A lifetime as an entrepreneur: business insights from Damon DeVito
In this week's blog, Damon DeVito talks all things startups and shares some sage business advice he once received from a local dairy farmer.
So, let's get moo-ving!
David: What are the key things you want to see in a startup before you are prepared to invest?
Damon: It is difficult to narrow down to a couple of punchy items. There could be 50 or 500 things that I want to know before I invest. Overall though, there are a few key elements that I look for every time before investing in a startup.
First, I want to know what is not going great for the founders. A friend of mine refers to this as the ugly truth and not the sweet lies. In these early days of your business, there is a lot of discovery with the customer. This discovery means you are always learning new things about your customers and uncovering previous mistakes. A lot of what you believe is going to happen will turn out to be wrong.
Next, I look at the team. This part seems easy enough, but it took me a while to figure out. I see young entrepreneurs grasping at how great teams should look. Do we have the right advisors? Do we have adequate training? If you pin me down, I care about what the problem is to the team. Why do these entrepreneurs care about this problem? Why are they the ones that will solve it? Having a strong team and advisors will keep entrepreneurs on track and help them overcome obstacles on their path to success.
It is okay for there to be loose ends. The important thing is to have an open dialogue around what is not going well. Then you can start to assess whether or not you have the right people to fix it. Of course, there are other elements that we look for, for example, market size, growth rates, etc., but those are table stakes to me. Show me you are not afraid of difficult challenges or difficult conversations. Then show me that you have the right team. Those are the most important things for me.
David: What role do accelerators play for startups?
Damon: To be blunt, you can fail with great accelerators. What is more, you can succeed without any accelerators. But the right accelerator certainly improves your odds of success. The odds are that if admitted to a prestigious accelerator, such as Techstars, you are highly likely to succeed. Great accelerator programs connect you with coaches, mentors, and capital. They de-risk for you in a lot of ways and are useful resource centers!
Another benefit of accelerators is that they are not grading you, unlike most historical education. There is a lot of arbitrariness and rigidity to some education methods. For example, why is four years the magic number to obtain a college degree versus two or three years? Why not have the duration of a program be as short as possible? That way we can make room for more students. What if some colleges could educate faster than others? Why do vastly different undergraduate programs require the same commitment of time? Top accelerators hand-pick a much smaller number of startups and supply copious resources and education in a short timeframe. It is quite intense. Accelerators give you the resources and education you need. However, it is the opposite of historical education. Accelerators focus on how fast we can get you going so that you can stand on your own two feet. Then, we will introduce you to some people that can fund that. Then by next year, we want you to start coming back and supporting others.
David: In addition to being an entrepreneur, you are also a university professor focusing on new ventures. Are we able to teach people to be entrepreneurs/founders?
Damon: I think the mental block people have is when you use the word professor and use the word school or classroom. I mean, accelerators like Techstars are teaching you something about entrepreneurship. The question then becomes, why do some places, like Techstars, tend to be successful in teaching entrepreneurship when others, like a university classroom, tend to be unsuccessful? That is why I structure my classes differently than a traditional textbook environment.
If Techstars works, then it is evident that we can teach entrepreneurship. The question then becomes, how do you teach it? There are a couple of models out there that are incredibly successful. I try to do a version of these models in my class. Like a startup, I have my class complete two-week sprints. We have guest mentors every single week to provide unique perspectives. I do not feel comfortable lecturing on entrepreneurship. I can have a conversation until the cows come home about being an entrepreneur, but the reality is I am unable to give you the checklist on what to do. What I have realized is that the problem was not that there were no models to teach entrepreneurship. The problem was that we were not using the right models to teach entrepreneurship in the classroom.
David: Before we let you run, I understand that you received some sage business advice from a dairy farmer. Can you share that story with us?
Damon: Like a lot of good stories, this one started on the golf course. I was out for a round of golf with a local dairy farmer and prolific businessman named Keith Duncan of Sycaway Creamery located in Troy, New York. Keith was affectionately known as Milk Man. On that day, I was playing the best round of golf in my life. Keith inquired if I was going to shoot a personal best that day. To not jinx my score, I hastily changed the topic and asked him if he had any business advice. He looked at me and said, Keep the trucks off the road.
I had no idea what that meant. I protested because Keith had a pile of milk trucks. I saw them all over the place! How was this good advice?
He contends, Oh, I have to have trucks. Sometimes, they have to be on the road. But keep the trucks off the road. You will understand someday.
What I realized is that it is all about scalability. For example, you may have a business where you need engineers. That is fine. Hire them. But do not hire more than you need. If you do, they will start developing more code that you do not need. In turn, this will waste resources that go beyond the initial cost to pay those engineers. Instagram is a fantastic example of this ideology. When Instagram sold to Facebook with only 14 employees, they were keeping the trucks off the road!
So keep the trucks off the road and watch the overhead. Honestly, it is something that I think about a lot. It is not one of those things where I have to remind myself every other day. Somehow, it always pops up at the right time. When faced with one of those decisions, Keith’s voice pops into my head. I can see him now. Just keep the trucks off the road.