Small Business ≠ Startup
By Sean Lane | CEO, CrossChx
There is a lot of talk these days about startups. You may have noticed.
Cities that aren’t the Bay area are constantly figuring out how to define themselves in a way that likens itself to the Bay area.
I find that while most undercurrents in cities around the US have a posture towards gaining an identity similar to the startup Mecca of Silicon Valley, most aren’t truly willing to do what it takes to be like Silicon Valley and I’m not sure they actually want to be like Silicon Valley. Being like SV means focusing on big, big wins. Building massive companies that fundamentally upend and transform an industry forever or create an entirely new industry from scratch.
Doing this requires huge investments, a super risky business model, technological marvels, and early focus on infrastructure and adoption rather than profit margins and bottomline. It also require a concentration of talent on teams that are mission driven to build these massive companies. Most “startup communities” aren’t ready to go all in on building these massive companies. They tend to be focused more on the idea of entrepreneurship and applaud all efforts for folks to go out on their own and start a company. They tend to focus on job creation, culture as defined by cool factor, and bucking the tradition of being an employee for a pattern of building small businesses from the ground up. It’s not wrong, per se, but fundamentally antithetical to doing what the famed SV companies have done.
Don’t get me wrong, encouraging entrepreneurship is noble and probably a very good strategy for economic development. It’s fun, it’s different, it’s very community friendly and it gives a sense of hope that otherwise may have been missed.
It is important, however, to figure out what you are setting out to do from the onset. Are you trying to encourage entrepreneurship as a whole, or are you trying to build massively impactful companies from scratch? I think the models to achieve the two ends are very different.
To build and support massive companies from inception to a world changing outcome means not everyone can be the CEO. I oftentimes worry about dilution in these startup-hungry cities. You have really smart and courageous people starting companies with no aspiration to build something massive. What I’m unclear about is whether or not these people understand the opportunity cost. I wouldn’t change a thing about my history but I can admit I did’ t understand the opportunity costs.
I used to not think big enough.
What would happen if the cities’ smartest, courageous and most creative people joined together to help build a handful of companies? Let’s say in any given startup hungry city there are 10 startups with millions in funding from prominent VCs and a clear vision to fundamentally change an industry (or create one). Chances are those companies are the ones with the greatest likelihood to become the next big thing. Now imagine if the top 3 smartest people from all the angel funded, bootstrapped, scrappy, clever, startups in the area worked instead at one of these 10 companies. I imagine the chances of success would be much greater.
The CEO, CTO, and other founding members of small market startups are more than likely pretty brilliant, tenacious people. They probably are the top 1% of all of their friends and work like no one else around them to achieve success. If those top echelon people were okay with running important functions like marketing, product, or engineering within a big market, legit funded startup you’d probably end up with a pretty freaking dynamic company.
This doesn’t mean no one should try to launch a startup. If you have the passion around an idea that can change the world, then by all means go build it. I would assume that’s not the case for most entrepreneurs, though. In most cases, statistically speaking, founders aren’t building a massive company with a big vision and a big market. They are probably trying build a good, solid business with the potential to make millions and would be happy with an enterprise value in the tens of millions.
That sounds great, It creates jobs. It makes founders wealthy. It creates new angel investors. It adds diversity to the community and more founder fame to highlight at events and in the press. It adds logos to mini venture funds and it puts cities on the veritable startup map. Again, not bad, but it’s hard to argue that it doesn’t perpetuate the cycle of small outcomes. It won’t attract huge VC funds. It won’t create the gravitational pull necessary to attract the world’s best talent and it won’t get you closer to being anything like Silicon Valley. It will help create a vibrant community. It will be fun. It will provide tons of chum for service professionals.
I live in Columbus and it’s no exception to the typical startup hungry city with a slight case of multiple personalities.
There’s lots of great activity around the idea of entrepreneurship. Lots of micro-capital being poured into solid businesses from wealthy individuals and public economic development funds. In parallel, there are a handful of companies here with the potential to become multi-billion dollar companies. They’re fighting vigorously for talent and market share, as they should. They’re building world class technology. They’re getting funding by large VC funds with the vision to build massive companies.
By virtue of where my life has taken me, I’m in the build massive companies camp. Before Columbus I lived in Baltimore. In Baltimore I was in the “startup community” camp. I did everything I could to propel entrepreneurship. I invested in companies. I built and sold solid small businesses. I built non-profits, an incubator, the list goes on. It wasn’t until I met Mark Kvamme and Chris Olsen until I changed my mind about what I wanted to do. Mark and Chris moved to Columbus from SV, where they worked at Sequoia, to start a large venture fund focused on building massive companies in the Midwest. Their idea was that the region was underserved, yet full of great opportunity and endless potential. They are pioneers in the Midwest and have truly gone all in on the idea that they’re going to build massively important companies just like the ones with all the fame on the West Coast. One of the most important things they have to do is teach great people how to think bigger. I bought in to their vision and they taught me to think bigger. I decided to move to Columbus and build a company to fix some of the biggest problems in the health care industry.
So now that I’m here and building CrossChx with my co-founder Brad Mascho, I’m observing the startup efforts from a different foxhole. The view is very different and my perspective has changed. Selfishly, I want Columbus to be all about building huge impact companies that change industries. I want to see new titans emerge. Since I was one of them, I can’t help but to respectfully and empathetically support the entrepreneurs building small market companies, the events, the incubators, the micro VC funds. But deep down inside I really want all the best people to work to help us build CrossChx. I want the best founders to join us and will for better or worse constantly push them to think bigger.
It’s not that I don’t have a healthy respect for entrepreneurship. It’s because I didn’t come to Columbus to build small things. I didn’t come here to perpetuate small outcomes.
I came here to create a global ID for each patient, to give patients access to all their health data despite which provider they visit, to make health care a better experience full stop. I want to change health care forever. To do that we have to build a massive, nationwide company, we have to recruit an army of the brightest people and we have to be stubborn about our larger than life vision.
So if you’re an entrepreneur and we run into each other around town and you tell me about the solid small market company you’re building; I’ll listen and provide advice where I can, but know that in the back of mind I’d rather have you and your best people on my team.
Sean Lane is co-founder and CEO of CrossChx, the leader in identity resolution for smarter healthcare. Learn more about Sean here and follow him on Twitter here.
