The Serial Entrepreneur: from Sisyphus to Archimedes
Most serial entrepreneurs I know are highly motivated, capable and intelligent people. After all, to create any new ventures they have had to solve all kinds of problems. They have persevered in the face of obstacles, many of them unforeseen or not well understood at the time the business was originally conceived. They deserve their accolades. To create even one successful startup is a significant achievement. To create more than one is nothing less than miraculous. (We’ll get to why this is true in a moment.)
What if I told you that despite their skill, intelligence, and experience, most entrepreneurs, even those who are successful serial entrepreneurs, are not experts at the “new venture creation” game? I’m telling you that now: they aren’t. Entrepreneurs – even serial entrepreneurs – don’t play the game frequently enough to become very good at it. No one does.
What does frequency have to do with this? To address this question, let’s take a good look at what investors do. Investors review a thousand opportunities to make just ten investments. That kind of frequency and volume creates a dataset, a pattern recognition that delivers superior results to a merely random distribution. Through consistent deal flow and repetition, investors have developed a due diligence process that helps them make better decisions and achieve better outcomes.
Unfortunately, founders and co-founders of startups lack a similar, “founder venture diligence” process. Entrepreneurs — even the most active serial entrepreneurs — rarely start new ventures. As the mean-time-to exit increases, founders can expect to be tied up in a venture for 7–10 years. This doesn’t give founders many opportunities to play the game. And this is why they lack a model, a repeatable process, that could help them identify the best opportunities, become aware of risks, make better decisions and learn what decisions are critically important to improve the new venture’s chances of success.
As a consequence, most serial entrepreneurs do not achieve miracles. They do not see success after success. Instead, for most their reward is in the struggle to create something new and will it to survive. This is unfortunate. Creating a new venture is certainly a worthy challenge, but it is not, by itself, a particularly worthy thing to do. There may be something worthwhile about the process of creating a new venture, but the larger part of the potential value to be achieved lies in building something that delivers sustained value to a customer, value that exceeds the cost of the product or service being delivered by the business. To attempt, again and again, to create a new business and to do this without delivering value, without achieving something meaningful, brings to mind Sisyphus, the tragic figure condemned by the gods to roll a stone up a hill again and again for eternity, only to have it roll back downhill each time and hit him.
This is why 10.10.10 has developed a program and process for serial entrepreneurs who plan to create new ventures. The process includes two parts.
Listen & Learn
The first part of the process is further divided into two elements: Listen & Learn. “Listen,” as the name implies, is about listening. Paying attention to problems and the people, organizations and institutions that experience those problems. This is a good place to begin. Actually it is better than a good place. It is the best place. At this stage of the process, a founder wants to understand something about the best opportunities, and many of the best opportunities are to be found in the world’s biggest problems.
As you might imagine, one founder’s perspective on “the best opportunity” will vary from another’s. Entrepreneurs starting a new venture often find it helps to begin by looking inward — listening to what your head and your heart is telling you about yourself and things that matter most to you.
Perhaps this explains why new ventures are often preceded by a process of self discovery and the personal change triggered by a new level of self awareness. The rise of programs like Reboot, Jerry Colonna’s program that offers help to “become the leader you were meant to be” helps illuminate the connection between who you are (and who you’re becoming) as a founder and the venture you are building or leading.
The experienced entrepreneur is always in a kind of listening mode — reacting to the problems he or she sees in the world and filing them away for further reflection. But the best kind of entrepreneurial listening is a team sport. What entrepreneurs really want and need is a way to hear about the world’s problems from those who know them well, who experience them firsthand. Right now this kind of problem identification and curation occurs, but it happens in silos, and few entrepreneurs have access to the organizations and institutions that have made it their mission to understand and work with those who experience these problems.
It makes sense, then, to devise a method for systematically identifying, collecting and curating these problems. (This is now happening. It’s “a thing.”)
The “Learn” portion of the first layer takes the problem-first focus and adds to it. For an entrepreneur, a problem identified through listening becomes the focal point of a process to understand history, context, pain (caused by the problem), impact (people, groups, organizations, sectors or regions experiencing the pain) and possible market segments.
Let’s be clear. This is a lot of work. If you do this by yourself, you will make progress, but is almost no chance you will work your way through the necessary research related to even a handful of problems – let alone the hundreds or even the thousands of problems that could be good candidates for opportunity identification and new venture creation. So you need help here, too.
Bottom line: to listen and learn effectively the serial entrepreneur needs a good set of “hearing aids” and a crack research department.
Leverage & Launch
The second part of this process has two components as well. The first of these, “Leverage,” is what an entrepreneur seeks when starting a new venture – an “unfair advantage” that will help the new venture succeed with an identified market segment. What should a serial entrepreneur be thinking about in this phase of the process?
The starting point here is specific market segment. Anyone planning to create a new product or service and a new venture needs to understand not just the problem to be solved or, from Anthony Ulwick’s perspective the “Jobs to Be Done,” they also need to understand who will be doing the hiring — i.e., who needs this product or service and who will pay for it. (If you are an experienced entrepreneur, you know a customer with the need is not always the person or entity paying for the product or service — e.g., Google’s search, healthcare, etc.) Much of what Ulwick and Alex Osterwalder et al. (“Business Model Generation” and “Value Proposition Design”) have written can be applied here.
“Give me a place to stand, and a lever long enough, and I will move the world. ”
“Leverage” is about much more than just understanding something about who your customer is and who might pay for your product or service. Leverage is about identifying a kind of “unfair advantage” — something that gives you, as an entrepreneur, a strong reason to believe that you can offer your chosen market segment something different, something of value, something superior to anything else available in the marketplace. It is about “Moats and Machines.” The machine is that part of your product or service that generates value day-in and day-out. The moat is the thing that keeps competitors from siphoning off that value, capturing or developing it for themselves.
How do you develop a value creation machine? You start with a clear understanding of the problem, the range of possible solutions and a strong sense about what a particular market segment may need. You add to that an understanding of how some portion of the value created can be captured by the business. Then you buy, build, license (i.e., rent) or otherwise secure the capacity to meet the customer’s need with a specific product or service.
Moats are barriers, sometimes called “barriers to entry.” If the machine you have created can be duplicated by anyone, you’ve lost your market advantage. You need a moat. Moats — aka barriers — are about securing for your business something essential, something necessary for to make your machine work, that cannot readily be obtained by others. An incomplete list of candidates for both machine and moat might include technology, intellectual property, legislative or policy change, data, exclusivity, distribution, know-how, and unique talent or skill.
Needless to say, it can be helpful to have both a moat and a drawbridge. (And perhaps a sizeable army of defenders.)
An entrepreneur will move from “Leverage” to “Launch” in a new venture only if key questions have been answered and critical decisions made. For example, to launch a successful new venture both entrepreneurs and investors want answers to the following questions:
- Who will lead this? Who serve as CEO?
- Who is on the founding team?
- What is the venture’s go-to-market model and plan?
- How much initial funding is required to reach the next funding milestone?
- Who will provide the initial capital?
Everything in this post related to the process — Listen & Learn, Leverage & Launch — is about improving entrepreneurs’ decision making and expected outcomes. To put it another way, it offers a way to play the game of opportunity and risk at a much higher level. At scale, this model moves value creation to an earlier stage in the venture generation process. And here’s the real kicker: while this provides enormous benefit to entrepreneurs, it also offers substantial benefits to investors.
I welcome your comments and feedback.
If you know an entrepreneur planning to start a new venture in the next year, consider forwarding this post. If you are a serial entrepreneur who plans to start a new venture in the coming year and this sounds interesting to you, request an invitation to participate in our next 10.10.10 program. To learn more about the program itself, click here.