For Experienced Entrepreneurs: What’s Next?
“Diligence is the mother of good fortune.” Miguel de Cervantes Saavedra
You’ve had some success. You know how to start a venture. You understand the three things a good startup CEO must do, and you know how to do each of them:
- Articulate a vision internally and externally
- Attract and retain top talent
- Raise capital and secure the resources your company will need to survive and thrive
So you want to create your next venture. What do you do? How do you think about this? What approach will you take as you’re starting your next venture?
I’m particularly interested in these questions. Serial entrepreneurs take a range of approaches from the moment they first begin to think about their next venture to the moment they create a formal entity and make a commitment to the new venture. Here are the most common approaches:
- You won’t have to think I about it. You already know exactly what you want to do. You’ve been thinking about this thing (and perhaps a few things like it) since before you exited your last company.
- You don’t yet know what you’ll do. But you have a few thoughts and ideas, and you’re planning to do some exploring on your own. You know feedback is important, so you’ll connect with friends, other entrepreneurs you trust, mentors, and people you’ve met who have experience in the sectors you are most interested in.
- You plan to do a stint as an EIR – an entrepreneur in residence at [venture firm, organization or company X] while you explore future opportunities.
Those three things are probably the most prevalent, the approaches entrepreneurs tend to take when they consider starting their next venture. (There are two other approaches to consider, but they are hardly common.) And of the three things I’ve listed, #2 and #3 seem far more common than #1.
But think about this. I often say that entrepreneurs are actually investors. They just don’t think of themselves as investors. But they are. Of course they invest their time and attention, and they often invest their own capital. In reality the invest far more. They invest the next chapter of their lives in whatever new venture they decide to create.
Creating a new venture is a personal commitment. And it’s more. It’s often an expression of your commitment to your family, your co-founders, your investors, your current or future customers and your founding team. Your commitment as a founding entrepreneur is an investment of your life. It’s not like dating. It’s like getting engaged to be married.
Think about it. Your commitment, your approach to starting your next venture, deserves some serious due diligence: at least as much due diligence as an angel investor’s investment of $500K or a VC’s investment of $1mm, $5mm or $10mm.
But what would a good entrepreneurial due diligence process look like? What are you looking for? How do you look? And how do you know you’ve found what you’re looking for?
I have some experience with this, and I want to share a few ideas.
Remember when you first heard about lean startups, customer development, minimum viable product and product market fit? Do you remember what that was all about? What was it that drove Steve Blank and Eric Ries to reinvent the way we approach early stage startups? It was about two things: uncertainty and waste. Startups get into trouble when they behave as if they already knew things that they couldn’t possibly know. When they acted like mature companies before taking the time and trouble to learn who their customer was or what that customer wanted. The customer development process is about customer discovery. It’s about realizing that startups are not smaller versions of larger companies. Instead, they are search organizations looking for a repeatable, scalable, sustainable business model. And the customer discovery process is an early stage startup’s due diligence process. (This is quite different, by the way, than an angel or VC investor’s due diligence process, but it’s quite related. The parallels should be clear: in each case the actors are trying to make better decisions based on a more complete understanding of risk and opportunity.)
Steve Blank’s notion of “product market fit” is about helping startups make sure there’s alignment between the product or service they’re developing / providing and the market that has (1) a need for the product or service and (2) is willing to pay for it. If you scale – i.e., if you invest significant resources – before you achieve product market fit, you’re rolling the dice. And if your number doesn’t come up, you’ve wasted your team’s time and your investors money.
Steve and Eric have done the startup world an incredible service by articulating a perspective — even inventing a vocabulary — that helps startups avoid the problem that comes of making too great a commitment too soon. It’s important, though, to understand that all of this lives on what I will call the “right side of the bow tie.” What do I mean by this?
Think of the knot in a bow tie as the moment a new venture begins. Most of what Steve and Eric are focused on, and what all accelerators — including Y Combinator and Techstars (where I served as a mentor for a decade) — are focused on happens after a new venture has been created. Not before.
But clearly, something has to happen before your new venture is created. And how important is this process? To put a finer point on it: how important are 3, 5 even 10 years of your life? This “entrepreneur due diligence process” is what happens on the left side of the bow tie.
Let’s get back to you — the experienced serial entrepreneur. You are on the left side of the bow tie. You plan to start a new venture. And that notion of product market fit as a way to avoid waste can also be applied to your situation as you think about starting your next venture. But what you’re looking for isn’t product market fit. You’re looking for something I call “founder-opportunity fit.”
This is exactly the same principle. You’re an experienced serial entrepreneur. You’re smart. You have lots of experience. You’re well connected. But if you start your next new venture before reaching a conviction that you have achieved founder-opportunity-fit, you are rolling the dice. Why would you do that? Instead, I’m going to urge you to take the necessary steps to address risk and opportunity. How? By doing what you can to make certain the commitment you are making to a new venture is properly aligned with
- who you are
- what you want to do and be, and
- what problems and what customers you care enough about to endure the challenges of a startup
Accelerators can be incredibly helpful in helping early stage startups find product market fit. But what sorts of things help entrepreneurs (not teams, not startups, but entrepreneurs) who are still on the left side of the bow tie and haven’t yet decided what new venture they are willing to commit to creating?
Actually, there are surprisingly few places to turn for help. Entrepreneur in Residence programs may spring first to mind, but someone I know recently described her experience in one of these programs — at a $2b plus venture firm in Silicon Valley — as being “a lot like having an independent study with a brilliant professor you really admire but who just isn’t paying attention.” EIR programs do provide some mutual benefit to both the entrepreneur and the host — whether it’s a venture firm, organization or corporation. But they have never been particularly focused on addressing the problem of founder-opportunity-fit.
Here’s another alternative that lives on the left side of the bow tie. Startup studios often find they need capable CEOs for the ideas they develop and turn into new ventures. If you plan to start a new venture but have no idea what you plan to do, connecting with the burgeoning number of startup studios may be a good way to do some exploring in a way that takes you out of your own head — and perhaps out of your comfort zone. Techstars just announced their first studio – in Boulder – and David Cohen, Isaac Saldana and Mike Rohan are kicking that into high gear. Based on my experience as a Techstars mentor over the course of a decade, I know they will do amazing things.
I’ve saved the best for last. Over the past five years, I’ve spent significant time thinking about and developing the process, programs and organizations that focus on the entrepreneurs journey — the missing founder due diligence process. The programs are available to successful serial entrepreneurs by invitation only. Over the course of 10 days, these entrepreneurs learn about 10 wicked problems and go through a “listen & learn; leverage & launch” process that focuses on 10 wicked problems and the founder due diligence that helps entrepreneurs make better decisions about their next venture.
It’s the only program of its kind designed to support serial entrepreneurs. To date fifty entrepreneurs have participated in 5 programs. BurstIQ, Apostrophe Health, Concert Health, Spout (SafeSpout), Upsuite, Recalibrate Solutions, HeyHerbie, and several in the works are ventures that have been formed by participating prospective CEOs who were looking for some kind of “founder opportunity fit.”
We’re about to kick off our 6th program, the next 10.10.10 Cities: Health program (in Denver from April 1–11). If you’re in the area and able to join us, I recommend the Big Reveal, on April 1st, 2019 — McNichols Civic Building at 4 pm; or the Finale, on April 11, 2019 — McNichols Civic Building at 5 pm. Please come. I’d love to see you!