From MBA to Entrepreneur Part 8: Derek Belch, Strivr
When legendary Stanford football coach David Shaw sits you down, it’s prudent to listen to his advice. Former Cardinal kicker Derek Belch took his guidance and launched a company, Strivr, that has grown into a leading provider of virtual reality-based, immersive training solutions for large enterprises.
“While I was coaching, as a graduate student, I had to do a thesis and mine was to come up with a way to train football players using virtual reality. I didn’t go back to Stanford to start a company, I went back to coach, but life takes you in a funny direction sometimes and that’s where we got going,” said Derek.
His winding road began at Stanford, where, as a senior, he kicked a game-winning extra point to allow the 41-point underdog Cardinal football team top second-ranked Southern California. After a few detours, he always knew he wanted to come back to the game he loved and eventually joined the coaching staff of David Shaw at his alma mater. It was during that stint as a graduate assistant in 2015 that he co-founded Strivr as a way to train athletes and received his first angel check of $30k from Coach Shaw.
From there, the product took off. Within one year, the company had signed up over twenty professional and collegiate sports teams with commitments of more than a few million dollars in revenue. But it wasn’t until a fateful call from Wal-Mart in 2016, that Derek and the Strivr team took a pivot towards enterprise training and exponential growth.
Now in 2022, flush with $35 million in Series B extended funds, Strivr seems poised to capitalize on the post-COVID shift in human resources and learning & development. The company has trained over one million workers using its proprietary immersive learning platform and continues to grow its presence at Fortune 1000 companies. This revolutionary technology could not come at a more essential time as the World Economic Forum estimates that more than one billion workers are expected to need reskilling by the year 2030.
“My vision is for VR headsets to be readily available within every ‘place of work’ in the United States — every Walmart store, every FedEx warehouse, every Bank of America bank, every hospital, every restaurant — just like we’ve seen with computers and tablets and phones over the last twenty years. In this way, employees of all types can get their reps before doing their job in the real world, whatever that job may be. In this way, enterprises will allow their people to train like athletes, which is very repetition-based and often very simulation-based,” said Derek.
I sat down with Derek to hear about his path to entrepreneurship, the fundraising process, the impact of four degrees on his professional growth, and much more.
I think your story from Stanford to Strivr is fascinating. To get us started, I’d love to hear a bit about your background and how you got into entrepreneurship.
I grew up in San Diego and then went to Stanford as an undergraduate to play football. These were the “dark ages” of Stanford football, so we weren’t very good at the time. Nonetheless, playing college football at that level was very rewarding. I worked in consulting for a couple of years out of school but I realized it wasn’t for me. I ended up going to business school at USC a couple years earlier than planned, as I wasn’t keen on going back to work for a big company at the time and business school seemed like the next logical step. I really enjoyed USC and I learned a ton. I didn’t have any formal, academic, business training and so I kind of went in knowing what I didn’t know and I got out of the program what I had hoped to. While I was in business school, I had this itch that if I didn’t coach football by the time I was 30 I was going to regret it, so I went back to Stanford after school and coached the football team for two years. The catch was that I had to be a graduate assistant because any other role would have been an unpaid internship, and David Shaw (Stanford’s head coach) wouldn’t let me do that. He told me I was “too smart to be a football coach”, but he supported my desire to see it through. So, while I was coaching as a graduate student, I had to do a thesis and mine was to come up with a way to train football players using virtual reality. It was so successful as an academic project that Coach Shaw sat me down and said if “I were you, I would go start a company”. He also said he would personally write a check to get me off the ground, if I would be willing to take his money as our first investor. That is literally how Strivr started!
I love that serendipity — everything fell into place at the right time. I think your story is also so impressive because of your pivot from football into enterprise. I know Wal-Mart was your first corporate client but can you walk us through how that change came about?
I’ll tell you the part that was really easy, but then I’ll tell you the harder parts of the decision. The decision to go the enterprise route was very easy. If you just do the math on how big Wal-Mart is compared to the whole sports market, let alone the entire enterprise market, it’s pretty clear which path to take. This is something that isn’t talked about enough in classical business education, but market size is so important with investors and what they’re looking for. Sure, we had achieved some great things in sports, and generated meaningful revenue, but in those early “seed stage” pitch meetings, investors straight-up told us that the sports angle was cool but without focusing on enterprise we can’t invest in you. Therefore, it was a very “easy” decision to go down that route.
However, you don’t take what you’ve been doing for two years and stop on a dime. We had a number of sports customers and we had to decide what we were going to do with them. If this Wal-Mart thing didn’t work out, we’d have to go back to sports and we had 30 people at the company, 28 of which were former college or pro athletes. We had built the company to be sports-oriented so we had to decide what to do with these people. Ultimately, we decided to stay in sports. We still have sports customers today, but we also have to think strategically about it and how we tell this story within our overall offering to the enterprise. We have eight NFL teams signed up today and we really focus on the ones we have the best relationships with.
The second difficult thing, which in hindsight we didn’t realize, was that it takes time to pivot a company successfully. It’s really hard, and as we’ve gone deeper into the enterprise world, we have learned something new every day that we need to be successful. It was like speaking a different language from what we were doing previously. I would say it wasn’t until right before COVID, early 2020, when we started to get a really good feel for what we needed to do, and that’s three years after the first Wal-Mart handshake. In hindsight, pivoting into enterprise is really hard and running an enterprise business is hard.
But, like I said, the decision to do it was not difficult. Are we trying to build a nice “lifestyle business” working with sports teams, or are we trying to build a huge, multi-hundred million-dollar revenue business? That was the underlying question. The latter would have only been possible with the enterprise as our focus.
To your point, a lot of people might think it was straightforward when Wal-Mart came and knocked on your door but as a small company, it probably wasn’t easy. Can you talk about the challenges in scaling so quickly?
At the time, we kind of just did everything because we didn’t know any better, but today we know what we need to do in all areas of the business. We know what needs to happen to provision hardware, we know what needs to happen with consulting services, technical services, content, and the software platform, etc. Many years ago, we actually didn’t know any better and so we just went out and sucked it up.
Honestly, we’re now running six businesses in one. We decided to keep doing everything ourselves versus partnering our way to scale so it was tough, but now we’re completely end to end. If you look at the VR ecosystem, we do consulting, hardware, content, data analytics, software and logistics — I mean there’s five to eight companies in each of those categories that are trying to make that ONE thing their whole business… we do them all, so it’s really tough.
You’ve often said that end-to-end coverage is what gives Strivr a competitive advantage in the marketplace. Do you have an end state of what training for employees looks like with Strivr as a gold-standard in 5–10 years?
There are two elements to this. There’s the product & technical element and then there’s the change management element. From the product side, our vision is to ‘elevate performance through immersive experience’, so we want to be giving our customers multiple data points to indicate to them how an employee’s performance in VR will be an indicator of how they will perform in the real world. To use an example, when pilots go through flight simulators, you pretty much know what they’re going to do when they fly the actual plane in the real world. That’s what we want to do from a product perspective.
Separately, there’s a change management aspect. We’ve got customers that for decades have been doing lectures, videos, and slides. We’re changing behavior and getting them to do things differently, so we’ve got to fit VR to their existing infrastructure of training, learning, and onboarding. As an example, my vision for how VR might work in the medical industry is that every hospital in the United States will have dozens of VR headsets on the wall and surgeons will walk up and get their reps in before going into real surgery — no different than how professional athletes train before a game. It’s going to allow enterprises to train their people like athletes train, which is very repetition and simulation based.
You’ve talked a bit about calculating ROI and switching to measurable business based metrics. How do you think about tracking and recording customer value?
Learning and HR related trainings are really hard to measure, especially for the ones focused on soft-skills. The first thing we’re doing is focusing more on frontline workers right now and focusing more on hard skills, when we can help it, and the ROI becomes a lot simpler. For us, time savings and therefore cost savings become immediately apparent. For example, a customer has a six week onboarding and we can get the same results in three weeks with our VR platform, equaling a significant time savings for the company.
Then, there is also real world performance improvement. As a result of our training, our customers are putting boxes on trucks faster or having fewer safety incidents. We want to track progress, which is very possible on the operational skill side, and it has turned out to be really good for us.
I know you said you’re focused more on frontline workers and hard skills right now. Are you having a generalist approach to your pipeline or targeting specific clients?
If you’d asked me that question a couple years ago, I would say it was more the former. We would have talked to anyone that wanted to talk to us. I would say that we still don’t say no to prospective customers often enough. But, as of now, we have a really good feel for who our customers are, which is primarily Fortune 1000 companies, with frontline workers as the end user and some sort of operational or hard-skills use case. That doesn’t mean that’s the only place we focus, but that’s ideal if you’re talking to a customer. We’ll probably continue to focus on this area for the next few years, but over time, I think it will start to evolve as the market evolves.
I believe you mentioned that you had approximately $3M in revenue within the first year from sports. As a company with a lot of hardware and focus on in-person demos, how did COVID affect your business the last couple of years?
To be honest, COVID wasn’t good for us in the short-term. We still grew the business, we just didn’t grow as much as the previous year. VR has to be experienced and not everyone owns a headset at home so you can’t demo our platform remotely. Within the enterprise, everyone was focused on remote work so we weren’t able to work with new customers for a good three to six months. It set us back a handful of months from a pipeline perspective… but, juxtaposed with that was the fact that we’ve now got a bunch of frontline workers that have been laid off and need retraining to come back. At home, a lot of people did buy VR headsets at the consumer level throughout the pandemic so there’s a lot of things at the macro level that eventually did turn out in our favor. Big picture, I actually think it will be good for us based on the macro trends in HR and L&D, and how technology is now coming into the workplace again.
You guys have recovered exceptionally well. You recently announced a Series B extension of $35 million. There’s been a lot of chatter about how hard it is to raise money in the current environment — how was the fundraising process for you?
Fundraising, even in good times, is so hard. We actually finished most of our fundraising in the latter part of 2021, so luckily it wasn’t during this particular moment in the markets, which have obviously been very challenging for a lot of companies. We were starting to see some of that when we wrapped up our round, but luckily avoided the worst of it.
Fundraising is so hard, though, no matter what they teach you in school. Ours was a pretty standard four to six months process where we probably pitched more this round then the previous rounds. We got some great names on our cap table with Workday and Accenture. One of our customers, Bank of America, invested in us as well, which I think speaks volumes to what we’re doing… so we feel pretty good where we are right now.
You mentioned how challenging the process is even if it’s studied at school. Do you have any advice for students who are starting their own companies and beginning to fundraise?
There’s here-and-now advice and then there’s “general advice”. For the here-and-now, Seed and Series A investment activity has not stopped and those valuations haven’t been crushed like the later ones where you have to have actual revenue to grab onto. So early stage companies and great ideas are still going to be invested in.
In general, I’d tell aspiring entrepreneurs that if you have an idea for a business, you just gotta go do it. It helps to write a business plan, go ahead, and if you want to do some market research with potential customers then that’s fine too, but you can only plan so much and it’s better to just go do it and if you fail then to fail quickly. 99% of startups fail, so it’s much healthier to fail quickly and move on versus a slow burn. One of the things we learned at Strivr was the difference between having revenue and not having revenue. Once you have signed contracts, the investors can grab onto it and start planning what the future will look like. That’s a very different ballgame for a company trying to raise money.
Also, it’s important to know what your product truly is. Defining your product from the beginning is super important and I think there are several people that overlook this point. There are several people from Strivr that have gone on to start their own companies and the first thing I say to them is identify your product and ensure that you hire a good product person immediately. We didn’t have a real product leader for almost three years at Strivr, and while everything worked out ok in the end, I think it would have really helped in those early days.
Lastly, there are two types of businesses — venture businesses and lifestyle businesses. These two are very different and I didn’t understand it initially but after doing this for eight years and talking to other founders, now I do. A venture business is usually a high growth business that is “all or nothing” every step of the way. You have to move very fast, and if you’re not growing 200, 300, 400% a year, then you’re not fundable in the venture space. As a founder, you’re probably not going to make much money for several years, but you may hit a home run down the road. A lifestyle business, on the other hand, can grow 20, 30, or 40% and it’s just fine. They don’t need to raise capital every 18–24 months, employees can make a good living (including the founder) and maybe you’re even working a more sustainable schedule from a number-of-hours standpoint. To be clear, there’s no “right” answer with either, and each has their own set of challenges. It’s very important to identify which type of company you want to start from the beginning, or to look for signs along the way that indicate where you should be going.
I know running a start-up is also a very tough venture, particularly with a wife and kids. How do you deal with the bumps in the road? What kind of support system do you leverage?
When I went to business school for two years, while I was dating my girlfriend (now wife), I made no money. When I was a coach for two years, I made no money either and at this point we’re engaged in the Bay Area. She was the breadwinner of the family and she made $60,000 in the Bay, which is not a lot for that location. I started Strivr in January 2015 and I think the first two years combined I made $50k so basically no money again for two years. Oh, and by the way, we got pregnant two weeks after I decided to start the company! So we had our first child on the way and I hadn’t made any money in six years. I’m Stanford educated, with a USC MBA, and I went six years without a steady paycheck, let alone one that matches my academic credentials — that’s kind of crazy! Once Strivr raised money for the first time, I was able to pay myself a living wage. I’m not making millions, or anything close to that, but my salary today, eight years in, is relatively on par with others of our size and stage. From our first funding round, the board wants you to pay yourself so you’re comfortable and not going to stress out about basic living expenses otherwise the founder could jump ship.
A few weeks ago, I was talking to a number of MBA students who asked what I “didn’t learn” in business school that has proven most valuable. That’s an easy story for me. While I was in business school, I had lunch with one of my professors from undergrad. I told him about all of my “big plans” for the future, and everything I was hoping to accomplish (keep in mind that Strivr was still over two years away at this point). He told me that my awesome plans would mean nothing if I did not have anyone to celebrate it with. He said it was fundamental to get my personal life in order before I go out to take on the world. It’s a lot easier to do it that way than the other way around. I had a realization at that moment and within a couple of months, I had proposed to the woman who is now my wife of eight years. He was right — having the support of my wife when times were tough and things were hard was critical. For her to support me through those lean years and be ok with failing takes some guts, and I am very thankful for that. We have had three kids along the way and that’s a totally different world because you’re trying to set them up for the future, but I’ve been lucky to ultimately be able to prioritize them as much as possible by making my own schedule.
The last thing I’ll say is that we have a really good board at Strivr. It’s a different dynamic, but I’ve been fortunate to have a couple board members that I can talk to really honestly, which is great. I started working with an executive coach four years ago and he’s been a great resource for me, too. You have to swallow your pride and lean into people that are willing to help.
Lastly, I know we’ve talked a bit about your MBA experience. Can you talk about how your time at USC has been a resource for you as a leader both personally and professionally?
I have made some really good relationships that I still maintain to this day. It’s a “who you know” world, and often not what you learn necessarily in business school. Overall, the most important class that you will take is organizational behavior. Everyone thinks that class is a fluffy class but it’s one of the most important as an entrepreneur because people dynamics on the way up are crazy. As you add more people into the mix and have to navigate the people side, the power structures, goals, and feedback — this is 80% of the job. You can learn the balance sheet, accounting, and valuations, but the companies that get the people portion of the job correct are successful and those that don’t, usually fail.
It’s not usually the things I learn in class that directly apply to my job but it’s the random stuff that you learn and are able to talk about later in life. At the time, it probably seems meaningless but then you’re at a party and it’s a conversation starter or you’re making small talk with a customer and it comes into play. It shows that you’re worldly and multifaceted.
Good MBA programs like Stanford, Harvard, MIT, and USC, etc. teach you how to think about problems. It’s not necessarily about what you’re learning, but it taught me how to work through solving a problem and surrounding myself with people who will push me. You can take those principles and concepts and apply them to running a company every day.
Interview lightly edited for conciseness and clarity