We sat down with PEC Alumni Advisory Board members and seasoned entrepreneurs Gordon Ritter ‘86, Daphne Earp ’10, and Geoff Yang ’81 to discuss global trends they see in entrepreneurship. Ritter, an economics/mathematics major and former banker, worked on 3 startups prior to founding his own venture capital firm, Emergence Capital. They invest in enterprise software companies such as Salesforce. Earp, an Operations Research & Financial Engineering major, anticipated working in management consulting before taking a position at Yext, then a budding startup which Earp discovered through Princeton’s high tech entrepreneurship class. Earp is now entering her 7th year at Yext and is launching the company’s German office in Berlin. Yang has been in the venture capital business for 32 years and helped found Red Point Ventures 18 years ago, managing early and growth stage funds as well as those in China and Brazil with just under $5 billion in assets. Yang is no longer actively managing but still serves as partner and has been working on his own companies and angel investments.
When Yang first entered the world of venture capital, entrepreneurship was a “cottage industry” centered almost exclusively around the Silicon Valley and Boston. Since then, per Yang, startups have become global, rising in prominence in New York, LA, Austin, and overseas. “China is probably the biggest place right now. In fact, if you look at market caps for the top ten internet (companies), China has 7 of the top 20…You see growth happening in Western Europe and in Eastern Europe. You also see it happening in developing countries. It’s really a global phenomenon.” Despite the wide variety in geography, Yang has noted several uniform qualities that define all successful entrepreneurs no matter where they are based:
• “They see order when other people see chaos. The world will seem chaotic and a great entrepreneur will come in and tell you how things fit together.
• They believe in it so hard that they will a company into existence…there’s that period when all you have is that faith and belief in yourself, and when you get through that phase, things start taking off.
• Great entrepreneurs tend to be the person around whom others organize.
• They have a clear vision of the future, and they can communicate it to others.
• They’re compelled to start something; they don’t just have a desire to start something. They see an opportunity, a hole in the market, something that really needs to be done, and they feel like it’s their manifest destiny. • They listen, analyze, decide, and adjust.
• They have to make hard decisions but also be compassionate; you can’t just make hard decision and have no compassion for other people.
• Lastly, they have to have passion for customers, employees and partners, not just for themselves.”
Through her time engaging with Berlin’s startup ecosystem, Earp became interested in the concept of “deliberately building a place where entrepreneurship can systematically happen.” Earp sees parallels with her experiences at Princeton, noting that “in both communities, there’s a sense of catch up. Everyone’s looking at Silicon Valley and China and thinking we’re behind…How do we build a culture that embraces risk but doesn’t penalize failure. Both communities are also working through the funding gaps. A lot of startups in Berlin are struggling to get investors to fund their ideas.”
For Ritter, both for entrepreneurs and for his own firm “my number one word is focus. As a venture firm, we decided we are not going global. We are not opening an office in China, or in Israel, or even an office in New York. We are in Silicon Valley. Also, we focus on companies and markets that we think really matter. We will take our companies global, but we focus on markets and people we know.” For aspiring investors, Ritter offered the following piece of advice: “Go with what you know and what you are good at. Don’t try to follow anyone into a market because it’s hot.”
Another important question on the minds of new entrepreneurs is finding the right location to start their company. Yang’s answer is straightforward: “Go with where you’re comfortable and go with where your network is strong.” For Yang, the thing that is more important than location is picking the best co-founders. Specifically, he advises entrepreneurs to bring on people who think differently than they do. “The problem I’ve seen so many times is people come in with their friends, and their friends are basically like them…Go where you have a group around you, a core set of founders with different skills and different mindsets. With a set of founders with different skills, you now have a broader network. It’s all people-based. Location matters, but the think of it as the location is where the people are.”
Having recruited for Yext, Earp doesn’t see any significant disadvantages to the company’s New York City location. “A lot of East Coast engineers of high caliber were excited to have an option to stay closer to home.” Nevertheless, she said that there are noticeable differences. One example she gave was “When we IPO’ed, a lot of the headlines were ‘a tech company we never heard of.’ I do wonder if being based out west would have made us a bigger name.”
Next, the panelists shared some advice they have for aspiring entrepreneurs. Per Earp, “it’s worth separating personal risk from business risk.” By this she meant that while a startup may be risky, it does not mean that being a founder has the same risk. She emphasizing that from her recruiting perspective, being an entrepreneur is a positive thing. “I don’t care if your startup failed after 6 months or 2 years. Whether it failed or succeeded, being an entrepreneur is a very attractive quality to have on your resume.”
Yang cautioned students against some misconceptions regarding entrepreneurship. “Don’t fool yourself into thinking that you’re ready when you’re really not. I encourage people to go get a job and get experience working on their foundational skills - ideally either in product marketing or in engineering, because for technology companies those are the two cylinders that keep the engine moving.” Yang considers it very beneficial to acquire experience at a big business, to build a network, and to see how others succeed before launching a startup. He said “I would rather fund someone who’s 28 and starting a company than I would someone who is 22 and starting a company.” Furthermore, he asserted that “you can take risk, but if you fail too many times, you’re a loser. You may not really be a loser but you’ll be branded a loser…One of the reasons I advocate building a foundation is that you always have something to fall back on.”
Ritter supported Yang’s take, drawing from his own experiences. He encouraged people to take some time to discover themselves. “What is your life passion? You don’t have to start right away. Road-test your ideas and skills on the way and when the time is right, you’ll know it. And don’t try to do it all by yourself.”
For concluding remarks, Ritter offered his perspective on the inevitable ups and downs of the financial markets and his strategy of investing. “Focus on early stage ideas, things you think are going to matter down the road…What’s hot today is not going to be hot in 5-7 years… This is a dangerous time to be investing in hot places.”