Reid Hoffman talks strategies for nurturing entrepreneurial resilience

Almost all startups have “valley of the shadow” moments, said Reid Hoffman, the technology entrepreneur and investor.

Navigating those challenging times was the focus of Hoffman’s remarks on Jan. 23 during the inaugural Distinguished Lectureship of the Stanford Initiative for Entrepreneurs’ Resilience and Well-Being, or SIER. The LinkedIn co-founder described his strategies for handling stress and failure during a one-hour conversation with Tina Seelig, executive director of the Knight-Hennessy Scholars at Stanford.

The event was SIER’s first, and it drew hundreds of Stanford community members to the Mackenzie Room of the Jen-Hsun Huang Engineering Center. SIER was established last year with a gift from the Li Ka Shing Foundation.

“Our initiative is designed to bolster entrepreneurial responses to hardships — turn challenges into unique opportunities for growth and innovation,” said Alan Yeung, the Li Ka Shing Professor in Cardiology, in opening remarks at the event. “What attributes help entrepreneurs be resilient and endure hardships while maintaining a healthy mindset?”

Yeung co-leads SIER, which is based in the Stanford School of Medicine, with faculty directors of the Stanford Mussallem Center for Biodesign and Stanford Technology Ventures Program (STVP).

Research is at the foundation of SIER’s activities. STVP faculty and PhD students are investigating the traits that help successful entrepreneurs persist through challenges. Their findings will inform curricula and programs to support entrepreneurs’ success as well as their mental health and well-being as they undertake difficult leadership roles. In addition, Stanford Biodesign SIER Fellows are applying biodesign principles to create technology-assisted products or approaches that support entrepreneurial resilience.

The importance of personal networks

Seelig began her conversation with Hoffman by asking him about Superagency: What Could Possibly Go Right With Our AI Future, a new book he wrote with Greg Beato.

However, they mainly discussed strategies for resilience in the face of startup troubles. Hoffman, who earned a bachelor’s degree in symbolic systems from Stanford in 1990, stressed the merits of strong personal networks, touched on a framework for mitigating entrepreneurial risk, and maintained that fostering a purpose-driven company culture serves as an emotional bulwark against the risk of failure.

Hoffman said building your personal network is valuable for navigating “valley of the shadow” moments, when start-up founders find themselves thinking, “‘Why did I think this was a good idea? I know I thought it was a good idea. Why are we doing this?’” The “valley of the shadow of death,” a phrase that appears in Psalm 23, is generally considered a metaphor for a time of uncertainty or a difficult experience.

Hoffman said that as he was starting his first company, a friend emailed him to say, “Welcome to where 15 minutes is the difference between exaltation and terror.” Those quickly shifting ups and downs are typical experiences for a startup founder, he said, so it’s important to have friends and colleagues you can contact for perspective. A personal network can ease the stress of starting a company and provide a sense of solidarity, he added.

Hoffman also said he is not averse to hiring friends for startups, though he conceded the practice is frowned upon because of the immense stress it can put on the relationship. “On the other hand, these are people you’re spending 80 to 100 hours a week with,” he said. “And you are much happier if these are people that you kind of feel like you want to be talking to on Saturday morning — that even if you have some disagreements about how to work … you have a respect and trust for each other.”

He added, “My advice is, generally speaking, try to build not just an intentional culture at the company, but try to build, as it were, a culture of general friendship.”

Bouncing back

Seelig asked what Hoffman’s “mental model” of failure is, explaining that she has conducted an exercise with her students in which they describe what the bottom is made of for them, with some specifying concrete or quicksand and others rubber or a trampoline. Hoffman said that, for him, it’s ball pit.

But he said he always adopts a careful risk-mitigation strategy before embarking on a new venture. He calls it “ABZ planning,” in which he’ll have a main investment thesis (Plan A); fallback strategies, which he calls plans B; and a Plan Z if a radical change is required. (“That doesn’t necessarily mean restart the company, but you restart the project or something,” he said.)

Fostering a missionary culture within the startup can increase the team’s resilience in the face of setbacks, Hoffman said. “You want a certain esprit de corps,” he said. One of the aphorisms heard in Silicon Valley is “missionaries build huge companies, and mercenaries build medium companies,” he said, adding that a startup team should share the sense that what they’re doing will make a significant difference in the world. He described commitment to a mission as a vital tool for sustaining teams as they face difficulties, as well as a kind of emotional hedge against failure.

“If we fail, we failed at trying to do something that was really important,” he said.