In every country, there is a segment of the population with entrepreneurial aspirations to be part of the sharing/digital economy, but they will not be found at hackathons, boot camps or accelerators.
They are students, housewives, doctors, journalists, corporates/bankers, non-profit volunteers, etc., with dreams to make a difference. They want an opportunity to create, others say exploit, and are NOT willing to tolerate existing inconvenience. But deep in the corner of their mind, there is this nagging question “Do I have what it takes to start and follow through a social enterprise.
My intention, today, is to cover attributes of an entrepreneur and not the specific bucket they belong to (entrepreneur, social entrepreneur, social service entrepreneur, social activist entrepreneur or hybrid model ). At a high level, a social entrepreneur is society oriented, impacting towards a new equilibrium, and ‘regular’ entrepreneur, economy impacting equilibrium. It’s a conversation for another day.
They, via social media, are seeing and reading about young/old people around the world directly contributing with startups to their country’s aspirations of becoming, say, a knowledge base economy. They are exposed to terms like startups, pivoting, fin-tech, disruption, big data, e-commerce, blockchain, B2C and B2B, venture capital, etc., and seeing these come to life in real-time. They also want to be participant entrepreneurs.
They want to be value-add stakeholders in the digital economy, but want to answer the headline question before taking the leap of faith! However, without properly understanding of their inner self, there will be more misfiring, greater false starts, even faster failures, more investor money wasted, and so on.
In the last decade-plus of global travels, I have come across many such wonderful aspiring people, would-be entrepreneurs, and wanted to share some lessons from both failures (learnings) and some successes (no golden touch) as founder, mentor, adviser, etc.
The purpose here is to ‘inspire to perspire’ to become startup founders that can become scale-ups on the way to eventually exiting. Although not everyone can be an entrepreneur, it’s important to expose such interested people to some of the elements of entrepreneurship and startups. The odds are not in their favor, but the journey of learning is the thrill of the chase!
The formula for Founder Success?
There is no one formula for success, like the landscape, in both developed and emerging countries, is a littered startup graveyard. Thus, angel and venture capital (VC) investing is about the law of numbers, hence, out of ten investments, one/two success stories, giving 20X to 100X, offsetting the 70-80% failure rate.
In bringing a more diverse (of self-doubting?) group of would-be entrepreneurs, like a liberal art student or history professional, into embryonic startup ecosystem, especially in emerging markets, we will have more innovative/out of the box solutions. Some of these emerging markets, from Kazakhstan to Saudi Arabia to Turkey to Bangladesh to Malaysia to Nigeria to Argentina to Panama and, even, tier 2 and 3 cities of US states, want to be involved and prevent brain drain, especially the under/unemployed youth. They aspire to become a high income, Knowledge Base Economy economies with diversity being a value add.
Yes, there are early green shoots in many emerging countries and Tier 2 and 3 cities/counties (in US), and it’s not just Agric-tech!
Yes, incubators and accelerators generally cover many aspects of existing entrepreneur and their startups, but this is for those contemplating becoming an entrepreneur/founder, i.e., beginning of their journey!
As there is no one formula for startup success, there is no one ‘bio/characteristic’ for successful entrepreneur/founder.
Thus, some things to bear in mind when asking whether you got what it takes or not are
*No age limitation, can be 16 (cannot vote) or 61 (verge of retiring).
*No gender bias, let’s not perpetuate the male dominated perception
*No education pre-requisite, from high school to MBA/JD
*Housewives welcomed (actually best qualified, as understand family/home startup then scaleup)
*Career corporate/bankers welcomed (but be prepared for lean lifestyle)
*No religious or cultural preference for success, but in Asia, one can see the influence and impact of the Chinese, not just in China, leading and funding startups, scale-ups and getting the financial benefit of exits. The culture of risk-taking is one important attribute for a holistic start-up ecosystem.
Unfortunately, in many of the emerging markets, today, we have:
More depositors than investors, look at the Bank Deposits Amounts/Market Cap of stock exchange
Private equity investing bias towards real estate, energy, infrastructure, etc.
GDP bias towards agriculture, manufacturing, etc., and very little, if any, meaningful exposure to technology, as represented by stock exchange economic sectors
For example, the high-profile startups/scale-ups exits in GCC/MENA, Maktoob (to Yahoo), Souq (to Amazon) and Careem (to Uber), have been trade sales, where a local IPO would have important signaling, profiling and multiplier impact to the embryonic eco-system.
Now, what about the off-springs of successful entrepreneurs/founder and family owned businesses? Logically, follow-up generation should have higher success rate, much like successful athletes and their off-springs. The next generation will have benefit of name recognition and resources, but, they encounter many of the same headwinds as first-time entrepreneurs.
Today, I want to focus on the required psychological/personal traits. As the need of the hour is about understanding and connecting the traits, hence, the potential entrepreneur can make an informed decision to become an actual start-up founder.
The business of a startup, article for another day, is not about a product, but unrelenting understanding and attention to the paying customer in the addressable market. Take your eyes off the prize (customer) and be prepared to become a statistic in startup graveyard.
The initial funding (self, family, friends, etc.) to outside financing (angel/VC) and path to exit (PE), also for another day, is one of the most demanding (growth path to scale), discouraging (from lack of replies to under-whelming valuation), and distracting (from day to day operations) part of a founder(s) job description, JD. However, once term sheet is signed, i.e., money hits the bank account, that’s when the elevated pressure begins.
Psychological/Personal Traits (Character/Integrity)
I have come to one conclusion: when mentoring/advising would be entrepreneurs, there are four (4) basic psychological/personal attributes, and one question to ask. By no means am I a professionally trained psychologist or even have read much literature on the topic, it’s from personal experiences. The below four points start the conversation for a deeper dive.
.1 Inspiration/Passion (IP):
What inspires you? The ‘what’ answers the ‘why’ and, eventually, ‘how?’ This is about seeing (before others) an opportunity to provide creative a solution (and not continue to tolerate inconvenience of) the pain point (problem) of the targeted addressable market that is willing to pay.
Some examples of IP: addressing connectivity of (finding) like minded people/childhood/school friends (Facebook), eliminating high information search costs (Google), shopping and accepting delivery without leaving home (Amazon/Alibaba), etc. But, for every unicorn ($1B valuation) or even Moon-shot success ($100B), there hundreds of thousand failures.
However, if you are doing for this money, fame (cover of magazine), attention, etc., you will probably become a statistic in startup grave-yard. Why? Because many of the concurrent ‘challenges’ in operating and managing the many moving parts of startup is about over-coming, day-in and day-out, with ‘inspired passion.’
The focused objective is making a difference, society and/or economy, and wanting to do it with last ounce of energy and funds, as this is a formula to handle valleys/headwinds. It still may not equate to successful venture, but a powerful lesson: learning for your next venture, ie, you won’t make the same mistake, but probably a different one!
Thus, the IP sets up the courage to create the opportunity. For angel investors and early stage VCs, it’s often the IP over pitch deck.The IP can also be viewed as your personal ‘Intellectual property!’
‘Great achievement is usually borne of great sacrifice….’ Napoleon Hill
Are you prepared to have an extreme makeover of your lifestyle? Prepared to work 120 hours/week for, minimum of 12-18 months with no pay and no assurance of change in the near term? Prepared to cut back on social life? Prepared to reduce sleeping hours by 50-70%, and eat noodles for period of time. Prepped family to live a lean lifestyle, especially manage expectation of reduced family holidays.
For the corporate person becoming an entrepreneur, the psychology of down-grade travelling from business class to coach and even bus/train, entertaining on your expense, staying at 2-3 star hotels, no regular paychecks every two weeks/monthly and minimal (or if lucky, spouse’s) health insurance. Being your own boss has both benefits and burdens.
Even with all the sacrificing, the odds are against you in succeeding.
As an important aspect of startup leadership is continuous damage control, hence, finding time/place to [self] decompress is key to ‘sanity’. You need to be conscious of exercising and eating healthy, as stress will be compound existing aliments and start new ones. Finally, spirituality, other may call it yoga, will be a potential source of comfort, having faith, as ‘after burden, comes ease.’
Resiliency is the courage to move forward notwithstanding doubters and initial failures, whilst sacrifice is about ‘giving up to get.’ The fortitude to handle adversity! What is your track record growing up? As valleys, headwinds and self-doubt become the norm for most days, both starting and ending, and for an extended period of time, every-day will be a Monday!
Be prepared to address in real-time some of ‘usual’ issues with less than 100% information:
- website/apps/IT, from UI/UX, glitches, hacking, etc., to recruiting head of IT v outsourcing, including ‘butting’ heads with CTO, who may not understand technology is a facilitator/enabler, while business drives revenue,
- funds, as projections typically understated and unplanned expenditures not uncommon, often means tapping into dwindling savings, credit card juggling, so on,
- customer traction and adoption not going according to expectations of ‘smiling’ ambassadors with glowing testimonials,
- Employees leaving as don’t see the light at the end of the tunnel, office politics, money/equity, etc.,
- The co-founder was your close friend, and, but, now, an acquaintance,
- Competition just got funded, got covered in profile media that you were dreaming about, etc.
It’s also about being authentic, genuine and credible with reactions, as staff will look at your non-verbal cues, from body language to mood swings, as proxy of situation. It’s about self-belief, when there is mostly self-doubt! It’s about caring, including choosing which battles to lose, but with a thick skin. It’s about iterating/pivoting, with internal buy-in, when the initial thesis is not meeting marketplace expectations.
Resiliency is closely tied to staying focused on (operations) execution. For example, as stated above, fund raising is often laden with disappointments (‘not valuing my startup in the millions’), and with distractions (from operations).
Its multi-tasking emotions within an allowable bandwidth.
4.Leadership without ego:
‘It takes so much strength to say to your ego, ‘You know what?’ You are going keep me lonely, so I have to ignore you.’ George Michael.
Accessibility and open-door policy: you will be sought and tested everyday, including lunch breaks, bathroom breaks, etc.! Your time and life is no longer your own! You have two families: one at home, and one at work-home!
Its more EQ than IQ: your new family (professional, but dysfunctional), office politics (yes, even at startups), accusation of favoritism towards an employee or unit (spending too much time with, say, IT or marketing or too much praise by way of examples, etc.).
Hire Slow, Fire Fast (rotten apple, which got be a value add performer, adversely affects the barrel): If you are the smartest person in every meeting, then you did a lousy job on hiring, etc.
The objective of hiring senior staff is provide a ‘healthy competition’ to eventually displace you, so that you can move to your next level of value add. The career ladder paths for them is implied explicitly, as the good one have options to walk.
Micro-managing is about trust issue: you need to overcome your phobia, ‘someone else cannot possibly do the quality job you can,’ resist the urge, as it’s proven path to self-inflicted wounds. In hiring smart people, give them authority and trust them to align and execute, as it makes no sense telling them what to do.
You need to be able to say ‘Please explain, am not getting it,’ ‘I’m sorry,’ ‘Thank you,’ ‘You’re Welcome,’ authentically and enthusiastically without pause.
Finally, the reason why accelerators typically require co-founders is because you need a partner to provide, say, a shoulder to lean (safety relief valve); to talk to with guards down (as they have same vested interest); to fill your shoes when you are having a bad day/week; to play bad cop (sometimes); and so on. Thus, a ‘spouse like compatibility’ is key, as you will spend more time with co-founder than your own spouse in the early stages.
It’s also about being human, where admitting errors is a sign of strength.
After a better understanding is established, the question I ask, ‘where do you see yourself/startup in 1, 3, and 5 years?’
Suggested answers that I look for include;
1 Year: Survival to minimum viable product (MVP)
3 Years: Road to Product market fit (PMF) to Scaling
5 Years: Path to Exit
To become an entrepreneur, one must have a CHIP.
I hope the above sparks many thoughts on would be non-traditional entrepreneurs to become a unique voice that echoes in the startup chamber.
All the Best!