Sun, Oct 14, 2018
The other day I had yet another discussion with an entrepreneur who was stuck in the “expectation-trap.” It works like this: You set out to build a company, read everything you can on TechCrunch, study today’s great entrepreneurs, listen to a few too many podcasts, analyze what it takes to get VC funding and end up believing that the only company worth building is a) VC funded and thus b) has to be hyper-growth.
I believe that is a big mistake.
First of all, it is insanely hard to build a hyper-growth company which achieves escape velocity. There are hundreds, if not thousands, of failed companies for every breakthrough organization. Creating a “normal”-growth company – a completely different game. Financing hyper-growth companies is a whole other game – as even if you manage to get your initial funding, you need to keep showing progress on your uber-aggressive goals or your next round will not happen. Oh – and be prepared to spend a considerable amount of time fundraising instead of building your product. Moreover, as you focus on growth and not profitability, you won’t have a Plan B should your funding not materialize – I hardly ever see one of these companies turn the boat in a situation where the financing falls through and go successfully into bootstrapping mode.
Next: The exit myth. Should, and this is a big should, you make it and exit your company – you typically find yourself with so little equity and so many liquidation preferences and other clauses staked against you, that your big payday will be somewhat disappointing. On the other side, I know plenty of people who built nice, neat, little companies which they sold for anything between single to low double-digit millions of dollars. With the critical detail that the founders typically owned 100% (or somewhat close to this if they have given their employees some stock) of the company at the time of sale. Big paydays and fun parties ensued.
Lastly: It might just be a good chunk more sane and satisfying to build something that matters and makes money.
Now – I am not advocating that you should stop dreaming and pushing. The world needs those of us who have the ability and tenacity to change it. But realistically that is not true for most of us. Which, in my book, is fine – you can create something insanely meaningful by touching the life of a single individual or small group of people. Just don’t get hung up on the “go big or go home”-bullshit you hear everywhere. It is not the only game in town.
Figure out what type of company you want to build – and then build what matters (to you)!