November 15, 2019
Last week, I was having a conversation with a friend who was considering the idea of starting a company and was explaining to me why he was worried about taking the plunge.
All his fears were legitimate:
“Do I have the skills to be a founder?
“Do I have the ability to figure out all the things necessary to build a successful startup?”
“Can I take this risk at this point in my career ?”
If you're also asking yourself these questions, take a deep breath and ask yourself this —
In most of these conversations, I learn that the to-be-founder plans to get into entrepreneurship as a 3-year career experiment — “If it works, great! If it doesn’t, I’ll go back to doing what I was doing earlier”. While this is a perfectly logical and intuitive approach to deal with your real fears, however, I believe this is not the right mindset.
Startups usually take several years to succeed. Especially first-time founders will make many mistakes.
I’m going to put it bluntly — your first startup is very unlikely to succeed in 3 years. Let’s take a couple of highly successful entrepreneurs and look at their journey. One of the names that come on top of my mind is Jeff Bezos. Amazon is one of the biggest success stories of the online era today. However, before Amazon became a household name, he had several failed ideas. Reid Hoffman is another well-known name I can think of. Before co-founding LinkedIn and investing in big names like PayPal and Airbnb, Hoffman created SocialNet, an online dating and social networking site which ultimately failed. If Jeff or Reid had given up before going on to build what Amazon or LinkedIn today is, imagine what would have happened.
The real risk with the experimental mindset is that you may give up before you even have the chance to succeed.
For those like me that rely on stats more than opinions, if you plot all the entrepreneurs against the percentage of their first startups that succeed vs second vs third, you will see an exponential rise. You will definitely find examples of entrepreneurs who are extremely successful with their first startups like Facebook or Google but the probability is much much lower. They are rare exceptions, not a rule of thumb.
As I was trying to do a quick research to support my hard-learned thought with some facts, I discovered a very interesting research story that echoes what I believe in this aspect.
Stanford Graduate School of Business Professor Kathryn Shaw along with Professor Francine Lafontaine of the University of Michigan examined the successes and failures of retail entrepreneurs over a 22-year period from 1990 to 2011. The research, which examined records of 2.8 million small retailers in Texas, found that entrepreneurs were more likely to succeed the more times they had run businesses in the past. In other words, they found that failed entrepreneurs are far more likely to be successful in their second venture, provided they try again.
Another research focused on tech entrepreneurs found that serial entrepreneurs were more likely to succeed than first-time business owners.
Isn’t it intuitive that one learns better from their failures? So, how is it any different for entrepreneurship? The more the experience one has as an entrepreneur, the odds of them succeeding only increase, further adding to their business longevity.
If your ambition is to become an entrepreneur would you rely on a hand of two pairs or a flush?
Most of us hear or read only the most successful phase of a start-up or a venture and aspire to come up with an idea to carve a similar success story in a short time. However, many fail to notice that the majority of the successful start-ups have had a very longer time frame of ups & downs. Only when you hold on for that long during these phases, success comes your way one day.
One of my key learnings as an entrepreneur so far has been that any sizeable ambition that you have needs discipline over a long period of time.
It is the same with entrepreneurship. When you are disciplined enough to pursue the rigor of entrepreneurship, you will learn from your experiences and figure out what not to do as much as what to do. Interestingly, while some broad learnings may be understood from others’ experiences, most of the specific learnings will only come from your own experiences. Therefore there is no substitute to time.
'A startup is a human institution designed to create value under conditions of extreme uncertainty' says Eric Ries, author of the book, The Lean Startup. As an entrepreneur, one needs to realize that uncertainty also holds true for the time it takes to see success.
If you want to be an entrepreneur, I would recommend you to think of entrepreneurship as a career path, not just as an experiment in your career.
When you’re about to start your first company, the fundamental question that you should ask yourself is if you have that appetite for entrepreneurship irrespective of the time it takes for you to see real success. You should tell yourself that “I’m going to become a successful entrepreneur, no matter how long it takes”. Then set up your life around for you to be able to continue on that path for at least 10 years. Along that journey, at any point, if you are unable to meet your basic needs or you really feel like you cannot do this anymore, you can still quit and go back to a safer path but don’t start with a commitment of a shorter time frame of 3 to 5 years.
Both choices may appear to lead to a similar outcome but the difference in mindset makes a big difference in terms of how you approach your startup. Like most things in life, startup outcomes also compound over time, so be prepared for the grind for a long time before outsized returns make you an “overnight success” ;-)