Lessons Learned: Coda #3

In over 30 years in the private equity and venture capital industries, I have collected notions that seem to be borne out by everyday experience.  Following are several of my conclusions that are offered without proof:

Lesson 1:  Entrepreneurs are born not raised.

In working with entrepreneurs through the years, I can offer a list of their characteristics such as smart, creative, dogged, resilient, resourceful, naïve, bull-headed, bold, and many more.  Note that all those characteristics are inherent, not learned.  Since I left academia many years ago, I have been amused at the proliferation of entrepreneurial programs in universities across the country, as if being an entrepreneur can be taught.  I’ve often wondered how you can teach someone to wake up at 4:00 in the morning in a cold sweat to worry about making payroll.

Lesson 2:  Small businesses don’t have access to big capital.

Access to financial capital by small businesses has become more difficult during the past 30 years.  Small banks have been absorbed by regional banks that have been swallowed by mega banks.  Small funds are officially avoided and neglected by large institutional investors.  High-net-worth family offices now invest in funds of funds, not in individual businesses.  And pension funds, whose investment programs are managed by gatekeepers, typically invest only in big funds.

Friends and family and angel investors are more important than ever in supporting the establishment and growth of small businesses.  Next Level is bringing “small capital” to small business to try to help fill that void, and all of you are playing a critical role in helping us do so.  We thank you!  

Lesson 3:  Timing is everything—but persistence widens the window of opportunity.

A familiar phrase is “an idea whose time has come.”  But that implies, if you wait long enough, something will happen.  Successful entrepreneurs do not wait.  Remember that the world will resist your new ideas.  The status quo does not like disruption.  Or put another way, old mousetraps do not like better mousetraps.  Determination is critical, but also it can be very expensive.  You may need help with the capital to fund operations while you are pursuing the right moment.  Don’t be afraid of dilution.  A small share of a big pie may be more than all of a small pie or all of no pie at all.   

Lesson 4:  Motion is often confused with progress.

Years ago, I had a partner who we called “Chicken Little” because the sky was always falling.  His anxiety led to group hand wringing, frequent calls, and innumerable meetings, all of which he viewed as action and progress.  His favorite saying was, “Are you going to take care of that, or am I?”  He never intended to do anything himself, of course.  Rather, he intended to create urgency and guilt someone else into doing the work.  That way he could register motion and take credit for “progress.”

Lesson 5:  The urgent crowds out the important.

In the 1980s business literature, the warning was “Don’t let the urgent crowd out the important.”  Unfortunately, it already has.  The biggest culprit is the smartphone.  It produces little noises that interrupt everything in life.  The smartphone makers call their noises “alerts” to give them the semblance of importance.  I would argue that the smartphone and its social media offspring represent the greatest drag on productivity in history.  Turn the phone off and take an urgency break.

Advice:  Give yourself credit.

Keep track of your own common-sense conclusions.  They may come from trusted outside sources or from your own experience.  Your collected thoughts of today can become the wisdom of tomorrow.

DGH