Nurturing Unicorns: How WHU Business School prepared the road for their six alumni-founded companies with $1bn+ valuations

Rui: If you’re looking for stories, strategies, and actionable advice on how entrepreneurial careers start, you’re in the right place. I’m your host, Rui, and this is the Startup Journey Podcast, the show where every week I sit down with different entrepreneurs, experts, and thought leaders to dig deep into what it takes to get a startup off the ground.

Today I’m joined by Dr. Dries Faems. The chair of entrepreneurship, innovation, and technological transformation at Otto Beisheim Business School. Dr. Dries, thank you so much for joining us today.

Dries: Great to be here. Thanks for the invitation.

Rui: Cool. So just recently I came across this article about Europe’s top 10 unicorn universities in 2022.

And your school was one of the honorable mentions there with nine future unicorns. So that’s why my team decided to reach out to you to understand a bit better how you are supporting. Your students in this journey. So if you agree, I think we should start with just a quick introduction about yourself So our audience can know a bit more.

Is that okay?

Dries: Yes, I can do that. So I’m Dries Vams, Professor of Entrepreneurship, Innovation, and Technological Transformation at the WHU Otto Beisheim School of Management. So this is a private business school in Germany. Our campus is in Wallener, which is a small city next to Koblenz. We also have a campus in Dusseldorf where we mainly do our MBA teaching and executive teaching.

And so indeed, WHU, especially in Germany, has a. Kind of reputation for being a school that has been very successful in kind of generating successful entrepreneurs. So for instance, the original founder of Rocket Internet, Oliver Zamner, uh, was an alumni of our school and this kind of legacy effect we still see nowadays.

So indeed quite some of our alumni have founded, uh, very successful companies within Germany, but also in Europe or even globally.

Rui: Thank you. Let me start by asking what are the secrets to this success? So what do you do differently? Because on one hand, we have the typical incubator accelerator, the Y combinators of this world, where it’s quite common to see entrepreneurs coming out of and building.

Really successful companies, universities. It’s not, I know it happens a lot as well. We don’t speak as much about it. So I would like to dig a bit deeper into that. What would you say the main reasons why you’re seeing such a successful entrepreneurs coming out of the school?

Dries: So I think the, the most important success factors is our alumni network.

So what we see is we had a kind of first generation of successful entrepreneurs. So Oliver Zammner of Rocket Internet is one of them. And what you see is that actually these entrepreneurs for the companies that they founded often hired a lot of students also from where, and in that way, you’ve got a kind of generational effects.

Where we are alumni got the opportunity to work in these new successful startups. They gained a lot of experience to create their own startup that also became successful. And you even then see that the entrepreneurs that became successful started acting as angel investors in the next generation.

Startup. So it is a very strong network effect where the prior generation access mentor, but also as investor in the new generation of AU startups, and this already happens on campus. So every year we have a lot of events on campus where the alumni come back to the campus, help our current students.

Already established networks, students will do internships at these companies. So this is a very strong kind of network effect that we have. That is, I think, a very important driver of this success. And on top of that, I think nowadays as we are all, we have a way I want entrepreneurship center. It’s actually just tries to nurture this network as much as possible.

So it’s not an entrepreneurship center with a big fancy office with a lot of beanbags where people can kind of create their first start. We don’t have that. We rather actually focus on let’s try to be a hub. And to optimize this kind of connection between the alumni and the students, because they are the stakeholders that in the end need to do the entrepreneurships that most of the university.

So we mainly try to act as a kind of connectors in the spider web that has been successful in the past. And that hopefully will stay successful in the future.

Rui: That makes sense. It’s, it’s about the community, right? I’ve been having a few conversations with alumni from Y Combinator, actually for a different piece of content that my team is working on.

And they all say the same. They go either because they wanted the money, right? That they would get from the program or because they were looking for mentorship, but they all in the end recognize the value of having a community of like minded people that are going through or went already through some of the.

major pitfalls that you find in entrepreneurship. So the human element is actually quite fundamental and I would expect it to be. So let me ask you a question about the actual programs that you have in, in, in your school, because I would like to understand if these successful cases, the, let’s say the successful entrepreneurs, if they are coming from a specific.

entrepreneurship program, because I have, you have, I know you have at least one master’s that is focused in entrepreneurship. Uh, is this more prevalent there or it naturally occurs given the quality of your business programs overall?

Dries: No. So I think the current successes in terms of the number of unicorns that emerged out of real world, Uh, we cannot attribute to the Master in Entrepreneurship because the Master in Entrepreneurship is a very recent program.

We initiated it like three, four years ago. So it’s more like we had this huge reputation as an entrepreneurial school and we wanted to leverage by creating a dedicated Master in Entrepreneurship and we are very convinced that we will I have a lot of future successful entrepreneurs out of this program, but it’s too early to see that.

So actually the successful entrepreneurs have come out of all our programs, especially actually the, the bachelor’s program. So the undergraduate program, a lot of people that are full of that program have become successful entrepreneurs. Uh, and also in that program, we pay a lot of attention to entrepreneurship.

For instance, I teach the obligatory entrepreneurship course in our bachelor program. Where all 250 students need to develop their own business model in eight weeks, where we do a kind of massive speed dating with alumni so that every student gets feedback from real entrepreneurs on their business model plan.

So we really invest time and effort to make it as realistic as possible. And that every student that’s at least has gained some experience in what it means to be an entrepreneur.

Rui: That makes a lot of sense. So tell me one thing, how selective are those programs. So the entrepreneurship, but actually getting into the school and generally speaking, how hard it is for students to get in?

Dries: We are selective. Yep. So I, uh, I think in the bachelor’s, I don’t know the number by heart, but it’s not that All people that apply are selected. I think it’s more like we select like 35 percent of the applicants are in the end selected. And we do quite some regular selection where they have to talk again, they have to talk with alumni, with professors before they get an offer.

At the same time, it’s a private business school. Yeah. So in comparison with public schools in Germany, there are some financial implications, but we have a lot of scholarships, especially actually in our master in entrepreneurship where actually students can get huge discounts to follow the program. So it’s not that we just want to attract students that already have rich parents.

That would be a bit unfortunate, I would think. Uh, but so we really are looking for. entrepreneurial talents. And then actually, if there are financial issues, then we actually have quite some scholarship programs, financial loan programs that can help students if necessary.

Rui: Okay. So I couldn’t help but notice in this article that I’ve seen about the best schools in Europe for entrepreneurs, that Your school is responsible or is helping nine future unicorns, right?

While other schools had unicorns already and then future unicorns. I’m not sure if this is 100 percent accurate because I’ve seen your website and I believe you have some people in there that already reached a billion, a one billion valuation. It seemed to me that that was signaling that there’s a recent effort or an added effort.

In supporting entrepreneurship by the school, which is actually something you mentioned already with this, uh, this masters being launched three, four years ago. Would you say that you are transitioning more and more to being a hub and to supporting entrepreneurs as a whole?

Dries: Yeah, we definitely hope so. So again, I think the initial successes that we had were Not because of the university.

It was a bit coincidence. I would say, I think, I think it was a bit of a coincidence that somebody like Oliver Zamner was an alumni of our school, created Rocket Internet and Rocket Internet was this incubator in Berlin that subsequently actually created companies like Zalando, HelloFresh that also became Unicorns.

And because of his WHO background, Oliver Zamner also hired or involved a lot of WHO people. So I think this initial. Success story was not that much attribute to the university, but today we really try with the entrepreneurship centers to, to try to maintain that entrepreneurial spirit so that success story can continue.

And for instance, we also created now an accelerator program, a very small one. So every year in the first semester, we spots among our students and we try to look, are there interesting teams that are working on an interesting business And then we select eight teams, put them in the accelerators. And then they actually simply get mentoring from 80 alumni and investors.

And we see that that’s actually quite a successful program. So several of these, uh, teams, so we started two years ago. So we did two cohorts already and we see that several of these teams now are really on track, get a lot of exposure in Germany. So in that way, you’re now really. Trying to kind of actively contribute to the success.

And again, it’s, it’s too early to say whether that will generate additional unicorns, but at least that’s what we’re trying to do, I would say.

Rui: Yeah, at least from the outside, I can see that there’s some signals that there’s some effort there. So I feel that’s, that’s a great thing. Let’s enter a bit. A, of a more controversial way of looking at this.

So a lot of people in the startup world, as you know, talks about building a company and that being something that you learn by doing, right? There are many entrepreneurs out there that say, no, you shouldn’t be studying. You should be going out there and speaking to people, making your own mistakes, dismissing even higher education.

And in some cases, even showing pride in being high school or college dropouts, right? What would you say are the main benefits of going through programs like this or having a higher education for entrepreneurs? First of all, I think

Dries: we all hear this anecdotal stories about people that dropped out of college, out of university and became the founder of a very successful company.

But these are outliers. If we look at the academic research about who really becomes a successful entrepreneur, the data say something very different. On average, for instance, The age of a successful unicorn entrepreneur is 40 years. So it’s not about a 20 year old guy in a hoodie creating a company. No, these are 40 year old people having extensive experience in a particular industry.

Often they have founded companies before. These are the people that are the successful entrepreneurs. And they often have a university degree. They didn’t drop out. No, they successfully finished that university degree. So I think that already gives a different perspective. And so we at WeAreU really believe that you can give people a kind of foundation that increases their probability to be successful.

Can we give them a guarantee that they become a successful entrepreneur? No, because becoming successful entrepreneurship is heavily based on being lucky. Yeah, you can do everything right and still, uh, you can be at the wrong time and then you’re unlucky and you fail and you can do everything wrong and be extremely stupid and still be by coincidence lucky and hit the jackpot.

Yeah. So that’s not something we cannot give a guarantee that all the students will become successful in their entrepreneurial endeavors, but we can at least help them to improve the probability of success. And that’s what we are trying to do in the school by in our teaching, focusing a lot on giving our students particular tools and methodologies that can be helpful for them.

Rui: Okay, I actually, I agree with that and I can use even myself as an example because I, I studied marketing, right? And when I ended my, um, my college degree. I landed in the, the labor market and I really literally knew nothing. And for a couple of years, I spent some time thinking and even saying that my degree was really not worth the time, right?

Because I didn’t get anything from it. But then later on, I started to understand that. I wasn’t supposed to really learn specific things during my time at college. I was trained to think and to analyze information and to find information and to produce knowledge from it. And I was trained to reason in a much better way.

So clearly there’s benefit to going through a college degree. Then there’s another layer in there. I actually know the study that you mentioned on the 40 year old successful founders, and it makes. Absolute sense, right? Because not only do you have industry expertise, but you also have a network already of people built that can sustain you on some of the pitfalls.

And you also most likely have some money to support the early stages of your venture. So obviously the cases that we see, the Mark Zuckerbergs of this world, right? The people building something in their twenties in the garage are the outliers. They are the interesting stories, let’s say. But if you see the vast majority of businesses out there, that’s hardly ever the case.

It’s just the stories that sell more. But it’s really important, especially for me that work with entrepreneurs as well, being part of a product house, specifically working with entrepreneurs, that these myths are really undone, right? Because they really hurt people going forward, moving forward. They mismanage expectations and end up in a lot of pain.

So, perfect. Now, still related to this topic. I have more than a few friends that went to business school and most of them tend to be overly analytical, right? So I also remember an entrepreneur I worked with recently that was perfectly positioned to transform his industry. The guy was super smart, had experience in his vertical, was dedicated, found a gap where a traditional industry could really improve its efficiency by leveraging technology.

But then while he was building the product, he’s MVP, he decided to spend 90 percent of his time fine tuning his business plan. Right? So when the product was ready, he hadn’t done any of the groundwork to prepare for the launch. So we decided to start selling after having the product. Eventually his runway ended and he had to abandon the project.

So knowing that, and this may be prejudice, may be a pattern, but knowing that business school students tend to be a bit on the analytical side, what mechanisms, if any, do you have in place to prevent this from happening with your students?

Dries: That’s actually exactly what we try to learn the students in the entrepreneurship courses.

And so our students, like in every business school, get accounting courses, strategy courses, finance courses, where they Become trained in being excellent analytical people. But so when they join my course, I tell them in the first lecture, look, this is a course is a bit different because in this course, you will need to fail.

Yeah. Failure is part of entrepreneurship. So if you have not experienced failure during this course, something went wrong. Because you need to have experience that you talk with customers and that they give you negative feedback. You need to experience that you do some tests on hypotheses and that the tests show that your initial ideas were bullshit.

That’s what you need to learn in this course. And that’s at the beginning, very difficult for my students because I always call them insecure overachievers. Yeah. So that’s the kind of students we have. And, and so in my course, it’s a bit It’s different, but at least we try to give them a kind of safe environment where it is okay to fail and where that doesn’t have negative impact on their grading and that kind of stuff.

And then actually you see that in eight weeks, a lot of them are able to understand, okay, this is part of the entrepreneurial journey and you can actually have some tools. to manage that kind of uncertainty that you’re facing when you engage in entrepreneurial trajectory. So that, that we see a bit as our responsibility that in the entrepreneurship courses, they get these tools so that they kind of can compensate sometimes that over analytical approach and deal with the uncertainty that entrepreneurship brings about.

And we’re also honest to our students. We also tell them, look, It’s not our ambition that all of you become entrepreneurs. If after the course, you come to the conclusion that you hate entrepreneurship, that it’s not your thing, perfectly okay. But then at least, you know, it’s, you know, then you have had the experience where in an informed way, you can come to the conclusion that entrepreneurship is not your thing.

Rui: Absolutely. And I believe the mindset alone is still valuable. If you want to go and work for McKinsey or Deloitte, it’s perfectly fine. But being prepared to fail and to experiment and to actually execute instead of planning everything to perfection and then not having room to implement it, I think the mindset alone is already valuable.

Cool. So let’s focus on the students again. What qualities do you think are important for a young entrepreneur, young or less young, for a student in your school to have in order to build a successful startup? What needs to come with the entrepreneur?

Dries: I think they have to have a lot of resilience. So if you engage in entrepreneurial trajectory, Again, you will experience disappointments.

It will not work out as you initially thought. There will be very, there might be times to celebrate, but there will be also times that you’ll lay awake in your bed in the evening where everything seems to go wrong. And so then if you don’t have the resilience to deal with that level of uncertainty, I think it will be very difficult to be a successful entrepreneur.

Um, so I think that’s a very important characteristic. And at the same time, I think the fact that our students are analytical can be sometimes helpful because I think you need to be optimistic and you need to have an ambition, but you also need to keep a bit your foot on the ground and be data driven.

If the data highlights that the startup is not going in the right direction, it might be time to stop the startup. And again, that’s something that we, we always tell our students and we heavily rely on these lean startup principles in our teaching. And what we actually say to the students, look, what is the lean startup?

What is it actually about? It’s about failing as quickly as possible. So failure is the most likely outcome of an entrepreneurial endeavor. You’re more likely to fail and to succeed. As long as you fail quickly, that’s not a problem. If you wasted two months of your life, then it’s a nice learning experience.

What you really do not want to have is that you wasted two years of your life. on an idea that in the end didn’t work out. So that’s why we kind of promote this lean startup approach as an approach that can help students to

Rui: fail quickly. Couldn’t agree more. I personally, and here at Delta, we’re big promoters of the lean methodologies as well, right?

So build fast. Go to market, iterate based on the user feedback or close the project as soon as possible to, to make sure that you, you risk the least amount possible. Cool. So let’s talk about the current landscape, right? Because we’ve seen a couple of curve balls over the last couple of years with COVID, with the war in Europe, and most.

Recently with the 10 plus year bull market that is now over, right? So a lot of the money that was out there ready to fuel pretty much any project is now gone, right? So what are your thoughts on the near future for founders? What can they expect for the upcoming years? I

Dries: think actually the new founders, so the students that we have today in class, I think it’s actually a great time for them to be an entrepreneur because I think today if you do it well, you might actually create a very successful startup.

And there will be a lot of investors that are willing to put money in you because there is a lot of dry powder. But now all the investors are looking for really the startups that do it in a serious manner. So, okay, maybe two years ago, you could get funding with a pitch deck about an NFT project where nobody could understand the use case.

That will not work anymore. Yeah. But I think that’s a good thing. I think if you have identified a great pain point, you can show your investors that you did experiments. to show the added value of your value proposition. If you can show that you have some traction, if you can show that you are doing your startup in a disciplined way, I think actually investors will be begging to invest in you.

So I think it is a great time for professional early stage startups. Uh, and okay, the cowboys, they might no longer get money, but I don’t think that’s a problem at the same time. I think the situation is a bit different for more. Startups at the later stage that are looking for series B or series C or series D, I think there you’re talking about a very different situation, but I think it is very challenging to get additional funding where you will have to be very disciplined in the next two years to make sure that you are reducing costs as much as possible.

So there I can see that the environment is very challenging. But for the younger startups, I actually think it can be a great environment.

Rui: I agree. And obviously we have the ugly side of all of this with all the layoffs and all of that, which also usually sparkles a new wave of entrepreneurship. But I agree with you.

I believe that on the other side of this storm, the sustainable projects, the ones that had solid fundamentals. will stay in the market and all the others that arguably didn’t have any reason to be in the market in the first place will actually be, be, be cleansed. So that it is what it is. Related to already established startups, I think we’re going to see an interesting movement in Companies trying to monetize in a much faster way, right?

Because now you had funding that would last for years. Revenues were the least of your concerns. It was just growth for the sake of growth. And now they need to be a bit more mindful because a lot of that money went away. So. Definitely an interesting landscape moving forward. I tend to be optimistic as well as to where this is going to lead us because it will force entrepreneurs to be more thorough on how they deal with their businesses, but also investors to do better due diligences instead of gambling on everything, because one at least is going to, is going to work regardless of it’s a Facebook or if it’s an FTX, right?

So that’s it. So any other advice for entrepreneurs out there looking to start their ventures?

Dries: Let me think. No, I think, so my overall recommendation would be, be optimistic today. I’m sometimes a bit annoyed that if you now, nowadays look at LinkedIn or you read newspapers, it’s all doom and gloom. And it’s like, Oh, we are in such a bad situation economically.

And I think that’s not necessarily the case for entrepreneurs. I think actually it’s a huge opportunity, uh, even with the layoffs. Okay. It’s, of course, unfortunate for people that get laid off, but what I’ve seen in the past two years is that a lot of startups are struggling to hire people or that the people that they wanted to hire had salary expectations that were no longer actually realistic.

So I think again today for a lot of startups, there might be actually quite some opportunities to hire good human talents at a reasonable price. Um, so also that I think is an important issue. So I, I would in general recommend. Do not be discouraged by the current kind of macroeconomic situation.

Actually, that might be a huge opportunity for new startup ideas. So if you have a great idea, I would not hesitate to embark on it.

Rui: Absolutely. And this is, you reminded me of something because just recently we were hosting our all hands end of year meeting at Altaria back in December. And I was looking at the room and most of the people that were there were not in the labor market.

prior to 2011. And all of these, all of these people, all they know is growth, right? It’s, it’s a bull market ever since. Everything is going up and to the right since the beginning. And I also think it’s now important for them to understand really the importance of doing. their due diligence, this namely for talent, right?

To understand the fundamentals of the businesses they are getting into instead of accepting something at face value. So I think there’s going to be a lot more scrutiny everywhere. And because of that, we’ll come out of this stronger with stronger businesses, with stronger workers, with people ready, uh, really to evolve at a much faster pace.

So thank you for that. Now, one tangible, very tangible piece of advice. If you could prescribe just one book to every entrepreneur starting out, what would that be? Can I also recommend podcasts? You can let, let me then change this to one resource.

Dries: Okay. So I think a podcast I really like or to which I’ve listened to lots in the past year is the acquired podcast.

So it’s a podcast of two venture capital guys in the U S. And they actually reconstruct the history of some famous companies, typically in the US, so it’s a bit US centric. So that’s sometimes a disadvantage for us as Europeans. But so they, they do episodes of like two hours or three hours detailing the whole history of companies like Nvidia or Epic, or they even did an Amazon episode.

And I think it’s, it’s very interesting to hear these stories. And I think you can learn a lot from that as an entrepreneur. I’m a

Rui: complete addict to podcasts, so I will add to yours, Masters of Scale as well, because I really like the approach that Reid Hoffman has towards, uh, the, the startup, uh, ecosystem.

But yes, I actually know quite very well. I really like it as well. Perfect. So one last question. Any other question that I should have asked knowing that I’m reaching out directly to a community of entrepreneurs trying to add value to their journeys in my position, would you have asked anything else?

Dries: No, I cannot immediately think of something.

Maybe let’s give me the opportunity to pitch our own podcast. So we have at BIAO the awesome founder podcast. So we also do a podcast where we interview actually the successful founders out of our ecosystem. So if people are interested in success stories more in a European context. They might check out our awesome founder podcasts, where we have interviewed quite some seminal people out of our ecosystem.

And we try to do some storytelling about what they experienced.

Rui: Perfect. I actually had one note in here then to ask where could people know more about you? And I was actually going to plug in your podcast as well, because I know it. So perfect. You did that already. So if people want to reach out to you, what would be the best way?

Dries: Oh, they can just email me. Or, um, I think even the more easier way is to reach out on LinkedIn. I’m quite active on LinkedIn. Um, so if people want to get in touch, they can always reach out via LinkedIn.

Rui: Perfect. Dr. Dries, this was indeed a pleasure. Thank you so much for your time today to, to discuss entrepreneurship to our listeners.

I hope you found the conversation useful. I know I certainly picked up some valuable insights. Thank you for listening and I’ll see you again in the next edition of the Startup Journey Podcast.