Avoiding Group Think and Hype
One of the truly fascinating things about entrepreneurship is that we all associate very positive feelings with the word. Yet, when it comes to the mental image of entrepreneurship, we have a completely different idea of how it looks like, depending on where we come from.
In Western European culture, where job security and personal financial stability are common professional values, entrepreneurship is often associated with wealth. It takes a rich person to be an entrepreneur, and entrepreneurship generally makes those rich enough to do it even richer. When I applied for a small tax break in Amsterdam in my first post-startup tax declaration, a break I always got with my pre-startup salary that was higher than the amount I was paying myself now, the tax office lady laughed at me and said no. “Of course not, you’re an entrepreneur now, no tax breaks for you. That’s for normal people with jobs, those who need the money”.
In Asia, many see entrepreneurship as the default entry-level career option, based on a widespread culture of hospitality businesses and small retail. In many cases, success is seen as the opposite of entrepreneurship: families would save money for kids to get a good education (abroad) so they could have a fancy job with a corporation and not need to peddle goods to passersby. The ramen shop owner in that scenario is a less successful person than the salaryman who eats his lunch there.
In mainstream US culture, entrepreneurship as such is rarely used to define a special class of people. It is rather a quality one has less or more of, as one goes about their job. I’ve often noticed how US business owners and employees alike refer to their work intermittently as “our job” or “our business”, whether or not they actually own the business or not. And the way hiring and firing happens in the US is equally much more similar to winning or losing a client than to the legally expansive structure of employment common in Europe.
Since the success stories of our generation’s software and internet giants have gotten celebrated in mass media and popular culture, the image of the technology-driven entrepreneur has come to evolve to the forever young kid in sneakers trying to change the world from his parents’ garage or college dorm.
In the past six years, as I was part of a number of individual, corporate, and government-driven attempts to kick start startup communities across Europe and the Middle East, I’ve often had to address requests “to make it look like Silicon Valley”. Let’s build more offices that look like Silicon Valley. Let’s have people commute on bikes like they do in Silicon Valley. Let’s invest only in founders under 25, like they do in Silicon Valley.
Truth is of course that all of the above are absolutely not like “in Silicon Valley”. Office spaces are probably the least inspiring thing about the Bay Area, usually being standard, two or three-story cubicle mazes. Camping out in a co-living house in East Palo Alto or Milpitas is something you do until you can afford a place in Mountain View or San Francisco. And cycling is mostly limited to the Google premises, where it’s a convenient way to get from one building to the other.
And then the issue of age. Entrepreneurship comes with experience, and it’s no surprise that the vast majority of successful companies are run or exited by folks over 40 and 50 years of age. It’s true there isn’t enough diversity in that: women and certain minorities are still very much underrepresented. But the vast majority isn’t kids in sneakers; rather older white and Asian guys.
Digging deeper into the popularly distributed image of a successful startup, these are some commonly expected characteristics:
- Asymmetrical business model: we get tons of non-revenue users who will then be the product;
- We need to grow really fast and the MoM growth metrics are more important than any other.
- Marketing is everything. And at any cost so we can show the model is working.
- VC is innovation fuel. Investors are expected to know better than founders and are also the ones who carry the risk of a wrong investment. The founders can’t afford to err but the investors can.
To be absolutely clear; I have never evidenced these prejudices to be more than just slightly noticeable in Silicon Valley itself. But in the media and event circuit outside he US, these myths are still prevalent; at times creating hype, and contributing to a group think that lets very smart people make bad decisions by succumbing to the fear of missing out on commonly expected behavior.
I recently took a call with an angel investor friend of mine who quizzed me about a company we were both interested in. The company has been around for three years, raised a number of small rounds, went to several accelerator programs, hasn’t released a product yet and has zero sales. When I expressed my doubts, my friend said he was surprised by my attitude. “These guys just got into a top accelerator and are among the best-known startups in their country. I’d invest.”
My friend has his own reasons for investing in that company and he’s probably right. Every angel has her own rationale and risk appetite. Yet I believe we’re doing the companies and ourselves a disservice by focusing too much on the popular success image. The company in question has all the traits of a publicly acceptable image of young kids trying to build the next big thing. But in reality, neither team nor traction provide evidence it’s anything more than a hyped up, over-marketed personal growth opportunity for the founders.
Working with early-stage companies isn’t easy. As the investor community, we need to be there not just as access to capital, but as mentors and friends who unlock opportunities and connections. And while personal growth is a very important aspect in the entrepreneurship game, company success is defined by hitting milestones, serving clients, and making money.
Whatever image of entrepreneurship one cherishes, the best way to help entrepreneurs is by helping them to get to revenue and growth in the fastest sustainable way possible, with a laser sharp focus on performance, skills, and clients. With or without fancy offices, flashy startup marketing, or other hyped up attributes.
At Cross Border Angels, we are committed to helping the best entrepreneurs around the world connect with the most useful angel investors. We also work with our companies in building top-notch market analysis, financial models, and business plans, which we call the Investment Pack. Learn more about CBA and our services at http://crossborderangels.com/entrepreneurs.