The Seven Deadly Sins of Entrepreneurship

April 25th, 2014 No comments »

The following post is a re-blog from a friend of mine and a brilliant human being. Feel free to check out more of his thoughts and experiences at http://www.jamesgreaves.com. This particular post rang true for me in my entrepreneurial travels and observations about what can make entrepreneurship hard. Enjoy!

Why YOU Are the Reason Your Startup Will Fail

Being an entrepreneur is, in my humble view, among the toughest things to do in the world. It stretches you in every possible way: your emotions, your belief in yourself and your self identity, your mental health, your relationships with your family and friends, your intellectual capacity, and your finances. It can consume you.

If that’s not enough, as an entrepreneur you also have to face up to the reality that if your startup fails, it will fail because of you.

Let me say that again in case you missed it. The only reason your startup will not be successful is YOU.

“But,” I hear you ask, “how can that be true, when entrepreneurship is such a risky business, with so many unknowns. Can you really be held responsible for your funding runway (or lack thereof), market conditions, consumer appetite, timing, team strength, natural disasters, acts of God, war, new entrants into the market and government intervention?”

Yes. That’s your job. Deal with it.

The problem is that we fill our lives with excuses, like “I need capital to scale this,” and “the market isn’t ready.” Platitudes that mask our own poor behavior and put the blame on others. When you can move away from excuses you can be completely honest with yourself. When you are honest with yourself, you can make proper decisions and free yourself to act in a way that will ensure success.

You heard that right too, there are ways you can act to ENSURE success in your startup. After all, a startup, at it’s core is not that complicated:

  1. Create a service or product
  2. Sell your service or product to customers (your market)
  3. Sustain competitive advantage (continue to drive your market by competing on cost, quality, or time)

The only questions you really need to ask yourself are: Is this a product that I can actually make, and make better/faster/cheaper than someone else? And, does this product meet actual customer needs; will they pay me for it?

If you can’t get started, then you are trying to sell something you can’t build, or something the market doesn’t want. If you can’t scale then you failed to manage properly, including hiring the people or engaging the partners you need to mitigate your weaknesses and plan accordingly.

If you do any of the above wrong, you likely fall into at least one of the Seven Deadly Sins of Entrepreneurship, self-defeating behaviors that directly affect your ability to do business. If you are the perpetrator of any of these mindsets you will almost certainly fail. I have seen all of these sins (individually or in groups) take down countless promising startups full of bright, hardworking people. They are those who let their inner selves derail their dreams.

The Seven Sins

  1. Arrogance: You don’t listen to your customers and you build something nobody wants, or you become disconnected with your customers and you piss them off. You think you are so smart have all the answers you need inside your own head.
  2. Lust: You get so caught up building something you want, you don’t build what you need to. You have dream to revolutionize something, and you want to do it your way on your terms. You miss the opportunities before you because you are only interested in building what’s in your brain.
  3. Pride: You celebrate too early and lose focus on your business. You get distracted or fritter away your capital on nice offices, non-core products, or similar nonsense well before your nascent empire is formed.
  4. Misdirection: You focus all your attention on the wrong things or miss the key areas you should be focusing on. There’s so many resources available to make decisions properly, but you don’t take the time to research the scientific patterns of behavior that have made other entrepreneurs successful. You’re too caught up in the myth that the best startups are risky enterprises run by mavericks, and you run off helter-skelter like a madman.
  5. Impatience: Fueled by tales of trail-blazing heroes, you force the issue by painting yourself into a corner. You spend money where it’s not needed or quit your job before your startup can support you. You believe that increased pain in the short term will somehow increase your chances of success.
  6. Blindness: You allow external circumstances to catch up with you and make excuses that aren’t true. You say your market isn’t ready when really you are selling a ridiculous product. You say you don’t have the funds to scale when you haven’t taken the effort to prove the concept to the market, investors or potential partners. Your external scapegoating is only masking the truth from yourself.
  7. Lack of Confidence: You are scared of failure, which is ironic because you act in ways that make you fail. You don’t engage your personal networks, you don’t reach out for help, you don’t fully commit to building the product you need to, or you are too timid to reach out to your customers. You fail act, or you act partially, leading to disaster.

The truth is, if you want to run a startup you can, and you can be wildly successful. But it may not be the startup you have in mind. You have to listen to your market. You have to build something you can do better than anyone else. To do either of these you have to overcome yourself, learn to listen, be patient, focus on the right things, be measured in your appetites, and be confident in the right things.

Startups are hard, but these Seven Sins are not an excuse not to try. They a challenge to try harder. But we must all try better, smarter, with more honesty and a more open mind. Once we do that, we can always find a way to succeed.

Start-up Community Culture

March 11th, 2014 No comments »

Recently I had the chance to listen and participate in a discussion regarding an entrepreneurial ecosystem embedded within a particular culture. The point was made that there is a need to separate start-up culture from the larger culture. I believe this to be true as you consider start-ups and entrepreneurs in the business of creating new social institutions. The larger culture isn’t used to new things and so you need a different kind of environment that is supportive. Basically, entrepreneurs are responsible for convincing the world and the people in it that the start-up has the right to exist and that what it does is valuable enough to support with various forms of legitimacy. It helps to have a subset of that world to help ease into the larger one.

The conversation got side tracked with what to do about it (what entrepreneurs move straight to action?). But I believe we jumped too quickly to supposed solutions without fully understanding the problem at a deeper level (also not an uncommon thing for entrepreneurs to do).

A culture is a bunch of shared underlying beliefs about what is important and appropriate that shows up as norms or practices. In a start-up culture I feel like how failure is seen and handled is the gauge for how supportive a culture is to entrepreneurial growth. In healthy start-up cultures failure is valued experience or a badge of honor. Other entrepreneurs recognize that failure is the expected result for most of us. The individual entrepreneurs celebrate the effort and courage regardless of the outcome.

In the talent market of a successful start-up culture it means employers or better yet other start-ups recognize that an incredible set of skills has just come available that can crush it for the next little while. Unhealthy start-up cultures avoid hiring former entrepreneurs for fear that they’ll leave again.

In the right kind of culture that is exactly what you want anyway. You want that entrepreneur to leverage those costly lessons and contacts in the next venture as soon as possible. The measure of a successful entrepreneurial ecosystem may very well be how quickly an entrepreneur becomes a part of another start-up.

Unfortunately, if that isn’t something we are currently looking for and so what happens is a gradual and often silent departure from the community to avoid the shame of failure and the awkwardness of no longer belonging. If we continue to have more entrepreneurial events as our solution to building a start-up culture then at least take the time to scout for talent and ways to help each other. As we make that our focus in our respective start-up communities we’ll begin to focus on the important things that underpin a great start-up culture.

Entrepreneurial Definitions

December 15th, 2013 No comments »

Last night I was helping my son with some English homework that involved a kind of definition map that he was supposed to use with his vocabulary. The definition map requires that you give examples, non-examples, and describe the properties of the word besides the actual definition. We found verbs were a lot harder to conceptualize than nouns. This activity caused me to reflect on the word ‘entrepreneurial’. I recently reviewed a book that advertised entrepreneurial quizzes. It turned out to be nothing more than a career interest tests with the word ‘entrepreneurial’ slapped in front of each section.

This is not an uncommon problem since being an entrepreneur or entrepreneurial is en vogue. Established businesses are entrepreneurial, leaders are entrepreneurial, and apparently even accountants can be entrepreneurial. It definitely fits into the current business buzzword vernacular. What does entrepreneurial finance mean anyway? Does it refer to finance done by an entrepreneur, a financier doing entrepreneurial things or something else? What is so different about entrepreneurs that it has created this additional adjective?

Often entrepreneurial is used in place of the word innovative, inventive, or creative. However, these are different things. Creative is the use of imagination to create something unique. Inventive is the creation of a new thing. Innovative is using new and old things in new ways usually to solve a problem. However, entrepreneurial is more than that. It solves a problem while making money. This situates the definition in the business world but still requires further clarification.

Google’s top result is a nice big definition but I don’t understand how “taking financial risks in the hope of profit” is different than what any other business person does? This definition is illustrative of the view that start-ups are just smaller and newer versions of large companies. I won’t bemoan what Mr. Blank has so eloquently described in Why the Lean Start-Up Changes Everything. The point is start-ups are about learning what works before scaling and optimizing. That learning function is a key; learning in uncertainty when there is no one right answer or way of doing things. We’ll cover more in just a second.

My definition of entrepreneurship or entrepreneurial is functional allowing people to be entrepreneurial one minute and normal the next whether you are inside a corporation or part of a start-up. So what is the function of an entrepreneur? What do they do? Well, from an economic standpoint they reduce uncertainty and make a profit by doing so. Now when I say uncertainty I am using economist Frank Knight’s version of the unknown unknowns that don’t have probabilities attached to them. Any time someone seeks to reduce uncertainty in executing a business model they are entrepreneurial. The uncertainty may lie within the different business model components such as the technology, market, or even the execution (e.g. franchisees or copy cat firms).

To be entrepreneurial is to reduce uncertainty in the execution of a business model in ways that are profitable. This happens through vision, action, and learning. Most uses of the term are used incorrectly in the context of risk rather than uncertainty which is what regular business is about and what comes after the entrepreneur has done their job.

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