by Derek Lidow
Getting at the Real Why
The experience of being an entrepreneur does not turn out as expected for most who try. The majority of people don’t get very far and give up. Less than half who actually start a company survive five years. And only a small fraction of those who remain in business meet their explicit objectives for having started the business in the first place. Other than William Shockley, this book profiles entrepreneurs with core motivations adequately strong and well aligned to power them to success, whether or not they could accurately describe those motivations when they launched their venture.
A strong “why,” a strong core motivation, is always present with great entrepreneurs, but rarely with entrepreneurs who muddle through. Uncovering and understanding those deeper motives is the first step toward succeeding as an entrepreneur or discovering that you are not cut out for its punishing demands—the personal sacrifices, inevitable setbacks, relentless work, crushing time pressure, financial uncertainty, and sleepless nights faced by 99 percent of entrepreneurs. You need to know whether your motivations are strong enough to carry you through an experience that can certainly be exhilarating, but also exhausting, calling on your deepest reserves of personal strength. You need to understand what test you must pass.
You could, of course, invest a great deal of time and money in therapy, but most ordinary entrepreneurs have little time or money for that. Besides, you don’t necessarily need to resolve whatever issues underlie your motives; you only need to know what those motives are so that you can guard against their excesses. You can start by undertaking a simple exercise that I often use with aspiring entrepreneurs and students.
First, ask yourself why you want to be an entrepreneur. You’ve probably answered this question many times before, either for yourself or friends and family, and you’ve also likely come up with the usual platitudes. Nevertheless, write them down. Then ask and answer some deeper and far more specific questions:
What fundamental desire or fear would success as an entrepreneur satisfy? This question, too, produces some answers that recur over and over. For example, many people fear being humiliated in the eyes of a parent or rival. Others discover that they have a deep drive for power or status, or to be listened to. They are deeply motivated by the wish to have no one ever telling them what to do, or to have a group of people become highly dependent on them. Many other people’s deepest motives are driven by challenging childhoods—economic hardship, for example, or an alcoholic or abusive parent—and their deepest wish is to never again feel the way those challenges made them feel back then. Still, others have had their deepest motives formed by any of the many possible permutations of family dynamics.
What makes me so mad that I can’t control myself? Perhaps there are certain names or labels that make you flash into anger. Someone casually says something that suggests you’re lazy or inconsequential and you erupt. That eruption is an indicator that you’re getting close to a core motivation you don’t fully understand. Suppose, for example, that you’re infuriated when what you regard as your unfailingly diplomatic touch is seen by someone else as toadying or spinelessness. Your anger is out of all proportion to the offense. Why? Perhaps as a child, you were the peacemaker in a highly dysfunctional family, a valuable role that you are constantly driven to recapture. Maybe there is some other deep reason. But the point is that your hair-triggers can tell you a lot about yourself, if you’re willing to pursue the clues they provide.
What made me happiest when I was child? Like anger, joy can point us toward our deepest motives. But if you ask people a generic question about what makes them happy, they will either name transitory things like a good meal, or long-term experiences like enduring relationships, family life, or spiritual satisfaction. Localize the question to childhood, however, and the indelible memory of specific situations that made you deeply happy and you can begin to hone in on highly specific motives. Maybe it’s as simple as constantly wanting to recapture the feeling you had when you made the winning goal in an important soccer game. Or perhaps it is as complicated as the enormous relief you felt when your parents reconciled after a trial separation. But whatever it is, it will get you closer to uncovering what really drives you.
What’s the test I need to pass? It is critical that passing this test will give you a sense of well-being. The test will likely be tied to proving your self-worth and your ability to act autonomously.
How would I feel if I failed? If the answer is, “as long as I felt I had given it my best, I could accept failure,” then the chances are your motivation is not strong enough. The psychological consequences of failure must be significant enough to drive you to overcome, without hesitation, the hardships and traumas you will encounter. There must be nothing that is more important; otherwise you are likely to abandon the effort when the going gets really tough. And it’s far better to find that out about yourself before you lose money, waste precious years of your life, and destroy a lot of valued relationships along the way. That doesn’t mean you shouldn’t join a startup where you can exercise skills you’re proud of in exchange for some kind of payback. It just means that you probably shouldn’t be the leading founder.
Would someone whose wisdom and guidance I value see my motives the same way I do? Once you have examined and recorded what you believe motivates you, seek out a trusted advisor, someone who knows you well, who has seen you in action in a variety of situations, who can be counted on for candor, and is willing to ask probing questions. Do their perceptions about what really drives you align with yours? If not, then revisit your self-questioning and try to resolve the difference.
As you will understand when you complete this exercise in self-discovery, your strongest motivations arise from the things that are the source of your happiness or that protect you from primal fears. You therefore inevitably find you have a totally selfish reason for wanting to be an entrepreneur. There is no shame in that, and there is much to be gained by identifying it and admitting to being selfish. If you don’t acknowledge it, you’re likely to feel ambivalent about success and, as a result, sabotage yourself.
Does that mean you should adopt a “looking-out-for-number-one” philosophy and steamroll anybody who gets in your way? No, just the opposite. The most challenging requirement for entrepreneurial success is the constant need to change your leadership style as your business grows and changes.[6] Without a powerful motivation, you will not make the required changes within yourself, nor will you master the tricky balance of being selfish enough to be a driven entrepreneur and selfless enough to lead the people that sign up to help you achieve your dream.
Why Not
Wanting to see your idea become a reality is not a good reason to become an entrepreneur. If you have a good idea then patent it and license it to someone who has a selfish need to run a company—which may or may not be you.
Wanting to do something interesting or fun is not an enduring enough reason to become an entrepreneur. Go find a fun and interesting job instead.
Wanting to learn is not a good enough reason to become an entrepreneur. Go find a job or take a class that’ll teach you what you want to learn.
You need a good reason to want to be an entrepreneur—and an enduring one, because succeeding will take a lot of time and inflict significant hardships.
You need a really selfish reason for being an entrepreneur because you will need to make the world want what you have to give it. Your selfishness will drive you to change, to care about your customers and teammates, and to take the steps required to get your vision accepted by others.
You must want to test yourself. That’s the only way you can get good enough to feel satisfied about yourself as an entrepreneur. It’s also the only way you can stay good enough to keep your customers happy.
With the self-awareness of what you really want comes the corresponding test of whether or not you can get it. Once armed with the knowledge of how and why you need to test yourself, you then have to choose whether a bedr
ock or high-risk strategy is best suited for you. High-risk entrepreneurship is capable of most expeditiously resolving whether you can pass your test, so let’s understand what that entails.
* * *
[5] Implicit and explicit motivations are different than intrinsic and extrinsic motivations and often get confused. I describe the difference in the Notes section.
[6] This will be discussed in great depth in the chapter “How Much.”
CHAPTER 5:
What If
What if you always dreamed of going to Mars, and somebody believed in you so much that they offered to finance your rocket ship? Wouldn’t that be cool? Today, Jeff Bezos is spending hundreds of millions of dollars to build the rockets and the support organizations to enable him to travel to Mars. He is spending almost entirely his own money to finance his expedition because this is a project he cares about personally. When it comes to his space dreams, Jeff is a bedrock entrepreneur. Not wanting to rely on strangers or feel pressure to meet externally imposed performance or financial milestones, he is building his space company slowly and steadily.
But Jeff Bezos started as a high-risk entrepreneur. He now has the money to finance Mars missions only because he was able to get savvy people to invest millions into his startup and then more investors to buy hundreds of millions of the shares of Amazon once it went public. Investor demand for these shares has, in turn, made his shares worth tens of billions of dollars. Jeff is a thoughtful and strategic entrepreneur who understands exactly when to be high-risk and when to be bedrock.
Audacious dreams that you cannot finance and staff completely yourself require a high-risk entrepreneurial mindset. To really understand this mindset, you need to understand the Silicon Valley investment model and the people who run the system that enables high-risk entrepreneurship. And, yes, Silicon Valley is the proverbial home of high-risk entrepreneurship. The Silicon Valley model can be summarized as, “shoot for the moon and use other people’s money.”
High-risk entrepreneurs play a disproportionately important role in job and wealth creation; less than a fraction of a percent of all startups create slightly less than 10 percent of all the wealth generated by startups. With the support of venture capitalists (VCs), whether or not they’re located in Silicon Valley, high-risk entrepreneurs launch companies that grow faster than an average company and are more likely to go public. Entrepreneurs backed by wealthy and experienced venture capitalists enjoy immense competitive advantages in business sectors where economies of scale or network effects dominate cost structures and/or customer acceptance. In business sectors where long-term studies are required to get regulatory approvals (like biotech), VC backing is virtually required to succeed. Without the Silicon Valley investment model, the United States would not be the world leader in enterprise software, semiconductors, social media, biotech, and e-commerce. The leading businesses in these essential industries all started as audacious dreams.
But not all businesses, and not all audacious dreams, find favor or gain competitive advantage from using the Silicon Valley model. Every entrepreneur needs to be able to decide for him or herself if their dreams need the support and favor of the highly experienced, busy, focused, and wealth-driven VCs. So, let’s understand what’s expected of high-risk entrepreneurs—and start by understanding why the fate of all high-risk entrepreneurs with audacious dreams that need or want the support of the venture capital community will almost certainly be determined on a Monday.
The Importance of Mondays
The entire field of venture capital works in almost perfect synchronization. It’s a ritual. On Monday, almost all of the venture capital world holds “partners meetings” to decide the fates of thousands of entrepreneurs—both aspiring entrepreneurs looking for money, and existing entrepreneurs operating their enterprises under the watchful eye of one or more partners of the firm.
The meeting style differs from firm to firm. Some are formal, some informal; some include only partners in the meeting and some invite their senior analysts. The manner in which the meeting is conducted depends on the preference of the person or persons calling the shots at the firm. VC firms have cultures just like any other business. In fact, venture capital firms are just businesses started by entrepreneurs.
On Monday morning, usually not too early, the senior partner in the firm calls the meeting to order: “OK, let’s get started.” The agenda is virtually the same every week: review potential new investments, then review the performance of the companies in their portfolio, then discuss fundraising (which is almost always happening in successful firms), and finally discuss administrative matters such as hiring and firing within the firm, or planning events like the annual partners retreat or the annual limited partners meeting. The meeting can take most of the day.
Usually, before each meeting, a packet of information gets distributed to the partners. It includes some summary information about how the VC firm is running, and detailed information on any of the companies that the partners will be discussing for possible investment.
Each firm feels it has its own competitive advantage in how they find the companies they want to invest in, and it is important to the firm that they maintain this competitive advantage. One of the important metrics of venture capital is termed “deal flow”—an indication of the quantity and quality of the potential investments the firm has reviewed. If any senior partner senses a problem with deal flow then that becomes the first topic discussed on Monday morning.
Firms that are willing to invest in early-stage startups care about the quantity and quality of the startup deals they’ve been asked to invest in. An early-stage VC needs to see a large quantity of proposals for early-stage startups because the firm will fund only a fraction of the deals they look at—sometimes as few as one in a thousand. So if they want to fund six deals a year, then they need to consider as many as 500 proposals a month.
VC firms also want to feel they are receiving high-quality proposals, so they often track how the proposals came to them. Did a proposal come in from another VC firm they respect, a firm asking them to co-invest? (That’s very high quality.) Did it come through a junior partner who has contacts with the business school faculty at her alma mater (medium quality), or was it received from a stranger over the Internet (poor quality)?
The partners of early-stage firms do not discuss the hundreds of pitch decks and information packets they receive.[7] Instead, each firm has a process for reviewing the information of the companies they’ve been solicited to invest in. The process usually starts with one of the junior analysts looking over the submissions, throwing away almost all of them, and creating a single-page summary consisting of the who, what, where, and how much of the few proposals he or she thinks their junior partner supervisor would like to see. After reading the one-page summaries, the junior partner may meet with one of the senior partners to discuss the firm’s potential interest in one or more of the business plans the young analyst summarized. If the senior partner is interested, then the junior and senior partner will brainstorm additional information they might want to know, and will then call the entrepreneur(s) who submitted the information. If the entrepreneurs on the call sound like they have a deep understanding of their moneymaking idea, they will then be invited to visit the VC firm to present their idea and their team in person.
In understanding how Silicon Valley super-sized dreams are made, you also need to realize that only about a third of venture capital firms actually invest in startups. Early stage investing is a specialty; most VC firms specialize in “growth investing.” Two-thirds of all venture investment dollars go into more mature startups. Most VCs think it is too risky to invest in high-risk entrepreneurs with dreams. In order to deliver a good return to their investors, most VCs prefer to invest in young, perhaps not yet profitable companies, with already established products and happy customers, that are looking for additional investment in order to grow faster. In other words, most VCs invest in growth—not dreams. If you’
re just getting going, then you need to pitch your idea and your team to an early stage VC firm.
The opportunity for a venture capital firm to invest in these more mature startups, particularly those considered already successful and headed toward an IPO or “big exit,” comes from having a reputation as a “hot” firm that has invested in other super-successful startups, and from having a personal relationship with the founders. On Monday mornings, senior partners share stories of how they met or socialized with founders and CEOs of “hot” startups and when and whether they think their firm will be invited to invest.
Almost all VCs that specialize in investing in more mature startups hire several young, extroverted Ivy League or business school graduates to make dozens of calls every day to CEOs of startups they have recently learned about. They try to get the CEO on the phone to flatter him or her with praise that the VC firm has been impressed with what the startup has accomplished. The young analyst’s mission is to try and get beyond the startup’s publicity and hype and obtain enough financial information to determine whether the startup has “momentum” (i.e., is growing fast). If the startup is growing fast enough, then the young analyst will brief a senior partner, who may bring the company and the financial information they’ve received to the attention of the partnership.
