Want to Nurture Creativity? First, Get the Culture Right



David Yager, CEO of the University of the Arts, talks with Wharton's Jerry Wind and Grace Cho of Orangenius about how the right culture can help nurture increased creativity.
Is creativity inborn or can it be taught? David Yager, CEO of the University of the Arts (UArts) in Philadelphia, believes it can be taught. It’s one of his main areas of focus at the institution. Yager is working on building a Ph.D. program on creativity that can attract people from diverse backgrounds such as science, art, engineering and business. “We are looking at creativity across different disciplines … [and] trying to understand the drivers for creative people,” he says. In a conversation with Knowledge@Wharton, Yager spoke recently with Jerry Wind, an emeritus professor of marketing at Wharton and Grace Cho, CEO of Orangenius, a firm that helps artists develop business skills, about how an organization’s culture plays a significant role in teaching, identifying and nurturing creativity; his attempts to change the culture at the 141-year-old UArts; and why it is important that creativity and business acumen go hand in hand. This interview is part of a series produced in collaboration with Orangenius. (Listen to the full podcast using the player at the top of this page.)
An edited transcript of the conversation follows.
Grace Cho: David, what got you interested in art?
David Yager: I’ve always been more interested in creativity and what drives creativity than art per se. I began with looking at creative writing as an outlet. Then I became interested in drawing and painting. It was always about — how do I express something in a different way? How do I attract an audience and deliver content that can be taken in through art, versus the same content being produced in a different way? I’ve always thought about my particular art as a way of getting people to think about things in a different way. For me, life is about trying to be creative in everything I do.
As a university president I think about, how do I not follow the rules? Just because we’ve done it before, is that a good reason for doing it again? I try to get the faculty and especially the students to think about that. I’m very student-centric. I try to get students to understand what opportunities they have in being at the University of the Arts, what opportunities they can have if they’re creative, and how that creativity can be translated across different disciplines.
“We can teach people to be more creative. But equally important, we can teach people to recognize creativity within their organizations.”–David Yager
Our students are changing and it’s important for me to be in touch with the language they’re using, the way they’re learning, the way they’re thinking about things, how technology has changed, how social media has changed. How they engage with each other has also changed. This is a generation that thinks differently about things. I think it’s important, as an academic, to be aware of our students, understand the position they’re coming from, and try to help them be better at the things that they’re doing.
Cho: Tell us about the University of the Arts — the student body, the makeup, where they come from.
Yager: We’re a 141-year-old institution. One of the things I’m constantly dealing with is changing the culture, because I believe culture determines a lot of the things we do. How we teach is a culture. How we believe in ourselves as a faculty is a culture. Even the courses we teach, reflect a culture. You were educated 25 years ago, and you’re very good at certain kinds of things, and so you believe that’s what we should be teaching students, or that’s basic knowledge that’s important. But maybe it’s not what we need to be teaching our students now.
We have a great history and great alumni. There are two unique things about us. We’re one of the two private, stand-alone schools of the arts that teach all of the arts. CalArts in California is the other one. And, we’re the only University of the Arts in the United States. There’s one in Berlin. There’s one in London. One in Hong Kong. And that separates us out, I hope, in the way we think about things. We want to be razor-sharp in certain areas, but we also want to be big-picture focused as a university.
Our status as a university has allowed us to work on a PhD program. The program we’re working on is on creativity. We’re looking at creativity across all disciplines and trying to see if we can build a program that a scientist, an artist, an engineer, a business person might come to. We’re trying to understand the drivers for creative people. How much of creativity is taught? How much of creativity is part of the person?
Knowledge@Wharton: Do you think creativity can be taught, or is it inborn? If it can be taught, what are some of the barriers to creativity that need to be overcome? Could you speak about that from the perspective of an art school?
Yager: I think creativity can be taught.
Jerry Wind: I agree.
Yager: Can you be the most creative person in the field just by being taught? That piece I’m not sure of.
Wind: Probably not.
Yager: I think you could help almost anyone become more creative. The corporate world right now is struggling with that — how do they create more creative middle management? How do they create more creative C-level people? And that’s what we’re thinking about relative to our program. We can teach people to be more creative. But equally important, we can teach people to recognize creativity within their organizations, which I think is an even bigger problem. Sometimes they don’t know how to decide on who the creative people are.
I have a lot of ex-students who work at Google. I’ve followed Google pretty much since they began. One of the things that always fascinated me was that they were hiring very diverse, creative people, including musicians. They were hiring musicians for a very particular reason –because they’re not just good programmers, but they program very differently from how a computer scientist programs. I’m not sure if their management is still doing this. They’ve grown so big. They don’t train like they used to. A lot of people in management have moved through very quickly. I think they’re going to struggle trying to figure out how to identify the creative people and how to allow them to be creative.
I was at a dance event recently and one of my colleagues had brought his six-year-old son. My colleague works on the development side. He’s not a particularly creative person, but his son is very creative. And we all said to him, “Just let him be creative. Don’t take it out of him.” So I think it’s a combination of letting people go in a direction, but there are certainly lots of things you can do with almost any group to get them to think more creatively than they thought an hour ago.
Wind: I agree. I look at creativity as a trait that is not normally distributed. The extreme — the Picassos, the Mozarts — they don’t need us. Don’t touch them. But everyone else — we can move them toward being more creative. There are tools for this. When I taught creativity, I especially focused on tools at the individual level. David mentioned another very important dimension, which is, how do you identify creative people? The challenge there is how do you make sure that you don’t constrain their creativity? There is a lot of concern that our educational system, starting at K through 12, not only university, kills creativity.
I would add one other dimension where you can enhance creativity, and this is by working on the organizational architecture. How do you create a culture of creativity? How do you create processes that encourage inquiry? The structure allows this. If you have a very hierarchical structure, like most universities, it kills creativity. What you need to create is a structure which has more of a co-creation culture.
When I taught a course, it basically focused on identifying the kinds of tools that would help you and provide the students with the ability to implement the tools. I used to also bring people as guest lecturers from diverse fields, all the way from scientists to artists to curators to choreographers and also from business, to show that creativity and the characteristics of creative people are pretty similar. Over the years, I’ve probably had people from 40 different disciplines.
One of the things that we found is that the same principles apply to all of them. For instance, constraints enhance creativity. What you also want to emphasize is what you can do from a leadership point of view in terms of designing the organizational architecture in the network in such a way that it will enhance creativity.
“What’s frustrating to me, having spent most of my life in a traditional university, is that creativity is not really thought about as an important attribute of leadership within the university.”–David Yager
Yager: What’s frustrating to me, having spent most of my life in a traditional university, is that creativity is not really thought about as an important attribute of leadership within the university. And yet, at the end of the day, the most successful people and programs are based on someone who stepped up, who was really creative and looked at things in a very different way. It’s easy to point to those examples, but difficult to get people to think that it’s important.
I gave a talk a number of years ago at the National Academy of Science on the relationship of creativity in the arts and creativity in science. I think they’re absolutely similar. A scientist who’s really creative, who solves something that nobody else has solved, has come about it from a very different point of view
Knowledge@Wharton: It seems that what’s common to creativity in the arts and creativity in the sciences is the ability to exercise your imagination. How can the corporate world unleash the imagination at a time when there is so much risk aversion? Middle managers, in particular, are especially risk-averse. How do you come up with a creative culture that unshackles imagination, and which allows people to take risks?
Yager: First of all, you have to believe that at the end of the day it’s going to drive success — in terms of stockholder value or money or whatever you use to measure success. And it should not be short-term. It’s not that yesterday you believed one thing, and today you believe something else, and all of a sudden you are going to create something new.
If you look at Google, the number of “mistakes” or wrong decisions they make would bankrupt many other companies. But then they have the wins that put everything back in place. For Google, it’s about being first. It’s about being on the top. They don’t think that taking risk is a bad thing, because they know if they don’t take risks, they can’t be on the top.
Years ago, I was working for a tech company, and we were competing on a project with IBM. We had the right solution. IBM did not. But I knew the client was going to select IBM. Because if they picked us and it didn’t make it, they might lose their job. But if they picked IBM and they didn’t make it, they could always say, “Well, I went with IBM.” So that’s a cultural thing.
I take risks here, as president of the university. For me, there are only two choices: You either maintain status quo, or you take leadership and take the risk. It’s not a wild risk. It’s risk modified by a process, a procedure, a history, experience and all those other kinds of things.
Knowledge@Wharton: What would be an example of a risk that paid off, and one that didn’t pay off?
Yager: I’m involved in three risky things right now. I don’t know where they’re going to go. They’re all a little different. Last year, I challenged my senior leadership. I went to all the deans and said, “I’m an investor. I have a pool of money. Come to me with a proposal. You tell me what the criteria are for success, and then we’ll decide if those criteria match our criteria.” That was risky in a sense, because people aren’t accustomed to doing it. The responses I got showed me that it was a little far out. They didn’t get it.
This year I said it a little differently. I said, “I want to be in the top 10 in certain disciplines, or top 15 or top 20. Pick out a program, and show me how that program has the opportunity to be a top-tier program, what it would cost to invest in it, and why.” I’m waiting for those now. I would have loved it if a dean or a president ever did that to me. I was always going to them saying, “I have this great idea. Would you invest in this?” That confused them — that we’re a business. When I interviewed for the position, I remember saying to the chair of the search committee, “If this place is going to be successful, we have to run it as a very successful business,” because that will allow me to have the money to do what I am doing.
“For me, there are only two choices: You either maintain status quo, or you take leadership and take the risk.”–David Yager
Wind: Why don’t you push your experiment one more level and go to zero-based budgeting.
Yager: Actually, last year we did. And, [I told them] to turn back 10%. This year also we’re doing a zero-based and turning back 10%. But the problem is, Jerry, if you don’t have the background and experience —
Wind: They cannot relate to you.
Yager: Yes, they don’t know how to get to it.
Cho: Do you think it’s a language issue? You just said it yourself. You say it in one way, versus it’s the exact same mission, but said in a different way. Sometimes when I talk to educators, it’s about the language.
Yager: I think partly that is it. And partly, it is that people have avoided certain things. I think part of what I have to do, since I really believe culture rules over everything else, is that I have to get people in place at senior management and middle management who are going to take risks and actually push me. If I’m the only one who’s doing the pushing, that doesn’t make sense. They need to be pushing from their point of view.
What bothers me about large research institutions is they become so hierarchical. It’s one of the reasons I left the University of California. I realized I had two choices. I could be a provost or president of a large institution, and be part of killing myself trying to change the hierarchical structure. Or, I could go to a place that’s smaller, where I know I can do it, and where I could do it in probably three years. It was a very conscious decision. I didn’t want to spend the rest of my life wasting time, going through meetings and committees to get anything done.
Wind: This is the key to answering the earlier question about the challenge with middle management. “How do you empower them to make decisions?” We can address this by at least three things: One is by what David was talking about– changing the culture. Google has been very effective in doing this by allowing everyone to spend 20% of their time on whatever they want to. Two, there are tools for this. Three, create a culture of experimentation. You can ask each one of your deans, “Come to me next year with a zero-based budget and at least one major experiment or series of experiments that can get us in the top 10. You will not get your budget approved unless you bring this experiment.” Everyone knows that not every experiment will succeed. So the minute you do this, you’re basically creating a culture where people are willing to take risks. That’s the way you could deal with this major problem of empowering the middle management.
Yager: It always gets down to culture. If you don’t spend time building the culture, it won’t work. In my first, second and third town hall meetings here I put up just one slide. And that one slide said, “We”. I talked about why, if it’s not “us” together, we’re not going to succeed. That’s a cultural difference. You can’t be “those people over there,” the administration, the president. That kind of thing — where it feels like “us” and “them” — kills culture. It kills it in corporate America, and it certainly kills it in universities.
Wind: And silence. What’s killing universities these days is the silence.
Yager: Right. And silence. I physically get out of the office. I go to events. I know the students. I know the faculty. I fund things. When I first got here, someone came over to me and said, “Our jazz band was just selected to compete for the top jazz bands in the United States. They picked six. But it’s in Monterey, California, and it’ll cost us $25,000. So we can’t go.” I said, “What do you mean you can’t go? Get all the stuff. I’ll raise $25,000 for you.” So they went out there and they did an okay job. They were really nervous. It was their first time doing this thing. I sat through the competition and then I went to the band leader and said, “I have to go up to San Francisco for an event. I’m leaving. Let me know what happens, but you guys didn’t do that well.” Last year, they got invited again and I raised $25,000 for them. They were much better prepared. I flew out again. When they finished, I went to the back, and I said, “Matt, you guys won.” And they did win. After that they got invited to play at the Monterey Jazz Festival as the number one jazz band.
So, I was willing to help make a decision. I was willing to raise money. I was willing to take a risk. Some might say, “Why did you go out for the jazz band? You didn’t come to my event?” Or, “Why did you raise money for them? You didn’t raise money for me.” I get this all the time, no matter what I do. I’m a people investor, rather than a program investor. I need to have a person that I’m investing in in a program. I invest in people.
“They want to understand music, but they also want to understand the business of music.”–David Yager
Wind: That’s the same as venture capital. VCs invest in people. They don’t invest in a program.
Cho: That’s right. David. Usually when it comes to educational institutions, even though they’re doing wonderful things, they seem to be moving at a glacial speed. Your approach must be so disruptive to whatever system there was earlier. How do you instill that sense of urgency with your leadership team? And how do you make them feel comfortable, to have that courage to do so?
Yager: I try to do it in a number of different ways. I use data to show them what’s working and what’s not working. For instance, I have one top-tier program, and the data show that a lot of students are applying for it. They’re applying from all over the place. So we now spend less money on recruiting students. When I was interviewed, one of the questions they asked me was how was I going to grow enrollment? Even though I acted like I was throwing an answer off the cuff, I had done my homework, and I said, “Enrollment’s not your problem.”
They got very angry with me. A Fortune 50 CEO was chairing the search and he said: “How can you say that? Enrollment is our problem.” I said, “It’s not.” And I waited. He then asked: “Okay, so what do you think the problem is?” I said, “First of all, enrollment is a symptom. If you’re treating the symptom, you’re going to treat it every year. We have to treat the problem, and that will fix the symptom. But fixing a problem takes much more time, much more thoughtfulness, much more creativity, and much more energy. But we will get there.” So we’re treating what I consider a symptom of something.
Wind: So you need a combination of creativity and courage. The courage of conviction. A lot of people can come up with an idea, but they will not have the courage to go to the board and say, for example, “No, admission is not our problem.”
Knowledge@Wharton: In addition to creativity and courage, there’s a third component, and that’s passion. As you are pursuing the path that your creativity suggests and your courage allows you to pursue, you need passion to overcome all the obstacles that are going to come up.
Yager: Yes. The passion gets people to join you.
Cho: You have to have that charisma to drive people. There is a fourth component also. And that is, you speak as if you are the CEO of a Fortune 500 company. There’s a base of business knowledge that you have. How do you spread that amongst your students, among the faculty who perhaps don’t think that creative people should have this kind of knowledge?
Yager: When I first got here, one of the things I wanted to grow was our professional practice. But I got lots of push-back from faculty. They said they didn’t have the credit hours for it. So we had an alumni event in Los Angeles and I asked them: “What did you learn that made you successful, and what did we not do?” Every one of them said, “I loved the school. Best experience in terms of being an artist. But I didn’t know anything about the business when I left.” So I went back to the faculty and said, “These are the pieces we’re missing. We have to move in that direction.”
The first thing we did was to start growing our internship program. I’m a firm believer in internships, but professional internships where they’re not carrying coffee, they’re actually doing things. I recently hired someone who’s doing special projects for me. One of the special projects is I want an inventory of all our professional practices. I want to put it under one umbrella. I want us to start having courses that teach the business.
We have a very successful program called Music, Business, and Entrepreneurship. It started about four years ago. It has grown from 30 students to 200 students. They bring in business people. They bring in lawyers. They bring in accountants. They bring in finance people. They bring in thinkers. And why it’s so successful is that those kids identified early on that they want to be in the business of music. They want to understand music, but they also want to understand the business of music. I’m going to take some of that model and do programs on the business of art, business of theatre, business of dance. We’re still trying to figure it out.
One of the arguments I get from faculty is that a lot of our students don’t want to do that. My argument is that a lot of our students don’t even know what they don’t want to do. It’s the same thing with internships. They say they don’t want internships. But they’ve never done an internship. They don’t know how valuable it is for their career. Part of our job is not to let students slip through just because they say they don’t want to do it. Part of our job is to say, “This is really important.”

How the Next Generation of Global Kids Will Learn from One Another

The best ways for educating young people have shifted dramatically thanks to technology – not surprisingly. Children still read books, of course, but increasingly tech tools make it possible for children to educate each other — from anywhere in the world — in a more personal way that can sometimes promote deeper learning than traditional methods offer. Notes Howard Blumenthal, a visiting scholar at Penn’s Annenberg School, in this opinion piece: “A mobile device is an ideal tool for curious children and teenagers to pursue a personalized learning path to global citizenship. Think beyond school, beyond traditional media. The internet is the fastest-growing educational institution the world has ever known.” Blumenthal is the creator and producer of the popular PBS children’s series “Where in the World Is Carmen Sandiego?” His current project is Kids on Earth (@KidsOnEarth), which connects children and teenagers around the world.
Old people will grab the spotlight. Their story is compelling. In 1950, one in 25 people was over 65. By 2100, one in four will be senior citizens. We’ll see old people everywhere because they live nearby. Expect lots of press about changing the retirement age, end-of-life medical care, updating Medicaid and its international equivalents, along with structural problems with the world’s geriatric care systems. Today, fewer than a billion seniors are on earth. By 2100, there will be nearly three billion.
Today, just beyond the spotlight, our planet has more than two billion children and teenagers. By 2050, there will be three billion. Before the end of this century, more than half of the earth’s 11 billion people will be kids or seniors. Both require extraordinary care and attention.
The difference: We won’t be quite so aware of the kids. That’s because they will grow up in places that don’t get much media attention. The vast majority of new kids will live in India and Nigeria, and also Pakistan and Tanzania, Ethiopia and Indonesia, Uganda and Bangladesh. They will grow up in parts of Asia and Africa often classified as developing nations — a euphemism expressing less-than-adequate food, clothing, shelter, clean water, health care, education and opportunity.
For this next generation, everything will change. Half of extreme poverty has already been wiped out, and we’re making real progress on the other half. Girls are going to school in record numbers. Child mortality rates are greatly improving. There are now wells and clean water where there were none. Deaths from malaria, tuberculosis, HIV/AIDS and diarrhea are declining at impressive rates. We’re building new medical facilities and schools, and lots of physical and technology infrastructure. The NGO/nonprofit/charity community is helping local people in need, often children and teenagers. Much can be learned from the United Nations Millennium Goals, and their newer Sustainable Development Goals, too.
We are growing the world’s first generation of healthy, literate and globally connected kids. A mobile device is an ideal tool for curious children and teenagers to pursue a personalized learning path to global citizenship. Think beyond school, beyond traditional media. The internet is the fastest-growing educational institution the world has ever known.
“YouTube videos miss an essential part of learning: human interaction…. Often, interaction leads to friendship and deepens understanding.”
Adults should be curious, too — curious about why, how and what kids are learning, curious about how best to help. Adults read alarming articles about misuse of devices (February 7, 2018, The New York Times Magazine cover story: “What Teenagers Are Learning From Online Porn”). Sensational journalism obscures the reality of being a global kid growing up with previously unimaginable opportunities.
A quarter century ago, I created and produced a television series for children and teenagers to introduce them to the world, “Where in the World Is Carmen Sandiego?” It became one of PBS’s more popular series because it made learning about the world fun.
Sharing Stories
Nowadays, it makes more sense for children and teenagers to learn about the world from one another, sharing stories about their lives. I thought I might lend a hand. Thanks to a small fellowship, I traveled to Kampala, Uganda, to interview children and teenagers. Hong Kong and a posh boy’s school outside Manchester, England, followed. Soon, under the moniker Kids on Earth, we’ll talk to kids in Kabul, Afghanistan, and Mexico City. Timbuktu, too. It’s amazing what you can accomplish with a small bag full of digital video gear and a willingness to listen.
When I ask kids as young as seven and as old as 17 what interests them, they’re curious about nature, science, math, coding, music, acting, cooking, baking, traveling, hiking, swimming, camping, friendship, sports (overwhelmingly football, our soccer), music and all kinds of food. So far, interest in television and videogames is limited.
In Uganda, kids knew about last year’s violence at an Ariana Grande concert in Manchester and her return for a benefit concert. How did they know? They followed the story on the internet. That’s how they knew Hillary Clinton lost the election for U.S. president, too. Eleven-year-old kids in Uganda know much more about the politics of my country than I know about theirs.
“Kids are curious and they are compassionate. To generate learning, nurture empathy.”
They are attentive to classwork and homework. They understand that school success is directly related to financial success as a working adult, so they are serious students. They study physics and chemistry because they intend to become doctors; their country needs more medical professionals. They respect their teachers and the curriculum. They are extremely careful with their books. They enjoy reading. Roald Dahl was mentioned often. So was Harry Potter.
In the classroom, kids see mostly blackboards (whiteboards in wealthier nations), and posters designed for young minds. On the internet, there is no children’s version. Children see what adults see. Children in Uganda watch the same footage of a school shooting as adults in Florida.
The first YouTube video was a trip to the San Diego Zoo: an ordinary person looking at an elephant. YouTube is dominated by ordinary videos, watched by a great many children all over the world. Increasingly, YouTube is the way children and teenagers learn about the world. They are not only viewers, but curators and creators, too.
The biggest producer of YouTube videos is not Nickelodeon or Disney, but individuals telling stories about their lives. If you’re in the children’s media business, that’s a big problem you can try to solve by developing new properties and opening new markets, but the sheer number of enabled storytellers increases daily, reducing market share and mind share as the population grows. Similarly, if you’re running curriculum, and you know that students can choose from a hundred animated explanations of how a plant cell works, how do you capture and maintain their attention in an old school classroom? If you’re building an ed-tech firm, how do you adapt to the reality that children all over the world are teaching and learning from one another?
I think there are three answers.
First, the critical advantage for educators is participation in the real world. The old classroom model is no longer a good solution; it’s too confining, too limited in terms of range of content and presentation options, too far removed from the real world that kids see on and off screen every day.
Second, YouTube videos miss an essential part of learning: human interaction. Listening to others, asking questions and sharing information. Often, interaction leads to friendship and deepens understanding. When an Israeli child encounters with a Palestinian child, they play because that what comes naturally. (Never underestimate play.)
Third, kids are curious, and they are compassionate. To generate learning, nurture empathy. Kids willingly memorize the names of the countries in Africa, but they become keenly interested when they are providing malaria nets or helping to build wells that save lives of children who become their friends. This is no longer theoretical. Students can be collectively involved in studying math and simultaneously learn to become global citizens.
“Kids … become keenly interested when they are providing malaria nets or helping to build wells that save lives of children who become their friends. This is no longer theoretical.”
While those rooted in 20th century thinking continue to manufacture story bibles and cartoon characters, and continue to build curriculum based upon what kids absolutely must know, people engaged in the 21st century readily admit the obvious: We don’t know how the future is going to work, but we’ll improvise and figure it out along the way.
Most likely, the answers reside in the future of interactions between hundreds of millions, then billions, of children and teenagers.
Constructing the initial phases of Kids on Earth, we learn by talking to kids everywhere. There is a lot we do not know. We debate whether English ought to be a common language among children, or whether local languages should be digitally translated to build common understanding. We wonder whether children who tell stories should be held to the COPPA-style guidelines that were designed to protect them as the audience. We’re curious about the connections between friendship, global citizenship and altruism among kids and teenagers, and we hope to focus there in the long term.
We want kids to be able to connect one-on-one and appreciate the commonalities and differences that exist between them. Right now, there is no safe way to do that, not yet anyway, so we keep an eye on public policy, and new technologies, especially machine learning, robotics and artificial reality. We keep an eye on older technologies, too. In many countries, books (and comic books) are the good ways to share stories because the local internet is unreliable or heavily controlled.
None of this has never happened before. Everything about it is new.
Imagine being four years old today, growing up near clean water with a healthy mother, with a new school nearby and ample internet service along with abundant electricity. And imagine your best friend lives 3,000 miles away in a refugee camp void of formal education, but you talk to her every day of your life. Because you both love drawing and because she makes you giggle.

How to Pitch Your Startup to a Venture Capitalist



Venture capitalist Jenny Lefcourt offers tips to startups.
Jenny Lefcourt is general partner at Freestyle Capital, a venture capital firm that specializes in seed and early-stage investments. She knows what it takes to be an entrepreneur because she’s been there. Lefcourt has sold two companies she co-founded — WeddingChannel.com and Bella Pictures — after dropping out of Stanford Business School. Meetings with investors to pitch the business and raise capital left her with a deeper understanding of the process, and she took that experience with her to Freestyle, which mentors the 12 companies it invests in each year. Its current portfolio includes Wag, the dog-sitting website, Digit, an automatic savings startup and Patreon, which lets fans become patrons of artists, musicians, writers and other creative people.
Leftcourt spoke to Knowledge@Wharton to offer specific and tested advice for budding entrepreneurs. The following are five takeaways from the conversation. (Listen to the full podcast using the player at the top of this page.)
Do Your Homework
Before the first meeting with a potential investor, the entrepreneur should be able to sharply define the company’s business model and have the right team in place. That means doing the required homework and answering important questions: Is this a lifestyle business? Is it a cash-producing business? What’s the short-term vision? What’s the long-term goal? Could the business be worth $1 billion someday?
Lefcourt shared the story of an entrepreneur who “bootstrapped” his idea for months because he wanted to make sure the demand for it was real before he went in search of investors. Once he was satisfied that his idea was solid, he figured out how much he needed and whom to approach for capital.
“There are probably 300 different seed funds, so understanding which one is right for you is the homework you’ll start to do by hearing about reputation, by looking on their website, seeing their portfolio,” Lefcourt said. “If there’s something [in their portfolio of investments that’s] directly competitive, you don’t want to pitch them. However, if there’s something that’s similar, and you think, ‘Wow, they’ll really get it,’ then that is someone you want to pitch. So that’s the type of homework you want to begin to do before you even enter into their office.”
Stay Focused
Many budding entrepreneurs make the mistake of information overload. They come to that first investor meeting armed with every possible fact, and they want to share all of it to show how well-prepared they are.
“What’s really important is to not go into the weeds of all the details because what you’re trying to do is give them enough information that they want more information,” Lefcourt advises. “Your goal at meeting No. 1 is to get people interested enough that they want meeting No. 2.”
However, entrepreneurs will need to demonstrate their knowledge of the marketplace, explain what is changing that makes the opportunity exist, and show that they have the right team with the right solution to the problem.
That’s where metrics come in. “You’re really trying to paint the big vision but also provide as much data or as much traction as you can so that not only do they see the vision, but they can believe it can be made,” she said.
It Always Costs More Than You Think
One of the most difficult early tasks for entrepreneurs is figuring out exactly how much cash is needed to move to the next level. Lefcourt has some simple advice on that point: “I always tell entrepreneurs to make sure that you budget for longer and more money, more resources because everything is harder and takes more time than you ever imagine it will.”
But don’t sweat it. She said smart venture capitalists are flexible about funding and can help the entrepreneur figure it out along the way. Freestyle has often recommended more or less capital to the companies it has worked with, for example.
“Your goal at meeting No. 1 is to get people interested enough that they want meeting No. 2.”
“You should know a little bit about what you’re going to achieve, and by when, and the capital you think it will take,” she said. “But beyond that, in terms of what you’re asking the person on the other side of the table, I don’t think you need to worry about that as much.”
Learn to Enjoy the Process
Lefcourt empathizes with entrepreneurs who would rather get back to business then sell themselves in an investor meeting. But that’s the only way to get the necessary financial backing, so they might as well embrace it.
“You have to remember that while your business is what you think about 24/7, you’ve got these people for a half an hour to an hour. It’s your job to grab their attention and be a good listener as well as a good visionary — and paint them a picture that’s exciting,” she said. “You don’t think of venture-pitching as sales, but you are. You’re selling to them that this is something they want to be a part of.”
When it comes to leaning in, attitude is everything. Investors feed off positive energy and people who can handle tough questions and criticism with panache.
“Understand there are really smart people out there, and they’re going to give you their ideas. They’re going to disagree with you,” Lefcourt said. “The more you embrace that process and the more you enjoy that process, the stronger you’re going to be, whether that VC ends up investing in you or not.”
Talk It Out
All entrepreneurs looking to scale up need to find the delicate balance between giving in to get the money and holding the line on what they feel strongly about. Disagreements are common, and the best way to work through them is to communicate.
“Everything is harder and takes more time than you ever imagine it will.”
“There is that line you have to walk when you’re pitching,” she said. “You don’t want to just please them and agree with them, but you also need to be open-minded and thoughtful because people will give you good ideas. The answer as to how to do that is just to be authentic about it, and then you won’t be confused. Know what you feel strongly about and be open-minded to someone pointing something out that could be interesting.”
Lefcourt said she got the best advice in entrepreneurship while working on her first company. She was having a disagreement with a VC, so she went to an independent board member for help. He told her to “sit down and have a nice conversation.”
“The good news is that once someone has invested in your company, everyone is aligned. Everyone wants the company to be successful. Everyone wants the founder to be successful,” she said. “If there’s a disagreement, it should just be discussed — the pros, the cons, the various outcomes. The VC may be right. The founder may be right. There may be something in between. But there’s only one way to get there, and that’s with really open, honest communication.”