloo Region and had a look around, how did it differ from your expectations? A – I understood about the university and I kind of knew there were startups here, but the Communitech ecosystem is probably unique. I’ve never seen anything like it. Q – In what way? A – It’s not an incubator with space, though it’s an incubator with space. It’s not quite an accelerator, but it has corporate partners. And oh, wait a minute, the university has a space. I was blown away by the ecosystem here, physically. Q – You mentioned on stage that collaboration is not usually a top 10 attribute by which tech ecosystems identify themselves. A – I said that just to make a point. Obviously, Silicon Valley collaborates. We actually have a culture, which I don’t know whether you have here, called the pay-it-forward culture. Q – So, give before you get? A – Or get and then you owe, and give it back. I was mentored early, and this is why I do what I do, because this is how I give back. I have a foundation and we do charitable stuff, but (public speaking) is the most direct way I know to make a contribution. It’s about teaching; it was just putting together what I know and mentoring and talking, and then we all get collectively smarter. Q – But were you also suggesting that we’re too nice? A – Yeah. I’m missing the killer instinct here. You know, Larry Ellison and Steve Jobs were not nice guys. Neither is Elon Musk. If you go down the list of the leading companies in Silicon Valley, they’re not run by nice people. Q – But don’t some of these big companies adopt mottos that suggest the opposite, like Google’s “don’t be evil?” There seems to be a fundamental tension between not being a jerk, and being a jerk when you have to be. A – Right. However you want to decide to describe it, the one thing you wouldn’t start with is, “It’s collaborative.” I mean, pick whatever you want – and maybe we can say Google is an outlier, or maybe it’s the new model, I don’t know – but that’s not the school I come from. The school I come from says, “We’re playing for keeps or we’re not going to play. While we’re visionaries and artists, our goal is to take over the universe, not to paint some picture on an alley wall.” Q – So it’s not a matter of being less collaborative, but a matter of not putting that forward as your number 1 attribute? A – Right. My attribute isn’t collaborative; my attribute is, “I have something that people are going to want to rip out of my hands, and I’m going to make sure they all know about it – and, by the way, know that mine is better, faster, cheaper, whatever than anything else they’ve ever seen.” The word “collaboration” is not in that list. That doesn’t mean I’m going to rip people off; it just means I truly believe that what I have needs to be heard, seen or used, but (also) that I’m not going to sit here and wait for it to happen, nor am I going to depend on other people. Communitech CEO Iain Klugman (right) discusses corporate innovation with Steve Blank as TD Bank Group’s Ian McDonald (second from left) and Saj Jamal, VP of Marketing for Communitech, look on. (Communitech photo: Anthony Reinhart) Q – That’s the approach BlackBerry took, and they were hugely successful. But now that the company has shrunk to a fraction of what it was, and the world has moved on to other smartphones, some Canadians have this tendency to point to that as proof of our inferiority, or as a reason not to bother trying to beat the world again. A – Well, those are the people who are not innovators. And unfortunately, if you depend on those people, then you’ll just sit here and never do anything. Luckily, they have nothing to do with you, unless they’re in government, standing in the way. That’s the other thing that screws up an ecosystem: caring too much about what other people think. Maybe that’s some Canadian trait; I don’t know. Maybe that’s part of wanting to be collaborative, and be liked, and nice. I’m only guessing, but I don’t really give a shit and never did, or else I wouldn’t have done (what I have done). When I came up with the Lean Startup, I was the only person in the world who thought it was a good idea. My VC friends literally patted me on the head and said, ‘Steve, we’ve been doing this for 30 years. What the fuck are you thinking?’ And when Eric Ries became the first practitioner, he doubled the total available market for people who believed in Lean Startup. That’s a great attribute of a founder. If you care what other people think, you’re not suited to be starting a company, and if I gave you money, I’m taking it back. Now, that’s different from what customers think. But what do the whining masses think? Well, go and work for a company and then you’ll have a job. Go and work for Walmart. Every startup looks like a toy on day 1. It does by definition. It’s a joke; there’s nothing there. Q – What are you picking up on, as far as what we need to do to elevate this ecosystem? A – Someone used this analogy, after I left (the stage), about the Blue Jays. It’s the same team, same physical field, but someone got off his ass and started hiring people and shuffling assets. That’s the exact analogy. Could someone have done that 10 or 20 years ago? Of course. Q – What about government? A – Keep them out of the way if you can’t get them to help. Steve Blank awaits a television interview after his appearance at the Waterloo Innovation Summit. (Communitech photo: Anthony Reinhart) Q – But if you can get them to help, what kind of help should we be trying to get from them? A – Change the tax laws so that the investors here get filthy fucking rich. Not for the entrepreneurs, not for anybody, but change the tax laws for the investors. Make this a gold mine to invest in, (for) Canadian and U.S. (investors). Q – What about this idea of direct government investment in tech companies? Mariana Mazzucato, who appeared at the Waterloo Innovation Summit, has argued for it, and said many big tech companies would be nowhere without early government investments in the infrastructure that underpins those companies. A – But they didn’t fund companies. Q – They funded Tesla. A – They funded Tesla at a very special time. They funded Tesla and they funded SpaceX. The government can decide that there are national initiatives that need to happen . . . and you could decide you want national initiatives for funding things, but you have to have the stomach for that. In the U.S., it was an accident. If you think about it, when a country does that, they’re acting as a national venture capitalist. Well, what happens? Most of them will fail, which is what happened in the U.S. The heat the government gets when politicians play ‘gotcha’ proves the reason why you actually, for Tesla, wanted to (instead) fund a venture capitalist or an investment firm. I would have rather our government gave an investment firm a 100-per-cent tax break and let them put $500 million into Tesla. I don’t know if you know about when Solyndra failed, but oh, man, the crap the government had to put up with – well, that was a pretty good hit rate for a government portfolio. But government doesn’t know about portfolio. They go, ‘Well, these 10 failed,’ but the other one created an entire industry that employs (many people). I’m a big believer in government funding basic science research, funding commercialization of science, and you can make a case that there are times when government needs to kick-start an industry. I would probably do it through proxies rather than direct investment, but that’s just me. Q – You know a lot of influential people in Silicon Valley; investors and CEOs. What would you tell them about your visit here? A – The first thing I would say, if there was someone starting a fund here, is ‘you should put some money into the goddamned fund.” Calvin Chu (centre), CEO of Palette Gear, explains his company’s product to Steve Blank in the University of Waterloo Velocity Garage, as Palette marketing head Ryan Van Stralen (left) looks on. (Communitech photo: Anthony Reinhart) The problem is, I can’t find anybody who’s trying to raise $100 million here. There’s no place to put the money. I’d say, ‘What a bunch of idiots they are up here,’ because no one’s even trying to raise a fund . . . I’d be saying, ‘Hey, let’s all write million-dollar cheques and get this thing going.” What needs to come with it, though, is pattern recognition skills, and board members who have actually seen this movie before, for scale. It’s not just the money; it’s the advice. God has invented Skype, so you can have board meetings with Silicon Valley investors, if somehow you can convince them to sit on boards of Canadian companies and they never have to leave (the Valley). Q – There are some companies here now that have U.S. investors who are willing to get on a plane and visit; Kik, for example, has Fred Wilson on its board, and there are others. But what about Canadians with money to invest? A – That’s the first list I would hack. I would go after them and say, ‘We just need a couple million bucks.’ Don’t you think? Q – I’ve heard the occasional rumour about Canadians from a previous era who made it big in tech, but don’t feel an obligation to help today’s startups because no one helped them back in the day. A – Yes, but I wouldn’t be asking them to fund a startup; I’d be asking them to fund a fund. Q – Is there anything you’d like to add? A – I thought this (visit) was just incredibly interesting and useful. Every place I’ve gone, I’ve gotten smarter. This time, I’ve gotten a lot smarter. Anthony Reinhart is Communitech’s Director of Editorial Strategy and senior staff writer. View from the ‘Loo looks at the issues, people and events that shape Waterloo Region’s technology sector.