Process? I don’t need no stinkin’ process. (A serial entrepreneur’s guide to opportunity & risk.)

I’ve been an entrepreneur for nearly 25 years. That makes me old. But I don’t want to talk about that. Instead, I want to talk about a disturbing pattern I began to notice six or seven years ago:

Serial entrepreneurs — like me — were often squandering their next opportunity.

This wasn’t just my experience. I saw this happen with a lot of my friends. I saw it happen with a lot of people who were, like us, successful serial entrepreneurs. We were routinely starting new ventures we wished we had never started in the first place. Sometimes we were jumping into ventures others had started and deeply regretting our decision.

We were, in effect, failing to understand a critically important aspect of new venture generation. This thing we were missing has its counterpart in “product market fit” a concept startups first learned from Steve Blank, Eric Ries, and Marc Andreessen (when he called attention to the concept first articulated in Steve’s seminal work, “Four Steps to the Epiphany”): without product-market fit much of your investment of capital, time and talent would be wasted.

What’s the counterpart when we think of new venture generation? I’m calling it “founder-opportunity-fit.” Is this really ‘a thing? It is. TechStars’ Alex Iskold blogged about this in April of last year, inspired in part by a Josh Kopelman Tweetstorm. Here are the highlights of that Tweetstorm (and the Tweetstorm in its entirety).

1. Everyone knows that a VC’s job is to “pick” amazing founders and companies.
2. But I think that startup founders have to be even BETTER pickers than VCs. VCs can pick dozens of companies. Founders pick one at a time.

5. The typical founder spends their time either: PICKING an idea, STARTING a company (hunting for PMF), or SCALING a company (growing)

6. Most founders spend <5% of their time on idea selection, yet I believe that “the pick” accounts for >50% of startup success/failure

7. Observation #1) Many founders rush “the pick”. If you’re spending the next 5–10 yrs of your life doing something, pick your idea wisely.

8. Observation #2) in my experience, serial entrepreneurs are more likely to rush the pick due to high self-confidence and easy access to $$.

Yes! Josh is spot on. I had been hugely fortunate. I started a successful ISP, FortNET in 1993. I started NETdelivery in 1995. After an introduction from a friend and advisor, Brad Feld, I’d co-founded and run Service Metrics. Service Metrics was funded in June of 1998 with $1 million Series A, and I raised a $14.5 million Series B in early 1999. We sold the company in the fall of 1999 — for $280 million. And that understates the upside of the outcome. When the lock had come off, and investors were able to sell their shares in the acquiring company, the $280 million in equity we received had soared to a total of $1.1 billion.

What happened next? I took a few months off, but I jumped back in almost immediately to create Latis Networks, which became StillSecure. Then I stepped in to run a company I’d led an investment in but didn’t start. Then I started Pavlov Games. Then I ran another, larger company I didn’t start. Then I started Vokl. I may even have started a few companies I’ve forgotten about. (But I doubt it, the experience is almost always a memorable — and sometimes, a painful — challenge.)

What was going on here? Consistent with Josh’s observation, I’d spent, in each case post-Service Metrics, less than 5% of my time picking my next opportunity. I have now given a lot of thought to the “why” of this fail, and I plan to go into this in greater detail in another post. It suffices to say here that the problem is pervasive, persistent and pernicious. And it costs entrepreneurs and investors stupid amounts of time and money.

While startup investors — angel investors and venture capital firms — had developed a strong model for due diligence, startup founders (including me) had not. We seemed to have developed no clear, proven, repeatable model for identifying the best opportunities and identifying and evaluating risks. As entrepreneurs we play “game” with investors (an important game), with two key components: opportunity and risk. Investors have become much better at this than the entrepreneurs, and it is pretty easy to understand why.

Opportunity

Whenever a entrepreneur creates a new venture, the entrepreneur must identify, assess, select and make real a particular opportunity chosen from among the vast collection of possibilities the universe has to offer. Opportunity identification, assessment, selection and realization are arguably the most important considerations whenever an entrepreneur creates a new venture. What process do entrepreneurs typically use to do this?

“Process? We don’t need no stinkin’ process.”

Risk

Identifying, assessing and mitigating risks related to an opportunity is the other important part of the game entrepreneurs and investors play.

These successful entrepreneurs were too often surrounded by people who said “yes” when they should have said “no.” This caused many of these ventures to be weaker than they should be, weaker than they needed to be.

In the ten year period between 2005 and 2015, the thinking about startups and entrepreneurs changed — almost completely. This revolution had three principal elements: (1) the influence of Steve Blank, Eric Ries and Alex Osterwalder; (2) the rise of the startup “accelerator”; and (3) the greatly reduced cost of starting a new venture.

Steve Blank (“Four Steps to the Epiphany” and “The Startup Owner’s Manual”), Eric Ries (“The Lean Startup”) and Alex Osterwalder (“Business Model Generation”) provided the perfect framework for supporting newly formed ventures, introducing entrepreneurs and investors to a new lexicon, an entirely new startup vocabulary.

Even as Steve, Eric, Alex and others were changing the way we talk about startups and think about what startups should do, Paul Graham introduced his “experiment” — Y Combinator — the world’s first startup “accelerator.” A year later, in 2006, TechStars followed suit and took its accelerator to many major cities in the United States (Boulder, Boston, New York, Seattle, Austin, Detroit, Los Angeles, Chicago, etc.) and to many cities abroad. TechStars also introduced its model to large corporations — Nike, Sprint, Microsoft, Barclays, and Disney, to name a few. Soon startup accelerators sprung up in every major city in the world.

But something was missing. What should entrepreneurs be doing and thinking about before the new venture was formed? Where was the program, the model, the vocabulary for that part of the entrepreneur’s journey? It didn’t exist.

Pick a Problem, Not an Idea

This is where Josh Kopelman and I diverge (though I’ve no evidence to suggest he’d disagree with what I’m about to say). Josh talks about idea picking. If you talk with any large group of entrepreneurs or investors and ask them how new ventures begin, you’re likely to hear them talk about the “idea.” What’s an idea? I like to say that ideas are problems or opportunities wrapped up in the entrepreneur’s favorite solution. This may or may not be a good solution. It almost certainly is not, at the beginning, the best solution. But it is their favorite.

I’ve written, elsewhere, about a different model – the problem-first approach. When an entrepreneur is willing to begin with a problem several good things happen:

• Learning becomes the first order of business — the problem’s history, context, related “pain” or impact
• Workarounds, alternative solutions, coping mechanisms and all other methods for relieving the pain caused by the problem can be taken into account
• The entrepreneur is free to consider alternative solutions that may radically alter the business model, go-to-market model, unfair advantage, capital requirements, team/talent selection, etc.
• Before investing in any of several solutions to the problem, the entrepreneur can assess founder-opportunity fit – i.e., “Do I really care enough about developing a viable solution to this problem to consider investing the next chapter of my life in the possibility of a good outcome?”
• The problem can be considered from the perspective of alternative solutions, market segments and sources of leverage – before hiring people, writing code or raising capital

Using its new “problem-first” approach, 10.10.10 introduced the world to a new way to think about venture generation. In the fall of 2014, a group of volunteers assembled in Denver, Colorado to explore the development of a new program. 10.10.10 would identify 10 “Wicked Problems” and engage volunteers who could research the problems, keeping in mind the goal: market-based opportunities that might be attractive to the entrepreneurs that it called “Prospective CEOs.” Why “Prospective CEOs?” Because the organization’s goal was to identify entrepreneurs who were planning to start a new venture but hadn’t yet settled on a problem, a solution or a market. These Prospective CEOs would come from throughout the United States. They would not be told in advance what problems might be included in the program.

How Does 10.10.10 Work?

Each 10.10.10 program invites 10 successful entrepreneurs — prospective CEOs — to commit 10 days in specific city. 10.10.10’s programs are designed to help illustrate opportunities that deliver three things:

• market-based solutions for wicked problems
• market-based returns to investors
• benefits to key stakeholders and benefits to “the commons” — the community, society and/or the world — that support stakeholders’ investment of resources

We challenge these 10 impact entrepreneurs with 10 wicked problems.

Individually and collectively they will explore, come up with solutions, and validators (experienced industry experts) help them identify opportunity, resources and risks.

In February 2015, 10.10.10 hosted its first 10.10.10 Health program. 10 Prospective CEOs — successful serial entrepreneurs — were identified and invited. Five were women, five were men. Five came from outside Colorado, including two from California and one from Florida. On day one of the program, during its “Big Reveal,” 10.10.10 we had 10 Problem Advocates pitch each of the wicked problems to the Prospective CEOs and the assembled community of 600 people.

Why pitch the problems? Because we treat these serial entrepreneurs, the people we call “Prospective CEOs” like investors. They are going to invest the next 5–10 years of their lives in something, so as Josh points out, they need to give more attention to choosing that opportunity wisely. This starts with evaluating a pitch. They listen to 10 problem pitches, they spend the next few days considering these market-based opportunities. Then they focus their attention on learning by doing — they use the Google Ventures Sprint process to create and test the prototype of a solution. They do all of this in 10 days.

What 1O.1O.1O is not . . . .

• Step one: have a really big idea (e.g., colonize Mars!)
• Step two: colonize Mars
• Step three: become famous and collect a billion dollars

But let’s be clear. We ask our prospective CEOs to do hard things. Hard things require resources and scale, and scale takes vision, talent, work and time. So we are keenly aware that most of the hard work will happen after the program itself. What happens after the 10 days?

Day 11+ 9 months

The prospective CEOs use what they’ve learned, the network they’ve built, to create a company that will bring to market the solution to a wicked problem. For 10.10.10’s health program, those solutions are connected with a wicked problem in health. In future 10.10.10 Cities programs, the wicked problems areas in focus will include water, energy, food, infrastructure, learning, waste, security and climate change.

These are early days. In post-program mode, 10.10.10's prospective CEOs make hundreds of decisions, testing their initial hypothesis. Some of them create new ventures, some do not. Even at this early stage, we can point to three new ventures that have been created and launched by our prospective CEOs as evidence that this new model has merit. BursIQ, founded by Frank Ricotta, is focused on addressing health data problems. apostrophe, founded by Cheryl Kellond, promises self-insured employers a way to deliver health and healthcare services their employees will love. Concert Health gives primary care providers a way to treat the whole patient by giving them a way to address both physical and behavioral health.

Over time and at steady-state, perhaps half of the prospective CEOs in our programs will create new ventures. This would be extraordinary indeed. Before 2025, the program could serve as many as 200 serial entrepreneurs each year. If half of this group creates a new venture that addresses a wicked problem, we will have delivered on the real promise of 10.10.10.

As I said, we ask our CEOs to do hard things. Some will fail. Some will succeed, and if their execution matches their vision, they will deliver far more than a “great exit” and ROI for investors. The problems they started with, the hard things they do (and learn), will help establish a context for understanding, measuring and delivering the kind of impact the world desperately needs from today’s (and tomorrow’s) entrepreneurs.

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. As of this writing our upcoming programs are 10.10.10 Health (June 5–15 2017) and 10.10.10 Cities (Water & Infrastructure) (October 16–26, 2017).