Starting a Company is Not Following a Recipe in a Cookbook

Earlier this week I had a chance to talk to a startup entrepreneur who had an interesting problem.  He felt that he had gotten so much advice about the process of starting a company and growing it that he was having a hard time parsing through it.  He was suffering as much as anything from having too much information, and was looking for me to help him filter it. As I thought about the irony of being asked to provide advice on which advice to take, something else more interesting hit me: he was suffering from a larger issue – the way that information is presented to first time entrepreneurs.

There is a tendency for information that is intended to help startup entrepreneurs to be reduced to a playbook or recipe.  Information is clustered around topics; for example, “when should you raise money,” “lean startup principles” or “hiring your first employee.”  Or, it is structured around the stage of a business – “how to start your company,” “how to raise a VC round” or “how to exit.”  This is further accentuated by the startup accelerator business model of Y Combinator, Techstars and their various copycats around the US and internationally that build companies through a multi-month program.  The service provider community also supports this meme – in many instances their value is found in working within a structured process (for instances lawyers or accountants).  All of these factors result through the best of intentions into delivering information and guidance in a way that suggests that startup growth is something that occurs by following a process and set of rules.

This creates in the inexperienced entrepreneur the impression that startup success is a function of discovering the “secret to success.”  Implicit in this is the assumption that by following the advice of the more experienced, and experts, the entrepreneur is more likely to be successful.  I have certainly seen over the years that an experienced hand can help a first time entrepreneur avoid some of the “sandtraps” of entrepreneurship.  However, it is a very a very small step from there for an entrepreneur to form the impression that startup creation is a distinct process – that there is a truly a recipe for success.

The first things to distinguish are activities that are conventionally expected, from those that are always required.  For example, it is conventionally expected that startup entrepreneurs leave their day job to begin a new venture – that they take the leap.  But, that is not an outright requirement – it is merely a customary expectation built upon years of collective market experience that successful entrepreneurs tend to be passionate about their ideas and willing to take the initial risk of starting a business.  But, conventional expectations are different from legal or financial requirements.  For example, if you raise capital without complying with legal rules you could lose your house in a fraud law suit.  Legal and financial requirements tend to be best addressed through a process – it avoids making mistakes.  The conflating of fixed requirements for startup behavior, which need a process, and the customary expectations, which do not, muddies the water.

A further compounding factor is that in certain industries, particularly emerging software, the underlying technology is amenable to rapid and systematic company formation.  For example, the lean software movement benefits from the ubiquity of software tools to encourage entrepreneurs to set up lean startups and iterate their way to a successful business model.   Because software design can often be best managed through a process, this also creates the impression that company formation and growth is a process.

I think that there is a large difference between the factors that make entrepreneurs successful, where there is significant uniformity of overlapping characteristics among successful entrepreneurs, and the various things that entrepreneurs must do to be successful, where there is significant variation.  We do entrepreneurs no favors by preventing them from appreciating the difference.

Perhaps a better way to explain the dichotomy is to tell entrepreneurs that the more that an entrepreneur’s activities relate to a legal or design process, or customary expectations of market participants; the more it will appear that success is inherent in following the rules.  However, following the rules does not in any way substitute for the core characteristics of a successful startup entrepreneur.  Things like:

  • Understanding and meeting an unmet market need.
  • Being optimistic and committed.
  • Being willing to fail upward.
  • Listening to those around them for validation, opportunities and support.
  • Being coachable and self aware.
  • Being tireless.

All the content and mentorship in the world won’t substitute for these entrepreneurial attitudes.  As I have said many times, new businesses only start because of entrepreneurs.  And, they only grow if the entrepreneur has the desire and makeup to succeed.  As entrepreneurs interact with the broad support system around them, they should always appreciate and ask – when something is presented as a step in the process is it required and why.  And, then the entrepreneur should ask himself if it is relevant to that particular entrepreneur’s existing opportunities.  For example, “should I raise capital?” should be changed into “are my customers overwhelming me?” Or, “when is the right time to sell?” should be changed into “I have just gotten a bid – what’s my number?”  In other words, the entrepreneur should proactively disaggregate all information into how it is relevant to her at that time.  There is a “process” for entrepreneurship – it is the individual circumstances that each entrepreneur finds himself in.

We have things inside out when we suggest that the entrepreneur must conform to a process.  The process of entrepreneurship is unique for every entrepreneur, and comes from the meandering nature of life as an entrepreneur.  Most entrepreneurs are driven by a desire for autonomy.  They shouldn’t forget this when looking for advice.