David Gardner is a serial entrepreneur and angel investor based in Cary. He sold ProviderLink to Compuware for $12 million in 2006. Four years later, he sold Peopleclick to a New York private equity firm for $100 million. Among his portfolio of 25 local startups are FilterEasy, Stealz, Validic, ArchiveSocial, FotoSwipe and Fortnight Brewing. He had two exits in 2013: Magnus Health (after it raised a round) and ChannelAdvisor.
Gardner wrote The Startup Hats over Christmas 2013 and expects to publish it. In the meantime, he shares it with ExitEvent readers in 13 installments. Here’s part two.
After speaking on entrepreneurship at a conference a few years ago I was taking questions from the audience when a wide-eyed young man near the front raised his hand. He asked what arguably might be the two best questions any would-be entrepreneur should ask,
“How do I know if I’m cut out to be an entrepreneur and what is it like to start your own company?”
I said that starting a new venture is a rush full of stress and uncertainty but one that will get you out of bed excited to get going every morning. You put together a little pot of money against a plan that you honestly don’t know will work and then you try like hell to get cash flow positive before it runs out. It’s like jumping out of an airplane without a parachute; all you have is a bag full of really ambitious silk worms and you are knitting as fast as you can all of the way down!
The first hat is the entrepreneur’s hat. If it doesn’t fit well then none of the other required hats will either. Unlike the other hats that basically represent skill sets, the entrepreneur’s hat is more of an attitude or personality type. There are many life experiences that are a must-have for some people, but would be a tragedy for others. It all comes down to what makes you happy and what makes you crazy. Even if you manage to get your company going and make money, if you are miserable every day of that process then this is not what I would call being successful.
The first thing I do when coaching a new entrepreneur is to help that person discover if this is what he or she really wants. An old Chinese curse reads, “May you get what you want.” Most people believe that startups fail because the entrepreneur lacks the required skills. Although this can certainly contribute to failure, I believe the main reason is that many of these people were not entrepreneurs at all and simply decided to was time to stop being miserable.
If you are thinking about being an entrepreneur you should start by asking yourself, “What energizes me?” What gets you excited and makes you want to work harder than you’ve ever worked before? Does risk intrigue you are repel you? Are you happiest when everything is neatly organized and in its place or when options are flying round with unlimited possibilities and potential?
One thing I can tell you with certainty is that a start up is chaos. A bird only gets off the ground and flies if it flaps its wings feverishly, at least in the beginning. There is a flurry of activity that comes from all directions as you get things going. Founding a startup means rarely getting to complete a full train of thought, at least not in one sitting. On many occasions in the midst of starting a new venture, I have begun an email in the morning and not finished it until late that night. Before I could finish it, the phone rings, a text message comes in, emails and chat messages pop up and people walked into my office needing immediate decisions to be made.
Some people thrive on such chaos. They enjoy the diversity of the day and struggling to slowly bring order to the mayhem. They aren’t overwhelmed by a need to get to the bottom of their inbox each day. They actually find the turbulent process invigorating, like a brisk run on a cold day. They get satisfaction at the end of the day in knowing that they fought well that day even if no milestone was achieved. A startup is not a hockey game where one giant score wins the day. It is a football game where success is measured in inches as you fight for each precious yard.
If you need to have everything organized and in its proper place before you can rest at the end of the day, then the startup world is probably not for you. Successful entrepreneurs are always organizing. They keep a to-do list but they are perpetually reprioritizing it, demoting some items, delegating some items and just doing enough to get by on others because that’s all the time those items merit at the moment. This is more than multi-tasking. It’s making up some rules and processes while you play. If you can’t get comfortable with chaos, entrepreneurship is probably going to kill you or at least leave you longing for that predictable corporate job you abandoned.
Besides being at peace with chaos, entrepreneurs are also known for their work ethic. Do you feel cheated after a hard day’s work that ran longer than expected and cut into your free time or do you arrive home with a feeling of extra accomplishment? Starting your own venture will probably be the most difficult thing you’ve ever done. You will work harder than you have ever worked before but if entrepreneurship runs in your veins then it won’t really feel like it does when you work hard for someone else. Another good definition of an entrepreneur is a guy (or girl) who is so crazy that he will work 70 hours per week for himself just so he doesn’t have to work 40 for anyone else! When the line between your work and leisure starts to blur and you don’t really care, then you might be an entrepreneur.
The root word from which the word business is derived is “busy.” Your inbox will never be empty; not even close to empty because there is always more you could and should be doing. You will be perpetually understaffed and doing the job of three people because you can’t yet afford to hire the staff you need. And even if you did, you’d struggle to find the time to train and manage them.
Your small team will be watching you, however, as you unknowingly create a culture that expects and prides itself on working hard and working fast. A candidate interviewing at one of my startups once asked me if we allowed employees to work from home, to which I replied, “Certainly, at night and on weekends!” I’ve always said that a startup really does have the most flexible work hours of all because you get to choose any 70 hours per week that fits your schedule the best!
So why would anyone choose to work this hard and to deal with this much stress? When you are captain of your own ship, charting your own course each day and deciding how to spend your time, tremendous creativity and satisfaction abound. When people are free to create, it releases a seemingly boundless energy that’s almost impossible to find at large companies among the rank and file.
Workers in conglomerates tend to find themselves in a pigeon hole with well-established policies, procedures and permission processes that, although necessary, can drain away precious creativity and energy. A life in the ranks can certainly offer more security and predictability, but not what most would consider adventure. To get adventure, you have to have the high-risk and high-reward that’s not typically in the cards for the vast majority of corporate automatons. If the unknown and uncertain calls out to you then you might be an entrepreneur.
Finally, with very few exceptions, the successful entrepreneurs I know are all good-to-great sales people who have made peace with the necessity of perpetually selling. Most of them really enjoy making their case and convincing others of the merits of their arguments. I’ve heard a lot of would-be entrepreneurs tell me, “I’m not a sales person.” To this I typically respond, “Then you are probably not an entrepreneur.” Every successful entrepreneur is at least competent at sales. You might be a brilliant engineer who has created a far better mousetrap, but the fact remains that it is not the better mouse trap that usually wins. It is the entrepreneur who can persuade everyone that he or she has a mousetrap for sale with significantly more benefits they really want and need.
There’s no getting around it. If you are starting a company then you are going to spend perhaps the largest part of your day under the sales hat. You are going to be selling investors on how your venture is going to make them a good return. You are going to be selling the best candidates on why they should work for your little startup. You are going to be selling those first few critically important prospects on why they should take a chance on you. And, when you screw up, you are going to be selling the customers you’ve disappointed on why they should continue to believe in you and give you another chance. Indeed, the sales hat is one you never truly get to hand off for very long. Even when your company grows to hundreds or even thousands of sales professionals, when the deal is big, the damage unthinkable or the account critical, you are going to be once again drafted into sales. So if you just can’t see yourself doing the job of a salesperson, then find a partner who lives for it or seriously rethink your foray into entrepreneurship.
Still think you are an entrepreneur? Then the next question is when. I talk to many would-be entrepreneurs struggling with their desire to take on the high risk of a new venture because they are addicted to their current income level and lifestyle. It gets even harder when others depend on your income as a provider because even if you are willing to take risks yourself, is it fair that they should have to risk so much as well? Starting a company in this situation becomes a family discussion and a family commitment because everyone has to be willing to sign on.
It is usually easiest to start your venture when you are young, broke and single but I’ve worked with several middle-aged and even older entrepreneurs who succeed wonderfully. Sometimes, they have a nest egg they are ready to gamble. Others figure out ways to de-risk their venture by getting a long way down the field before they give up their day job. A lot of startup incubators will not assist someone who is still employed. They will tell you that you aren’t serious until you quit your day job. I very much disagree. Some of my most successful entrepreneurs engineered ways to minimize the risk associated with their ventures. You can design a lot of software at night and on weekends. You can organize focus groups and test your assumptions. You can recruit and sell on a contingency basis. My advice is to delay the start of your capital burn for as long as possible.
So if you think that you might be an entrepreneur and that the time for your venture might be upon you, then keep reading.
There is another personality type that I’ve seen struggle with entrepreneurship; the perfectionist. Startups are usually not the place where we have the opportunity to get things perfect or even try. We generally do things just well enough and then move on. In other words, time is our most precious commodity, so I encourage entrepreneurs to be very stingy with it. Since that last 10% often doubles the time commitment, it is usually not a good deal for entrepreneurs with a constant backlog. This thinking is contrary to the thinking of most corporate workers. In a big company, you most often want to do a project as well as you possibly can even if the last 10% costs you twice as much time as the entire project, because it is the quality of the final deliverable upon which you are usually evaluated and promoted.
I have found that those from healthcare and engineering backgrounds, for example, particularly struggle with the “good enough” concept. All of their training has been around a zero-mistake mentality. I’m glad that medical doctors and bridge builders think this way, but when it comes to a startup, that mentality can drain your venture dry. A common stereotype among investors is that doctors are horrible businessmen. I did not understand this since doctors are some of the smartest and hardest-working people I know, but after helping some with their startups, I came to see that it was their perfectionism that most often was keeping them from achieving the speed that startups require. They are very comfortable under the construction hat but they wear it way too long and starve their ventures of the time so desperately needed from the other required hats.
Successful entrepreneurs think in terms of opportunity costs because their time is so precious. They know that they could polish that PowerPoint for another hour and perhaps make it 5% better, but this would be at the cost of not getting two other important tasks done that day. For most startups, the goal is not perfection but efficiency. Good enough is almost always better than flawless in a startup. If that last sentence sticks in your claw then you may not be an entrepreneur.
Business consultant and thinker, Tom Peters, calls this concept “falling forward fast.” Shamefully, I was on my third startup before I came to fully understand what he was talking about. In a startup, you will be dealing with a bunch of unproven assumptions and unknowns. There is a stumbling about as we try things, see what works, throw out the plan or revise the plan and try again. Peters argues that we should encourage our workers to make all of the mistakes they can as quickly as possible because this is how we learn what works. In the purest sense, a startup is fast experimentation and iteration on an ever-evolving hypothesis. Obviously, if what we are working on so diligently might have to get replaced or significantly modified in the near future, then it makes no sense to polish it to perfection. There will be a time for polishing, but not until you are very close to 100 percent confident that you have nailed it. And by then, they probably won’t still be calling your venture a startup anymore.
So, we often build a prototype that is just good enough to give customers a concept so that they can give us feedback. We quickly modify a click-through agreement knowing that it will need to be replaced by a real lawyer once we get a lot of customers, but it’s good enough for now. If no one buys this, then the agreement is pointless anyway so put in a good-enough placeholder and keep moving. Stick and move. Stick and move. Switch hats. Circle back when necessary. This is life in a startup.
I guess it’s a little unusual to start a book on entrepreneurship by trying to talk the reader out of becoming an entrepreneur but that might be some of the best advice you’ll ever receive. I met an executive at a party a few months ago. He seemed to know me and just started talking. I asked him if I had helped him with a venture. He said that we sat and talked on my back deck about 10 years earlier and that I had helped him discover that he did not want to be an entrepreneur. He smiled, “Best advice I have ever received.”
Ah, but some of you are still reading. You were undaunted by my less-than-glorified portrait of life in a startup. In fact, you found it exhilarating. The rest of this book is for you, so open up your closet and let’s put on some hats that you are going to need.
Read The Introduction to The Startup Hats here.
Stay tuned for part three, The Navigator’s Hat…