Here’s a new term: The FAILtrepreneur
def: someone who tries to be an Entrepreneur, and takes advantage of lots of things intended to “help” them be a success, but somehow finds each “help” pushes them further and further into mediocrity and the failure of their business. Then they go work for a management consultancy; they have great stories to tell about their jolly jaunty time playing at being an Entrepreneur
What “business-people”, consultants, politicians etc tend to think Entrepeneurs need
Time and again, these people think they’re “helping”. They never stop to think about what their assumptions say about themselves – and how little they say about Entrepreneurs.
Typically, they believe that startup-founders-to-be need:
- An office – “rent is too expensive for poor people!”
- Tax breaks – “my biggest financial worry each year is my personal tax bill. And it would be the same if I started a new company. I’d get taxed on my £500k profits straight away, after taking all that risk! That’s why I don’t do it. Other people must feel the same!”
- Income guarantees – “startups are risky – you can spend years running a startup, and not be able to contribute to your mortgage and your pension. No-one would dare skimp their Mortgage and Pension!”
- Opportunity – “I always feel I could have done more in this world, if only I’d been running my own company. Look at how successful I’ve been, working for others – and imagine what I’d have achieved with my intelligence/contacts/business skills if I’d been running the show!”
- Contacts – “I hate it when startups talk to me, they’re useless to my career, and they’re so likely to fail they’ll probably make me look bad when they blow all our money. I would never trust them / sign a deal with them. So it must be really hard for them to talk to / meet other companies, potential partners and investors!”
- Confidence – “To be honest, I’m terrified of starting a company – God! it must be so awful! – if it fails, it’ll all be my fault, and everyone will finally realise what a talentless hack I am!”
What DOESN’T an Entrepreneur want?
The last thing that Entrepreneurs need – the very last thing – is to be given handouts or to be patronized.
Being an Entrepreneur is *all about* starting from an inferior position and not just out-doing everyone else, but positively eclipsing them.
The idea that they need “a leg up” or “handouts” is laughable – all it does is re-enforce the qualities and expectations that the Entrepreneur needs to avoid.
What does an Entrepreneur really need?
Resource; specifically: whatever resource they cannot manufacture for themselves, out of thin air.
Ultimately, a great Entrepreneur is someone who sees opportunities, leaps on them, knocks them to the ground, and exploits the heck out of them.
If they can do that, normally they can magic-up whatever else they need. But there’s often a couple of needs that prove slightly too overwhelming:
- Time – a lot of the time, an Entrepreneur misjudges an opportunity. Given time, they can usually bend it into a new opportunity – or adjust their own spending to fit the potential profit. Often, they run out of time before they finish that.
- Cash – “running out of cash before our profit comes in” is really the only thing that kills startups
- Staff – cash often kills startups because the first thing you lose is your staff. Everything else is negotiable (deadlines, suppliers, tax, creditors, etc) – but people need money to live, and you can’t negotiate with “hunger” or “I have to pay my rent”.
Everything else is fluff:
- Office space – have you ever heard of a startup that failed because “we didn’t have an office”? Of course not – that would be stunningly pathetic – like saying: “we failed because my pen ran out of ink, so I could never sign any more contracts. Ever.”
- Tax – to a startup founder, their concept of “success” is making so much money that they’ll be *proudly* paying $1 million / year in tax – and not sweating it. People who fail … never earn enough to pay tax in the first place (something many rich people forget is possible). In the end, it’s only the people in corporate jobs that worry about tax…
- Income guarantees – to say to a startup founder that they need something to offset lost income is to say: “I believe you will fail”. If you’re building a multi-million-dollar company of which you own – at minimum – 50% of the company, you really couldnt’ care less about “salary”. You’ll be a multi-millionaire just from your shares (and not a paper one: a real one. Because you’re one of the few people who will be legally able to sell them)
- Opportunity – what? Do you even know what “entrepreneur” means?
- Contacts – every (legal) business needs to sell something. Selling requires finding people and persuading them to give you money that is MORE than the cost of the thing you’re giving them. If you’re able to do that … how could “contacts” ever be a challenge for you? If you’re NOT able to do that … you are guaranteed to fail anyway
- Confidence – an Entrepreneur is confident almost by definition – you don’t become a fledling Entrepreneur until the day you leave behind your un-confidence. If you don’t have a vision, and self-belief, you haven’t even started yet.
Concrete suggestions for helping Entrepreneurs
1. Give salary guarantees to the employees, not the founders
2. Cash (but here be dragons: so many ways to do this badly, so few to do it well!)
(this would need a series of posts just to summarise the successes and failures to date – and I believe the professional investors of this world are doing a pretty good job already via the VC blogs, the Angel blogs, VentureHacks, etc)
3. Give cash to failed startups who can explain how they’re salvaging their failure
Professional investors won’t touch a small failed business with a bargepole (usually).
Not because there’s no profit there – there manifestly IS profit there – but because the potential upside has been given a glass ceiling, and they’re not interested in “small but steady profit”.
Fair enough; but that leaves a gulf where someone else could step in. If the businesses that failed are big enough, then professional investors are happy to be involved – the money becomes enough to excite them. It’s when they’re small that there’s a black hole.