Endeavor Webinar Series:

Insights by Jason Green & Bill Sahlman

Continuing its webinar series aiming to support its network in navigating through the crisis caused by the Coronavirus outbreak, Endeavor invited Jason Green, an Endeavor Global Board Member and Founding General Partner of Emergence, the leading early stage firm focused on partnering with enterprise cloud leaders and Bill Sahlman, Professor of Business Administration, Emeritus at Harvard Business School, to discuss everything from finding opportunity amidst crisis to what the world will look like on the other side.

The Essence of Endeavor 

Jason joined Endeavor 22 years ago, right at the beginning of his career. According to Jason, “When we initially set out some objectives at Endeavor, it was to get into 10 countries and support 100 entrepreneurs and that was as ambitious as we could imagine in terms of metrics.” “There are lots of lessons to be learned about the compounding of great passion and ambition and great teams over a period of time” he added. 

Regarding the organization’s evolvement over the years, the founder of Emergence stated that “Endeavor is truly one of the things I am most proud of having being involved over my career and it’s all about the entrepreneurs that are creating the value and forming this trusted network and that are giving back to the next generation. I can’t imagine of an organization that has been more significant over the last 20 years for entrepreneurship and frankly over the next 20 years it will be even more impactful.”

Jason pointed out one of the most valuable connections he has made through Endeavor, the one with Santi Subotovsky, an Endeavor Entrepreneur that came to him for advice back when he had just started an educational learning company in Argentina. Jason loved his background and his ambition. “He was clearly someone who really cared deeply about entrepreneurship and helping entrepreneurs fulfill their potential and we were lucky enough to recruit him to Emergence. He started as a Senior Associate in our firm and he worked his way up, as he is now a Managing General Partner of the company. Santi was the person that led our investment in Zoom, which is now connecting all of us around the world.” 

Bill also agreed that “Endeavor and other organizations have transformed the world in terms of knowledge of the process, in terms of trying to create legal and cultural context in which entrepreneurship is supported. In this context, failure is tolerated as it’s inevitable and the way to success is treated in better ways than how it might have been treated otherwise.” He explained. 

The Beginning of a Career

“All roads start to converge over the years if you are around long enough.” said Jason, who started his venture capital firm, Emergence, back in 2004. “We launched the firm with a bet on the enterprise cloud and our first investment was Salesforce, something that obviously worked out reasonably well. We were kind of alone believing in the future of enterprise cloud software so we got the chance to invest in companies like Yammer and Zoom, one of our most proud investments as a firm.” explained the investor. 

“All entrepreneurs are in sales, as they have to convince somebody to do something that perhaps they didn’t know they should do.” Said Bill

Bill started his career in academics back in 1980, when he joined the faculty of Harvard Business School. During his first years at the university, he met people in the local entrepreneurial community that were talking about a different way of managing and raising capital. Their view had nothing to do with Corporate Finance, the course that he was teaching at the time. This urged him to propose a new course called Entrepreneurial Finance, a course where almost 50% of students signed up, despite the initial distrust of the faculty.  

“Through the years I came to understand a lot more about entrepreneurship, as I did more than 200 case studies.” Bill said. “Creation stories are unbelievably important and most of them are not completely true. But the reality is, all entrepreneurs are in sales, as they have to convince somebody to do something that perhaps they didn’t know they should do. We are all in the business trying to spot possibilities and to sell ourselves so that other people join. That’s really the essence of entrepreneurship” he added.

Spotting Successful Ideas

Bill was one of the first people to believe in Amazon’s success. When asked about how he spots others’ business ideas, Bill stated that while he was studying Amazon, he realized that their success was based on the fact that they could operate with negative capital. “The initial category they chose to offer was books. Although customers pay upfront when buying a book online, Amazon doesn’t pay the supplier of the book for 45-60 days. Also, they didn’t need any fancy retail locations. They had free access to the largest audience in the world and they could offer access to 3M books instead of the 125.000 books that you would find in a large bookstore. They could operate with negative capital, and they still run a massive business with negative capital.  Now, they have chosen to invest in logistics but still, the basic business in unbelievably profitable in cash flow terms.”

“Amazon cost a little bit more to acquire, but the balance between the cost of the acquisition and the lifetime value was the thing that clicked for us” said Jason

Jason was one of the first to see SAAS, right before anyone knew what this acronym meant, as Salesforce was an early bet of his. “What we recognized was that Salesforce was not a consumer company with negative working capital. Instead, it was high margin, recurring, high quality revenue. Thus, the life time value of those customers was way higher than that of a consumer company.” Jason explained. “It cost a little bit more to acquire them but the balance between the cost of the acquisition and the lifetime value was the thing that clicked for us. We got an $150M valuation which at the time seemed insane – now it’s $160B – and it went public on a billion – dollar valuation. This taught us how compelling these businesses are over the long term if you had great opportunities.” He added. 

Managing cash and pursuing opportunities

According to Bill, most entrepreneurial ventures are organized to run out of money periodically. “I have this expression that ‘Money is time’. You get time to prove something and if people have faith that you are going to do so, they are prepared to give you more money to take more time figure out what the opportunity is”. he explained “This period sucks. There is nothing positive about a worldwide pandemic. It’s going to be tough to get through. A lot of people are going to lose their lives and it’s a complete and total disruption. Having said that, there are things that you can do to deliver value to customers even in this new period.” he added.

Bill suggested that we will now have to reimagine how work takes place. “Think about Zoom as a perfect example of a product that exploded as a result as of this inability to meet physically. Or Coursera, since now you can get world class education anywhere anytime for free. It’s an astonishing world in which we live in and those companies are in fact doing extraordinarily well.” He explained. However, “they will have to improve their value proposition to sustain that position” Bill insisted.  

“There are things that you can do to deliver value to customers even in this new period” said Bill

“Supply chains are going to get moved all over the world, software like risk management is going to turn out to be a big business. On the one hand it is completely depressing and some companies are going to go out of business. On the other hand, some companies are going to buy enough time and figure out how to have a viable business model. Some incredibly important businesses are being created either within an existing business or brand new. Undoubtedly, they will transform the way we think about the world and in 5-6 years we will recognize that.” Bill explained. 

Solving Real Problems

In emerging markets, where Endeavor operates, Endeavor Entrepreneurs are really solving real problems at scale. According to Jason, “One of the things I have appreciated when travelling the world to go to Endeavor’s International Selection Panels and meeting all these entrepreneurs, is that there are a lot of advantages for people that grow up in a region that doesn’t take capital or talent for granted and think about ‘how do I break out of my market to be a global thinker’”.

Jason added that in some ways, all of the things that are happening now are shifting some of the advantages to that mentality. “We are no longer constrained geographically for capital or resources. This has unleashed the entrepreneurial engine across the world as well as the companies that are able to think like that, in order to attract talent from all over the world. I am really encouraged by that and I think that venture capitals recognize that value is being created all over the world. If you are going to be the best in the world you can no longer just be the best in Silicon Valley.” He explained. 

“We are no longer constrained geographically for capital or resources. This has unleashed the entrepreneurial engine across the world” said Jason

Bill agreed with Jason on the fact that the world has an endless supply of problems, but fortunately entrepreneurs view problems as opportunities. “When you don’t have resources to protect, you don’t have offices, you don’t have all sorts of things, you can do ‘control – alt – delete’.” He said. “My point is, hit the different outcome that you want and then organize the resources to attack the opportunity. Always try to focus on some unmet need, some place where you can create and capture value and my argument is that they are all over the world.” Everywhere in the world there are dissatisfied consumers, broken systems, things that you can do that in sometimes make society better off and in which you can make money or you can attract donations to the point where it’s self-sustaining.” Bill added

Management vs Leadership

According to Bill, Leaders are the ones who understand that individuals don’t really accomplish a lot, but it’s the teams that accomplish incredible things. “The question is how do you form high performance teams where you don’t have to answer every question, but they ask the right questions, they organize to solve these problems and they collectively do more than any individual.” He pointed out. “Leadership is about creating organizations that have high functioning teams who deliver customer value proposition that attracts suppliers for capital and partners for distribution, whereas Managers are sort of optimizers. It’s on a spectrum: managers are really important with giving feedback but they are not in the business of creating these high performing organizations of high performing teams, as much as they are in making sure that the train runs on time.” He added. 

“If you are going to be the best in the world you can no longer just be the best in Silicon Valley” said Jason

Jason focused on the need for adaptation and authentication in times like these. “Honestly, I look at this crisis as an opportunity to think about what can we do for organizations to get better this time.” According to the investor, he, as a leader, continues to push the organization to get better. “I think that Leaders generally have to have an optimistic view of the world but it’s also important to be authentic and to show some vulnerability in this time. It’s all about that balance of maintaining optimism about the future but also being real about the problems and challenges that you are having personally or as an organization. Ultimately, leadership is about establishing culture and I view culture as the environment in which you create for people to make decisions when you are not there.” He explained. 

The future of work

According to Jason, although there are many negatives associated with this pandemic, this situation opened us window into the future and accelerated things by 5-10 years. As an example, he pointed out that “We’ve tracked in our portfolio that the average productivity of our software engineers has gone up by 20-30%, because now they have an ability to be focused and undistracted in their jobs, like never before.” .

“Now is the time to do things that will put you in a place where no one can compete with you” said Bill

Jason explained that even before the crisis, in his company’s last 12 investments, 3 or 4 of them have been made 100% remotely. Also, all the companies of his portfolio have now pivoted so that they can work remotely. “But there are still a lot of gaps, like even though I love Zoom, I get frustrated at the end of the day after 15-20 video conferences. I don’t think that we are going back. I think that this has fundamentally shifted us into the future in a way that we couldn’t have seen otherwise.” He explained. “We are about to make our first investment without ever having met the entrepreneur live. The entire process has been remote. We realize that we can do a lot, probably 80-90% of what we did before in person, online. It’s absolutely possible and it’s going to happen more and more.” he added.

Jason also insisted on the importance of global connections, today more than ever. “In this global ecosystem, the global network of entrepreneurs is going to become even more connected than it’s ever been, and we owe this connectivity to organizations like Endeavor. Today, we’ve lost trust in many things, like politics and news, and organizations that are built from the ground up to be in service to others are going to become even more powerful in the coming years. There is no more important role for Endeavor to play than that trusted flow of information and support to each other.” He explained. In the end, according to the investor, it all comes down to entrepreneurs’ willingness to give back in that process. “That is the spirit that creates that powerful compounding effect that we have seen in the last 20 years”. 

The Day After

Bill stated that he is optimistic about better treatments and vaccine coming out soon. “I have spent a lot of time in life sciences. Right now, there are 200-400 companies with the smartest people in the world trying to understand the disease, find ways to test for it, treat it, prevent it in the first place and track all the information needed so that people can avoid getting sick.” he explained. “I am incredibly optimistic over a 2-year time frame. Until then, I believe that we will get to the point where we understand ways to live with the disease at this period of time.” He added. 

“Leadership is about establishing culture and I view culture as the environment in which you create for people to make decisions when you are not there.” Said Jason

Jason suggested that entrepreneurs plan the long game. “The opportunity during these times is to demonstrate that you are the business that people want to buy from, people want to contribute to and you must do so in ways that are very tangible and visible. That is when you create that loyalty, trust and bond. Personally, as a Board Member, I love it when companies are looking for opportunities to make a statement during these times. Supporting employees and the ecosystem of the company, even treating your employees differently during this time, is an incredibly strong statement.” He explained. 

The webinar wrapped up on a positive note regarding the day after the crisis. Bill explained that this new situation will have a liberating impact, as it opens up the possibility of attracting people who look differently and who are valued for what they can contribute as opposed to what they look like or what school they went to. 

Finally, Jason added that “The more the work becomes digital and online, the more it becomes transparent and measurable and then manageable. This transformation to the digital world unleashes the ability for people to be truly judged based on their work, something with tremendous benefits long term. We are not going back to the way things were before and that creates a great opportunity for companies that are willing to make that bet and go all in and embrace it. This new situation will unleash an incredible amount of opportunity and growth that we never even imagined, as we will now have access to talent all over the world.”