Startup Mindsets with Earl Valencia

you

Hi, I'm Scott Hansel, and this is another episode of Hansel Minutes. Today, I'm chatting with Earl Valencia. He's the author of Startup Mindsets, along with Dan Gonzalez. This is a blueprint to thrive in an innovation-driven and globally connected world. How's it going, sir?

I'm good, Scott. Thanks so much. Excited to be here in your podcast. A big fan. Well, congratulations on coming out with the book. Everyone is talking about startups right now, and I have to give you kudos that you didn't put AI.

all over the book, nor did you put it in the title or the subtitle. Is that a conscious decision? Because not every startup you know has to be AI these days. Yeah, I think that's definitely a conscious decision. Actually, the origin of this book really is there's a lot of... books that talk about how to build a startup.

But we really struggled to find a book of why you should start one. And our theory really is that not everybody should be a startup founder. And if you talk actually to a lot of young people today, their dream is to be a startup founder. It actually is very difficult, right? So I want to be sure that we have a book to tell people what are the questions they need to answer before they even think about starting a company.

Now right now, that term startup and founder almost has become so much like a... a meme almost you say founder and you immediately think about some tech bro on the bus on BART in the Bay, but your, your experience and you grew up in Southeast Asia and the Philippines you now are in Seattle. You're not really a Silicon Valley. person right but you have experience kind of globally

Yeah, yeah. You know, how I ended up actually going to Silicon Valley is through business school. So I went to Stanford for business school. But, you know, I grew up in, you know, I was born in LA, but I grew up in Southeast Asia most of my life. And, you know, my parents basically said, you know.

you only have a few careers that we really would support you. You know, doctor, lawyer, and engineer passed the muster, right? So, you know, when I was young, when I was 12, my parents brought me to the Johnson Space Center in Houston. And I told my parents,

hey, maybe someday I want to be an engineer. And they're like, yeah, exactly. That's exactly what we want you to do. So I ended up going to engineering first in the Philippines and then ended up finishing undergrad and graduate school in the East Coast. I mean, I took up aerospace engineering, actually. So my dream was to become an astronaut.

You know, when you're in kind of hardcore aerospace engineering land, like you don't really think about startups, right? And then I ended up getting actually admission to Stanford kind of by accident. At the time, they were doing an exception for people who didn't take... the GMAT, they only had GREs. And I had one. So I recycled my score. And lo and behold, I was one of the first admits of Stanford not to take the GMAT ever. So that was a surprise.

And in Silicon Valley, at least in Stanford, I discovered like this really strange world of people talking about funding, talking about ideas to become unicorns and billion dollar companies. And I was like, what's going on? So that really made me think about this whole notion of building something from zero and how do you take...

literally an idea and dream to make it something big someday. And, you know, when I go all around the US or even go around the world, I realized that that's not a normal way to think. It's just very unique to that place. And right now it's a meme, but I think it's...

also a notion of like how do we actually you know create value and i think people miss that now right like the reason of why you create companies is hopefully to kind of create value in the world and not just try to like ipo it right

Right. And I think that's a great point that you call out creating value and people have to ask themselves, what is value? Right. There are those that make digital value and try to turn it into just money. Then value is value helping human beings live better lives, live more satisfying lives. Solving a problem seems to me where value starts at least. Yeah, and I think that's really the thought.

really part also of how we want to frame the book, right? Like, you know, we never told people like, you know, our goal is to make you billionaires, right? But we even talked in the book, it's like, what type of personal mission do you want to solve? And I think that's super important to start your journey, right? Because when you start a business, it is never rosy. I think right now it's a bit...

People are making sure that it's kind of Hollywood now, right? People think that it's normal, it's easy. But actually, when you really talk to other founders, you realize very quickly that it's actually a grind. And the only way that you can go past the grind is to actually connect it to something bigger than yourself, right? And that's kind of the way that we want to kind of talk about it. And we framed it in this book of...

what really is your, you know, impact statement, right? Because ultimately, if you don't have one during the rough times, it's just easy to stop and quit. And that's, you know, we don't want that for at least for these founders, right?

Right. Because in the hard times, you don't have anything to hold on to. Yeah, exactly. And that's really the thought, right? That's why it's funny. In business school, as an engineer, when I was an engineer, I was like, why do you always talk about vision, mission, values? I thought it was a waste of time.

But only when I started my own company, I realized that those statements actually are the ones who will get you through the difficult times because you will anchor on, should you hire this person? They're good, but not aligned to your values. Should you get this investor? they keep on talking about returns, but they actually don't believe in what you're trying to achieve, right? Or maybe the technology, like a technology actually like good for humanity or destructive and how do you balance?

Those two. So those types of statements will guide you during these like really periods of uncertainty as you build your company. Now you open the book and you compare traditional.

leadership mindsets with a startup mindset then this term mindset is so important because you really it's not something you can really put your finger on it's not something physical but you're saying if your mindset is different then your experience as a leader is going to be different. What is the traditional leadership mindset as it relates to or compared to a startup mindset? Yeah, I think the thought there is...

You know, we have an analogy of like a traditional business or we call it an SME curve or a startup curve, right? An SME curve is like a linear, right? So basically, at some point in steady state. you can say that I want to put in $2 and I can output, let's say, $4, right? So maybe 100% profit or maybe less, like $2, you get $3. But when you see it, actually oftentimes you see a startup, there's actually multiple...

months, if not years, that you will lose money. And then hopefully in the future, you will actually have this exponential curve, right? So there's going to be a point in time where the traditional mindset. a traditional kind of curve or SME will actually flatten out versus someone that will just go exponential and kind of reach. So how does it apply to a person, right? I think that's really the question. And I think the thought here is...

Two things. One is long-term thinking. How do you then think about it where if you are anchored on a large vision and really a solid mission, then you can think what... decisions that I do today that might not affect the next two or three months, but then will be aligned to get me to that larger goal in the future, right? I think that's one. One is long-term thinking.

And the other one really is in this notion of risk, right? Like how do we then tolerate risk today so that I can then get that scale in the future, right? I think that's really the way that I hope people would think of. And it doesn't mean that, let's say, traditional business is bad. Actually, very good traditional businesses make...

a lot more money than sometimes tech startups with even lower risk. But I think as a leader, if you then apply those two principles, right? Like one principle of like long-term thinking. and then on the principle of how do I think about risk today and balance it out with your return in the future, then maybe you can think about scenarios or ideas that you will... then build your company towards, right? So these are at least some thoughts that we had. And it's funny, I always thought that this...

J curve or this exponential curve, again, is something that a lot of people can relate to. But I realized that in the startup world,

People just realize that it is normal, but actually not really normal if you talk to any business person all over the world. Do you think that there's any things in your time that you spend in the Bay that are, for lack of a better word, kind of... problematic about startup thinking like there's the there's the joke if you're like a young person in your 20s and you're dating in the bay everyone has got a startup everyone's a founder you know you're at a panera bread and you decide to

register a domain and suddenly you're a startup founder. Is there a legitimacy that someone feels when they become a founder? Is it literally just I have a prototype and a domain? Is that enough to be a founder or do I need to go to business school and learn more? You don't need to go to business school in order to be a founder, right? I think the most important thing really is...

You know, why do you want to start a business and what are the tools for you to actually get there? Right. I think right now there's a little bit of a, you know. making sure that being a founder is kind of en vogue. And what's more important actually is making sure that you are true to your mission and actually figuring out why do you want to do this in the first place.

Yeah. You said in the book, one of your central questions is, what problem are you so passionate about solving that you take it on, even if it probably fails? How is that the ultimate test for you as to whether or not you should have the startup mindset?

Yeah, this is one of the major actually thesis of the book, right? We interviewed hundreds of founders that are series B and below. Because there's a lot of actually books to talk about the successes, but no one really talks about this kind of grind phase, the phase of extreme uncertainty. So we asked two interesting questions. First question is... Why did you start the company? And the second question is, if the company fails, would you regret it?

And the question to the first one is a little bit what we expected but actually a very deep question that most people really talked at length about. It's really about something personal to them, some injustice they saw. something that relates to something so deep to them, maybe from a family member and experience in their life, something that changed really their perspective. And then the second question was the biggest surprise.

What if it fails? Is that okay? And to be honest, most startups will fail. I think when you go to TechCrunch, everybody thinks, wow, all these people are making lots of money. It's guaranteed if I go to the same train. I'm also going to be successful. But to be honest, out of probably like one story in TechCrunch, there's 99, if not 99,000 other stories that is probably not published in TechCrunch that probably failed.

But people told us, even if it doesn't succeed, if they worked on something so meaningful to them, they will not regret it a single day. And that was the biggest surprise for us. That's really why we said that having a startup mindset is so important in reflecting why you want to start this journey, even in extreme uncertainty.

Hey, friends, we're going to take a breather and thank our sponsor, ShareGate by WorkLeap. I've got Shailen Gimby here to chat with me about, you know, those M365 environment migrations. Sometimes, I know you've been in one where the environment's out of control. It's crazy. You've got random folders. You've got old SharePoints that you haven't looked at in a while. You've got empty teams. When is the moment that tells you that an M365 environment is completely out of control?

Well, you're going to hear things like, why do we have 500 plus inactive teams? Or why does Bob and Marketing have access to legal documents? And you'll even get the, I'd like to pay for a specific video app, not realizing that they have stream. You know, at that point, IT knows they're not in control anymore. The environment is running them. And that's when security risks, compliance issues, and productivity roadblocks start piling up. That's exactly why we built ShareGate.

We help IT teams take back control by detecting inactive teams, automating cleanup and enforcing governance policies without forcing IT to micromanage everything. You know, if you're constantly chasing ownership and permissions. It's time to rethink your approach. Time to rethink your approach. No truer words. Check out ShareGate by WorkLeap at ShareGate.com. It's one tool to migrate faster and secure your tenant. And big thanks to ShareGate for being a sponsor of Hansel Minutes.

Now, you have a foot in Silicon Valley, a foot in the Northwest, a foot in Southeast Asia, and you kind of reframe Silicon Valley's advantage. to be a different one rather than just they have more resources so can you help me understand you're thinking about

Silicon Valley and the myths around Silicon Valley versus what you think maybe folks in emerging markets, especially in the Philippines or in the Southern Hemisphere, you know, should understand and take away from the Silicon Valley playbook. Yeah, I think there's... So people think that Silicon Valley is a place, right? So that's for sure, right? But what the advantage actually with Silicon Valley is, number one, there is talent.

So to be honest, it's a talent magnet. So people from all over the world will come there because they think that they can get fame or fortune, especially in the technology field. The other one is actually this hyper... connectivity right so if you have an idea you'll find people that might be interested in you uh and the idea that you're trying to build but what's most important actually is this mindset

that people have in order to succeed. This notion of risk tolerance, if I work on something meaningful, how do I then take equity, which is more long-term? but not necessarily have, let's say, cash for compensation? How do I work with people that are different from you, but then compliment me because their skills are there? I think these are the things that...

If you go to other markets, you won't be able to see. And those ingredients alone is why this place, or you can replicate it somewhere else, but at least these ingredients. are necessary for really an innovation ecosystem to thrive. Okay. Now, you've had interviews about the book Startup Mindsets all over, including newspapers in Asia. And they've all taken different things away from them. Do you feel that, like, I'm looking at an interview here with...

TatlerAsia.com. Are they taking different things away from the book than are in the Northern Hemisphere or in the West? I think so, right? I think that's the funny thing, right? Depending on... Who their audience is is what they take out. And I think when you talk to, you know, folks, let's say in Asia, they always want to highlight, you know, what is success, right?

For example, success is writing a book from a top publisher like Penguin. Success could be that you built a company, you raised venture funding. Success could be working in a big tech company. So they want to highlight the success. even if actually we highlight, you know what, let's not focus on the success, but let's focus on the journey.

Let's focus on how actually, you know, what are the lessons you need to do? And let's not glamorize this, right? But I think what's happening, and again, Tattler is not one of the many. publication is like, how do we think about this as a way for people to get excited about this? But what I want to frame is not about... people to get excited, but hopefully people to ask the right questions as they go towards this journey. I think that's really the way that...

we want to frame. And that's why this book was also created. Yeah. Well, to your credit, one of the reasons that I wanted to talk to you is that I honestly was like, I don't want to read another startup book, but you are.

Rather than talking at length about startup success, you're talking about resilience. You're talking about failure. You're talking about timing. And that's why I think it's so interesting that you're bridging. worldwide audience, you know, an audience that is East and West, North, North and South, because you said that startup mindset people, founders will look at the failure as being in itself meaningful.

How do you cultivate that mindset on a team that has like, oh, we can never fail. We cannot fail. We have to succeed. Yeah, I think, you know, as I talk to other founders, right? you know that failure is always around the corner, right? And, you know, I joked, I actually talked to a number of founders, you know, the other week, and we joked around to say that, you know, honesty...

most of the successes we see are really about luck, right? Like imagine that you have, you know, all these top founders, like... they just had the right connection or the right introduction or the right technology or the right market timing even, right? The right idea at the right time. And, you know, Silicon Valley in particular is littered with ideas that just didn't have what's the best theme, the best idea, but just wrong timing or good timing just happened to be like a little bit.

Technology just got overtook by one technology that was like 1% or 2% better. So all of these things happen. So as a founder, I think the most important thing is to be honest. I call it intellectual humility, right? This notion of knowing that you're working on it, but also understanding that you are going into an area.

which has just like extreme high risk, right? And that's kind of why, to be honest, people get rewarded because you're going to extreme risk and maybe you have the small percentage, you get an extreme reward. I think the biggest thing really to reflect on is how do you then control that risk and how do you be sure that you are going in with open eyes and not this idealistic?

blinded way because you think that it's, you know, a lottery ticket that's waiting to happen. Yeah. Speaking of that lottery ticket waiting to happen, you have this term, wannapreneur, if you're a wannabe-preneur, as opposed to an entrepreneur.

You know, what is a mistake that someone makes and how do you tell the difference? Because I'm sure that everyone in the Bay Area right now and all over the world is looking for a co-founder, right? They're having coffee and someone is texting someone right now on LinkedIn to pick their brain.

about a startup. How do you avoid wannapreneurs? Yeah, and I think that's, it is actually the most cited or the most ones that every press wanted to talk to me about, this specific chapter, right? Because right now... Many people, not just in Silicon Valley, not here in the Northwest, not even in New York, but literally every city in the world, you'll have a lot of young people and they say that I want to be a founder.

It is really a phenomenon that wasn't here even maybe 15, 20 years ago. But I think the key really is... Are you really an entrepreneur or do you just want to be an entrepreneur? See, that's something that requires. I love that you had a pause there.

Because it does have to have a pause when you say something like that. The listener and the reader has to go, is it the glamour or is it the building of the thing? Is it the making of the thing and the people you're going to help? Or is it just that it's fun to say entrepreneur? Yeah. And it is something that is, you know, I think needed to be asked today. Because I don't want someone to leave, let's say, you know.

their job, put their family at risk, right? Like do something and change their lives. But ultimately inside of them, that's not who they are or who they want to become, right? And that's why it's important. And the other one, too, is entrepreneurs are people that just have a bias for action. And I've met so many people, I don't call them one-up-preneurs, but so many people that pitched me an idea. Right? Hey, I have this idea. Let's talk. Maybe can you invest in me? Blah, blah, blah, blah.

And then I see them again in three months. And they're like, oh, by the way, I have this idea. They asked him, what happened? Oh, I'm still working on it, right? But I'm like, can I see something? That's when you know that you have the entrepreneur's DNA. It's when you don't let time pass by. Because the problem that you're solving is so important to you.

that you need to try to solve it as quickly as you can. And that's the type of thing that I want to share because everybody thinks that they have an idea. In fact, people come to me and tell me, hey, that idea. That product, that was my idea 15 years ago. But I said, did you act on it? And they're like, I didn't. So that's a type of discussion that I always like to have.

That's a great point. And there's so many people out there that are like, oh, I had that idea. It doesn't matter, right? It doesn't matter that you had that idea because ideas are, you know, there's always an idea. I've got lots of ideas. I've got 30 plus domains that are all.

failed startups that I never cared enough about. And that's really the thing, right? If you're going to launch a startup today, what is the problem that you're going to tackle? What's the thing you care the most about that you can't sleep until you make it?

Yeah, and this is something too is a misconception, right, which is venture funding. So people think that venture funding is like, again, another lottery ticket, right? Like I got money to work on this. But for people who are experienced entrepreneurs or startup founders, they realize that getting someone else's money is a responsibility. Ultimately, even if you give 1% of your company to an investor, it's not your company anymore.

It is the company of you and you have the duty to investors to try to make it and work the hardest. So once you get money, it's actually like at least a three to five year commitment right away. You have to be sure that you are ready, you're willing, and you want to solve that, especially once you go to venture funding raising.

Yeah. Now you had mentioned a couple of things I wanted to get clarity on because I think not everyone knows what a series A and a series B and these different things are. Could you briefly just give us a startup 101 so we can speak that same language? Yeah, of course. Right.

You know, typically when you start a business, there's like an idea stage, right? So, you know, you may be a co-founder and you build a prototype and you get some traction, right? So that's really what it is that you can call the idea to precede stage. Right. Because seed is like a, it's like a, you know, like a plant, right? Like it's a seed. Okay. And then once you go.

towards getting some customers, some traction, some people maybe paying you or you're getting users to use it, then you can go to the next stage, which is a seed stage. And after that, so people could give you money just in the basis of that, right? Maybe the business model isn't perfect yet. You're not necessarily growing yet, right, et cetera. But then when you go to the next stages, which is series A and B, A to be the first one that really says...

I see that your business model is working. You have a product in the market that's growing. And typically right now, the bar is a bit high, actually. So you need to be like a million dollars projected run rate per year and maybe growing about... to 15% per month. Per month? Per month. Wow. So that's something that you have to go. So you have to start the Series A with like a hockey stick or a remnant of a hockey stick.

And then you go to the later rounds, which is like B and C, which is what they call growth rounds, right? Because you realize you perfect the model, you have the market, and you just need fuel to the fire to start growing and scaling and try to reach your full potential. So this is the hardest part. But this pre-seed and seed stage is what we call the valley of death in the startup world because this is where ideas get launched.

you have some conviction, some investors that believe in you, but they bet on the team, maybe the idea, but the market still hasn't said that that's the right idea for the market.

You say they bet on the team. That's where I think sometimes people outside that bubble see... maybe a failed project, but the person keeps getting bet on. Is it personality driven or idea driven? Because there's this possible myth of the meritocracy where a good idea will always be bet on, but then we see the same person.

getting raising money whether it be friends and family or so how much is it the value of the idea versus you know earl's a known startup person in the community and we'll give him money Ultimately, investors. When I took my venture capital class at Stanford, and the professor was Eric Schmidt, who was the first CEO of Google. And he told us the point of investing is when...

greed overcomes fear, right? Greed overcomes fear, which just means that, you know, you need to take out and de-risk yourself before you give someone a money. And de-risking could come from I know the person, I trust the person, I believe in the person. And the other way you also believe in the person on the team is competence. Are you the only team in the world that can address this problem, which I call founder market fit? So those are areas that we have to think about when people get money.

You might have the best idea in the world, but in order to get investment, if you want to call that, and that's your goal, you either have to figure out how can these investors trust me? as a person that I will do the right thing and be stewards of their money. So that's one question. And the next question is, am I the right team to address this problem? that we're trying to solve in pitching to you.

Okay. Typically those two will work out. So that is where things go beyond passion. Like you can be very passionate, but have no background in, I don't know, medical software design. Exactly. And so what you need is an alignment between the founder's background, their motivation. their insight the problem space because the the venture capitalist is going to bet on a founder who fits the market but so again it fits the market but typically it's also mission right

Mission, market, founder fit. Because ultimately, if they're addressing the market, and market typically is a problem, right? A market is just a reflection of the needs of... x amount of people it could be thousands of companies or billions of users right but it's a reflection of the need so if you if i was an investor and i can sense that you really want to solve this need

then that aligns. And I know that during hard times, you will push through, right? So that's why it's important to call that thing that we talked about in the beginning of this podcast is what is your mission? And then you can address the market. And then is your team the right team also to address this mission and the market? Right. And also personal experience with the problem. Like if you're a nurse building health tech, insider knowledge of a niche market, are you just chasing?

a meme or are you solving a problem that you care deeply about yeah and it's hard right because technology um you know there is an advantage also with technology but People underestimate the domain expertise in certain industries. And I think you mirror the two together. If you have a good technology with good domain expertise, then that's typically a bettable company.

Yeah, and you talk in chapter 15 to remind people that it is a marathon, not a sprint. People seem to think that they can sprint to a billion dollars. This is not the case. It is never the case. It is typically a grind and you cannot make it quick. You know, there was a time before, and we hear this all the time, like, I'm going to build something and I might get acquired really fast.

I think the market corrected a bit of really saying, are you building a sustainable business that then has potential to grow bigger? And I think that is the thought process. And that's why it's a marathon, right? Because if you're addressing really a large market, it just takes time. failures a lot of hard kicks a lot of experiments before you get it right so it takes time and it it you know if you're addressing a a problem worth solving then you have to tell yourself to be patient

And maybe tell your team to be patient. And I think that's the hardest part, actually, to be a leader in this situation. Yep. And having the startup mindset, indeed. Thanks so much for hanging out with me today. Hey, thank you, Scott. Always humble and honored to talk to you and looking forward to have more conversations. Appreciate it.

I appreciate you. So the book is Startup Mindsets, A Blueprint to Thrive in an Innovation Driven and Globally Connected World by Earl Valencia and Dan Gonzalez. And this has been... another episode of Hansel Minutes, and we'll see you again next week.