Nobel winner has tips on how to succeed as a start-up

When he isn’t teaching material science, Dan Shechtman is showing Technion students how to build a successful high-tech operation

Professor Dan Shechtman speaks at the MedInIsrael conference (Photo credit: Courtesy)
Professor Dan Shechtman speaks at the MedInIsrael conference (Photo credit: Courtesy)

Nobel Prize winner Professor Dan Shechtman, world-renowned for his work in chemistry and material science, has another area of expertise: he is a top guide on how to succeed in the start-up business.

“When I was a student in the Technion, the prevailing spirit among the students and professors was that the skills we would acquire would be so good that everyone would want to hire us,” Shechtman said in a special presentation at MedInIsrael, a medical technology fair organized and sponsored by the Israel Export Institute. “That was nice to hear, but I thought to myself, what if I wanted to start my own business?”

Technological entrepreneurship, as Shechtman calls the skill set engineers and scientists need to succeed in business, is essential to the success of nations. But, surprisingly, there are very few places where engineering, science, and medical students are taught it. Even in top Ivy League schools, said Shechtman, “they teach start-up management — how to advance a company that already is in existence. But they don’t teach the skills needed to actually start the company.”

Seeing a market opportunity, Shechtman decided to take on the job. “When I became a full professor at the Technion I figured I could do whatever I wanted, so I organized a course on technological entrepreneurship.” To spread the word, Shechtman went on a marketing campaign. “I ended up with 600 students, making it the largest class in the Technion. At first I opened the class only to would-be entrepreneurs, but now it’s open to everyone. Who knows where the next great idea will come from?”

As one would expect from a Technion class, the requirements are very stringent. “Attendance is mandatory,” Shechtman said. “We don’t have tests, but there is a daily work assignment; students have to write up a report on the class, discussing the main points, interesting information, etc.”

The class consists almost entirely of lectures by guest speakers who share their experiences in the high-tech and business world. “We have successful entrepreneurs whose companies had an exit — for example, we have had Economics Minister Naftali Bennett several times to discuss the success he had at his start-up, Cyota (now a part of EMC).

“We also host entrepreneurs from the opposite side, who are just starting in business. They discuss their strategies, what they think they are doing right and wrong, and so on. We also ask for a lot of personal stories, like specific experiences, how they got their idea, their efforts in raising money, etc. These are the things people remember,” Shechtman said. In addition, the class hosts attorneys, accountants, venture capital players, and others who are essential to the business of start-ups.

Shechtman has plenty of practical advice for Israeli start-ups, culled from years of running the class. “The first mistake many people in Israel make — and it’s a very Israeli mistake — is not getting professionals in key positions,” Shechtman said. “Very often these start-up ideas are hatched by kids in the army who plan their future, and they try to go forward with their idea even though they lack the skills. If you’re serious about success, you have to put friendship on the side for the good of the company.” If your friends are really friends, they’ll understand, Shechtman said.

In general, it’s important to make sure the right person is in the right job. “For example, you don’t want an engineer as CEO,” Shechtman said. Engineers are focused on the technology, as they should be, and often tend to ignore marketing and financial issues. “Even if they don’t teach how to start a start-up in Ivy League schools, they do teach how to run one once it’s operating. Get one of those Ivy League business grads to be CEO. Don’t let engineers run the company,” he said.

Among the tasks of that CEO, and the staff s/he builds, will be to become experts in the market. Issues like supply, demand, competition, regulation, and many others affect the start-up, and it’s necessary to keep track of the information and make decisions on it. “You need to keep on top of the market, follow it daily, make it a part of your life. If you don’t, you won’t know what you are up against, and you won’t succeed,” Shechtman said.

Then there is the question of funding. “The best thing is to go as far as you can without asking for money from anyone,” Shechtman said. “Venture capital funds want their money back in 5 to 7 years, and there is no way you can build a stable company in that time. The fund is likely to try and find a buyer at that time so they can make a profit on the exit, but the company will not have reached its full potential.”

When the time comes for a start-up to expand — hiring more engineers, for example — a much better strategy for bootstrapped start-ups is to offer new employees a piece of the company. Nowadays, when start-up success and successful exits are not uncommon, many potential employees will be willing to give up immediate salary and benefits in exchange for a bigger payoff later on. That’s the kind of thing that impresses angels, Shechtman said – and angels are people you want to impress, because they are a much “safer” source of money than VC funds, and are more likely to give the company the time and freedom it needs to follow through on its plan. “Many angels had start-ups themselves that they sold,so they can easily identify with you. Plus, they appreciate bootstrapping and innovation.

The only thing to avoid, Shechtman said, is the temptation to sink all your assets into the company. “Don’t sell your home or liquidate your life savings for this,” Shechtman said. “Don’t use your life savings, and don’t borrow money from relatives or friends. Doing those things will create far worse problems for you than failing. If you have a good idea, you will find investors.”

And if you do fail, so what? “There are cultures where failure is such a terrible shame that individuals can never live it down,” Shechtman said. “Fortunately Israel is not one of these places. One of the hallmarks of entrepreneurship is failure, and many of our speakers tell of how their first or second idea failed — while the third was the success. It’s an old cliché but very applicable to start-ups — if you don’t succeed, try, try again.”

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