What differentiates entrepreneurs and company executives from typical employees at big corporations?
What sets today’s business owners apart? Over a decade of research and 10,000 interviews with entrepreneurs in the tech and life sciences industries help determine the differences.
While founders may have certain characteristics that define them, they also encounter a range of problems, conflicts and choices on a daily basis that could impact their company’s future.
Learn how to tackle these obstacles like a pro, so when it comes to launching your Startup, you’re equipped to face any challenge that comes your way with ease.
Entrepreneurship and career pursuits often stem from different motivations
While those focused on a career seek stability, prestige, financial gain, and social connections, entrepreneurs are driven by the desire for control, power, autonomy, and the thrill of taking risks.
The contrast in motivations can also be seen in the experiences of successful entrepreneurs. Blogger founder Evan Williams, for instance, valued power and control so much that he rejected a multimillion-dollar buyout offer to retain control over his company. Meanwhile, Sittercity founder Genevieve Thiers left her job at IBM, feeling confined and longing for influence and autonomy.
Interestingly, male and female entrepreneurs often share similar motivations such as autonomy, power, influence, and managing others. However, women entrepreneurs may place more value on altruism, while financial gain is not always a top priority. On the other hand, female career-focused individuals tend to prioritize recognition, social connections, stability, and a desirable lifestyle.
Therefore, identifying your motivations is the first step towards a successful entrepreneurial journey. If you have the drive for power, influence, and autonomy, you may have what it takes to become an entrepreneur.
Before jumping into entrepreneurship, consider if you have the necessary human capital. Human capital refers to the skills, knowledge, and experience required to succeed in your desired industry. Without it, your chances of success may be limited.
For instance, Barry Nalls, founder of Masergy, built his business upon years of experience in the telecommunications industry. Similarly, baseball star Curt Schilling learned the importance of understanding people management when he launched his MMOG start-up, 38 Studios.
In contrast, those who lack relevant experience in their Startup industry have higher failure rates. Hence, it is crucial to identify and fill any skill gaps before starting your own business.
So, think about the skills, knowledge, and expertise you need to bring your product to life and ensure its success. Are you ready to launch your entrepreneurial journey with the right human capital?
Social capital is just as important as human capital for new businesses
Social capital refers to the professional and social network you bring with you to your company. The more connections you have before starting your business, the easier it will be to access resources and find new ones.
Barry Nalls, the founder of Masergy, had established connections with potential employees, customers, advisors, and investors before launching the company. This allowed him to make Masergy viable just six months after starting it.
It’s crucial to find a balance between building social capital and not getting too entrenched in your current job. Spending too much time as an employee can limit your ability to diversify your skills, which are necessary for successful entrepreneurship.
To avoid becoming too specialized, Nalls made sure he didn’t spend more than two years in one position at GTE before moving on to the next. Don’t let your dreams of starting a business slip away while you’re still working at your old job.
If you’re an entrepreneur, you must have enough social, human, and financial capital. Without these resources, your business might fail. Barry Nalls, founder of Masergy, had sufficient human capital from his years of experience in telecommunications, social capital from his established professional connections, and financial capital to start and run the business.
However, not everyone has the same resources as Nalls. In case you lack any of the three types of capital, finding a co-founder might be a solution. Before seeking a partner, assess your current resources, identify the areas you need help in, and find someone who can complement your skills.
Even if you have enough capital, having a co-founder can bring benefits to your business. With the right balance of roles, you and your partner can handle the tasks efficiently and make your business successful.
Avoiding Confusion with Clear Co-Founder Roles
Avoid arbitrary decisions and establish clear roles for each co-founder from the outset. The title of CEO is often awarded to the “most committed” founder or the person who initially came up with the idea for the company. But to ensure the long-term success of your company, delegate roles based on each co-founder’s skills, not just seniority or the origin of the idea.
Take Apple, where Steve Jobs was the CEO because of his sales skills and Steve Wozniak was in charge of R&D due to his technical skills.
However, if co-founders have overlapping skills, it’s better to have clearly separated roles. This creates accountability within the organization and allows for clear responsibility and success measurement. The division of work defines distinct roles and responsibilities, ensuring all tasks are completed efficiently.
Handling equity distribution in a Startup with multiple co-founders can be tricky. A 50/50 split may seem like the fairest option, but it’s rarely that simple. The experience of Odeo’s co-founders Evan Williams and Noah Glass serves as a cautionary tale. Initially, Williams offered Glass a 70% share, reasoning that Glass was working full-time while he was only part-time. However, as the company grew, the disagreement over who should be CEO caused tension and eventually resulted in Glass leaving the company.
To prevent conflict, it’s better to wait until co-founders have a better understanding of each other’s skills and commitment before dividing equity.
Generalists are in high demand in Startups because they can comfortably handle multiple responsibilities and adapt to the challenges that come with starting a new business. Unlike specialists, they are more suited to the fast-paced and ever-changing environment of a Startup. In fact, the first employees in a Startup may be required to move from one role to another, which is why generalists are ideal for this type of work.
Additionally, prior experience in small companies rather than large corporations is also a plus, as it gives an employee the skills necessary to start from the ground up. This is a crucial aspect of Startups, as employees are expected to work independently and contribute to the team effort. As a result, managers may not be necessary in the early stages.
However, this does not mean that specialists are not valuable in Startups. They just need to be comfortable with the idea of working in an ever-changing environment and have the ability to adapt quickly. Startups that fail to take this into consideration may find themselves with employees who struggle to keep up with the pace of the business.
In conclusion, Startups need generalists who are adaptable, have experience in small companies, and can work independently. These employees are crucial to the success of a new business, as they are able to handle the fluidity of the Startup environment.
Raising funds for your Startup can accelerate product development, but it comes with the responsibility of meeting the expectations of investors
The choice of bootstrapping or seeking outside funding is a crucial one for Startup founders as they strive to grow their ventures.
The decision between self-funding and obtaining capital ultimately depends on the founder’s objectives and market competition. While some founders opt for self-funding based on intuition, others seek outside support.
Jim Triandiflou and Mike Meisenheimer, founders of Ockham Technologies, were offered $2 million from investors but declined, instead using $150,000 from their own pockets to start their company. Their reason: they wanted to “sell something first.”
Evan Williams, the founder of Blogger, initially funded his Startup with the help of friends and family, but changed his approach when creating Odeo. Recognizing the competitive market and the need to enter quickly, he sought funding from top venture capitalists and raised $5 million in exchange for 30% of the company.
Venture capitalists (VCs), who raise money from institutions and invest in promising start-ups, can improve a company’s organization and discipline, but they also bring additional responsibilities and reporting demands.
In summary, being an entrepreneur demands a unique combination of drive and expertise that is immediately tested during the early stages of a start-up. With careful consideration for financial needs, company structure, and decision-making, a smart founder can navigate any challenges that arise. To ensure success, it’s important for co-founders to understand each other’s motivations and skills before starting a business and establish a solid management team.
Inspired by a book “The Founder’s Dilemmas”; Noam Wasserman