‘Removing the Element of Luck’ for Young Entrepreneurs

Most newly minted entrepreneurs do not lead glamorous lives — and Seth Berger (W’89, WG’93) knows first-hand what that’s like. Scraping coins from a shoebox and living on instant noodles, Berger was a recent college graduate when he founded AND1, a footwear and clothing company. Today, he is the managing director of Sixers Innovation Lab, which supports bright young minds in Philadelphia by providing office space, health care, food, and even housing. On this episode of Mastering Innovation on SiriusXM Channel 132, Business Radio Powered by The Wharton School, Berger takes listeners through his journey as a Penn graduate to his role today in removing obstacles, or as he calls it, “the element of luck,” that young entrepreneurs must overcome to in order to succeed.

An excerpt of the interview is transcribed below. Listen to more episodes here.

Transcript

Harbir Singh: So I looked at your website, and it talks about getting office space and getting information infrastructure, getting advice, even getting free food. To me, it sounds like what you’re really trying to do is to make it easier for entrepreneurs to go through the task of building a team. How do you get a team together?

Seth Berger (WG'93, W'89), Managing Director, Sixers Innovation Lab
Seth Berger (W’89, WG’93), Managing Director, Sixers Innovation Lab

Seth Berger: You got it. You know, when I started AND1, it was 1993 — I started the day I graduated. My first year, I made $1,812. When I’m speaking with grad classes and undergrads, I tell them, “I didn’t live off ramen; I lived off imitation ramen.” I was really focused, and we literally had a shoebox in the first year where we would take money out, sometimes coins, to figure out, “All right, this is what we’re going to live on for the weekend.” The things that entrepreneurs shouldn’t be thinking about, quite frankly, is paying the bills, healthcare, where are they going to live, and other really simple things that if you don’t have money, you have to think about.

We at the Sixers Lab, like you said, want to make it easy for entrepreneurs to spend their entire waking hours thinking about their business. We provide office space, we provide food, we provide free legal, and in some cases, we provide housing. If you come to the Sixers Innovation Lab, we say, “Look, we’re going to give you every advantage you need if you’re a committed entrepreneur, and we’re going to give you every opportunity to succeed.”

When I graduated, 2 out of 800 was the number of people I was told that went to start their own business from our Wharton graduating class. Today, 20% go start their own businesses, and their opportunity cost is still relatively high. But I know for sure that 100% of the graduate students at Wharton, and probably 100% of the undergrad students here at Penn, are capable of starting and succeeding in their own businesses right out of school without needing any traditional work experience, and we want to make it as easy as possible for those folks to thrive.

Singh: I think that’s a fascinating point, and you’ve, of course, demonstrated yourself and are a living example of this. I think part of what you’re saying is that sharing infrastructure is important. If you have to build infrastructure for a company that has no revenue, that infrastructure is not going to be up to the mark, and that may itself be a limitation to the success of the product.

Berger: That’s totally right. It’s really interesting. You were talking about Apple, and I totally agree with what you said. In my opinion, they’ve done an amazing job at allowing consumers to represent themselves through technology. When I was a kid, what sneaker you wore was the biggest way you could rep yourself. Today, one way is what kind of phone you have. And the point is if you don’t have the best in class in whatever you’re pursuing alongside of you, you’re going to have a greater chance of failure.

When you come to the Sixers Lab, we give you great office space and great technology. We give you every advantage you need.

I once heard this great quote, “The outcome of your life is a combination of luck and the quality of your decisions.” Think about it. That’s it, right? So, if you happen to be an entrepreneur in Philly or one that can come to Philly, we want to remove that element of luck by saying, “Hey, we’re going to give you every advantage you need to succeed.”

Singh: So, how do you select the companies? I know that there’s some broad parameters, but I’m just thinking that there must be lots and lots of people interested in this opportunity. Do you have an industry footprint or a set of technologies that you’re focused on?

“If you don’t have the best in class in whatever you’re pursuing alongside of you, you’re going to have a greater chance of failure.” — Seth Berger

Berger: We do. We really like to focus on sports, entertainment, and technology. Having said that, we have businesses and investments in the apparel space and in the pet space. But really, e-sports, sports business, sports gaming, entertainment, and the way those businesses interact with technology is where we want to play. The question about how we select is really an interesting one.

We’ve seen over 800 applications to the lab in about two and a half years, we’ve made 8 investments, and in these, we look for something really simple: we want a smart management team that is incredibly committed and humble. If you’re lacking any of those three factors, we’re not going to make an investment. I don’t see many management teams today, quite frankly, that I’m not impressed with their intelligence. I’m usually in five minutes sitting and looking across the table thinking, “Okay, they have a higher IQ. They’re smarter, so we’re good there.” Usually, they’re really committed and driven, or they wouldn’t have made the decision to be entrepreneurs to begin with.

Singh: That’s true. There’s enough passion.

Berger: Yeah, there’s passion. However, the third factor, to me, is really important. We’ve passed on businesses when I felt the management teams didn’t have an appropriate level of humility. The reason humility is so important, in my opinion, is that we all make mistakes.

We’re never going to make all the right decisions. It’s really important to recognize, “Oh, I’ve made a mistake here.” The best athletes and the best businesspeople learn from their mistakes, and then they go ahead and make new mistakes. So, the management teams who feel they have figured out all of the answers, as opposed to trying to figure out all of the questions, are the ones we pass on. We want a curious management team that wants to figure out the questions, knowing that in a lot of cases, today’s technology will help them figure out the right answer.

About Our Guest

Renowned sports industry entrepreneur Seth Berger will supervise the Sixers Innovation Lab Crafted by Kimball, overseeing recruitment, assessment, development and investment in participating start-ups. Berger, a University of Pennsylvania and Wharton School of Business alumni, has acted as a consultant and CEO in the gaming, technology and sports industry over the past decade.

Berger is best known as the Founder and CEO of AND1, an upstart basketball sneaker, apparel and entertainment company. A true entrepreneur, Berger launched AND1 selling screen printed t-shirts from his garage in 1993 and developed the company into a global apparel and footwear powerhouse, attaining the No. 2 spot in the US basketball footwear market behind rival Nike in 2001. At its peak, AND1 and its licensees exceeded revenues of $285 million. AND1’s entertainment division created the AND1 Mixtape Tour, a series of live streetball basketball games and ESPN TV series that was a No. 1 rated show among male teens, eclipsing SportsCenter, in 2001. AND1 donated more than 5% of its annual profits to youth-based charities.

Berger is currently the Head Men’s Basketball Coach at the Westtown School in West Chester, PA; in 2016 he led the team to the school’s first State Championship in any sport.

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