"The tide is high but I'm holding on
I'm gonna be your number one" - Blondie, Tide Is High
Perchance to dream: Reading the Forbes magazine's cover story on the "Masters of the Net Universe" and the 12 individuals collective net worth makes any aspiring entrepreneur dizzy with the possibilities. Jeff Bezos, CEO of Amazon.com, is a smart man. He's now worth $2 B ($3 B Canadian pesos). Is he really smarter than you or me? Didn't everyone and their brother start to imagine an on-line bookstore as soon as they saw the web in 1994? How did he win? What is he really like?
Let's take stock in his life now. He is managing a company that represents the 21st century of retailing. He is obscenely wealthy (obscene is not attractive to me, I'd be comfortable with about1/100 of what he has). But, perhaps most importantly, he is a proven commodity. He did it, man. There is no turning back. He is set for life. Anything he wants to start up after he tires of Amazon.com will be a cinch. He's got the AAA rated reputation.
When he walked into a VC's office 4 years ago, what was it about him that the VC liked? Why did they make the bet on him? Do you or I have what it takes to be a Jeff Bezos?
I think its time for a little discussion about entrepreneurialism and how it affects the funding of any start-up company. The discussion also applies to hiring anyone in the organization that will be in a leadership position. Before we get started, I should warn you that I am taking the perspective of high-tech start-ups that have the potential of being huge companies some day. Therefore, the context of the column is high-risk, high-reward situations.
The discussion falls into 2 parts. Who are you? And what do you know? I want to explode a couple of myths along the way as well.
Part 1 - The Personality Traits
Absolute Must-Haves: Self-motivation - If you are a person that needs someone to tell you what to do or are fond of avoiding strenuous work, you can stop reading now. Head on over to http://www.bored.com and try and figure out what your phone number spells.
Integrity - Many people will build their dreams and aspirations around you and your vision. Others, like me, will bankroll you with millions of dollars. If you lose people's trust, you lose. If people think you are dishonest, you'll never get started. Anyone that buys into your vision (financier, supplier or employee) must check your history out and make sure that you have integrity. Oh, and you only get one chance here. The fatal blow to any entrepreneur's career is loss of integrity.
Leadership - This is a rather broad word. There are many different styles of leadership. One style may be effective in a given situation, another might not. At any level of management, whether you are the CEO, or product manager, the entrepreneurial leader needs to be two things: consistent and a tireless motivator. Regardless of your style, you must be consistent. Wild swings in managerial style will instill confidence in no one.
Articulating the Vision - Everyone you talk to should easily understand your vision for the product and market. If you can't tell your story convincingly in an elevator ride, you should stick to the research and development.
Myth #1 - you have to be a workaholic and have no life in order to win. Not true. In fact, the obsessive nature of some people may in fact be a detriment to their success. You can still be the next Jeff Bezos if you have some of the following characteristics:
Should-Have Traits: Organized - One VC I know liked the tidy briefcase rule. (You can guess his age by the reference to a briefcase. Now it's the tidy Windows desktop rule). If you cannot prioritize and order your life, you will have a tough go as an entrepreneur. Read Steven Covey and get organized.
Ability to Delegate - Are you a control freak? Does the thought of someone else doing the deal fill you with anxiety? Is everyone else out there stupid? Do you fix all the other bonehead's mistakes? Do you honk your horn at least 5 times driving home everyday? People probably have nicknamed you "The Black Hole" because stuff that gets anywhere near you disappears forever. Forget running a company. Try a self-employed roleÖ
Risk Taker - You may be surprised to see this as a "should-have". Given demand for talent in start-ups today, you may be rewarded quite well for moving from your "safe" job. The degree to which you are willing to take risks is important. If your idea of raising capital is to take the remainder of the company's money, fly to Vegas and bet on blackÖ then you may be too risky to invest in.
Tolerance of Ambiguity - my favourite $20 phrase for not melting down when absolutely everything goes awry. And it will. Trust me.
Ability to develop insight - Some entrepreneurs take in tons of information and process it into meaningful action items. These are the "garbage-brained" individuals who can retain so much, they can synthesize a new strategy from the work already done. Others have the gift of abstract thinking that allows them to fly over the forest, instead of running around in the trees. These individuals are the creative thinkers that come up with the big leaps forward in innovation and strategy.
Myth #2 - You have to be an a**hole to be a success. See the next point.
Humility - There is not enough of this to go around. People with insecurities hide behind bravado and ego. Many successful entrepreneurs actually lack humility. But, they are no fun to be around and usually create employee turnover problems. Those with the ability to be honest about their own shortcomings, yet maintain their confidence, are the easiest to get along with. And things go a lot easier when the entrepreneur is easy to get along with.
Part 2 - Given what you know now, can you do it?
The hardest part about being a start-up entrepreneur or deciding to leave your cushy job to join a start-up is having the inner confidence that you really know the market inside-out. Do you know enough? Well, you can never know it all, but when can you be comfortable saying, "I know where this market is headed."
I referred to domain knowledge a few columns ago. VCs look for domain knowledge in the start-up individual or team. We feel much more comfortable when a person has 10 years of experience in the wireless industry and they want to do a wireless equipment start-up. Let's clarify this a little further. Exactly what did the person do for 10 years. Management skills are mandatory. How many people did they manage? Did they instigate new initiatives? Were they recognized as an authourity on certain subjects? Did they outperform expectations? Bottom-line is that your resume must be exemplary to be an entrepreneur. Just working in the industry is not enough.
Another extremely important factor in domain knowledge is the network of contacts that the entrepreneur has. How many potential customers do they know? How well do they know them? How many industry leaders or other important contacts (people from accrediting organizations like the HPB or FDA, industry pundits) do they know? Having extensive contacts is an incredibly important asset to any start-up company.
Domain knowledge is only achievable from direct experience. Or is it? Can you immerse yourself in an industry for 6 months, reading, attending trade shows, talking to people at every level, reading moreÖ? Absolutely. VCs do it all the time. It's still not quite as good as experience, but the ability to achieve insight into a certain market may only be limited to your understanding of the technology and the market dynamics. This happens quite often when people with relevant job experience in one market run successful start-ups in a different market.
Myth #3 - If your start-up fails, you are finished as an entrepreneur.
I've assumed that you have not been an entrepreneur before, because, as I said at the top, once you've done it, you're laughing. Even if you failed, you might be ahead of the pack. If the failure of a start-up is directly attributable to your management, then you may have to move to Cleveland. But there are often other circumstances. Norm Francis, CEO of Pivotal in North Vancouver, had a "failure" with Pen Magic in the early 90's. Pen Magic was the undisputed leader of business applications for pen-based computing on the Newton. The market didn't materialize like everyone thought it would. Did that keep the VC's away when Norm needed money for Pivotal? Nope. Doing just fine thanks.
Is now the right time to be an entrepreneur? There are many factors that enter into this argument, but it all boils down to one thing, timing. If Jeff Bezos had shown up with his idea in 1996, would he have been successful? No. He timed it all right. The Internet hype was reaching a crescendo in late 1994. The VC money was pouring into Internet-related start-ups. All of the stars were aligned for him.
Can you do it? Are you entrepreneur material? Are you willing to take the plunge?
Do your homework on the opportunity thoroughly. You must really think about all of your options. Remember that many start-ups fail.
Ask yourself this (a great pearl of wisdom from an entrepreneur in the Silicon Valley):
If you know you will be dead in seven years, would you still do it?
By the way, here are the findings of a survey by Chris Shipley of Demo Letter that went to 200 entrepreneurs in high-tech and 80 VCs:
Top five (of twenty-five) characteristics that VC's look for in an entrepreneur:
Proven Mgmt Skills
Ability to communicate vision
Ability to prioritize and focus
(a large number of VC's mentioned that entrepreneurs need a well-rounded life!)
Top five (of twenty-five) traits that entrepreneurs think they have:
Ability to prioritize and focus
Ability to articulate the vision
(Ability to get along with others was seventh)