I received Bad Blood: Secrets and Lies in a Silicon Valley Startup by the Wall Street Journal reporter John Carreyrou for Christmas, and wow! This is a startup story on steroids! It is one hell of a page-turner for any entrepreneur. The book -- which has been on the New York Times hardcover nonfiction bestseller list for 20 weeks -- details the meteoric rise and fall of the biotech startup Theranos.
Intellectual property, patents, non-disclosure agreements, pitching your invention, promoting it through national media, raising big money, faking it until you make it, international travel, rubbing shoulders with celebrities and politicians -- all of these aspects of entrepreneurism are covered at length.
There are so many takeaways for entrepreneurs from this unfortunate and fascinating story at times I nearly fell out of my chair.
What I thought were the most important:
1. If your story is compelling and you can explain it in less than a minute, others are likely to support, join, and invest in you.
In this case, the big benefit being pitched was "saving lives" and a process that was faster, quicker, and ultimately less expensive. That's a huge value proposition! It worked: Everyone wanted to be a part of this new, revolutionary, disruptive, world-changing invention. The opportunity and potential revenue were so large that people didn't even care to see a prototype, proof of concept, or results.
Now that's what I call impressive.
Your best pitch is a one-line benefit statement with a value proposition and a great story.
As an entrepreneur, being a good storyteller is paramount. You can grab your audience in just 60 seconds if you paint a picture of what you're going to solve and you share the opportunity quickly and concisely. This takes practice! Telling a story that people can relate to doesn't actually require any selling. Think big-picture. The best benefit statements summarize the features of your product or service. Remember, people want to know what they're going to get and what you're going to do for them. Don't beat around the bush.
Pro Tip: If anything sounds too good to be true, it probably is. Do not be blinded by hype. Get real results. If you do have a great idea, make sure you have a working prototype that is also scalable. Smart people will ask to see the manufacturing process and will want to see that your product actually works. Being able to manufacture your product idea so that it functions and at a price point people will buy is very important.
2. Fear of missing out, also known as FOMO, is powerful.
Companies that are industry leaders invested large amounts of money and time into this invention, which they didn't even know would work! All because they knew they didn't want their competition to have it.
I've seen this play out a few times in my lifelong career as an entrepreneur. Early on there was a time when my licensee was ready to pull out of one of my technologies. They were nervous and unsure it was worth it. We only had a working prototype and the stakes were high. The product manager had her career on the line. In a meeting, she said she was ready to pull out of the project. I remained extremely calm and confidently responded "No problem. I guess we will have to reach out to that other company."
It worked! She couldn't let the competition have it!
Pro Tip: Always cover your bases. Reach out to many companies so you find the best partnership. You can very subtly leverage one potential partnership over another. This has to be done very carefully -- no one likes to be double-dated. Be very helpful and tell them before they invest their time and money that you have shown your innovation to others in the industry. When they ask you whom else you have shown it to, tell them that you are under an NDA so you cannot disclose their name. They won't like this, but they will appreciate your honesty.
3. Building the right team is critical.
One major problem with this startup was that its board of directors fell in love with the technology, but no one had any experience in the field. They were blinded by their ignorance. This is a classic example of the "blind leading the blind." I read that no healthcare or pharmaceutical company made an investment. In hindsight that was a huge red flag.
Pro Tip: Surround yourself with a team of individuals who have the right credentials, expertise, and industry experience. This is absolutely crucial and especially when you are venturing. Select an advisory board with good leadership and management experience and make sure that they have the skills to resolve potential technical obstacles. Find people who are actually knowledgeable regarding your innovation. Remember that people not only invest in an idea or technology, they also invest in the management team.
It all comes down to the actual execution of the concept. Make sure to pick your team carefully and place people with the right technical expertise on your management team. People who have skills that you don't and skills that can help to move your business forward in your specific field. Most importantly, listen to their advice.
4. You cannot tell a book by its cover.
Extremely true in this case. The author of Bad Blood describes how Theranos founder Elizabeth Holmes looked the part. She adopted the uniform of the legendary Apple founder Steve Jobs, her headquarters always had the right addresses, she dropped out of the right college, had the right pedigree. Apparently she even lowered her voice to fit the part.
Pro Tip: There are always telltale signs when something is not working. There may be misrepresentations, overconfidence, overstating of the facts, or exaggerations of revenue. Also: Consistently missing deadlines and being in stealth mode for a decade, which occurred in this case. If you look at someone's past you can sometimes foretell the future. This is very useful information when hiring.
5. Setting unrealistic goals and disconnecting teams will seriously hurt morale.
The book explains how unrealistic goals were constantly set by management that employees could not achieve. Just because you want something doesn't mean it's going to happen on your timeframe. Projects were managed very tightly and secretively at this startup. When in reality, sharing the same information among multiple departments and encouraging interaction and even cross discipline reviews of work is of great value.
Pro Tip: Hire the right people for the job and let them figure it out themselves. It gives them a sense of pride when they accomplish their goals. No one likes to be micromanaged. If you have to micromanage someone then you have hired the wrong person -- the fault is yours. Sometimes giving someone a small task to perform can tell you a lot about competency and future performance.
6. It takes patience and excellent listening skills to inspire people to do their best work and to match the right person to the right job.
It's not necessarily what you say; instead it is what you actually do. When leaders have integrity and a strong work ethic then others will follow their example.
Pro Tip: Make sure you spend time with your associates and employees on personal matters. Ask them how they are doing and realize that for some people this is even more important than bonuses and raises. Ask them what they want to achieve and then help them achieve their goals.
7. Don't believe your own hype.
Most entrepreneurs have a big ego. You can't afford to let your ego get in the way of making good decisions. Always treat everyone fairly and don't forget anyone. I believe it takes many people for anyone to become successful. I highly recommend Ryan Holiday's book Ego is the Enemy.
Flattery goes a long way when you're reaching out to people. People will appreciate encouragement and it's always good to have a sense of humor about yourself and your project. People really do their best work best in healthy environments where they feel safe, happy, and comfortable.
8. Put your customers first.
Clearly Holmes put many people at risk. This is not acceptable in any industry. The means simply do not justify the end. There are some industries that you can take a risk in -- your product fails, no one is harmed. In some cases, your brand suffers and you lose customers (which is bad for business) but no one is physically harmed. The medical industry is an obvious one where people can be greatly harmed by risky choices. That kind of risk is simply not acceptable.
Pro Tip: Accept responsibility for your actions early and quickly. It is always best to admit your mistakes. If you understand your customer and truly want to service and help them achieve their goals, they will follow you. I highly recommend reading Seth Godin's new book This is Marketing, which covers this topic at length.
9. Transparent is the only way to be.
Today it's more difficult than ever to build an audience and loyal customers. No one trusts anyone these days. Find a way to be completely transparent and I believe your integrity will shine through.
10. Admit your mistakes.
You are going to make a lot of mistakes along the way. I believe that if you try to cover them up, you will create even bigger problems for yourself later on. It is very hard to build a loyal customer base and with a single mistake, you could lose them. Don't forget that once you make a mistake people will constantly find out about it on the Internet. Instead, turn your problems and obstacles into an opportunity for growth. Ryan Holiday hit it on the nail once again with his book about stoicism, The Obstacle Is the Way.
Pro Tip: Most startup companies move quickly and as a result there are going to be mistakes. At my company inventRight we have a policy that all is forgiven if you raise your hand as fast as you can and admit that you have a problem or that you made a mistake. I want my team to be able to own their mistakes, learn from them, and move on quickly.
John Carreyrou: Kudos. You did a fantastic job researching and reporting this wild startup story. I am sure this will be a case study for years to come. It definitely was for me!