Interview with Steven Hoffman, CEO of Founders Space on incubating and accelerating innovative start-ups. | August 2018Transcript
New Horizons: You are listening to New Horizons, the podcast channel for Huawei’s ICT Insights Magazine. Join us as we talk to innovators and thought leaders from around the world.
Well, hi everyone and thanks for tuning in. Joining us on the phone today is our very special guest, Steve Hoffman, also known as Captain Hoff. And we are going to be talking about startups and innovation. Before we jump into the interview, here’s a little background on Steve: He is an investor, startup mentor, serial entrepreneur, author, and the Captain and CEO of Founders Space, one of the world’s leading startup incubators and accelerators, with over 50 partners in 22 countries. Thanks for joining us today, Steve.
Steve Hoffman: It’s great to be here.
New Horizons: So can you tell us a little bit about yourself and the goals of Founders Space? How did that whole thing get started?
Steve Hoffman: Well, Founders Space started over six years ago; so I had been in Silicon Valley doing startups myself. I did three venture-funded startups and, after my third startup, I was taking a break and I was spending time helping friends who were launching their companies.
So I’d go out to coffee with them. I’d give them advice and that grew into Founders Space. First, we started doing roundtables where I’d get entrepreneurs together with investors and lawyers and technical people who could help them out. And then later, we launched our incubator and accelerator in Silicon Valley, and after that we began expanding all around the world. And now, I spend about half my time traveling.
New Horizons: Wow. Well, I know you’ve been spending a fair amount of time in China over the past year or so. Can you tell us what you’ve been up to there and what are the outcomes?
Steve Hoffman: Oh, China is fantastic. We started expanding into China a few years ago, and it has really accelerated. Right now, we have Founders Space in Beijing. We have it in Wuhan. We have it in Xi’an. We’re about to launch in Chengdu. We have operations in Shanghai.
And I am bouncing between Chinese cities all the time. We are running incubators and accelerators there. We are also doing work of training entrepreneurs in various cities, helping them get started, helping them raise venture capital, and get funding. And helping them innovate.
New Horizons: The one city you didn’t mention was Shenzhen, I know you’ve done some work there too.
Steve Hoffman: I do a lot in Shenzhen because it is a hub. We have partners there. We have collaborated with a lot of different startups and different organizations. We also have collaborated with Huawei. So, I’m very happy to be on the show today.
New Horizons: All right, well we’re very happy to have you. And you know, I see you’ve been getting a lot of endorsements from some pretty influential venture capitalists like Tim Draper… quite a few Fortune 100 companies. Can you tell us a little bit more about that?
Steve Hoffman: So in my line of work, we work with Venture Capitalists all the time. We are always… we have so many startups coming through our program right now, that literally thousands of startups a year sign up with, for our online programs. And then in person, it’s in the hundreds that we have in our incubators, and we have run through our events and things like that. And, so I’m always looking for great startups, and when I find them, I like to introduce them to, you know, top VCs all around the world. So we work with a lot of great… most of the large VC firms in Silicon Valley have been in to Founders Space to come to our pitch events and demo days and things like that. We also work with a lot of top investors in China and all across Asia and Europe. And it’s really exciting for me personally because I get to hear from the investors their different philosophies on how, what, they look for in great startups, and how they invest. And that educates me.
New Horizons: Wow. Well, I guess that answers my next question, which was going to be: What is the venture community think of Founders Space? But, I guess that leads into the next one: Are the mainstream VCs, Sand Hill Road types, investing in your incubated companies?
Steve Hoffman: They are. So we, you know, they’ll put the tier one VC firms will step in. They tend to step in a little later. A lot of the companies that come through Founders Space — because we’re an incubator and accelerator — tend to be in the earlier phases where they are, they usually have a prototype or they’re just launching their product, and they don’t always have the traction necessary for the big VC firms; but you know, once they get going, once they kind of breakthrough with that product market fit, which is a lot of what we help them with, that’s when the big guys step in and actually put in the money.
New Horizons: Wow. Well that sounds really positive that you’ve been able to take this from basically ground zero into a trusted advisor that the VCs turn to as well.
Steve Hoffman: Yes. Yes. And it’s a good collaboration. Most of the VC’s, they’re looking to solve their own problem; and their problem is, you know, whether they’re small or large, is getting good deal flow. They have to place, once they take money from their LPIs, their Limited Partner Investors, they have a limited amount of time to actually put that money to work. So being a VC isn’t easy!
New Horizons: Right.
Steve Hoffman: Because there are a lot of startups out there as you know, but most of them will fail. Most of them, you know, don’t have it all right. It’s an experiment. Each startup is an experiment and most will fail and a huge will… a few, a handful, will break through and become these unicorns, these big businesses. And you know, if we can give them help, and help them identify potentially really good startups that does them a favor and it does our startups a favor.
New Horizons: Right, right. Exactly.
And that leads into the next question is: Can you give us an idea of some of the trends in technology you’re seeing these days that these budding entrepreneurs are focusing on?
Steve Hoffman: Oh yes. In terms of trends, I mean there are a few big ones like the mega trends going on right now. Everybody’s talking about blockchain, you know: AI, Big Data. There’s a lot of new medical technologies coming out that are really promising, and pretty amazing. There’s brain-to-computer interfaces, nanotechnology. We’re seeing a lot and one of the ones I’m very excited about is DNA editing — the whole CRISPR — using that, and so across all these different segments, there’s a lot going on. I think some of them are overhyped and will… and I can talk about that… and some of them really, in a way, we haven’t even seen the full potential of where they’ll take us.
So in the overhyped category, I would put I think, the blockchain is a bit overhyped. I think there is potential for the blockchain beyond cryptocurrencies. But, the blockchain was specifically designed for cryptocurrencies, and people have been trying to apply it to enterprise problems and you know, security for IoT devices, and all these others: Banking and insurance. But it’s been really hard because you know, it isn’t, it isn’t the right tool for everything. You can’t just take a technology like the blockchain and say, “Oh, we’re going to put it on this problem because it’s new and it’s amazing, It’ll do a better job at solving, you know, this type of problem.” It doesn’t actually. And a lot of times, it does a worse job than other technologies that are already available, but you know, every major corporation now is experimenting with the blockchain. Lots of startups are experimenting.
I have, surprisingly, given all the attention, all the money, and all the bright minds using it, I’ve seen very few kind of really good examples of using the blockchain where it creates a lot of value outside of cryptocurrencies. So, I just haven’t seen that. On the other hand, if you go to technologies like AI and Big Data, those are truly a universal kind of core technologies that are affecting every business and industry on the planet. I am seeing amazing breakthroughs with machine learning and deep learning, and all the new types or uses for all the data being gathered out there that will just, that just blow my mind. The potential out there, what we’re going to see over the next decade with the use of AI and Big Data that will really transform how we do business and how we live our lives.
New Horizons: Right. And that’s something that we’re really keen on here too, is a couple of areas like Artificial Intelligence that you’ve mentioned and as well as IoT. Are any of your startup companies working in that space? And what are they up to?
Steve Hoffman: We have a lot of startup companies working in that space. It’s very exciting! I am particularly interested in the combination IoT, the combination of hardware and intelligence and putting it into businesses and into the home, and into our lives. And I will give you a few examples of different ways I see this playing out.
New Horizons: Ok.
Steve Hoffman: One way is machines. These machines are gathering data, and I think they’re gathering data from lots of different sources. So, there’s lots of data out there, but if they gather the right data, they have the potential to predict our actions and the actions, you know, in our business environment — much better than human beings can. You know, human beings have evolved-- the brain, the prefrontal cortex of the brain. What makes us humans, and separates us from most other animals, is that we have the ability, unlike dogs or cats or other things, to actually predict the future, to make simulations in our mind of what the future is like, and then plan for it. That’s what gives us our amazing ability. Other animals don’t seem to be able to do this. They don’t seem to. They live more in the present. They aren’t able to…
New Horizons: Right, right.
Steve Hoffman: Really imagine what their life will be a year from now or 10 years from now. You don’t see your cat sitting around thinking of that. They’re more concerned with what they’ll get for dinner.
New Horizons: That’s right.
Steve Hoffman: But with Big Data, computers are actually getting better than we are. And, I can give you a few examples that are kind of breakthrough examples that show the potential of this.
New Horizons: Sure.
Steve Hoffman: One example is if you look at Facebook did a recent study, and they went up to their users and they would ask their users what their users like. You know, what videos do you like, what articles do you like to read? And so on and so forth. And then, they went to their algorithm that they have developed, and they asked it based on the user’s past behavior to predict what these users would like. And then they fed the users test content, and they watched what the users actually did. And guess who was right?
New Horizons: I guess it was the computer.
Steve Hoffman: Yes! The algorithm, the AI algorithm did a much better job of predicting what people like than the people themselves!
New Horizons: Wow.
Steve Hoffman: You know, so what that is saying is really amazing, right?
That these algorithms actually can know us better than we know ourselves, and they can predict our future actions better than we can. Now, you’d say, well, why is that, you know, or how can an algorithm, you know, do a better job than us at knowing what we will do? And it’s because most of us, we have this ideal I self, like we say, Oh yeah, you know, if I saw an educational documentary come into my feed. Oh, of course, I would look at that. But rather than clicking on that, we ended up clicking on a cat video… because, at the end of the day, that educational documentary, even though we would like to say we would prefer that over cat videos, the video gets our attention, and we watch it. So people don’t really know themselves as well as they think they do. But an algorithm can know you, what you can know based on what you actually do, and make a very good model of you.
And if you apply these same techniques to business, what will businesses actually do, how will things play out in the future when you’re making business decisions and relying on all these different variables. First of all, human beings can’t even compute all those different variables, all the different data. It’s just too much. And second, even if we could compute it, we may, we have built in biases where we will tend to weight things in the wrong way. Whereas an algorithm can look at the past and extrapolate and weigh much more accurately on the different probabilities of things turning out. So what we’re going to see is a world in which these machines, they can be IoT devices in a factory or in a supply chain or anywhere, are going to be gathering lots of data and then we’re going to be using this data to optimize those processes, make them more efficient, make them, allow them to do things they don’t do, and actually predict what will happen in the future under different scenarios. And that’s a huge amount of power.
New Horizons: It gets rid of the whole gut feel, intuition, or at least maybe supplements it because we can’t maintain all of that data and interrelations in our brain, and juggle that around, and try to make it all work. I’ve found that those types of algorithms have really been helpful. For example, in the medical field, they’re doing a better job of diagnosing and recommending treatments because they have access to all of that information; they can bring it together and make a much-more-informed decision.
Steve Hoffman: Absolutely. Like you look at the typical doctor, I mean they’re busy, right? They have to see patients like nonstop in our current healthcare system; every 15 minutes, a new patient is coming, and then they have, they want to have a family life after work. How many medical journals can they read in a year? Just not that many, but an algorithm can actually scan through every medical journal that was ever printed in no time, and come back with a diagnosis that takes into account a lot more information than any human being could possibly do. So, it’s super exciting when you get to that level, you’re like, oh yeah, I would much rather have a computer algorithm diagnosing me. I mean the person, I might like them sitting there smiling at me, you know, making me feel comfortable. But at the end of the day, please get that algorithm’s opinion, on what the cause really is, because I want that data. And that will apply not just to medical, but that will apply to every decision, every critical decision, and even not so critical ones, that we will be making in our future.
Whether we are trying to decide should I change jobs or career? You know, well, in the future you may be actually be consulting an algorithm out there that will be giving lots more data than you ever could have telling you, helping you chart your career path, where you should go, what you should be thinking about. Corporations, when they’re exploring new markets, they will be gathering all this marketing data and processing massive amounts of it; and it won’t just be data based on what App or what sales are. Because we are wearing these devices, and because these devices are entering our homes and our businesses and our cars and are monitoring everything we do, all of that data will be pulled in. Like they’ll be telling us what people actually do with their time, where they actually go, what they actually respond to, and huge opportunities will be created for startups in this space. And I’m super excited. One other thing you brought up, I want to say one other thing. I’m very excited about this. One other thing, you know, if you haven’t read “Thinking, Fast and Slow” by Daniel Kahneman, the Nobel Prize winner; he did studies on human behavior. And his book is fascinating because — you were talking about gut decisions, you know, these algorithms will be better than our gut decisions. Well, the fact is our decisions aren’t that good. They are actually flawed; they were developed when we were living in the wilderness, and if a lion jumped out in front of us, we had to run away. Or if we met a stranger on the path from another tribe, we had to make a quick decision whether to trust that person or not. When you get into more complex decision-making, it doesn’t work that well. And that is what we’ve found and that is where we can really enhance ourselves and our ability to make decisions by relying on AI and Big Data.
New Horizons: If any of your startup companies are working on a personal agent that sits on your shoulder and advises you what to do and what not to do, please let me know. I’ll be one of the first customers for that.
Steve Hoffman: See, you are lining up already. You know, my prediction--and I’ve been thinking a lot about this-- is yes, there won’t be one master AI that will rule our life in the foreseeable future, who knows in the long term, you never know. But in the foreseeable future, what we’ll have are tens of thousands of AIs targeted at very narrow problems. So, you will have an AI that is super deep, like if you’re on a specific thing. So, if you’re interested in getting a cancer diagnosis, you might have one AI that is an expert on cancer diagnostics, and it has an algorithm finely tuned for that, and all the data available. And then you would go and pay that AI for that advice. If you want to solve a supply chain problem, there may be specific AI platforms out there dedicated just to those problems.
And in your personal life, if you want to find out who you want to date, I am sure there’ll be AI that are really good at better than you are at helping you find the right match.
New Horizons: Oh boy, well.
Steve Hoffman: We aren’t all that good. The divorce rate above 50 percent. Apparently, we aren’t all that good at that.
New Horizons: Well that is going with your gut again right?
Steve Hoffman: Yeah going with your gut, instead of you know, I want the data on her. Instead of “I want to know if we are really compatible or we just think we’re compatible.”
New Horizons: Exactly, exactly. Now, you recently published a book called “Make Elephants Fly.” That’s focused on innovation methodologies for startups. Can you tell us a little bit about that?
Steve Hoffman: Yes. Well, so the idea behind why it’s called “Make Elephants Fly” is because the elephant is your big idea. That’s the big idea, and it seems impossible like as a startup especially or any innovator to get that idea off the ground.
It’s how can you make that elephant get off the ground, and the book goes into detail on that process. The process of starting out with an idea, of figuring out if it’s really a workable idea, and then going through step-by-step through everything you need to do to take that idea, and make it a reality, make it into a real business.
New Horizons: Right. All those things that you’ve learned over the past couple of decades, working with startups in one place.
Steve Hoffman: Yeah, doing my own startups as well as working with, you know, hundreds of other startups, watching them struggle, and trying to help them through all those critical points where you hit these roadblocks.
New Horizons: Right.
Steve Hoffman: And you really don’t know what to do. All that experience. And then I’ve also been doing a lot of work with large corporations, like Bosch and other huge multinational companies, helping their internal teams go through the innovation process; how to rethink innovation.
New Horizons: I’m going to have to go pick up a copy. It will be my next eBook read on my next trip to Shenzhen. Is that available in Chinese as well?
Steve Hoffman: Yes. So it’s a best seller now in China.
New Horizons: Wow. Congratulations.
Steve Hoffman: It’s available in multiple languages. So Chinese, Vietnamese, Korean, Japanese, all over. Several European languages. So yes, and, really what it does is it’s designed, this book in particular, is designed for anybody who’s innovating, so you can be a startup founder, you know, and you want to come up with the idea for what works or you can be inside a large company as part of an internal team and you need to come up with new ideas and how do you take them through that process, of validating the idea and everything that goes along with it, and eventually bringing it to market.
New Horizons: Oh, that’s fantastic. So where can people in China pick up a copy of this book?
Steve Hoffman: Oh, it’s available in all the major bookstores. So it’s published by one of the largest publishers, called CITIC Zhongxin; that’s a major publisher, and they just put it out everywhere, and it’s also available online so you can go to Taobao or JD.COM, or any of the sites, and it’s available.
New Horizons: All right and again, it’s called “Making Elephants Fly” or “Make Elephants Fly”?
Steve Hoffman: Yes it’s called “Make Elephants Fly”. That’s the name. And they could go to makeelephantsfly.com. That’s it. It’s also on Amazon, and it’s published in other countries by Hachette that is the US publisher.
New Horizons: Okay, great. Steve, thanks so much for taking the time out of your busy schedule. I got to ask you one final question though. Do you ever get any sleep?
Steve Hoffman: You know, because I do so much business in China and Europe now. It’s really hard. People are calling me early in the morning, and late at night, and all hours on the weekends.
You know, in China, people work some weekends, and the weekends and weekdays are different here, so it’s just like nonstop barrage. I’m sure you experienced some of the same, some of the same thing, being an international guy.
New Horizons: A little bit, a little bit. Well, is there anything else you’d like to leave us with before we sign off?
Steve Hoffman: I just want to say it’s, you know, fantastic being on the show. I look forward to hanging out sometime.
New Horizons: Oh, that sounds great. I’ll make sure to come up to San Francisco sometime soon then.
Steve Hoffman: Check out Founders Space.
New Horizons: Yeah. Yeah, definitely. Foundersspace.com. And then you’ve got some seminars coming up.
Are those going to be available for streaming online?
Steve Hoffman: So we don’t usually do that, so we don’t put them online. We’d like people to come in person, it’s an ‘in-person’ experience.
New Horizons: Right. Okay, fair enough. Understood. Will listen, thank you very much for taking time, and let’s do this again because you’re just in front of really great, exciting new technologies and developments in business and startups.
And I really would like to make this a regular thing. If we could do that.
Steve Hoffman: Sure, I’d be happy to do it.
New Horizons: Thanks for listening to this episode of New Horizons. And, if you enjoyed the show, please be sure to share it on social media. Once again, thanks for listening.
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